From the Circuit Court of Boone County; Civil Appeal; Judge Frank Conley; Reversed and Remanded With Directions
Motion for Rehearing Overruled, Transfer Denied November 15, 1983. Application Denied December 20, 1983.
Before Somerville, C.j., Shangler, Manford, JJ.
The opinion of the court was delivered by: Shangler
The trial court entered a judgment to terminate a joint venture, adJudged an accounting of the venture property, and after adjustment of the equities, ordered distribution to the several venturers. The order of the court was the response to our mandate in Sheridan v. McBaine, 564 S.W.2d 540 (Mo. App. 1978). That opinion determined that a subscription agreement to convey property to a corporation in return for shares of stock bound the successors in interest to the subscribers as de jure joint venturers when the corporate purpose aborted upon the death of a subscriber.
The original protagonists Crane and Thomas, executed the subscription agreement with the purpose to form the Windrush Corporation to develop and sell an acreage. The plan was for Crane to convey his 310-acre farm to Windrush [valued at $80,000] for 800 shares of the corporate stock. Thomas was to transfer stocks and bonds of a like value for a like number of shares. These undertakings were conditioned on the adoption by Windrush of a Plan to Offer stock. Crane and Thomas executed articles of incorporation for Windrush as incorporators, the certificate issued, but Crane died before a meeting of the shareholders could convene, and the Plan to Offer Stock was never adopted. Neither of the subscribers, Crane nor Thomas, ever transferred title to the land or securities to the corporation.
In furtherance of the corporation purpose, Thomas moved onto the farm after execution of the subscription agreement and made substantial repairs on the house. There is no doubt that this occupancy and renovation were legitimate corporation activity and expense. He continued that occupancy after Crane died, but soon afterwards the Crane heirs demanded rent and possession. The Crane heirs then sued to quiet title, for possession and rent. Thomas counterclaimed for declaration of and dissolution of a joint venture and, separately, for reasonable value of labor and materials expended on the farmhouse repair. Windrush counterclaimed for specific performance of the subscription agreement. *fn1
Our opinion in Sheridan v. McBaine, 564 S.W.2d 540 (Mo. App. 1978) reversed the trial judgments for the plaintiffs on their petition, and reversed the denial of the Thomas counterclaim for declaration of a joint venture and for its termination and accounting. The rationale of opinion was that [1.c. 543[2-4__ the corporate promoters had come to so definite an agreement of purpose - to develop real estate contributed by Crane [valued at $80,000] with funds contributed by Thomas in the form of securities of like value - that they were in legal effect joint venturers to accomplish that purpose so that the disruption of that corporate end by the Crane death before the shareholders could approve the plan did not terminate the enterprise but bound the heirs, an intention clearly manifested by the subscription agreement. Thus, our mandate returned the cause to the trial court with direction for "further proceedings in accordance with the prayer of defendants' counterclaim" - to terminate the joint venture and for an accounting. That was the subject of the retrial and is the subject of this appeal.
To lend perspective to the judgment we now review, the trial court on remand - as it was bound to do - gave effect to the court of appeals rationale that since the Crane death a joint venture subsisted between the two promoters to accomplish the defined, but unfulfilled, corporate purpose - and that they were bound to that enterprise. Thus, the trial court on remand confined the evidence to the obligations of the joint venturers to the enterprise, the performance of those obligations, and the redress of the equities between them. The court of appeals opinion implicitly holds that the subscription agreement and the incidental implementations of the corporate purpose by the promoters in anticipation of the formation of the Windrush Corporation as the operative unit defines the scope of the joint venture. The trial court on remand assumed those premises to come to judgment of termination of joint venture and accounting.
The subscription agreement [dated July 5, 1972] - one of the determinants of the obligations of the joint venture - imposed these performances on the signatories Crane and Thomas upon adoption by the Windrush Corporation of the Plan to Offer Stock at the first meeting of the Board of Directors of the Corporation - [an event never consummated because of the Crane death]:
"If the corporation adopts the "Plan to Offer Stock" as referred to in 3. above, each of the parties hereto agree to simultaneously transfer to the corporation an amount of property equal to Eighty Thousand Dollars ($80,000.00) each in accord with the three-year schedule as follows:
"'Each of the parties hereto shall in the same transaction transfer to the corporation One-fourth (1/4) of the total Eighty Thousand Dollars ($80,000.00) of property to be transferred by each and such transfer shall occur within one month following incorporation. - During the first year of incorporation, each of the parties shall in the same transaction transfer to the corporation a second One-fourth (1/4) of the total property to be transferred by each. During the second year of incorporation, each of the parties shall in the same transaction transfer to the corporation a third One-fourth (1/4) of the total property to be transferred by each. During the third year of incorporation, each of the parties shall in the same transaction transfer to the corporation a fourth One-fourth (1/4) of the total property to be transferred by each.'
"Each of the parties shall receive from the corporation in exchange for the property transferred common stock of the corporation equal in value to the property transferred and in accordance with the above three-year schedule. By written agreement of the parties hereto, the schedule of transfer of property may be accelerated provided that any such accelerated transfer shall be made by both parties in the same transaction.
"This agreement shall be binding upon the executors, administrators, heirs, and assigns of the parties hereto."
The subscription date was July 5, 1972. Crane died on February 25, 1973, before the Windrush Corporation could convene a meeting to adopt the subscription agreement Plan to Offer Stock. Thus, Crane never transferred title of the 310-acre farm to the corporation, and Thomas never transferred any securities. Thomas did, however, on November 1, 1972, direct his stockbroker to transfer specified stock - $39,983 in value - the corporation. The corporation was without officers, so those shares remained owned by Thomas. Thereafter, on November 24, 1973, Thomas sold some of those shares and retained the funds.
There were other, actual, performances to further the joint venture purpose and incidental to the original corporate intention. Thus, Thomas took possession of a house on the Crane farm soon after execution of the subscription agreement and remained for four years until November of 1976. In the course of that tenure, Thomas made certain repairs and expended sums for improvements. *fn2 There were also rents collected by Thomas and emoluments to the Crane heirs from some uses of the property after the Crane death. The judgment on remand - which we discuss presently - adjudicates each to come to the encompasses accounting.
As we noted, in November of 1973 Thomas sold 50 shares of Petrolite stock - among those shares Thomas specified to the broker in November of 1973 to set aside for transfer to the Windrush Corporation and used some of ...