Newell v. Wagner Electric Mfg. Co. , 318 Mo. 1031 ( 1928 )

ON MOTION FOR REHEARING. Appellants urge in their motion for rehearing that the Court en Banc in adopting the divisional opinion herein, has overlooked Section 9792, Revised Statutes 1919, which provides, among other matters, that "the secretary of state shall not license any foreign corporation to do business in Missouri when it shall appear that such corporation was organized under the laws of a foreign state by citizens and residents of MissouriForeign for the purpose of avoiding the laws of this state,Corporation: as it would be a fraud upon the laws of bothOrganized states, and its pretended incorporators would beby Residents held as partners, and as such become liable for theof Missouri. debts of the alleged corporation," and has also overlooked the decision of Division One in the case of Booth v. Scott, 276 Mo. 1, construing the purpose, application and effect of that statute. Neither the aforesaid statute, nor the decision above referred to, was called to the attention of Division One, in oral argument or brief, at the time of the presentation and submission of this cause in division, or prior to the rendition of the divisional opinion. The matter was presented, however, in the submission of the cause in this court, en banc, and has had our full consideration, with the result that our conclusions are in accord with the conclusions reached in the divisional opinion, which has been adopted as the opinion of Court en Banc.

It was urged by appellants in the presentation of this cause in Court en Banc, and is again urged in their motion for rehearing, that it is indisputably shown by the record herein that the sole object and purpose of the organization and incorporation of the Delaware corporation was to enable that corporation to issue and sell $1,500,000 in preferred stock, which the Missouri corporation was unable to do because of inability to obtain the consent of all its stockholders, and because of the inhibition of Article 12, Section 10, of our State Constitution, which provides that "no corporation shall issue preferred stock without the consent of all the stockholders." Assuming that such was the sole purpose and object of the incorporators of the Delaware corporation, does it follow therefrom that the organization of the Delaware corporation was had for the purpose of avoiding the laws of this State, within the purview, meaning and intent of the statute aforesaid? We believe not. Article 12, Section 10, of our Constitution, requiring the consent of all stockholders of a corporation to an issue of preferred stock, has application only to a Missouri corporation, and not to a foreign corporation. The Delaware corporation, so far as the record shows, was duly and legally incorporated in the State of Delaware with an authorized preferred capital stock of $3,000,000, of which $1,500,000, or one-half thereof, was issued and paid for in cash, by and with the consent of all the stockholders of the Delaware corporation. The authorized common capital stock of the Delaware corporation consists of 80,000 shares of non-par-value, which the evidence shows was paid for by tangible physical properties, real and personal, sold to and purchased by the Delaware corporation from the Missouri corporation. The organization and capitalization of the Delaware corporation, so far as the record shows, fully complies with the corporation laws of this State. Whether its organization and capitalization was in accord with the corporation laws of Delaware was a matter primarily for that state and its officials to determine; but presumably, at least, the Delaware laws were fully complied with; otherwise, a certificate of incorporation would have been withheld, and would not have been issued, by the State of Delaware, and there is no showing upon the record that the Delaware corporation was incorporated in fraud or in derogation of the laws of that state. If the incorporators of the Delaware corporation had elected to incorporate under the laws of Missouri, with the same and identical form of organization, corporate purposes, and capitalization, we know of no law of this State, organic or statutory, by which the officials of this State could have rightfully denied the incorporators a certificate of incorporation, for it nowhere appears in the record, nor do we understand appellants to contend, that the objects, purposes, and corporate powers of the Delaware corporation are not entirely compatible with those for which a manufacturing and business corporation may be organized under the laws of this State, or that its corporate powers and purposes are inimical to the public policy of this State. And, furthermore, its capitalization is in entire harmony with the laws of this State respecting the capitalization of a domestic corporation.

In our view of the matter, the statute upon which appellants now place their reliance (Sec. 9792, R.S. 1919, supra) was intended by the Legislature to apply to such corporations as are organized under the laws of a foreign state, by citizens and residents of this State, whose corporate powers and purposes are inimical to, and not in harmony with, the laws and public policy of this State, or whose capitalization is not in harmony with the laws of this State on such subject. The decision of Division One in the case of Booth v. Scott, 276 Mo. 1, so strongly relied upon by appellants, deals with such a foreign corporation, for there it appeared that the articles of incorporation of the foreign corporation provided that its authorized capital stock of $1,000,000 was to be paid into the corporation "at such time as the board of directors may direct," and more than one-half of its authorized capitalization was to be issued and delivered to the incorporators, and as a bonus to the purchasers of its preferred stock, without the payment into the corporation of either cash or property as compensation therefor. Such plan of incorporation and corporate capitalization, it is quite evident, was not in harmony with the laws of our own State on the subject, and apparently was so out of harmony with the laws of this State that the foreign corporation so organized never applied to the Secretary of State of Missouri for a license or authority to do business in this State.

In the case of State ex rel. v. Cook, 181 Mo. 596, this court, en banc, in discussing the application, purpose and meaning of the above statute, said (l.c. 602, 603): "It is not asserted that relator (a New Jersey corporation organized by citizens and residents of this State) has in any particular failed to comply with the laws of New Jersey, and it is not suggested that the business it proposes to transact in this State is in contravention of any law of this State; on the contrary, a reading of the articles will demonstrate that they are such as are recognized by our laws providing for the incorporation of domestic business corporations. It is conceded that the general purposes for which this company is organized are not in contravention of any law, either of New Jersey or Missouri. . . . Looking to our statutory provisions for the public policy of the State, it will be readily observed that we have adopted a most liberal comity toward corporations organized under the laws of other states and countries. Indeed, we have placed them upon substantially the same footing as our own domestic corporate bodies and given them the same powers and subjected them to the same obligations that are provided for like corporations in this State. . . . We have nowhere prohibited such foreign corporations from doing business in this State on account of the citizenship of the incorporators, save in the proviso to the Act of 1903, and in that proviso the fact that our citizens are the incorporators does not bar such corporations, but on the contrary the implication amounts to a positive permission, provided only they have not formed such corporation for the purpose of evading ourlaws. When, therefore, such foreign corporation presents itself for admission to the State and not only shows that its articles provide powers and a business not opposed to our laws, but such as we grant to our own like domestic corporations, there is nothing in the proviso to the Act of 1903 which would exclude them. `It is only if some rule of law or principle of policy adopted by a State would be interfered with by allowing a foreign corporation to transact business within its jurisdiction, that the usual comity will be refused.' [2 Morawetz on Private Corporations (2 Ed.) p. 925.]"

The organization and incorporation of the Delaware corporation, in our opinion, cannot be deemed to have been had for the purpose of avoiding or evading the laws of this State, within the intent and meaning of the quoted proviso of Section 9792, supra. It does not appear from the record herein that the corporate powers and purposes, or the capitalization, of the Delaware corporation, conflict, in any respect, with the laws and public policy of this State, or that the organization of the Delaware corporation amounts to a fraud upon the laws of this State or of the State of Delaware. Consequently, the organization of the Delaware corporation was not a void act, as appellants contend, and the transactions between the Delaware corporation and the Missouri corporation were not made void by reason of the organization of the Delaware corporation. We, therefore, adhere to the conclusions expressed in the divisional opinion, adopted as the opinion of the Court en Banc, and the appellants' motion for rehearing is overruled. All concur, except Walker, C.J., andGraves, J., who dissent.