State ex inf. Haw v. Three States Lumber Co.

BOND, J. I. The State of Missouri, upon the information of its attorney in Mississippi County, charges in quo warranto, that the defendant, a Wisconsin corporation, filed a certificate of its corporate purposes with the Secretary of State,, on January 3, 1894, to-wit: “To purchase, lease, build, construct, alter, maintain and operate, rent and sell sawmills, grist and. feed — 369 — mills, planing mills, sash, door, blind and furniture factories, etc.” That procuring, in accordance therewith, a license to do business, defendant thereafter failed to comply with the laws of this State in the matter of filing' its charter, maintaining a public office and making reports of .its business; that defendant- also violated the Constitution of this State in the tenure of real estate not “necessary and proper” for the conduct of “its legitimate business” for more than six years and that in attempted evasion of the Constitution it put the title to 20,090 acres of land, which it held in this State, in one Gilchrist, who was thereafter a nominal titleholder for .the benefit of the corporation and through whom it bought and sold for itself lands in this State; that said conveyance was made to Gilchrist August 18, 1902, a little less than six years after defendant ceased to do any business in this State other than as incident to the ownership of said land through said trustee. The information prayed a forfeiture of the corporate rights and property and for such other judgments and orders as to the court might seem meet and proper. The answer admitted defendant to be a corporation organized in Wisconsin, admitted it did not file its articles of incorporation or corporate purposes when it sought admission into this State, except as stated above in the information; denied that it was the owner of any real estate in Mississippi County, Missouri,-six years before the filing of the information, and denied that its conveyance thereof to .Gilchrist in 1902 ' was for the fraudulent purpose of evading the Constitution of this State. The answer set up that it did, however, file'its articles of incorporation in this State on March 28, 1911, under which it was entitled to acquire and dispose of lands and real estate within the United States, and other things. The answer also set up that the lands originally purchased by defendant were valuable at that time only for timber and that it — 370 — erected a sawmill thereon in 1894¡, and continued to operate it until it was destroyed by fire in 1887, and did not rebuild the same nor further conduct the saw-milling business in this State for commercial reasons, b.ut did build a sawmill at Burdette, Arkansas, about eighty miles distant from the lands it owned in Mississippi County; that since 1897 defendant has transacted no business in the State of Missouri, other than “such as was incident to the ownership of said lands and timber so long as it held the same.” The reply took issue and also averred that defendant was estopped to deny that its lawful power to do business in this State was confined to the things mentioned in the statement which it filed with the Secretary of State when it obtained a license from him in 189’4. Upon the trial the court, among other things, found that the defendant had violated the Constitution and statutes of Missouri by holding the lands described in the information for more than six years, which were not necessary and proper for carrying on its legitimate business, and that its conveyance to G-ilehrist in 1902, and the declaration of trust made by him, were for the purpose of evading the Constitution and laws and statutes of Missouri and fraudulent and void. Wherefore the court fined defendant $5000 and costs of suit and ordered execution, to reverse which judgment defendant has- appealed. II. It is wholly unnecessary to discuss what right's an'd powers defendant might have enjoyed in this State under a land-buying and land-purchasing charter such as it did not file when it obtained a license to do business here, but only filed after the happening of matters charged in the information and the institution of that proceeding on behalf of the State. What is actually produced as its plea for a. right to do business in this State was a statement (copied above) that it was incorporated to build and operate sawmills, furniture factories, “etc.” In accordance with these specific objects it was licensed to do business in this State. That was — 371 — the effect of the license then given to it by the Secretary of State, for he had no legal authority or power to authorize it to exercise any other franchises than those comprised in the statement of its corporate purposes filed with him. The addition of the word “etc” embraced only other purposes of like character to those specifically named. [Doty v. Telephone Co., 123 Tenn. l. c. 340.] In pursuance of the authority thus given, defendant entered upon the sawmill and logging business in this State and prosecuted the same until 1897, when after a fire destroying the plant, it declined to rebuild, hut established a sawmill eighty miles distant in the State of Arkansas. It did not thereafter use any of the timber on the land owned in this State, as an adjunct of the sawmill in Arkansas, but shortly before the lapse of six years from the discontinuance of its business here, it conveyed all the lands to one of its stockholders (Gilchrist) to hold for all the stockholders in proportion to their shares in the corporation. The only reasonable view to take of this act is that the defendant thereby intended to do one of two things: first, to make a bona-fide transfer of the title to said lands, in compliance with the Constitution and laws of this State, or, second, to make a colorable transfer^ of the title to said lands for the purpose of evading the Constitution and laws of this State. Which of these two motives characterized the act in question is readily determinable from a consideration of the circumstances attending its performance. Before examining these specifically, it may be noted that the positions taken in the learned brief for defendant are somewhat inconsistent. According to one theory, defendant, in good faith, conveyed an indefeasible title in fee to Gilchrist in 1902. According to the other contention made in the brief, defendant claims the right to own the land in question under the broad provisions of its charter in Wisconsin, as shown by a belated copy filed March 28, 1911, after the bringing of this suit. It is only necessary to discuss the first of these propositions, the — 372 — issues as to which were decided adversely to the defendant by the trial court; for if that judgment is upheld, it can make no difference as to its rectitude that defendant, after the bringing of the suit, sought to show (by subsequently filing its charter) a right to retain title to the lands in question contrary to the terms of its deed to Gilchrist. After a careful consideration of the testimony we cannot escape the conclusion that the learned trial court was correct in its findings as to the object and purpose of the deed from defendant to Gilchrist. We think the deed to Gilchrist was a pure pretense. It was made with seeming calculation just before the lapse of the six years after defendant retired from transaction of any and all business in this State. The title thus vested in Gilchrist purported to be subject ,to direction as to conveyance by him, which should be given by the stockholders as such, of the defendant corporation. These facts are susceptible of only one construction, which is that defendant recognized that its status in this State) after the cessation of its. business in 1897, as to its right to retain the land acquired here, fell within the provisions of the following clause of the Constitution of this State: “No corporation shall engage in business other than that expressly authorized in its charter or the law under which it may have been or hereafter may be organized, nor shall it hold any real estate for any period longer than six years, except such as may be necessary and proper for carrying on its legitimate business.” [Constitution, art. 12, sec. 7.] That this was a colorable conveyance by the defendant is further demonstrated by the fact that from the time- it was made until the present, it has kept on its books a separate account of the alleged Gilchrist trusteeship, which shows that all the taxes and disbursements on account therefor, have come from the coffers .of the corporation. This account shows in the aggregate some thirty-one thousand dollars,, with no evidence of interest charged, or closure. It also appears that the corporation claimed the right to receive the money for — 373 — alleged trespasses on the land, after its deed to Gilchrist, though suits therefor were brought'in his name. The resolution under which the conveyance was directed authorized it to he made for the consideration of one dollar. There is no evidence of the record or production of the trust declaration on the part of Gilchrist until after this suit. The evidence does show by the testimony of its assistant secretary and treasurer, that the understanding was that defendant would eventually operate this timber and that Gilchrist knew of that intention on the part of defendant. It was further shown by the witnesses for defendant that none of the timber on the land in question was ever used in connection with the Arkansas sawmill. And it further appears that this land has lain in practical mortmain from the time of the deed to Gilchrist, one of the. mischiefs which the Constitution is designed to prevent. The lands in question, during the twenty-four years since its original purchase, have been held in practically a solid body and appear to have increased in value from fifty thousand dollars tó approximately a million. By the holding device adopted by defendant it has reaped the benefit of the exploitation and enhancement of value that has and must come to the lands in that portion of the State from the State systems of drainage and Government systems of levees which have b.een and will be established. A careful consideration of this record has impressed us that the trial court was not only warranted by the undisputed testimony in the record in the imposition of a fine of only five thousand dollars,, but acted with leniency in thus limiting the fine for the misconduct of defendant. That judgment is not, however, to be held to preclude the State from proper proceedings hereafter (in case of further default of defendant) to cause a transfer of the title of the land in question so as to promote the complete alienability thereof contemplated by the Constitution. The judgment of the trial court is affirmed. It is so ordered. All concur, except Faris, J., not sitting.