Beyer v. North American Coal & Mining Company
| Decision Date | 10 January 1916 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Stark County, Crawford, J Reversed.
Reversed.
M. A Hildreth, for appellant.
The complaint shows that the majority of the stockholders and directors are prejudiced against Mr. Beyer and his interests. He can maintain this action. Pom. Eq. Jur. § 1095; Thomp. Corp. 2d ed. § 4568; 2 Machen. Corp. § 1179; Kley v. Healy, 127 N.Y. 555, 28 N.E. 593; Continental Securities Co. v. Belmont, 206 N.Y. 12 51 L.R.A.(N.S.) 112, 99 N.E. 138, Ann. Cas. 1914A, 777; Pollitz v. Wabash R. Co. 207 N.Y. 113, 100 N.E. 721.
There has been no acquiescence in or ratification by the plaintiff of the acts of the corporation. Arnot v. Union Salt Co. 186 N.Y. 501, 79 N.E. 719; San Diego, O. T. & P. B. R. Co. v. Pacific Beach Co. 112 Cal. 53, 33 L.R.A. 788, 44 P. 333.
This principle also applies where a plaintiff against whom it is invoked remained silent or inactive when there was the opportunity and the duty to act or speak. Rothschild v. Title Guarantee & T. Co. 204 N.Y. 458, 41 L.R.A.(N.S.) 740, 97 N.E. 879; Sheldon Hat Blocking Co. v. Eickemeyer Hat Blocking Mach. Co. 90 N.Y. 607.
The complaint states a valid cause of action. Jacobson v. Brooklyn Lumber Co. 184 N.Y. 152, 76 N.E. 1075.
Where in a stockholder's action the defendants against whom the wrong is charged are the executive officers of the corporation, who also constitute a majority of the acting board of directors, a prior demand upon the corporation to bring the action is not necessary. 10 Am. & Eng. Enc. Law, 790; Kelsey v. Sargent, 40 Hun, 150; Copeland v. Johnson Mfg. Co. 47 Hun, 235; Barnes v. Brown, 80 N.Y. 527; Ziegler v. Hoagland, 52 Hun, 385, 5 N.Y.S. 305; Beers v. New York L. Ins. Co. 66 Hun, 75, 20 N.Y.S. 788; Duncomb v. New York, H. & N. R. Co. 84 N.Y. 190; Munson v. Syracuse, G. & C. R. Co. 103 N.Y. 58, 8 N.E. 355; 21 Am. & Eng. Enc. Law, 2d ed. 897-910; Cook, Stock & Stockholders, 3d ed. § 657; Taylor, Priv. Corp. 5th ed. 646- 648; Billings v. Shaw, 209 N.Y. 265, 103 N.E. 142.
Where the trustee's act consists not in possessing himself of the property of the beneficiary as owner, but in taking collateral security for a debt honestly due him, the rule can have no application, since the payment of the debt or the discharge of the liability is an essential prerequisite of the avoidance. But where fraud enters into the transaction, a demand to bring action is not necessary. Delaware & H. Co. v. Albany & S. R. Co. 213 U.S. 435, 53 L. ed. 862, 29 S.Ct. 540; Denver & R. G. R. Co. v. Alling, 99 U.S. 463, 25 L. ed. 438; Davis v. Rock Creek Lumber Flume & Min. Co. 55 Cal. 359, 36 Am. Rep. 40.
One cannot faithfully serve two masters whose interests are diverse. Andrews v. Pratt, 44 Cal. 309; San Diego v. San Diego & L. A. R. Co. 44 Cal. 106; Wilbur v. Lynde, 49 Cal. 290, 19 Am. Rep. 645; Pickett v. School Dist. 25 Wis. 552, 3 Am. Rep. 105; Cumberland Coal & I. Co. v. Sherman, 30 Barb. 553; Field, Corp. §§ 174, 175.
Where directors, in violation of their duty and in betrayal of their trust, secured their own debts by mortgage to the injury of the stockholders and creditors, the mortgage is void. Koehler v. Black River Falls Iron Co. 2 Black, 717, 17 L. ed. 341; Rothwell v. Robinson, 39 Minn. 1, 12 Am. St. Rep. 608, 38 N.W. 772; Pencille v. State Farmers' Mut. Hail Ins. Co. 74 Minn. 67, 76 N.W. 1026; Schwab v. E. G. Potter Co. 194 N.Y. 409, 87 N.E. 670; Wilbur v. Lynde, 49 Cal. 290, 19 Am. Rep. 645; San Diego v. San Diego & L. R. A. Co. 44 Cal. 112; Wyman v. Bowman, 62 C. C. A. 189, 127 F. 257.
A corporation holds its property in trust for its stockholders. The stockholders have a joint interest in the same property. Wheeler v. Abilene Nat. Bank Bldg. Co. 16 L.R.A.(N.S.) 892, 89 C. C. A. 477, 159 F. 391, 14 Ann. Cas. 917; Jackson v. Ludeling, 21 Wall. 616, 22 L. ed. 492; Jones v. Missouri-Edison Electric Co. 75 C. C. A. 631, 144 F. 765; Booker v. Crocker, 65 C. C. A. 627, 132 F. 8.
A minority stockholder has the right to maintain an action against wrongdoers, in his own name on behalf of the corporation. Hingston v. Montgomery, 121 Mo.App. 451, 97 S.W. 202; Dodd v. Pittsburg, C. C. & St. L. R. Co. 127 Ky. 762, 16 L.R.A.(N.S.) 898, 106 S.W. 787.
Bangs, Netcher, & Hamilton and W. J. Mayer, for respondents.
Neither party, privy, nor stranger may impeach a judgment by an action in equity, as a matter of right, or on the ground only that the judgment is wrong. An action brought for such purpose is res judicata. 1 Van Fleet, Former Adjudication, § 1, p. 95; Nichols v. Stevens, 123 Mo. 96, 45 Am. St. Rep. 514, 25 S.W. 578, 27 S.W. 613; 2 Van Fleet, Former Adjudication, p. 998; Willoughby v. Chicago Junction R. & Union Stockyards Co. 50 N.J.Eq. 656, 25 A. 277; 11 Enc. Pl. & Pr. 1168.
The remedy against such a judgment is provided by statute. Rev. Codes 1905, § 6884, Comp. Laws 1913, § 7483; Bruegger v. Cartier, 20 N.D. 72, 126 N.W. 491; Freeman v. Wood, 11 N.D. 1, 88 N.W. 721; Routledge v. Patterson, 146 Wis. 226, 131 N.W. 346.
The party seeking relief from a judgment must plead an available defense to the original action, in addition to pleading an acceptable excuse for not using such defense at the proper time, and pleading no present available remedy. 11 Enc. Pl. & Pr. 1192.
"Where the defense set up consists only of matters which were litigated at law, whether before or after judgment, there can be no relief." 11 Enc. Pl. & Pr. 1192, 1193.
Where an action is brought in a court of equity to enjoin or vacate a judgment, facts must be alleged excusing the failure to resort to all remedies in the original action. Freeman v. Wood 11 N.D. 1, 88 N.W. 721; 11 Enc. Pl. & Pr. 1193, 1194.
The appellant is bound by the original judgment. The so-called fraud, to which he refers in the complaint, is not a fraud or matter that was or should have been an issue in the original action. Nichols v. Stevens, 123 Mo. 96, 45 Am. St. Rep. 514, 25 S.W. 578, 27 S.W. 613; Yorke v. Yorke, 3 N.D. 343, 55 N.W. 1095; 3 Enc. Pl. & Pr. 627, 628, 630.
The statutory remedy by motion to vacate a judgment obtained by fraud is exclusive, where it is not shown that such remedy was not available. Freeman v. Wood, 11 N.D. 1, 88 N.W. 721; Kitzman v. Minnesota Thresher Mfg. Co. 10 N.D. 26, 84 N.W. 585; 6 Enc. Pl. & Pr. 1515; 11 Enc. Pl. & Pr. 1197; English v. Savage, 14 Ala. 342; Roebling Sons Co. v. Stevens Electric Co. 93 Ala. 39, 9 So. 369; Reagan v. Fitzgerald, 75 Cal. 230, 17 P. 198; Piggott v. Addicks, 3 G. Greene, 427, 56 Am. Dec. 547; Myrick v. Edmundson, 2 Minn. 259, Gil. 221; Gould v. Loughran, 19 Neb. 392, 27 N.W. 397; Mosley v. Southern Mfg. Co. 4 Okla. 492, 46 P. 508; Given's Appeal, 121 Pa. 260, 6 Am. St. Rep. 795, 15 A. 468; McIndoe v. Hazelton, 19 Wis. 568, 88 Am. Dec. 701; Coon v. Seymour, 71 Wis. 340, 37 N.W. 243; Kidwell v. Masterson, 3 Cranch, C. C. 52, Fed. Cas. No. 7,758.
The complaint further discloses that appellant, in some form or other, participated in the former adjudication, and he has shown no sufficient reason why he should not be bound by the same. 11 Enc. Pl. & Pr. 1187.
This case is also connected with the litigation commencing with Investors' Syndicate v. Letts, 22 N.D. 452, 134 N.W. 317, and Beyer v. Investors' Syndicate Co. 31 N.D. 247, 153 N.W. 476. It is also remotely connected with the case of Beyer v. Robinson, post, 560, 156 N.W 203, just handed down by this court. The facts have been so often stated by this court that we will do little more than mention them. The case at bar seeks to enjoin the Investors' Syndicate from continuing the foreclosure of the $ 500 Dana mortgage given in 1888 by the Letts's upon the N.W. 1/4 of 16, 139-94. This quarter was first homesteaded by Jeremiah Letts, who received a patent from the government about 1888. The same year he executed a mortgage thereon in favor of Mrs. Dana for $ 500, being the mortgage involved in the present action. About the year 1895 one Williams, a promoter, persuaded Letts and Beyer to organize a coal mining company to develop lignite mines upon this and three other quarter sections in the vicinity. After an ineffectual effort to organize, a corporation known as the North American Coal Mining Company was brought into existence with a capital stock of $ 50,000. The Letts's were to contribute their equity in this quarter section and another tract of land and received $ 10,000 in stock in the new company. Beyer, this plaintiff, was to furnish money enough to purchase this Dana mortgage and other similar items to the amount of $ 3,440, and he also received $ 10,000 in stock. Williams, the promoter, received $ 30,000 in stock. In this manner Beyer became the owner by assignment of the $ 500 mortgage, and he, in turn, assigned it to the North American Coal Mining Company. In 1895 Williams, who was in control of the coal mining company, made a fraudulent transfer of this mortgage to the Investors' Syndicate Company. The details of this fraudulent transfer are set forth in Investors' Syndicate v. North American Coal Min. Co. 31 N.D. 259, 153 N.W. 472. It is sufficient to say that the action of Williams and his colleagues was illegal and ultra vires, and was so known to the Investors' Syndicate Company at the time of the alleged transfer, and that the said assignment was void. The effect of that decision was to show that the title to this Dana mortgage was really in the North American Coal Mining Company. About the same time as this transfer, Beyers attempted to...
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