Summary
In Webster v. Joplin Water Works Co., 352 Mo. 327, 177 S.W.2d 447, 453, a case cited by defendants-respondents, plaintiffs had no cause of action, and it was held the trial court properly refused to allow the substitution of another in whom the cause of action, if any, existed.
Summary of this case from Slater v. Kansas City Terminal Railway Co.Opinion
No. 38370.
January 3, 1944. Rehearing Denied and Motion to Transfer to Banc Overruled, February 7, 1944.
1. PUBLIC UTILITIES: Franchises: Public Service Commission: Water Utility Transfer Without Order of Commission: Void Upon Collateral Attack: Transferee Not an Innocent Purchaser. The attempted transfer of the franchise and properties used in furnishing water to a portion of the City of Joplin by an individual to a corporation without an order of the Public Service Commission was void and subject to collateral attack by third parties. An order of the Commission to take steps to rehabilitate and reconstruct the water works system did not authorize the transfer. And the corporation, whose president was the transferor, was not an innocent purchaser and could acquire no rights by the attempted transfer.
2. PUBLIC UTILITIES: Estoppel: Transfer Void Without Order of Public Service Commission: Third Party Not Estopped to Raise Issue. A third party who is alleged to have injured the water works properties of a corporation which received them through a transfer without an order of the Public Service Commission is not estopped to interpose as a defense the invalidity of the transfer.
3. PARTIES: Substitution of New Plaintiff Properly Refused. Where the action was filed by a single plaintiff who had no cause of action whatsoever the trial court properly refused a motion to substitute another plaintiff in whom the cause of action, if any, existed.
4. TRIAL: Pleading: Limitation of Reply Not Error. The trial court committed no error in striking out parts of plaintiff's reply and limiting it to a general denial, as the portions stricken would not have prevented the defenses asserted in the answer. And it is the function of the petition, and not the reply, to state the cause of action.
Appeal from Barton Circuit Court. — Hon. Thos. W. Martin, Judge.
AFFIRMED.
Samuel L. Trusty, Louis N. Wolf and J. Carroll Combs for appellants.
(1) Officers and directors of a defunct corporation become the statutory trustees and the corporation's legal representatives with authority to institute and prosecute suits. Sec. 5036, R.S. 1939; Watkins v. Mayer, 103 S.W.2d 569; Eberle v. Koplar, 85 S.W.2d 919. (2) The plaintiffs, as trustees of the Southwest Missouri Water Works Company, a dissolved corporation, were real parties in interest, since Oscar F. Webster, whom defendant claims was the owner of the property and business of the water utility at the time it was damaged and destroyed, assigned whatever rights he had to sue for such damage to the plaintiffs. Such an assignment was made after the property in question was destroyed by defendant, after such property had ceased to be public utility property, and after such cause of action had arisen for the destruction of such property and business. Wheless v. Meyer Schmidt Grocer Co., 120 S.W. 708; Honey Creek Drainage Dist., etc., v. Sampson, 5 S.W.2d 119; Green v. Powell, 46 S.W.2d 915; Secs. 98, 5651, R.S. 1939; State ex rel. Park Natl. Bank. v. Globe Ind. Co., 29 S.W.2d 743; Dearborn Elec. L. P. Co. v. Jones, 7 F.2d 806. (3) The proceedings before the Public Service Commission show that the Commission did authorize Webster to transfer, etc., his water utility to the Southwest Missouri Water Works Company, and, thereafter, the Commission recognized and dealt with the Southwest Missouri Water Works Company as the operating utility. State ex rel. City of Sikeston v. Public Serv. Comm., 82 S.W.2d 105; Sec. 5657, R.S. 1939. (4) An objection that the transfer of the utility to the Southwest Missouri Water Works Company was void can be raised only by the state or as provided by the Missouri statutes. Webster Mfg. Co. v. Byrnes, 280 P. 101; Secs. 5686, 5689, 5694, 5703, R.S. 1939; State ex rel. v. Buzard, 168 S.W.2d 1044; Otter Tail Power Co. v. Clark, 229 N.W. 915; State ex rel. St. Louis v. Public Serv. Comm., 73 S.W.2d 393; A.W. Mendenhall Co. v. Booher, 48 S.W.2d 120; Boatmen's Bank v. Gillespie, 108 S.W. 74; Bank v. Rockefeller, 195 Mo. 15, 93 S.W. 761; Proctor v. Bd. of Trustees, 123 S.W. 862; Rockhill Club v. Trustees, 56 S.W.2d 9; Belchers, etc., Co. v. Grain Co., 13 S.W. 822; 19 C.J.S., p. 441, sec. 981. (5) Where a transfer of utility property is made in good faith and for value, it will be supported upon the insistence of the purchaser, notwithstanding the terms of the statute. Under such circumstances the term "void" means "voidable." Dearborn Elec. L. P. Co. v. Jones, 7 F.2d 806, interpreting the Missouri statutes relied on by respondent. 46 C.J., p. 263; Bromley v. Goodrich, 40 Wis. 431; Green v. Kemp, 13 Mass. 515; St. Louis, etc., R. Co. v. Terre Haute, etc., R. Co., 145 U.S. 393, 12 Sup. Ct. 953; New York L.I. Bridge Co. v. Smith, 42 N.E. 1088; Kearney v. Vaughn, 50 Mo. 285; Blinn v. Schwartz, 177 N.Y. 252, 69 N.E. 542; United States v. Minona, etc., R. Co., 67 F. 948; Southern Natl. Ins. Co. v. Barr, 148 S.W. 845; Kinney v. Lundy, 89 P. 496, and cases therein cited. (6) A wrong-doing defendant cannot set up the wrongs of another and thus escape responsibility for its wrongs. The doctrine of estoppel is operative against Webster claiming title to or ownership of the utility as against the Southwest Missouri Water Works Company, and the wrong-doing defendant cannot assert any greater rights than Webster himself could assert. Johnson v. Ferguson, 44 S.W.2d 650; Dearborn Elec. L. P. Co. v. Jones, 7 F.2d 806; State ex rel. Boatmen's Bank v. Webster Groves Sewer Dist., 37 S.W.2d 905; St. Joseph v. St. Joseph Term. R. Co., 186 S.W. 1080; State ex inf. Shartel v. Mo. Utilities Co., 53 S.W.2d 394; State ex rel. City of Sikeston v. Public Serv. Comm., 82 S.W.2d 105; Kribs v. Jefferson City L., H. P. Co., 199 S.W. 261; Scheiter v. City of Chillicothe, 107 S.W.2d 112; Godfrey v. K.C. Light Power Co., 247 S.W. 451; Green v. Kemp, 13 Mass. 515. (7) The Public Service Commission does not have jurisdiction over the within controversy involving the recovery of money damages. Mitchell v. Illinois Cent. R. Co., 47 N.E.2d 115; State ex rel. Kansas City P. L. Co. v. Buzard, 168 S.W.2d 1044; State ex rel. Laundry, Inc, v. Public Serv. Comm., 34 S.W.2d 37. (8) The trial court erred in refusing to permit Oscar F. Webster to be made a party plaintiff individually, especially in view of the issues raised by defendant in its answers. Lilly v. Tobbein, 103 Mo. 477, 15 S.W. 618; Sec. 971, R.S. 1939; Turner v. Noble, 249 S.W. 103; Hackett v. Van Frank, 96 S.W. 247; Cytron v. St. Louis Trans. Co., 104 S.W. 109; Hutcherson v. Thompson, 123 S.W.2d 142; Wente v. Shaver, 169 S.W.2d 947. (9) The allegations in the reply alleging good faith on the part of Webster and the Southwest Missouri Water Works Company, coupled with a plea of mistake of fact, etc., were erroneously stricken by the trial court. The corporate fiction will be disregarded to prevent injustice, particularly where, as here, there has been no change in management and operation of the utility. Authorities under Point (5), supra; Otter Tail Power Co. v. Clark, 229 N.W. 915; Dearborn Elec. L. P. Co. v. Jones, 7 F.2d 806; Osler v. Joplin Life Ins. Co., 164 S.W.2d 295; Sec 5578, Par. 21, R.S. 1939. Gertrude W. Willams, Roy Coyne, Cowgill Blair, Jr., John W. Scott and Haywood Scott for respondent.
(1) Where counsel for appellants, in open court during the trial, state and admit facts, the existence of which precludes a recovery by appellants, the court may close the case at once and give judgment against appellants. Wood v. Wells, 270 S.W. 332; Pratt v. Conway, 148 Mo. 291, 49 S.W. 1028; Hampe v. Versen, 32 S.W.2d 793, 224 Mo. App. 1144; Wonderly v. Little Hays Inv. Co., 184 S.W. 1188. (2) The term "water corporation" as used in Chapter 35, Revised Statutes of Missouri, 1939, known as the Public Service Commission law, includes a person operating a water utility. Sec. 5578, Par. 21, Chap. 35, R.S. 1939. (3) No person operating a water utility shall sell, assign, transfer or otherwise dispose of his franchise or water works, or water system necessary or useful in the performance of his duties to the public without having first secured from the Public Service Commission of Missouri an order authorizing him so to do, such sale, assignment, transfer, or disposition made other than in accordance with the order of the Public Service Commission authorizing same is void. Sec. 5651, Chap. 35, R.S. 1939. (4) All stock in a water corporation issued without an order of the Public Service Commission of Missouri authorizing the same is void. Sec. 5654, Par. 2, Chap. 35, R.S. 1939. (5) Penalties and forfeitures are provided by the statutes of Missouri for the violation of the provisions of Chapter 35, Revised Statutes of Missouri, 1939. Sec. 5654, Par. 4, R.S. 1939; Sec. 5660, R.S. 1939. (6) The sale, assignment, transfer or disposition by Oscar F. Webster to the Southwest Missouri Water Works Company, a corporation organized by the plaintiffs under the laws of the State of Missouri, of his franchise and water works necessary and useful in the performance of his duties to the public was void, no order having been first secured from the Public Service Commission of Missouri authorizing such sale, assignment, transfer, or disposition, and all the stock of said Southwest Missouri Water Works Company was void, it having been issued to the plaintiffs without an order of the Public Service Commission authorizing the same. Sec. 5651, Par. 1, R.S. 1939; Sec. 5654, Par. 2, R.S. 1939; Ry. Exchange Bldg., Inc., v. Light Development Co., 107 S.W.2d 59, 341 Mo. 334; Cooper County Bank v. Bank of Bunceton, 288 S.W. 95, 221 Mo. App. 814; Borg v. Illinois Terminal Co., 16 F.2d 988; Slater v. Shell Oil Co., 103 P.2d 1043; Napa Valley Elec. Co. v. Calistoga Elec. Co., 176 P. 699; Crum v. Mt. Chasta Power Corp., 30 P.2d 30; Chicago Western I.R. Co. v. Engelstein, 333 Ill. 117, 164 N.E. 189. (7) The statutes of Missouri provide that upon the dissolution of any corporation the president and directors at the time of its dissolution shall be trustees of such corporation. Sec. 5036, R.S. 1939; Watkins v. Mayer, 103 331 S.W.2d 566; Eberle v. Koplar, 85 S.W.2d 919. (8) The statutes of Missouri provide that the directors in a corporation in Missouri must be stockholders in such corporation. Sec. 5346, R.S. 1939; Loomis v. Mo. Pac. R. Co., 165 Mo. 469, 65 S.W. 962. (9) Where the stock held by plaintiffs in a Missouri water corporation is void under the law of Missouri, the plaintiffs are not, legally, stockholders in said corporation, and not being stockholders they are not, legally, directors, and not being directors they are not trustees of said corporation. Secs. 5036, 5654, R.S. 1939. (10) Under the Missouri practice act it is provided that a petition shall state "a plain and concise statement of the facts constituting a cause of action." Sec. 916, R.S. 1939. (11) The Missouri statute permits only substantive facts to be used in stating any cause of action. Sec. 935, R.S. 1939. (12) Where the plaintiffs pleaded that they are trustees, without a statement showing facts which constitute them such, their allegation is but a legal conclusion and is insufficient. Tucker v. Diocese of West Mo., 264 S.W. 897; Wilson v. Polk County, 112 Mo. 126, 20 S.W. 469; Piggott v. Denton, 46 S.W.2d 618; Knapp, Stout Co. v. St. Louis, 156 Mo. 343, 56 S.W. 1102; State ex rel. J.K. Wirt v. County Court of Cass County, 137 Mo. App. 698, 119 S.W. 1010; Meredith v. Pound, 92 S.W.2d 698; Pesch v. Boswell, 84 S.W.2d 151. (13) In order for plaintiffs to have stated a cause of action it was necessary for them to allege, as a fact, that the issuance of the shares of stock in the Southwest Missouri Water Works Company to the plaintiffs was authorized by order of the Public Service Commission of the State of Missouri, and that, therefore the plaintiffs became legally stockholders in said corporation and were duly elected president and directors thereof, and then to have stated the facts showing the dissolution of said corporation, if it was dissolved, so as to show that the plaintiffs were the statuory trustees of said corporation. Borg v. Ill. Term. Co., 16 F.2d 988; Secs. 5036, 5654, R.S. 1939; Stewart of Outhwaite, 141 Mo. 562, 44 S.W. 326. (14) The objection that plaintiffs' petition fails to show a right of action in plaintiffs need not be raised by a demurrer to the petition, but may be raised at the beginning of the trial by an objection to the introduction of any evidence under the pleadings. State ex rel. Elmer v. Hughes, 146 S.W.2d 889, 347 Mo. 237; Elmer v. Copeland, 141 S.W.2d 160. (15) The Public Service Commission speaks by its orders. Sec. 5651, Par. 1, Chapter 35, R.S. 1939; Sec. 5654, Par. 2, Chap. 35, R.S. 1939. (16) Third persons may raise the defense that the transfer by Webster of the water works utility to the corporation, Southwest Missouri Water Works Company was void. Slater v. Shell Oil Co., 103 P.2d 1043. (17) Plaintiff corporation was not a purchaser of such property in good faith for value, as provided by the statute. Sec. 5651, Par. 1, Chap. 35, R.S. 1939; Dearborn Elec. L. P. Co. v. Jones, 7 F.2d 806. (18) The defendant does not stand in Webster's shoes and is not barred from making the objection which it did to the introduction of any evidence in this case and is not estopped to take advantage of the admissions of facts made by appellants in open court at the trial. State ex inf. Shartel ex rel. City of Sikeston v. Mo. Utilities Co., 53 S.W.2d 394, 331 Mo. 337; Bramell v. Adams, 146 Mo. 70, 47 S.W. 931. (19) Estoppels preclude the assertion of facts, not law. 31 C.J.S., p. 191, sec. 1; Straus v. City of New Orleans, 118 So. 125, 166 La. 1035; Lewis v. King, 103 So. 19, 157 La. 718; Miss. Power Light Co. v. Pitts, 179 So. 363, 181 Miss. 344; Moore v. Willis, 9 N.S. 555. (20) Estoppel results from something which the law treats as so conclusive an admission that it cannot be controverted by the party making it. 31 C.J.S. 191, sec. 1; Columbia Ins. Co. of N.J. v. Mart Waterman Co., 11 F.2d 216, certiorari denied 46 S.Ct. 486, 271 U.S. 672, 70 L.Ed. 1144. (21) Estoppels forbid one to speak the truth and hence are not favored. Westinghouse El. Mfg. Co. v. Fornica Insulation Co., 288 F. 330; Foster v. Modern Woodmen of Am., 138 S.W.2d 18. (22) Allegations made in a prior case or proceeding, in pleadings or otherwise, do not, as a rule; operate in a subsequent case, proceeding, or transaction, as a technical estoppel by record against the party making them. There can be no estoppel if both parties know the facts or have equal means of ascertaining them. Rhoads v. Rhoads, 119 S.W.2d 247, 342 Mo. 934. (23) One relying on an estoppel must have exercised such reasonable diligence to acquire knowledge of the real facts as the circumstances of the case require. If he conducts himself with a careless indifference to means of information reasonably at hand, he cannot invoke the doctrine of estoppel. 31 C.J.S., 270, 271, sec. 71 (b); Swinney v. Modern Woodmen of Am., 95 S.W.2d 655, 231 Mo. App. 83. (24) Substituting by amendment Oscar F. Webster individually as a plaintiff upon the theory that he has the alleged cause of action instead of the present plaintiffs having it is not permissible. It was an attempt to make a complete substitution of parties plaintiff, which is not allowed. Fair v. Agur, 133 S.W.2d 402; Gresham v. Talbot, 31 S.W.2d 766, 326 Mo. 517; Russell v. Nelson, 295 S.W. 118, 317 Mo. 148; Arrowood v. Delaney's Estate, 295 S.W. 522; Meyer v. Oregon Interurban Ry. Co., 271 S.W. 865, 219 Mo. App. 360; Altheimer v. Teuscher, 47 Mo. App. 284. (25) It has never been held that what is now Section 971 of the Revised Statutes of Missouri, 1939, which provides that the court may add the name of a party or correct a mistake in the name of a party, authorizes the court to add, by way of amendment, the name of the only substantial party plaintiff or defendant, as that would be in effect the institution of an entirely new suit by way of amendment, which cannot be done. Courtney v. Sheehey, 38 Mo. App. 290; Altheimer v. Teuscher, 47 Mo. App. 284; Thieman v. Goodnight, 17 Mo. App. 429. (26) This court has recently made a distinction between an action instituted by a plaintiff wholly without right of action and an action wherein there is originally merely a defect in the parties plaintiff, holding that in the first case the party who might have sued cannot be substituted after the statute has run, but in the second case the defect may be cured by adding the necessary party after the statute has run. 1 Houts, sec. 206, p. 398, note 45; Gresham v. Talbott, 31 S.W.2d 766, 326 Mo. 517. (27) The joinder of an improper party plaintiff which renders the petition insufficient to support a judgment can neither be waived nor cured but can be brought up on a motion in arrest or during the trial. Jones v. Kansas City, Ft. S. M.R. Co., 178 Mo. 528, 77 S.W. 890. (28) A claimed plea of assignment of Webster's alleged cause of action as an individual contained in plaintiffs' reply to defendant's answer to plaintiffs' second amended petition contained in paragraph VII, as an attempted statement of a cause of action in the plaintiffs herein, had no place in and did not belong in a reply. Alleged facts constituting a cause of action must be stated in the petition and not the reply. Baker v. Lamar, 140 S.W.2d 31; Kent v. City of Trenton, 48 S.W.2d 571; Neal v. Twelfth Grand Ave. Bldg. Co., 70 S.W.2d 136, 228 Mo. App. 536. (29) The defense to the effect that the attempted transfer of Webster's franchise and water works utility is void and the issue of the stock in the corporation is void and that the plaintiffs did not become stockholders in said corporation and, therefore, could not become directors in said corporation or officers thereof and, therefore, are not trustees of said alleged dissolved corporation, is not a collateral attack on any judgment or judicial proceeding of any kind. A "collateral attack" is an attempt to impeach a judgment or decree in a proceeding not instituted for the express purpose of annulling such judgment. Lieber v. Lieber, 239 Mo. 1, 143 S.W. 458; Ray v. Ray, 50 S.W.2d 142; Slater v. Shell Oil Co., 103 P.2d 1043.
This is an action to recover actual and punitive damages (said to be $35,000 and $50,000, respectively) for the allegedly wrongful and malicious destruction of the water works utility property and appropriation of the customers and the business of the Southwest Missouri Water Works Company, a corporation, by the defendant, Joplin Water Works Company, a corporation. (We continue the original designation of the litigants.) Oscar F. Webster, Susie Webster, and Hazel Mounts instituted the action as trustees for and on behalf of plaintiff corporation, a dissolved corporation. See Sec. 5036, R.S. 1939. After a jury had been empaneled, opening statements made, and the first witness on behalf of plaintiffs had been sworn, defendant objected to the introduction of any [449] evidence on the ground the petition failed to state a cause of action. This was sustained. Plaintiffs appealed. Subsequent to the submission here a stipulation on behalf of the litigants was allowed. This stipulation brings to this court the occurrences before the court nisi at the time the objection was sustained "as a part of the record proper for all purposes on this appeal." Callier v. Chester, P. Ste. G. Ry. Co., 158 Mo. App. 249, 256, 138 S.W. 660, 661; Pennington v. Kansas City Rys. Co., 284 Mo. 1, 17(I), 223 S.W. 428, 431[4]. We, consequently, seek the heart of the controversy of this review; i.e., whether the action may be maintained when instituted by said statutory trustees on behalf of the Southwest Missouri Water Works Company. Crowley v. Sutton (Mo.), 209 S.W. 902, 903[2]; St. Louis v. Senter Comm. Co., 340 Mo. 633, 646, 102 S.W.2d 103, 110[5]; Presley v. Central Terminal Co. (Mo. App.), 142 S.W.2d 799, 801[2, 3]. It is defendant's contention that the petition attempted to state a cause of action in plaintiffs as statutory trustees succeeding to the rights of the Southwest Missouri Water Works Company aforesaid and the allegations in said petition established that the cause of action, if any, never accrued to or vested in said corporation. The contention involves the issue that an attempted transfer by Webster of the water utility to said corporation was void as to third parties under our Public Service Commission act (Secs. 5651, 5654(2), R.S. 1939). The substance of the petition, with pleaded historical facts leading up to the alleged cause of action and defense narrated, follows:
Plaintiffs' petition alleged that plaintiffs since April, 1936, have been the trustees of the Southwest Missouri Water Works Company; "that, until the acts of the defendant hereinafter mentioned, said Southwest Missouri Water Works Company was a public utility engaged in the distribution and selling of water and water service" in named subdivisions in Joplin, Missouri; that said Southwest Missouri Water Works Company purchased in 1935 said water utility property, franchise, etc., of Oscar F. Webster, who theretofore operated said public utility property. It is alleged that between December, 1935, and April, 1936, defendant committed various and sundry tortious acts to the destruction of said water utility property, its franchises and business. The Southwest Missouri Water Works Company received its charter May 3, 1935. Quoting: "After said property was destroyed by the defendant and after it ceased to be in use as utility property and after the claim arose against defendant for damages" as aforesaid "and after the dissolution of said corporation and while" O.F. Webster "was the president and chief stockholder of said dissolved corporation and one of its trustees, the said Webster personally arranged for and authorized the institution of the action against the defendant by such trustees for the benefit of said dissolved corporation" and ever since has participated in the prosecution of the same for the benefit of any and all persons interested therein.
The Southwest Missouri Water Works Company stock was issued to plaintiffs. O.F. Webster transferred all of said public utility property to said corporation for said stock on January 23, 1935. After said transfer, the officers of said corporation "including Webster as president and manager and chief stockholder, took charge of and operated and continued to operate said property as a public utility until it went out of business as a utility and as a result of the wrongful acts of said defendant . . ."
The city of Joplin in 1933 instituted proceedings before the Public Service Commission to require defendant to extend its lines into the territory served by O.F. Webster "so that fire protection" be afforded said territory, making O.F. Webster a party to said proceedings. Webster participated in said proceedings until the order of the Commission of August, 1935, was entered overruling the motion of the Southwest Missouri Water Works Company for a rehearing on orders made July 12, 1935, and July 22, 1935.
The Public Service Commission, on April 23, 1934, ordered Webster to file plans and specifications for the "enlargement or reconstruction and rehabilitation" of his water utility to comply with certain requirements and furnish fire protection. These plans and specifications were filed on July 23, 1934, in the name of the Southwest Missouri Water Works Company and showed "that the water works system was to become the Southwest Missouri Water Works Company, a corporation," and that said corporation had not received its charter. On February 13, 1935, said Commission ordered Webster to take whatever steps were necessary to "rehabilitate and [450] reconstruct" said water utility property and report within thirty days whether he had been able to finance and perfect arrangements therefor. This time was later extended for an additional sixty days. On May 3, 1935, the Southwest Missouri Water Works Company received its charter and had the same recorded in Jasper county, Missouri, May 9, 1935. The city council of Joplin on May 14, 1935, authorized the making of a contract with the Southwest Missouri Water Works Company for a certain number of fire hydrants in its territory, of which proceedings defendant knew and endeavored to have completed. On May 15, 1935, said Southwest Missouri Water Works Company was authorized by its stockholders to mortgage its property; but on May 27, 1935, said company reported that it had been unable to finance the rehabilitation of its water utility property as ordered by said Commission. A copy of this report was sent by the Commission to defendant on May 28, 1935. Thereafter, on July 12, 1935, the Public Service Commission, upon findings made, ordered defendant to extend its lines into the territory aforesaid and furnish water utility service to persons "not at this time furnished by O.F. Webster." Defendant on July 22, 1935, filed a motion for clarification and on said date said Commission made a supplemental order modifying its original order as follows: "and to be in readiness to service and serve at any time any present customer of Oscar Webster who may at any future date elect to require of said Joplin Water Works Company a service connection and water service." On August 1, 1935, the Southwest Missouri Water Works Company filed objections to and a request for a rehearing of said order of modification, which (quoted) "request of the Southwest Missouri Water Works Company, otherwise known as O.F. Webster as owner of the water system" was denied on August 24, 1935. This order became final.
In December, 1935, the Southwest Missouri Water Works Company instituted a proceeding to enjoin defendant from entering its territory. Defendant filed a demurrer. The proceeding was dismissed after, according to the petition, plaintiffs' property had been destroyed.
Following defendant's objection to the introduction of any evidence, the petition was amended, evidently to crystallize the issue, by adding the following:
"Plaintiffs further allege that no application was made by the said O.F. Webster to the Public Service Commission of the State of Missouri for a written order or any order to transfer the property in question to the Southwest Missouri Water Works Company, and that no written order was granted, issued or entered by the Public Service Commission to O.F. Webster to transfer his said property to the Southwest Missouri Water Works Company; that no application was made to the Public Service Commission of Missouri for an order to issue the corporation stock in question and that no written order or order was granted by the Commission to the Southwest Missouri Water Works Company to issue said stock or to transfer said stock to said stockholders; that all of said property in question was used by Webster for many years as said utility property, and that in the conveyance by Webster to said corporation all of said property was conveyed to said Southwest Missouri Water Works Company as utility property and for utility purposes and was necessary and useful in the operation of said utility business by said Southwest Missouri Water Works Company, and further allege that it was necessary and useful to the performance of O.F. Webster's duties as a public utility at the time of said conveyance by Webster of the said franchise and said water works utility to said corporation, Southwest Missouri Water Works Company."
An added second paragraph alleged that the Southwest Missouri Water Works Company never held any franchise from Jasper county or certificate of public convenience and necessity from the Public Service Commission and that Webster's franchise and certificate of convenience and necessity were valid and existed at the time of the attempted transfer from Webster to said corporation.
Plaintiffs' petition charged and the court nisi took extra precaution before ruling upon defendant's objection in understanding plaintiffs' counsel admitted that all the property damaged by defendant was public utility property useful and necessary at said time in the conduct of the water utility business in the territory served and that no effort was being made to recover damages for the destruction of any other kind of property.
The petition (as well as oral statements made by counsel for plaintiffs before the court nisi) proceeded upon the theory [451] that ownership of the property at the time of its destruction by defendant was in the Southwest Missouri Water Works Company, the corporation; that is, that said corporation as a legal entity suffered the damages and the cause of action originally accrued to it as such owner. Plaintiffs' petition did not plead and the proceeding was not instituted and maintained on the theory a cause of action accrued to and existed in Oscar F. Webster as an individual, which cause of action was by him thereafter and subsequent to the destruction of the property as utility property assigned and transferred to said Southwest Missouri Water Works Company. Plaintiffs' point constructed upon such theory is disallowed.
What was the effect of the alleged sale and transfer in 1935 of the water utility by Webster to the Southwest Missouri Water Works Company?
The term "water corporation," as used in the Public Service Commission law "includes every corporation . . . partnership and person . . . owning . . . any plant or property . . . distributing or selling for distribution, or selling or supplying for gain any water." Sec. 5578, Subsec. 21, R.S. 1939. Webster was within these provisions of that act.
Section 5651, R.S. 1939, provides: "1. No . . . water corporation shall hereafter sell, assign, lease, transfer, mortgage or otherwise dispose of or encumber the whole or any part of its franchise, works or system, necessary or useful in the performance of its duties to the public, nor by any means, direct or indirect, merge or consolidate such works or system, or franchises, or any part thereof, with any other corporation, person or public utility, without having first secured from the commission an order authorizing it so to do. Every such sale, assignment, lease, transfer, mortgage, disposition, encumbrance, merger or consolidation made other than in accordance with the order of the commission authorizing same shall be void. . . . Nothing in this subsection contained shall be construed to prevent the sale . . . by any . . . public utility . . . of property which is not necessary or useful in the performance of its duties to the public, and any sale of its property by such . . . public utility shall be conclusively presumed to have been of property which is not useful or necessary in the performance of its duties to the public, as to any purchaser of such property in good faith for value."
We think the case turns on the provisions of Sec. 5651, but with respect to the issuance and sale of stocks et cetera, by public utilities, Sec. 5654, R.S. 1939, provides in part:
"2. All stock, and every bond, note or other evidence of indebtedness of a . . . water corporation issued without an order of the commission authorizing the same then in effect shall be void . . ." Consult Subsecs. 1 and 2.
The issue thus presented is whether by virtue of Sec. 5651, supra, the attempted transfer by Webster to the Southwest Missouri Water Works Company, the corporation, was void as to strangers to such transfer. We think so because the statute so provides and the Southwest Missouri Water Works Company was not a purchaser in good faith for value within the language of the statute or of Dearborn El. L. P. Co. v. Jones, 7 F.2d 806, 807 [2]. To hold otherwise would render that valid which the law says is void. Mr. Webster was the principal stockholder and chief executive officer of the Southwest Missouri Water Works Company, and the corporate entity cannot be said to have had "an honest, legally justifiable, belief" that Webster, in the circumstances, had the right to sell and transfer title. Consult 7 F.2d l.c. 808.
The Public Service Commission's order of February 13, 1935, authorizing Webster "to take whatever steps were necessary to rehabilitate and reconstruct the water works system" et cetera was not an order authorizing the reorganization of a "water corporation" under Sec. 5657, R.S. 1939, relating to "reorganizations"; but an order to rehabilitate and reconstruct a water works system under other applicable provisions of the Public Service Commission law. At any event, it was not an order absolving Webster from the consequences of violating positive legislative enactments. The Public Service Commission of the State of Missouri possesses no such authority.
Plaintiffs say the contention that the transfer of utility property is void can only be raised by the State or as provided by the Public Service Commission act, referring, in connection with the latter, to the provisions of the act with respect to hearings before the Public Service Commission. [452] Plaintiffs stress dictum in Webster Mfg. Co. v. Byrnes (1929), 207 Cal. 630, 280 P. 101, 107, on the proposition that the State only can raise the issue. There, however, the particular utility property was not as of the time involved subject to the provisions of the public utility act of California, such utilities not coming under its provision until sometime thereafter (280 Pac. l.c. 104[1], 106[13], 105 [8]). The later California case of Slater v. Shell Oil Co. (1940), 39 Cal.App.2d 535, 547, 103 P.2d 1043, 1050[9, 12], had occasion to pass more directly upon the instant issue, and said: "It is to be noted that this provision declares every transfer without the consent of the Railroad Commission is void. That the section means what it plainly states, that a purported transfer in violation of the statute confers no rights on the transferee, and that third persons may raise this defense, is clearly established by the following cases: [Citing cases.] . . . That transfer, however, for reasons already stated, was void. For that corporation to seek dissolution while still owning property devoted to a public use, without disclosing that fact to the Superior Court was a legal fraud upon that court, rendering the decree, insofar as it purported to expressly or by operation of law transfer the property to the company devoted to a public use, subject to collateral attack." See also Borg v. Illinois Term. Co. (C.C.A.), 16 F.2d 988, 989[1]; Chicago W.I. Rd. Co. v. Englestein, 333 Ill. 117, 164 N.E. 189. Cooper County Bank v. Bank of Bunceton, 221 Mo. App. 814, 822, 288 S.W. 95, 99[5], permitted the purchaser of a note and deed of trust of a public utility to rescind the transaction on the theory the original transaction was void, stating in disallowing the defense that the purchaser might have but failed to procure the validation of the transaction by the Public Service Commission: "We find no law, nor are we cited to any, whereby the Public Service Commission is given power to validate a deed of trust which is void under the statute. The statute declares that an incumbrance made other than in accordance with the statute is void, and, being void, the commission is not authorized to make it valid." Under the foregoing authorities the validity of a void transfer of public utility property is subject to collateral attack. The sections of the Public Service Commission act mentioned by plaintiffs — sections relating to the right of parties to make complaint to (Sec. 5686, R.S. 1939), or apply for a rehearing before (Sec. 5689) the Commission, or making its orders conclusive in collateral proceedings (Sec. 5694) or upon whom the burden of proof rests (Sec. 5703) — do not preclude a third party litigant invoking the protection of provisions of that act when sued by one having no interest in the cause of action, if any, otherwise stated against him in the pleadings.
Defendant is not questioning the corporate existence of the Southwest Missouri Water Works Company or its right to do business in this state. It questions its right to maintain this action on the theory its pleading shows it did not originally have and never has acquired a right of action, if any existed, against defendant. Plaintiffs' contention on this score is disallowed.
Plaintiffs make the point that the transfer was in good faith and for value and, in the circumstances, the term "void" is given the meaning of "voidable," citing Dearborn El. L. P. Co. v. Jones (C.C.A.), 7 F.2d 806, 807[2], which states: "The elements which make a purchaser in good faith for value are: An actual sale, a present consideration and an honest, legally justifiable, belief that the vendor has the right to sell." Webster was the majority stockholder, the president, a member of the board of directors and manager of the Southwest Missouri Water Works Company, and knew or was charged with knowledge that no order of the Public Service Commission authorizing the transfer had been made. The Southwest Missouri Water Works Company was not a purchaser in good faith for value within the quoted language.
We find nothing in the record to sustain plaintiffs' contention that defendant is estopped to interpose this defense. The contention here is based upon allegations in the petition allegedly sufficient to work an estoppel as to Webster and the statement that defendant, a wrong-doer, cannot claim any greater rights in Webster and through Webster and on behalf of Webster than Webster could assert in himself. This might be well enough if Webster or a privy of his were defendant. The trouble is that plaintiffs, and not defendant, are claiming under, by, and through Webster. The Southwest Missouri Water Works Company was the grantee in Webster's transfer, had ample power to protect its interest, and its successors, plaintiffs not defendant, [453] succeed to the fruits of its action or nonaction in its dealings with Webster. The point is disallowed.
On September 14, 1942, plaintiffs and Oscar F. Webster filed a motion, assertedly on account of allegations in defendant's answer, asking that said Webster individually be made a party plaintiff "to assure defendant" full protection against said Webster, individually. Plaintiffs now assert error in the overruling of said motion. It is apparent from defendant's answer, mentioned in said motion, as well as from what we have said, that there existed no community of interest between Webster as an individual, on the one hand, and plaintiffs as trustees, on the other, in the subject matter of the cause of action against defendant. The ultimate purpose of the motion if plaintiffs are to urge its overruling as error here was (not assurance to defendant but) to substitute said Webster as the real party in interest in lieu of the trustees named as party plaintiff. Generally a mistake as to the proper party plaintiff compelled an abandonment of the action and the institution of proceedings de novo at common law. 1 Chitty, Pleading (7th Eng. Ed.) *1, *69. Plaintiffs say the substitution was authorized under Sec. 971, R.S. 1939, reading:
"The court may, at any time before final judgment in furtherance of justice . . . amend any record, pleading, . . . or other proceedings, by adding or striking out the name of any party, or by correcting a mistake in the name of a party, . . . or when the amendment does not change substantially the claim or defense, by conforming the pleading or proceedng to the facts proved."
The statute speaks of "adding," not "substituting," the name of a party.
Statements in some cases indicate a doubt as to the scope of prior holdings permitting and refusing amendments adding or substituting parties plaintiff. See Glover Son Comm. Co. v. Abilene Mill. Co., 136 Mo. App. 365, 369, 116 S.W. 1112, 1113, and Turner v. Noble, 211 Mo. App. 656, 662, 249 S.W. 103, 104. We think the statements too broad. The substitution of a party plaintiff and the relation back of the substitution to defeat limitations are different issues but for practical reasons cases usually involve both issues. Our review of the Missouri cases leads to the conclusion, perhaps not too precisely stated: One having a joint interest may be added as a party plaintiff and the joinder will relate back to the original institution of the action or (more to the instant case) in extreme situations, accompanied by peculiar facts, the real party in interest may be substituted with like effect where the pleading discloses that the action in fact was being prosecuted in the interest of said substituted plaintiff; but such real party in interest may not be substituted as plaintiff to avoid limitations where the pleading shows that the original plaintiff was a stranger to and could have no interest in the cause of action and fails to show that the action was being prosecuted in the interest of said real party in interest.
In Lilly v. Tobbein, 103 Mo. 477, 490 (4, 5), 15 S.W. 618, 620, 23 Am. St. Rep. 887, members (on behalf of themselves and other members) of an unincorporated church association were permitted to be substituted (the opinion refers to now Sec. 971, supra, treating of "adding" parties) for the unincorporated church association after the running of the statutory period of limitation where the unincorporated church association had instituted the action within the statutory period. That case had several distinguishing features. The court expressed doubt that a judgment for the voluntary association would have been void; was of opinion the reversal (The Catholic Church v. Tobbein, 82 Mo. 418) of a former judgment sustaining plaintiff's cause was error ("On the conceded facts, this will should have been probated at the outset . . ."); but an underlying reason was: "The suit has been, from first to last, prosecuted in the interest of the church, and we entertain no doubt but the amendment substituting the individual plaintiffs for the unincorporated association related back to the commencement of the suit and the statute of limitation was arrested at that time." A like situation existed in Hackett v. Van Frank, 119 Mo. App. 648, 650, 657, 96 S.W. 247, 248, 250, where attorneys inadvertently instituted the action in the name of a nonexistent partnership, the substituted corporate plaintiff, the real party in interest, having continued the retail business in the name of the partnership after the formation of the corporation. The Hackett opinion also states (658 and 251, respectively) "timely application was made as soon as the mistake in the parties plaintiff was discovered, due notice of an intention to ask leave to amend was given . . ., and, as the demand will [454] be outlawed by limitation if this suit is abated, we deem it proper to reverse the judgment and remand" with directions permitting the substitution of the corporate party plaintiff. See also Drakopulos v. Biddle, 288 Mo. 424, 430, 231 S.W. 924, 925[1].
Russell v. Nelson, 317 Mo. 148, 155, 295 S.W. 118, 122[5-7], was a suit to contest a will and earlier cases bearing on the instant issue were reviewed. That case holds that where an original plaintiff never had the cause of action sued on, could never have maintained the same on the facts pleaded, and on the facts pleaded was entirely out of the case; that is, was an utter stranger to the cause of action, the proceeding could not be saved from limitation by "adding" (really substituting) the real party in interest as plaintiff. Usually amendments are allowed, occasionally they are refused; but Sec. 971, supra, does not authorize an amendment substituting the only party in interest or a complete substitution of parties plaintiff. Meyer v. Oregon Interurban Ry. Co., 219 Mo. App. 360, 364, 271 S.W. 865, 867[2], and cases cited. Consult Arrowood v. Delaney's Est. (Mo. App.), 295 S.W. 522, 524[5]; Altheimer v. Teuscher, 47 Mo. App. 284, 286, and cases; Annotation, 135 A.L.R. 325.
Cases like Cytron v. St. Louis Transit Co. (Banc), 205 Mo. 692, 698 et seq., 104 S.W. 109, 111 (suit for a minor's death); Gresham v. Talbot, 326 Mo. 517, 524, 31 S.W.2d 766, 768[2] (suit to contest will presenting the reverse to Russell v. Nelson, supra) — holding an action timely instituted by a party in interest tolls limitations as to others having a joint interest and is not barred by the mere fact that other joint parties are not added until after the running of the statutory time — are not this case. The Cytron case makes plain that the "one year" provisions for instituting actions for death (Sec. 3656, R.S. 1939) is "one of limitation and repose." Fair v. Agur, 345 Mo. 394, 397[1, 2], 133 S.W.2d 402[1, 3] holds, following earlier Missouri cases, that the real party in interest may not be substituted party plaintiff subsequent to the running of limitations in an action for death instituted within the limitation period by a then stranger to the cause of action. Consult cases there cited.
Under the Missouri cases, the instant motion to amend was properly overruled.
Plaintiffs sought to file a reply containing several different pleas to defendant's answer. The trial court restricted the reply to a general denial. Plaintiffs claim error. They say the court erred in striking their plea of estoppel from the reply; in striking their allegations of good faith on the part of Webster and the Southwest Missouri Water Works Company, coupled with a plea of a mistake of fact; in striking their plea of assignment by Webster of whatever rights he might have in the cause of action to plaintiffs; and in striking their plea to the effect defendant was collaterally attacking the transfer by Webster to the Southwest Missouri Water Works Company. Our discussions and rulings hereinbefore sufficiently cover such of these contentions as are not hereinafter mentioned. We dispose of the other asserted errors in as general language as presented for review. Our examination of the whole of the instant record fails to disclose actions by defendant estopping it from interposing the defense relied upon. With respect to Webster's assignment of any cause of action, it is sufficient to say that the petition failed to state a cause of action and that it was the function of the petition and not the function of the reply to state the cause of action. Baker v. Lamar (Mo.), 140 S.W. 31, 34[8]; Daniel v. Pryor (Mo.), 227 S.W. 102, 105[5]; Neal v. Twelfth Grand Ave. Bldg. Co., 228 Mo. App. 536, 541, 70 S.W.2d 136, 139[4]; Kent v. City of Trenton (Mo.), 48 S.W.2d 571, 575[2] (stating: "Plaintiffs must recover, if at all, upon the cause of action stated in the petition, and, if none is stated, a reply cannot aid the petition.")
The judgment is affirmed. Westhues and Barrett, CC., concur.
The foregoing opinion by BOHLING, C., is adopted as the opinion of the court. All the judges concur.