Carnegie Dock & Fuel Co. v. Kensington Mills, Inc.
| Decision Date | 26 May 1922 |
| Docket Number | 22,879 |
| Citation | 188 N.W. 270,152 Minn. 258 |
| Parties | CARNEGIE DOCK & FUEL COMPANY AND ANOTHER v. KENSINGTON MILLS, INC. AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Hennepin county to sequestrate the property of defendant corporation. A receiver was appointed who applied for an order assessing stockholders. The motion of certain stockholders for an order removing defendant's default was heard and denied by Nye, J. From the judgment decree and order for assessment against all the stockholders of defendant corporation and authorizing George S. Grimes receiver, to enforce the assessment, the stockholders appealed. Reversed.
Corporation -- articles construed -- stockholders not liable to creditors.
Articles of incorporation construed and held to limit the corporation to carrying on a manufacturing business exclusively, with consequent nonliability of the stockholders to creditors of the corporation.
Constant Larson and A. T. Larson, for appellants.
William Howard Anderson and George S. Grimes, for respondents.
In September, 1921, plaintiff obtained a default judgment against the defendant corporation, docketed it in the office of the clerk of the district court of Hennepin county, caused an execution to be issued thereon directed to the sheriff of Hennepin county, and obtained the return of the sheriff that no property of the defendant could be found within his county. This action was then commenced to sequestrate the property of the corporation. It failed to answer and plaintiff obtained the appointment of a receiver, who applied for an order assessing the stockholders. They appeared and opposed the application, principally on the ground that the corporation was organized for the purpose of carrying on a manufacturing business exclusively, and hence its stockholders were not liable to assessment.
The corporation was organized under the laws of this state in August, 1918, with a capital stock of $50,000 subsequently increased to $100,000, divided into shares of the par value of $10 each. The articles specified the general nature of its business to be "the manufacture of all kinds of flour, cereal products, feed and milling stuffs, and to acquire by purchase, lease or otherwise, and to own, sell, lease, mortgage, convey, improve and operate such real estate, factories, elevators, buildings and manufactories for the production and storage of all kinds of goods that may be produced from or in conjunction with grain or cereals of any kind, and such machinery, grain and other personal property as may be necessary and proper to carry on the above business and do all things necessary and proper to fully carry into effect the above powers." Fairly construed, does this language limit the business to that of manufacturing, including such business as is properly incidental thereto?
This court has held that under our Constitution liability of stockholders for the debts of the corporation is the general rule, and nonliability the exception, Merchants Nat. Bank of St. Paul v. Minnesota Thresher Mnfg. Co. 90 Minn. 144, 95 N.W. 767, that if a corporation, ostensibly organized to conduct a manufacturing business, might transact business other than manufacturing without being open to the charge that its dealings were ultra vires, its stockholders do not come within the exception, St. Paul Barrel Co. v. Minneapolis Distilling Co. 62 Minn. 448, 64 N.W. 1143; that, if stockholders wish to come under the exception, they must see that express terms are inserted in the articles of incorporation which limit the business to that of manufacturing or such as is properly incidental thereto, Minnesota T. Ins. & T. Co. v. Regan, 72 Minn. 431, 75 N.W. 722; and that if, under the authority reserved to it by its articles, the corporation may lawfully engage in any business not exclusively manufacturing or mechanical and not properly incidental thereto, the constitutional exemption from liability does not apply, Graff v. Minnesota Flint Rock Co. 147 Minn. 58, 179 N.W. 562.
The articles considered in Anderson v. Anderson Iron Co. 65 Minn. 281, 68 N.W. 49, 33 L.R.A. 510, and in Cuyler v City Power Co. 74 Minn. 22, 76 N.W. 948, come nearest to being the same in substance as those now before us. In the first case it was contended that the corporation was...
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