Doud v. Wis., P. & S. Ry. Co.

• Decision Date: 01 December 1885
• Citation: 65 Wis. 108,25 N.W. 533
• Parties: DOUD AND OTHERS v. WISCONSIN, P. & S. RY. CO. AND OTHERS.
• Court: Wisconsin Supreme Court

65 Wis. 108

25 N.W. 533

DOUD AND OTHERS

v.WISCONSIN, P. & S. RY. CO. AND OTHERS.

Supreme Court of Wisconsin.

Filed December 1, 1885.

Appeal from circuit court, Monroe county.Gardner & Gaynor and Moses Hooper, for appellants, C. Dowd and others.

John W. Cary, for respondents, Wisconsin, P. & S. Ry. Co. and others.

COLE, C. J.

It has frequently been decided by this court that where an objection was taken on the trial to any evidence being received on the ground that the complaint fails to state a cause of action, that this was in the nature of a demurrer ore tenus; and, upon such demurrer, as upon any other, the court must determine, from the facts stated, whether the complaint was sufficient in law. The decisions upon this point are quite fully referred to in the brief of counsel for the defendants, and need not be cited here. True, it has been said that, where the objection to the sufficiency of the complaint was taken in this manner, a greater latitude of presumption would be indulged in to sustain the complaint than would be where the objection to it was taken in the ordinary way by demurrer; but this qualification of the rule relates to an imperfect statement of facts, and does not mean that the court will, on demurrer ore tenus, supply by presumption necessary averments or material facts which have been omitted from the complaint. The complaint must still bear the test, when all its facts are considered, of substantially stating a cause of action, otherwise it will be held bad. It results from this view that the omission of material allegations in the complaint cannot be aided or helped out by matters stated in the answer. The acute and able counsel for the plaintiffs insist that, inasmuch as the defendants did not formally demur in season, but answered, that all the facts, whether stated in the complaint or answer, should be considered in analogy to certain rules of practice which obtain in other cases. But we think the complaint must stand or fall upon what, by a liberal construction of its averments, it may be said to contain. Its allegations cannot be supplied, if defective, by matters in the answer.

This is an action brought by a part of the stockholders of the defendant corporation against the corporation and certain of its officers, directors, and stockholders to obtain certain relief. The objection taken to the complaint on the trial was that the action being for the protection of the property of the corporation, or of the corporate franchises, the right of action vested primarily in the corporation, and could be maintained by the stockholders only upon the refusal of the board of directors to prosecute, or when it appears that it will be useless to call upon the board to act. The learned trial judge on this subject followed the rule which has been laid down by courts of the highest authority, both in this country and in England. The able counsel for the defendants has cited in his brief many of these cases, and the number could readily be increased. These decisions are clear and pointed, fully establishing the doctrine that a stockholder has not the right to bring an action in his own name against officers of a corporation for fraudulent acts or waste of the corporate property, unless such corporation, or its officers, upon being applied to for such purpose by the stockholders, refuses to prosecute, or unless it appears that a request to prosecute would be useless. Prof. Pomeroy, in his work on Equity Jurisprudence, states the rule deducible from the authorities as follows: “In general, where the directors or officers, or some of them, cause a loss of corporate property, by negligence or culpable lack of prudence, or failure to exercise their functions; or fraudulently misappropriate the corporate property in any manner, whether for their own benefit, or for the benefit of third persons; or obtain any undue advantage, benefit, or profit for themselves, by contract, purchase, sale, or other dealings, under color of their official functions; or misuse the franchises; or violate the rules established by the charter or the by-laws for their management of the corporate affairs; or in any other similar manner commit a breach of their fiduciary obligations towards the corporation, so that it sustains an injury or loss, and a liability devolves upon themselves,--then the corporation is the party which must, as the plaintiff, bring an equitable suit for relief against the wrong-doers. * * * In cases belonging to this class, therefore, whatever be the nature of the particular wrong, whether intentional and fraudulent, or resulting from negligence or want of reasonable prudence, and whatever be the indirect loss occasioned to individual stockholders, no equitable suit for relief against the wrong-doing directors or officers can be maintained by a stockholder or stockholders, individually, nor by a stockholder...