Robertson's, Inc. v. Renden

• Citation: 189 N.W.2d 639
• Decision Date: 31 August 1971
• Docket Number: No. 8647,8647
• Parties: ROBERTSON'S, INC., by Eaton's of North Dakota, Judgment Creditor, Plaintiff and Respondent, v. Marian RENDEN, Defendant and Appellant. Civ.
• Court: United States State Supreme Court of North Dakota

Page 639

189 N.W.2d 639

ROBERTSON'S, INC., by Eaton's of North Dakota, Judgment Creditor, Plaintiff and Respondent, v. Marian RENDEN, Defendant and Appellant.

Civ. No. 8647.

Supreme Court of North Dakota.

Aug. 31, 1971.

Syllabus by the Court

1. For reasons stated in the opinion, the corporate judgment creditor had no standing to bring an action on behalf of its corporate judgment debtor against a director of the latter corporation for alleged wrongful conduct of the director in making distribution of assets of the latter corporation at a time when the corporation was insolvent or when such distribution would have rendered the corporation insolvent.

Conmy, Conmy, Rosenberg & Lucas, Bismarck, for defendant and appellant.

R. W. Wheeler, Bismarck, for plaintiff and respondent.

ERICKSTAD, Justice (on reassignment).

On June 11, 1965, Robertson's Inc., a North Dakota corporation operating a women's store in Bismarck, North Dakota, entered into an agreement with Eaton's of North Dakota, Inc., whereby Eaton's purchased the store and business from Robertson's Inc.

On July 15, 1966, Eaton's commenced an action against Robertson's Inc. on the purchase agreement, which action was tried to a jury on October 5, 1967, and resulted in a judgment against Robertson's Inc. in the amount of $7,006.55 plus interest and costs. The judgment was entered in the district court of Burleigh County on November 24, 1967.

An execution issued on that judgment was returned unsatisfied on May 8, 1968. A second execution was outstanding on September 24, 1969.

The instant appeal is taken by Marian Renden from a judgment obtained by Robertson's Inc. on the 26th of September, 1969, in the sum of $7,006.55 plus interest and costs. The judgment arises out of an action brought by Eaton's of North Dakota on behalf of Robertson's Inc. We shall hereinafter refer to Robertson's Inc. as Robertson's; Eaton's of North Dakota as Eaton's; and Marian Renden as Renden.

The action brought by Eaton's on behalf of Robertson's was an attempt to recover from Renden the judgment obtained in the first action by Eaton's against Robertson's on the theory that certain withdrawals made by Renden as a director and stockholder of Robertson's were made when the corporation was insolvent.

Renden asserts that there are four basic issues to be settled on this appeal.

'1. Is the defendant, Marian Renden, personally liable for the judgment debt?

'2. Was the distribution made by Robertson's, Inc., in June of 1966 made at a time when the corporation was insolvent?

'3. Was the distribution made by Robertson's, Inc., in October of 1967 made at a time when the corporation was insolvent?

'4. Is Robertson's, Inc., by Eaton's of North Dakota, Judgment Creditor, a proper plaintiff in this action; and does Eaton's of North Dakota have standing to bring such an action?

If Robertson's does not have standing to bring this action, the appeal must be dismissed. For this reason we shall consider first the issue of whether Eaton's has standing to bring the action.

Prior to the adoption of our North Dakota Business Corporation Act by Chapter 102 of the North Dakota Session Laws of 1957, patterned after the Model Business Corporation Act, certain sections of the North Dakota Revised Code of 1943 were pertinent as to the rights of creditors. They follow:

'10--1404. Purposes for Which Action May Be Brought Against Corporate Officers as Such. An action may be maintained against one or more trustees, directors, managers, or other officers of a corporation to procure a judgment for the following purposes or so much thereof as the case requires:

'1. To compel them to account for their official conduct in the management and disposition of the funds and property committed to their charge;

'2. To compel them to pay to the corporation which they represent or to its creditors any money and the value of any property which they have appropriated to themselves or transferred to others or lost or wasted by violation of their duties, or to transfer any such property held by them to the corporation;

'3. To suspend such person from exercising his office when it appears that he has abused his trust;

'4. To remove such person from his office upon proof or conviction of misconduct, and to direct a new election to be held by the body or board duly authorized to hold the same in order to fill the vacancy created by the removal, or when there is no such body or board or when all the members thereof are removed, to direct the removal to be reported to the secretary of state who then may fill the vacancy;

'5. To set aside an alienation of property made by one or more trustees, directors, managers, or other officers of a corporation contrary to a provision of law or for a purpose foreign to the lawful business and objects of the corporation when the alienee knew or had notice of the purpose of the alienation; and

'6. To restrain and prevent an alienation described in subsection 5 when it is threatened or when there is good reason to apprehend that it will be made.'

'10--1405. Who May Bring Action Against Corporate Officers as Such. An action may be commenced as prescribed in section 10--1404 by the state or by a trustee, director, manager, or other officer of the corporation having a general superintendence of its affairs, or by a stockholder of the corporation upon the neglect or refusal of such officer so to do at the request of such stockholder. Any such action brought for a purpose other than the purposes specified in section 10--1404, subsections 3 and 4, may be brought by a creditor of the corporation.'

'10--1408. When Corporate Stockholders and Officers May Be Made Defendants in Action Against Corporation. In an action against a corporation upon a claim for which its stockholders, directors, trustees, or other officers, or any of them, are liable in any event or contingency, one or more or all of the persons so liable may be made parties defendant by the original or by an amended or supplemental complaint, and their liability may be declared and enforced by the judgment in such action.'

'10--1409. When Corporate Stockholders and Officers May Be Made Defendants After Judgment Is Entered Against Corporation. If any creditor of a corporation whose directors, trustees, or other officers or stockholders are liable for the payment of his demand, desires to make one or more of them parties to the action after a judgment therein against the corporation, he may do so by filing a supplemental complaint against them founded upon such judgment.'

'10--1410. Action Against Corporate Stockholders and Officers: Joinder of Corporation; Procedure. Whenever any creditor of a corporation shall seek to charge the directors, trustees, or other officers or stockholders thereof on account of any liability created by law, he may commence and maintain an action for that purpose in the district court and at his election may join the corporation therein. When it appears necessary in such action, the court shall cause an account to be taken of the property and debts due to and from the corporation and shall appoint one or more receivers, who shall possess all the powers conferred and be subject to all the obligations imposed on receivers by the provisions of section 10--1612. If upon the filing of the answer or the taking of such account, it shall appear that the corporation is insolvent and that it has not property nor effects sufficient to satisfy the creditor, the court, without appointing any receiver, may proceed to ascertain the respective liabilities of such directors, trustees, or other officers and stockholders and to enforce the same by its judgment as in other cases.'

With the adoption of the Model Business...