Ashton v. Penfield

LAMM, J.

From a decree in • the Buchanan Circuit Court at its September term, 1908, overruling the several motions of defendants to revoke an order appointing a temporary receiver for the Merchants’ Improvement .and Investment Company, a corporation (hereinafter, for convenience, called the -M. I. & I. Co.),- finding the allegations of plaintiff’s petition to be true, decreeing that the temporary receiver be made permanent for the purpose of winding up the affairs of the M. I. & I. Co. and distributing its assets, dissolving the M. I. & I. Co., restraining defendants and each of them from collecting debts or receiving payments thereon belonging to said M. I. & I. Co., or from paying out or in any manner interfering with or delivering to any person, except the receiver, any of its moneys, properties or effects, and requiring the receiver to take possession of and sequester its real and personal-property, taking an account of its assets and property and reporting to the next term of the court (the court retaining jurisdiction to make such further necessary orders to carry into effect and execute the . decree, to wind up the business of the corporation and pay its debts and distribute its assets, etc.), defendants on due steps appeal.

The suit was begun by Lucinda B. Ashton as plaintiff. The Ashton Investment Company, a corporation, intervened, joined in the prayer and asked to have its alleged right to certain shares of stock, held by Mrs. Ashton in the M. I. & I. Co., determined, and that it be allowed to share in final distribution in accordance with its interest as so determined.

The scope of the assignments of error seeks a summary of the pleadings and facts.

The petition need not be reproduced in totidem verbis. Shortly stated, it charges that the assets of the M. I. & I. Co. consist of personal property and real estate of the value of $25',000'; that it has abandoned and ceased to exercise its charter rights and purposes (setting them forth), except in maintaining and renting its buildings; that its capital stock is $10,000 divided into 100 shares, of which Mrs. Ashton owns forty-nine, Mrs. Penfield forty-nine and Mrs. Smith two shares; that three persons constitute its board of directors; that A. H. Penfield (the husband of Mrs. Penfield) has always been secretary, treasurer and manager of the company; that Mrs. Ashton acquired her stock through the will of her husband Thomas, who died in July, 1906; that Mrs. Smith acquired hers in aid of a conspiracy through a pretended assignment from A. H. Penfield; that A. H. Penfield is a person of bad reputation for veracity and for honesty in business; that Mrs. Penfield, Mrs. Smith, and A. EL Penfield (Mrs. Smith being a sister of Mrs. Penfield) fraudulently conspired and confederated together to so use the corporate property as to secure to themselves its profits and funds for their own personal use and to deprive Mrs. Ashton of any income, dividend or profit from her stock. It then goes on to charge that with knowledge of Penfield’s malodorous reputation and Ms rascality in its corporate management, Ms said, wife and sister-in-law had permitted themselves to he wholly dominated hy him and had put him in sole charge of the corporation, its assets and business, had voted him an exorbitant salary as secretary, had wrongfully permitted Mm to occupy rooms in the business house of the corporation free of rent. It then charges with detail, a wrongful juggling of corporate accounts, a deep-seated dissension (personal and business) between the directors and between stockholders, the control of the votes of Mrs. Smith and Mrs. Penfield by Penfield as their adviser, agent and manager, and the wrongful and persistent use of such controlling power, the denial to Mrs. Ashton as a director and stockholder of any voice in the management or direction of the corporate business — all in pursuance of said conspiracy. Charging there were fraudulent erasures and alterations of corporate hooks and failure to keep true and honest accounts, misappropriations and conversions of corporate funds to personal and by-ends, neglect to conserve and protect the property interests of the corporation, such confusion and intermin*gling of accounts as to make it impossible to state true accounts of expenses, gross earnings or net income, a denial of the right of Mrs. Ashton to have access to such books as were kept, a failure to pay dividends because of reckless mismanagement (all to the injury of the company), the petition then alleges the boast of A. H. Penfield that he would see to it that no' profits to the Ashton estate would ever be shown under Ms management. It makes other allegations of the same trend and finally that plaintiff has no adequate remedy at law. The prayer is for the appointment of a receiver to preserve the property of the company, to take charge of its said property and its books and effects, to collect rents and pay existing obligations; that Penfield be required to account for his official conduct in the disposition of the funds óf the company and to return all moneys, properties or effects taken or misplaced by him, for the rent of the rooms occupied by him and for all sums wasted through negligence or bad management; that the directorships and other offices held by defendants be declared vacated; that the company’s property be sold; that the M. I. & I. Co. be dissolved and the proceeds of the sale of its property be distributed among stockholders, and for such further equitable and proper relief as the circumstances require and to the court seems just.

The petition was verified by the affidavit of Mrs. Ashton, and on the 28th day of May, 1908, the court appointed a temporary receiver pending the final determination of the cause, who was ordered to take charge of the corporation, all its assets, collect outstanding accounts, preserve its properties and assets, take necessary steps to protect the business affairs of the corporation, pay its legal debts — all under the direction of the court — and to give a $10,000 bond for the faithful performance of his duties.

Presently the M. I. & I. Co. filed a motion to revoke the order, and the other defendants filed theirs directed to the same end.

Presently, at the same term, the M. I. & I. Co. filed a general and special demurrer. Demurring generally because the petition did not state facts sufficient to constitute a cause of action, and specially because plaintiff had no legal capacity to sue and because several causes of action are improperly united in the petition.

At-the same term the other defendants filed a motion to strike out certain parts of the petition. At the same term the motion to strike out was overruled.

At the nest term said movents filed an answer denying every allegation in the petition and alleging that if plaintiff has a cause of action she has a complete and adequate remedy at law. At the same term the corporate defendant filed its answer to the same effect.

The motions to revoke the order appointing a receiver were taken below with the case on the merits. They appear in the record proper, bnt do not appear • in the bill of exceptions, nor is there any call for them in that bill. As part of its decree the court overruled those motions and the bill shows an exception saved.

The scope of the decree appears heretofore sufficiently. '

It will serve no appellate purpose to go in this opinion into the va’st details of the testimony of this long record. I have read every line of it. Experts were appointed to state an account from the books of the M. I. & I. Co., to state one between the M! I. &■ I. Co. and a bank, referred to in the petition as the Bank of Commerce, to state oné between that bank and Penfield on certain personal and special accounts involving the affairs of the M. I. & I. Co., and between the Ashton Investment Co. and the M. I. & I. Co. These accounts, together with pass books, and excerpts from the corporate books present a conglomeration of figures and items nearly all of which, disconnected from the testimony, could only be understood, if at all, by an expert bookkeeper. The trial chancellor had the advantage of them together with explanations made by experts on the stand with the books in hand. There were erasures, mutilations, interpolations and changes shown by the books and actually under his eye during the trial, which the silent printed record does not disclose to us. It results therefrom that a court of review does not occupy as good a position as the trial court in weighing discriminatingly many items shown by the books and in grasping the significance of bookkeeping methods evidenced thereby. Accordingly, we shall omit figures in detail (except in one instance hereinafter appearing), and state our understanding of the material facts disclosed.

A. H. Penfield is the son-in-law of Mrs. Ashton — a venerable woman, aged seventy-four years at the trial. In his career he had been with the Chemical National Bank of New York and with the Tootle-Lemon Bank of St. Joseph, was familiar with bookkeeping and was a versatile man of affairs. There is nothing to warrant the conclusion that the trouble, if any, found to exist in the bookkeeping or in the business affairs of the M. I. & I. Co. and chargeable to him, resulted from mere ignorance, inefficiency or inadvertence! Thomas Ashton, his father-in-law, a well-to-do old man, was capable of taking care of his own affairs until disease cut him down. However, Penfield had his confidence as his trusted agent and adviser and transacted much of his business and that of the M. I. & I. Co. until the old gentleman’s death in July, 1906. In May, 1905, Ashton had been sick for a time. His sickness culminated in a surgical operation and we infer that during that sickness and thereafter until Ashton’s death, Penfield, possibly more than theretofore, managed his affairs and those of the corporation.

' At a certain time, say in 1900', the M. I. & I. C'o. was incorporated with $10,000 capital stock,. divided into 100 shares. It was located in St. Joseph. Its charter life was fifty years. Its charter purposes were to purchase real estate in the county of Buchanan, subdivide the same, if advisable, into lots and blocks,, dedicate streets and alleys, to erect houses on such lots or tracts to sell the same, to loan money to assist persons in buying property and improving the same, to negotiate loans on real estate and personal security, and to borrow money pledging its property as security, and to do such acts and things as may be necessary to effectuate such purposes. Penfield was, and Ashton was not, a stockholder at that time. There were three directors, Penfield one of them. Its by-laws show its officers were president, vice-president, treasurer and secretary — the last two combined. That .the duty of the secretary -was to keep the seal aud minutes of stockholders’ and directors’ meetings, to countersign certificates of stock and to serve and publish corporate notices. That the duty of the treasurer was to receive all moneys, keep faithful account thereof, pay the obligations out of the corporate funds — the latter ’ to be kept in some bank in the official name of the treasurer. He was to make a full detailed statement ' once each year and was to have general management of the corporation. That no officer was to receive a salary except by vote of the directors. In 1902 Thomas Ashton purchased stock and was elected a director. At that time he owned and continued thereafter to o'vn forty-nine shares. From the outset to this day, Penfield was secretary and treasurer. At a certain time P'enfield, Ashton and Bullock were the sole stockholders. Presently, Bullock’s stock was acquired by the others and Penfield transferred forty-nine shares to his wife and retained two shares in his own name. After the death of his father-in-law he transferred these two shares to his sister-in-law, Mrs. Smith, and the stockholders at that time were Mrs. Ashton, who claimed under the will of Ashton, and her daughters, Mrs. Smith and Mrs. Penfield. At the stockholders’ meeting in 1907 the mother and the two daughters were elected members of the board of directors, Mrs. Smith being recognized as a stockholder and the mother voting “no” on all substantial matters presented — • among others, the matter of approving the secretary’s report and approving all unapproved minutes, and waiving the by-law regulation on the transfer of stock to Mrs. Smith. She did not participate in the ensuing directors’ meeting at which Mrs. Penfield was elected president, Mrs. Smith vice-president, and Penfield secretary. This was the first meeting so far as disclosed at which the secretary-treasurer made the financial report called for by the by-laws. Prior to that time no officer had received a salary, hnt at that meeting one of $50 per month was voted- the secretary.

Going back a little. In 1904 the Ashton Investment. Company was incorporated — its charter life fifty years, its capital stock, $15,000, divided into 150 shares of $100 each. In that corporation Thomas Ashton owned 148 shares, Penfield one and: a Mr. Sheridan’ (another son-in-law of Ashton) one. Its charter objects were “to buy, own, hold, improve and sell real' estate in Missouri and elsewhere in the United States, to negotiate loans and buy and sell negotiable securities, loan money on real estate and personal security, and to'pro secute any other lawful business in which the directors may decide to engage for profit.”

Thereafter, in the same year Ashton in consideration of $1 conveyed by warranty deed to the Ashton Investment Company supdry and divers tracts and parcels of real estate in the city of St. Joseph, Missouri, together with whatever personalty was transferred by this clause, viz.: “Also all stocks, bonds, mortgages and all personal property of every descrip- • tion, including household furniture, horses, wagons and farm implements,” appearing in the body of the deed. This deed was spread of record the day after its execution and the testimony runs to the effect that Ashton used the Ashton Investment Company thenceforward as a convenience, a vehicle to carry his business ventures and affairs.

In 1878 Ashton made his will, giving all his property to Mrs. Ashton for life, donating to her power to take possession and to exclusively control and manage the same for the enjoyment, use and benefit of herself and for educating and raising- the three youngest children. directing that no final distribution be made until hig wife cease to be his widow or should die and giving her full power and authority to control, manage, sell or convey absolutely any or all of his estate on such terms as she may see fit and convenient, to control, manage or reinvest the proceeds of said sales as may to her seem best, to make advancements to their children and on her death or remarriage the rest, residue and remainder of his estate, after carrying out the other provisions of the will, was to be distributed in equal parts to certain named distributees, his children. In that will he mentioned certain advancements made Mrs. Sheridan and Mrs. Smith. In 1896 he executed a codicil in which is set forth certain advancements made his son William, and it is directed that William account therefor. In 1903 he added a second codicil setting forth further advancements to William, revoking certain parts of the first codicil and making a new arrangement in relation to William and certain children of his. That will was probated! and Mrs. Ashton, nominated therein as executrix, qualified. In her appraisement and inventory she made no reference to the stock in the M. I. & I. Co., but did inventory the stock in the Ashton Investment Company. We infer the estate is in process of administration.

Singular as it may seem, defendants (barring their plea) .'stood mute at the trial and introduced no evidence tending to break the force of plaintiff’s testimony, to be presently referred to, sustaining the charges of fraud and mismanagement made in the petition, thereby practically confessing the same. That testimony tends to show that the only property .owned by the M. I. & I. Co. is a brick building at the corner of King Hill and. Missouri Avenues, in the city of St. Joseph, plus the ground on which it stands and certain furniture and fixtures appurtenant thereto. It is three-story structure. The ground floor has three or more business rooms. The second is cut into offices. The third has a hall for lodge purposes and offices. The building is valued at from $25,000 to $28,000, and the ground at, say, $6000. The ground-floor business rooms are severally rented to a clothing man, a drug man and a bank. The offices are rented by professional people and the hall by lodges meeting there. After this building was built Penfield organized a small bank, called the Bank of Commerce, of which he was president and the dominating stockholder and spirit. This bank occupied the banking room in said building as a tenant of the M. I. & I. Co., and its books were under the personal supervision of Penfield, and the M. I. & I. Co. was its customer. The testimony shows it went into the hands of a receiver in 1907, but what dividend, if any, it paid is not disclosed. It was permitted by Penfield while a going concern to become indebted to the M. I. & I. C'o. in the rise of $1400 for monthly rent, which account was not only not collected as it accrued, but was never presented to the bank receiver and is a total loss as we see it. After the death of Mr. Ashton, Penfield’s wife and sister-in-law as directors of the M. I. & I. Co., in 1907, ordered this rent charged off as a loss.

If the M. I. & I. Co. ever used any of its charter powers outside of building said business house and. renting and maintaining the same, it is not disclosed. Certainly there is no trace of such úse of its franchises for the years just preceding* this suit. There was uncontrádicted testimony that its simple affairs could be well attended to by any responsible real estate and rent collecting agency for five per cent of its income— say, ten to fifteen dollars, per month. This would include looking after repairs, insurance and taxes, but it would not include a janitor — janitor service having always been provided extra at thirty dollars per month. For this service, when the corporation was paying no dividends and its affairs had been put in confusion, Penfield’s wife and sister-in-law, as said, allowed him, in 1907, for the first time in its history, to be employed as secretary at a salary of fifty dollars per month. He is a note broker and loan agent now, apparently was such broker and agent.while managing the Bank of Commerce and the M. I. & I. Co. He was, as such note broker and agent, with a clerk, occupying three rent-able rooms in the building by permission of his wife and sister-in-law, rent free, and in his personal business has the use of office furniture belonging to the M. I. & I. Co. This office furniture, we take it, in point of fact, was purchased to refit these offices, for his private business as a broker and money loaner. No corporate necessity was shown for such complete office outfit, nor for the use of such offices to the exclusion of tenants. He is now paying the receiver ten dollars per month therefor. Up to the failure of his bank he seems, when occasion called, or necessity spurred, to have used the name of the M. I. & I. Co. to raise money to pay or carry personal obligations at his own bank,, having small regard to meum et tuum. In one instance he, in a veiled and roundabout way, paid a lawyer’s fee of $200 out of the company’s funds after Ashton’s death for defending a colored man named Flynn for a murder in a gambling fracas. There were other instances in which he used the corporate name on notes for his private purposes and to stiffen his personal credit with his bank, but it is not so clear in the jungle of accounts that eventually the corporation had any of them to pay. In several instances, however there was a shifting of accounts, and moneys disappeared from M. I. & I. Co. funds to reappear in other accounts in his name, afterwards so manipulated that they never got back to where they belonged. "We confess to a bad impression arising from such devious and foxy trails. He kept no proper books, no cash book, ho journal showing the corporate accounts and business transactions of the corporation from day to day. He kept a ledger which is full of erasures and alterations made by him, all not without a sinister look. He mixed the corporate accounts with his personal accounts in the bank, and handled them in his bookkeeping somewhat as a personal matter. He made no annual financial statements except one. He kept no account with tenants showing when rooms were occupied and when not, and at what rental and by whom, but he bulked the income of the building in gross, furnishing no clue by which his accounts could be checked up and verified in that behalf. In short, the accounts and business affairs of this, small corporation became inextricably confused and this apparently resulted from a settled course long pursued by him. He is shown to be a man of bad repute for truth and honest dealings, and defendants in the face of such proof offer no countervailing testimony. Mrs. Smith and Mrs. PenfieLd live in the same house. What one does the other does in the matter of corporate management. They share each other’s wishes, hopes and plans and the master-hand guiding and controlling both of them is Penfield under this record. He thinks for them. They move as and when he directs, and there is testimony tending to show that the minutes of the last corporate meeting and directors’ meeting were prepared substantially in advance by him and ratified by them. We have no doubt they know of and approve his course and purposes, and, so> knowing, have put and hold him in control for personal ends and not for the corporate good and that his management, with their acquiescence, has resulted in radical corporate injury. There is testimony of a veiled boast of his that the corporation should be so managed that the Ashton estate should have no income from it. Whether this boast be true or not, that end has apparently been attained. For years the M. I. & I. Co. either paid or credited dividends, but since the death of Mr. Ashton it has paid none, and no adequate explanation has been made or ■ attempted for this significant fact.

There are other phases of this case not to be overlooked. Mrs. Ashton though recognized as a stockholder, -either in her own right .or as trustee under the will of Ashton, was refused access to the corporate books and the right to investigate them and was compelled to enforce her right by mandamus in the courts. Not only so, but there are deep-seated corporate and personal dissensions among the stockholders and directors naturally tending to waste, recklessness, unfairness, inefficiency and general bad management.

A matter throwing a flood of light on the relations of the parties owning this family corporation is seen in another suit pending at the time of the trial wherein Mrs. Penfield sues her mother and other distributees of the Ashton estate to set aside a contract evidencing an advancement to her in the sum of $22,000, which contract she alleges was procured by duress and threats of criminal prosecution against her husband for converting to his own use various sums of money belonging to the Ashton estate, aggregating that amount. Light on that phase of the situation is further thrown from the evidence indicating that Penfield used large amounts of bis father-in-law’s funds to conceal or make good his own overdraft in his own bank when it was under examination by the State authorities in 1905. There is also evidence that having, charge of his father-in-law’s bank pass book at the time of his death and before, and having been repeatedly asked to deliver it over when his father-in-law was sick, and to executrix after his death, he on one excuse- or another did not do so. The pass book was lost or destroyed, and simulated or contradictory copies thereof were after-wards furnished by him, which did not agree with the bank books, the original pass book- or with each other.

We mention these things merely to show the deep-seated suspicion and dissension existing, and finding voice, in the corporate management.

There was testimony that a small block of stock in a bank, now a.tenant of the M. I. & I. Co., had been bought with its funds. Put this ultra vires act is not shown to have resulted in’any loss and is a matter easily corrected.

Over insurance was taken on the building. Policies for $30,000 were carried on a building worth, at the highest estimate, $28,000'. The petition charges that this over insurance was carried that Penfield might make a profit on the premiums. That charge is not sustained. Under the receiver the yearly rental of the building is estimated at, say, $4000. The following exhibit (one of many in the record), reproduced in part, summarizes the situation and tells its own story:

STATEMENT OP CASH .INCOME, CASH EXPENSES AND DIVIDENDS PAID IN CASH TO STOCKHOLDERS.

1901.

Rents, year 1901, March to December, inclusive .................... $ 2,578.43

Interest .........................$ 838.22

Insurance .................... 347.60

Taxes ............................ 88.88

Other Expenses ................... 224.63 1,499.13 $ 1,079.30

1902.

Rents ........................... $ '3,043.94

Interest..........................$ 794.70

Insurance ........................ 73.95

Taxes ............................ 86.70

Other Expenses ................... 487.40 $ 1,442.75 $ 1,528.39

1903.

Rents ............................ $ 3,614.88

Interest..........................$ 286.80

Insurance ........................ 58.05

Taxes ............................ 159.50

Other Expenses ................... 1,081.75

1904.

Dividends '........................$1,150.00 $ 2,736.10 $ 878.78-

Rents ............................ $ 3,065.21

Interest..........................$ 84.78

Insurance..................... 449.13

Taxes ........................... 78.30

Other Expenses ................... 896.19 ■

Dividends ........................ 450.00 $ 1,958.40 $ 1,106.81

1905.

Rents ......... $ 3,047.20

Interest ....... ! 80.50

Insurance ..... "516.05

Other Expenses 1,160.83

Dividends ..... 300.00. $ 2,057.38 989.82

1906.

Rents ................... .....$3,022.00

Interest on hills receivable ..... 12.85 $ 3,034.85

Insurance ............... $ 149.08

Taxes ....-............... 562.86 -

Other Expenses .......... 1,640.68 $ 2,352.62 $ 682.23

1907.

Rents ................... .....$3,608.54

Interest on bills receivable ..... 19.80 $ 3,627.74

Insurance ............... $ 530.93

Taxes ................... 563.81

Salary, A. H. Penfield, Secy. 300.00

Other Expenses ........... 1,155.26 $ 2,550.00 $ 1,077.74

1908.

Rents .................. .....$ 561.50

Interest on bills receivable ..... 7.77 $ 569.27

Salary, A. H. Penfield .., 100.00

Other Expenses .......... 169.26 $ 269.26 $ 300.01

Total Income ................. $22,581.52

Total Expenses ................ 12,965.64

Excess of Income.............. 9,615.88

Total Dividends Paid .......... 1,900.00

Part of trial balance from Secretary’s hook under date of February 29, 1908:

PROPIT AND LOSS.

Insurance ..........$ 2,124.59

Taxes............... 1,540.05

Interest ............ 2,085.00

Other Expenses ...... 7,216.00

Bal. Surplus Account.. 10,515.88

$23,481.52

Rents ..............$22,541.70

Interest ............ 39.82

Discount Notes ....... 500.00

Discount Notes ....... 400.00

• $23,481.52

SURPLUS.

Building ............$27,996.26

Bal. Dividend Account. 3,751.85

$31,748.11

Balance.............$10,515.88

Stockholders........21,218.63

Material Sold... 13.60

$31,748.11

DIVIDEND ACCOUNT.

Paid Ashton .........$ 931.00

Paid Penfield ........ 969.00

Credited Ashton ..... 891.50

Credited Penfield ..... 919.71

Balance............. 40.64

$ 3,751.85

Balance ............$ 3,751.85

$ 3,751.85

STATEMENT OF CASH RECEIVED FOR RENTS AND CASH PAID FOR EXPENSES FROM MARCH, 1901, TO FEBRUARY, 1908, INCLUSIVE:

years. 1901. 1902. 1903. 1904. 1905.

Rents Received ....$2,578.43 $3,043.94 $3,614.88 $3,065.21 $ 3,047.20

Expenses Paid ..... 1,499.13 1,442.75 1,586.10 1,508.40 1,757.38

Excess of Rents over Expenses........ 1,079.30 1,601.11 2,028.78 1,556.81 1,289.82

Average Monthly-Rents .......... 157.84 253.66 301.24 255.43 253.93

Average Monthly Expenses ........ 149.91 120.23 132.17 125.70 146.44

Ratio of Expenses to Rents .......... 58.14 47.40 43.87 49.20 57.66

years. 1906. 1907. 1908. totals.

Rents Received ____$3,022.00 $3,608.54 $ 561.50 $22,541.70

Expenses Paid...... 2,352.62 2,550.00 269.26 . 12,965.64

Average Monthly Rents ........... 251.83 300.71 • 280.75 268.35

Excess of Rents Over Expenses........ 669.38 1,058.54 292.24 9,576.06

Average Monthly Expenses........ 196.05 212.50 134.63 154.35

Ratio of Expenses to Rents ........... 77.86 70.66 47.86 57.52

Any other vital facts will appear in the course of the opinion.

On such record, error is assigned, for that

(1). The court appointed a receiver for a solvent and going corporation on a petition stating no cause of action (and herein of whether the petition is sufficient foundation for any relief).

(2). Overruled the motion to revoke the order appointing a receiver.

.(3). Entered a decree dissolving the M. I. & I. Co.

(4). Held that Lucinda B. Ashton had legal capacity to sue.

(5). Permitted the Ashton Investment Co. to file an intervening petition while the case was under advisement.

I. Of the secondary assignments of error.

Before reaching main propositions, it is better to clear up the case by disposing of minor assignments of error — the 2d, 4th and 5th.

(a). Was there error in holding that Lucinda B. Ashton had legal capacity to sue? The question has several points of view, viz.:

(1). Her legal capacity to sue was challenged only by the demurrer of the M. I. & I. Co. That is regularly the way to raise the question when (and only when) the petition shows on its face her legal incapacity. [Sec. 1800, R. S. 19091.] The second statutory ground of demurrer, as set forth in that section, is: When it shall appear on the face of the petition “that the plaintiff; has not legal capacity'to sue.” In this petition there are no facts stated that either directly or by necessary implication show any legal incapacity-in her to sue; hence that ground of demurrer is not well laid.

(2). Moreover, -when defendant corporation subsequently filed its answer, as it did, it thereby waived its demurrer in that particular. By filing an answer raising issues of fact, and invoking a trial thereon, it is good and stiff doctrine that a defendant is held to waive all defects — barring two capital ones, viz., that the petition does not state facts sufficient to constitute a cause of action and jurisdiction of the subject-matter. [Hanson v. Neal, 215 Mo. l. c. 277, and cases cited.] Defects of the kind in hand become mere burnt powder after answer made, and a call to hark back to them falls on unheeding ears in a court of dernier ressort.

(3). Where legal incapacity to sne does not appear on the face of the petition, snch issne, if raised at all, must be raised by answer. [Baxter v. Transit Co., 198 Mo. 1; Bulkley v. Iron Co., 77 Mo. 105; Fulwider v. Power Co., 216 Mo. l. c. 582.] It was held in the Baxter case that a general denial was not sufficient to raise the issue of legal capacity to sue. Neither of the answers in this case has a special plea in abatement or bar raising such issue.

On such premises, the point must be ruled against defendants.

(b). Was there error in permitting the Ashton Investment Company to file its intervening petition-while the case was under advisement? If the dates in defendants’ abstract control, this intervening petition was filed after judgment and after motions for a new trial. But there is internal evidence in that abstract of mistake in dates. One of the points made in the motions for a new trial was the permission to file the intervening petition. That point involves an impossibility, an anachronism, if that petition was filed after the motion. Coming events cannot so cast their shadows before as to be dealt with as facts in praesenti in pleas under rules of scientific pleading. The situation is cleared up by an additional' abstract of plaintiffs, showing the intervening petition filed before judgment.

The point up- is quite delicate. It is evolved from the theory that Ashton’s stock in the M. I. & I. Co. passed by his deed to the Ashton Investment Company and became merged in the assets of that company, thereby making it a holding company with the legal title. That subsequently the will of Ashton in favor of Mrs. Ashton, giving her the life ownership of all his property, was operative to convey his then stock in the Ashton Investment Company, which latter stock, by operation, of law, took with it all the legal or equitable rights and benefits of the stock in the M. I. & I. Co.

But the point is quite beside the merits, hence the case ought not to be allowed to break there. This, because the intrusion of the Ashton Investment Company-raised no issue calling for present determination below or here. Its petition went to its right to share in the final distribution of the proceeds of the sale of the assets of the M. I. & I. Co., and calls for determination when that distribution, if ever, is up- for final adjudication. [Avery v. Bank, 221 Mo. l. c. 82 to 85, inclusive.] It raised no new issue' touching defendants — ■ nor did it impose any new burden upon them. They were in nowise injured by the appearance of the petition in the files. Nor have they concern with the conflicting claims (if any) of the Ashton Investment Company and Mrs. Ashton between themselves, ergo that petition calls for no plea from them. Withal, the decree did not dispose of the issue raised by the intervening petition, but left it in gremio legis.

We take the point, as one without present substance and to be reserved. We so rule.

(c). We also rule the second assignment against defendants. This because, error in overruling the motion to revoke the order appointing the temporary receiver is not regularly here for consideration. Error in such ruling can be reviewed only when the motion itself is part of the bill of exceptions, or where it appears in the record proper (as here) and a call is made in the bill for the motion itself. [Bank v. Bank, 169 Mo. 74; Cantwell v. Lead Co., 199 Mo. l. c. 41; Hendricks v. Calloway, 211 Mo. l. c. 555, et seq., and cases cited.] The matter is crystallized into and regulated by statute. [Vide, Sec. 2083, R. S. 1909.] And defendants do not bring themselves within that statute.

II. The main propositions are related and naturally fall into subdivisions under one head.

(a). Does the petition state a'cause of action foi the appointment of a receiver and for other relief? The question comes up later wlietlier the court went too far in its interlocutory decree. It is necessary, however, to disentangle the last question from the first by determining at the threshold whether the only life of the petition is to dissolve the corporation, wind up its affairs and make distribution among creditors and shareholders. Because if that is the all in all of the suit, then the appointment of a receiver and other relief are so purely incidental and ancillary as not to touch the merits, and the case must ride off solely on the single question of whether the court had power to decree a dissolution and order distributing. In that narrow view of it, if we hold a court of equity lacks power to dissolve the corporation, then the receivership goes by the board.

But we are not able to- bring ourselves to the view that this petition states no cause of action except for the dissolution of the M. I. & I. Co. It dealt with a situation having several angles. One declared object of the petition was to preserve and conserve- the corporate property by taking it out of mismanaging, wasteful and fraudulent hands, and putting it in the care of the court. Another is the righting of property wrongs suffered a-t the hands of those in charge. Allegations directed to such relief abound. The prayer is broad enough to include such relief, and both allegations and proof imperatively call for it if it may go on equity principles. Attending to those principles, I think the general doctrine is that however reluctantly equity moves in lifting the affairs of a corporation from its officers and board of directors, yet it does move, and that in a known orbit and with vigor. It has large power in that behalf in emergencies appealing to conscience. Corporate insolvency may be a factor worth considering, when present, but actual insolvency is not necessary (as will presently appear) to the exercise of equitable jurisdiction and the supervision -of a chancellor through, a receivership where there is such gross mismanagement or fraudulent conduct of corporate affairs as head towards corporate disaster and wrong to shareholders.

It is urged that such relief is at law, not in equity, aud we are referred by counsel to certain sections of the statutes for the cure of corporate ills. But those statutes are not preclusive and do not oust the ancient and settled jurisdiction of equity, absent express provision to that effect. Apposite to that view of it, this court said in Greeley v. Provident Savings Bank, 103 Mo. 222: “But the circuit court, independent of section 2193, Revised Statutes 1889, had the authority to appoint a receiver in vacation and to subsequently confirm that provisional appointment by an order made on the assembling of court. The section referred to does not shorten the arm of a court of equity in this particular; since no words of preclusion are used in that section. [Cox v. Volkert, 86 Mo. 511.]"

Before existing heads and subjects of equity jurisdiction are lopped off, the lawmaker must evince such beheading purpose so unmistakably that there can be no' fair two ways about it. [Baldwin v. Davidson, 139 Mo. l. c. 126-7, and cases cited; Arnett v. Williams, 226 Mo. l. c. 118-9.]

The matter was in judgment in another case, Thompson v. Greeley, 107 Mo. l. c. 586, et seq., and the doctrine of the Greeley case was reaffirmed. After discussing the general doctrine in High and Beach in their works on receivers, to the effect that courts of equity will not ordinarily take over the management of the affairs of a corporation from its own officers and entrust it to a receiver, Macfablane, J., in the Thompson case, points out that the general statement of those authors is qualified by certain exceptions arising from cases of extreme necessity. “These authors,” he says, “place the want of jurisdiction- on the ground that a forfeiture of the corporate franchises can only be dedared in a court of law in a proceeding in the name of the State, and the appointment of a receiver and a sequestration of the corporate property would suspend the functions of the corporation and virtually operate, as an annihilation of corporate rights. These are persuasive reasons why courts should act with great caution, and not take the management of the concerns of corporations out of the hands of directors and managers, to whom the law has intrusted it, except in cases of urgent necessity. It is no reason against the jurisdiction of the courts when equity alone can grant adequate relief or protection to stockholders and creditors. These authorities, we think, recognize the jurisdiction, but limit its exercise to cases of extreme necessity. ’ ’

In State ex rel. v. Bank, 197 Mo. l. c. 593, et seq., the question was approached, hut plowed round, and not decided. However, Cantwell v. Lead Co., 199 Mo. 1, was a suit to appoint a receiver and for relief flowing from such appointment. The, Lead Company was not insolvent but there were allegations of extreme mismanagement, 'fraud, waste, impending danger to the corporation and internal feuds and dissensions standing in the way of harmonious and wise action. The question, in judgment was: Did the petition state a case for the appointment of a receiver? We unanimously ruled it did. The doctrine of that case has not been exploded, and should he reckoned with. In the face of contentions made in briefs and at the bar by learned counsel for defendants that case may best speak for itself, thus: “Courts have hesitated to lift the affairs and assets of a corporation out of the hands of its board of directors and administer them through receivers, and have flatly said so, and given cogent reasons for this hesitancy. . . . But when all this has been said, it may further be said that this court has never denied power in a chancellor to prevent a scheme of irreparable injury and wrong, merely because, the movers in that scheme speak and act in a corporate capacity rather than in an individual capacity. That solvent corporations are wrecked for purely selfish and illegal purposes, that minority interests are ‘frozen out,’ that business immorality has run amuck under the assumption that courts are powerless, is too true. But the assumption is wrong. Judicial hesitancy does not mean judicial atrophy or paralysis. The board of directors of a corporation are but trustees of an estate for all'the stockholders and may not only be amenable to the law, personally, for a breach of trust, but their corporate power under color of office to effectuate a contemplated wrong may be taken from them when, by fraud, conspiracy or covinous conduct, or extreme mismanagement, the rights of minority stockholders are put in imminent peril and the underlying, original, corporate entente cordiale is unfairly destroyed. It would be sad commentary on -.the law if, when the trustee of a corporate estate is making an improper disposition of it, or has shown improper partiality towards one of its conflicting parties, or has put the estate in a fix it is liable and likely to be either wasted or destroyed, or mercilessly taken from all and given to a part,' a court could not reach out its arm and preserve and administer the estate. "We have never so declared the law.” ,

In State ex rel. v. Foster, 225 Mo. 171, we issued our writ of prohibition restraining the enforcement of a decree in certain particulars because it went too far. But, observe, in that case we did not interfere with the receivership itself — contra, we said this (p. 203): “The court upon the facts as disclosed by the record in that proceeding, had full power to appoint a receiver to take charge-of the assets of the .corporation. ” This ruling was our answer to the contention that we should lay a judicial ax at the very root of the case.

And in State ex rel. Sanitol Chem. Lab. Co. v. Geo. H. Williams, Judge (a case in which no* opinion was written), a receiver was appointed below for a solvent corporation on many specifications of gross and fraudulent- corporate mismanagement. On application made here on March 29, 1910, for our writ of prohibition, we refused the writ in Banc.

The doctrine of the Cantwell case finds strong support in standard authority.

In Gluck and Becker's Rec. of Cor. (2 Ed.), p. 53, is this: "The inherent power of a court of equity to appoint a receiver of the property of a corporation at the instance of one or more stockholders, charging fraud and mismanagement on the part of the officers 'in charge, to the imminent danger of the interests of such stockholders, is now too well settled to admit of question.” The text is put on the ground that the corporate property “is not safe in the hands of corrupt and irresponsible officials.”

In 1 Foster's Fed. Prac. (4 Ed.), pp. 768-9, the sum of the matter is announced thus: 11 Independently of statutory authority, a court of equity will ordinarily appoint a receiver of the property of a corporation in •only eight classes of cases: Firstly, .... Secondly, .... Thirdly, at the suit of persons interested in the property, whether as stockholders or creditors, . . . where there is a breach of duty by the directors, and an actual or threatened damage of a serious. nature, although there is no insolvency. Fourthly, . . . Fifthly, . .' . Sixthly, where the governing body is so divided and engaged in such mutual contentions, that its members cannot act together ..."

And in a very late edition of an approved work (3 Cook, Cor. [6 Ed.], bottom pp. 2490, et seq.), the general doctrine is put in this way: “A court will not appoint a receiver merely because some of the stockholders disapprove of the management. A receiver will not be appointed at the instance of a stockholder, even though mismanagement is charged, there being no fraud and no danger of insolvency. There is a limit,-however, to this rule. The powers of courts of equity to appoint receivers are very broad. Thus a court of equity has'power to appoint a receiver where there is such fraud or dissension as to make it impossible for the corporation to carry on its business honestly and to the advantage of its stockholders. Such receivership, however, will be granted only in extreme cases and will be limited in time and extent, so far as the circumstances will permit.”

Smith states one of the rules to be (Smith on Rec., p. 359), that a receiver will be appointed “where upon application of a stockholder it is shown that the directors and officers of the corporation are mismanaging its affairs, as for their own personal advantage and gain.”

Morawetz (Pri. Cor., sec. 399) holds to the view that the appointment of a receiver of a solvent corporation must be considered a strong remedy to be justified only in 'a strong ease. [See Alderson, Rec., sec. 347.]

In the leading case of Hawes v. Oakland, 104 U. S. 450, speaking for all his learned brethren, Mr. Justice Miller said: ‘ ‘ That the vast and increasing proportion of the active business of modern life which is done by corporations should call into exercise the beneficent powers and flexible methods of courts of equity, is neither to be wondered at nor regretted; and this is especially true of controversies growing out of the relations between the stockholder and the corporation of which he is a member. The exercise of this power in protecting the stockholder against the frauds of the governing body of directors or trustees, and in preventing their exercise, in the name of the corporation, of powers which are outside of their charters or articles of association, has been frequent, and is most beneficial, and is undisputed.” In discussing the true foundation for a suit by stockholders, in that case, the allowable exercise of equity jurisdiction is put substantially, I think, on grounds announced by quoted authorities. [See p. 460.]

The trend of the doctrine of many courts is the same way. For example: Ponca Mill Co. v. Mikesell, 55 Neb. 98; Haywood v. Lincoln Lumber Co., 64 Wis. 639; Davies v. Light Co., 107 La. 145; Sternberg v. Wolff, 56 N. J. Eq. 389; Stevens v. Davison, 18 Gratt. 819; Miner v. Ice Co., 93 Mich. 97; Wayne Pike Co. v. Hammons, 129 Ind. 368; Duncan v. Treadwell Co., 82 Hun 376; Cameron v. Groveland Improvement Co., 20 Wash. 169; Jasper Land Co. v. Wallis, 123 Ala. 652; Griffing v. Griffing Co., 96 Fed. 577. In Tompkins v. Catawba Mills, 82 Fed. 780, stress was laid on a deep-seated division in the board of directors which could not be healed. [Towle v. American B. & L. & I. Soc., 60 Fed. 131; Arents v. Tobacco Co., 101 Fed. 338; Red Bud Realty Co. v. South, 131 S. W. (Ark.) 340; Davis v. Hofer, 38 Ore. 150; O'Connor v. Knoxville Hotel Co., 93 Tenn. 708.]

Applying the foregoing propositions to the facts and pleadings, our conclusion is that the petition states a cause of action for the appointment of a receiver and other relief falling short of the capital event of dissolution, and that the facts are of such sort as to make the case a typical one to be settled by equity principles. The conspiracy charged is proved in its scope and ultimate purpose. Fraud and extravagant and corrupt mismanagement for personal and by-ends, long persisted in and still existing, whereby the rights of shareholders have been grievously hurt, make up the miserable story of the life of this corporation. Its affairs and books have been put and kept in confusion. The truth is hid away in bad bookkeeping. Mrs. Ash-ton having a right to see into its affairs was arbitrarily fenced off and denied the right to look. Either an ingrained inability or lack of disposition to protect the corporation from being used as a personal convenience and perquisite of Penfield is shown. That Penfield is not a suitable person to have charge is shown. That he controls his wife and sister-in-law, thinks for them and acts for them, and that they do as he bids them do, sufficiently appears. That with knowledge of his misdoings and evil purposes they put and keep him in charge of the corporation as its only active officer and sole manager sufficiently appears. They seem to be one and all unfaithful stewards as trustees of a trust estate, hence have forfeited the right to control that estate, however much they may masquerade under cloak of a majority of the stockholders. The record shows that on top of the capital stock ($10,000), something like $14,000 went into the construction of the building.. That Ashton paid his half of this $14;000 is clear. If P'enfield ever paid his entire half, that fact is only shown, we think, by rather mysterious bookkeeping. Assuming, however, he did, here is a valuable ten year old building, the sole corporate asset, apparently renting readily in a great city. The ratio of its expense to rent has run from about forty-three per cent to nearly seventy-eight, per cent for each year. The building went from a dividénd-paying basis- to a non-dividend-paying basis and no proper excuse is shown. Its books show a surplus, but, as I see it, that surplus is a fiction of the bookkeeper’s art. Certainly, such surplus is not in its chest in cash nor in any other visible asset. With afflictions of this sort its secretary is given a salary of $600' per annum and free rent as a loan agent and money broker, amounting to $120 more, when under .the proof the rents would almost be a fair exchange for Ms services as secretary. The deep-seated corporate dissensions shown are ills necessarily breeding weakness and danger until cured or put aside. There is high authority for the propositions that a house divided against itself cannot stand. Under this- record the majority stockholders and directors are in the wrong in matters of difference and the minority in the right. To hold that such majority may work its will upon the minority when that will seems evil, as here, is hut to admit that the arm of a court of equity is too weak or too short. Fortunately, it is neither. We lay stress upon the fact that defendants are silent when fraud, extravagance, mismanagement, oppression and injury are laid at their door and proved to exist; and stress upon another fact, namely, that evils present are not the mere product of ignorant inefficiency or mere differences of opinion in the administration of complicated and delicate affairs. They are the product, apparently, of design and capacity, a disposition and power to wrong. This corporation was not an elaborate and great affair of far-reaching scope and diversified interests, requiring nice discrimination in administration in which differences of opinion might naturally arise among plain, average and well-intentioned people. Contra, it is a simple business corporation with simple affairs,' requiring only the cardinal house-spun virtues of diligence, economy, zeal and honesty in management to fetch to all its owners a modest return upon their stock investment. We conclude, then, that in the face of injuries, suffered and threatened, the minority stockholder was entitled to a receivership and to the aid of equity in rehabilitating the corporation by such orders, proceedings, suits and management as would attain that result and meanwhile protect the corpus of the estate. Under the facts here the complaining stockholder could get no relief from corporate action. It is not to be supposed the wrongdoers would sue themselves and if they had done so such suit would have been so against reason as to he a transparent fraud; for one party only would be dominus litis.

We rule the present assignment of error against defendants.

(b). The remaining question is: Did the decree go too far in dissolving the corporation, theréby ending its life, and ordering the distribution of the estate among shareholders and creditors?

That question has two sides. It has been held in respectable cases that where the situation is so crying as to show the purposes or business of the corporation have been abandoned, or where performance of the corporate purpose is clearly impracticable, or where the trouble is so radical, deep-seated and dominating as to point to inevitable corporate disease, a crippled and non-paying corporate life, equity will wind up its affairs and dissolve it, absent statutory authority. [Arents v. Tobacco Co., 101 Fed. 338, and cases and authorities cited; O’Connor v. Knoxville Hotel Co., 93 Tenn. 708; Miner v. Ice Co., 93 Mich. 97; Gluck and Becker on Rec. (2 Ed.), pp. 54, 55.] But the doctrine of this court runs counter to that and our doctrine accords with the overwhelming weigh! of authority elsewhere. The rule in this jurisdiction is that a court of equity is without any jurisdiction in any extreme case put to dissolve a corporation and make distribution of its assets. [State ex rel. v. Foster, 225 Mo. 171.] I did not agree to that ruling when made, but was of mind then that the reason of the rule no longer existed in full vigor because of changed business conditions. But there was no call then or now to give voice to con- • trary views. The matter is settled. Stare decisis. On the authority of the Foster case we hold the decree erroneous in the above particular,

Accordingly, the decree should be reversed and the cause remanded with directions that the court enter a decree confirming the appointment of a receiver, overruling the motions to revoke the order appointing him; that the receiver should be kept in charge until such time in the future as the court may find full equity done and that it should then lift its hand and retire, otherwise proceeding in accordance with this opinion, reserving the right to itself in said decree to make such further and other orders and judgments from time to. time as equity and good practice call for. It is so ordered.

Ferriss, Kennish and Brown, JJ., concur; Valliant, G. J., dissents in an opinion filed, in which Woodson, J., joins; Graves, J., dissents in an opinion filed, in which Woodson, J., also concurs.