Drew v. Beckwith, Quinn & Co.

• Decision Date: 11 June 1941
• Docket Number: 2187
• Parties: DREW ET AL. v. BECKWITH, QUINN & CO. ET AL
• Court: Wyoming Supreme Court

114 P.2d 98

57 Wyo. 140

DREW ET AL. v. BECKWITH, QUINN & CO. ET AL

No. 2187

Supreme Court of Wyoming

June 11, 1941

Rehearing denied June 29, 1941, Reported at: 57 Wyo. 140 at 169.

APPEAL from the District Court, Lincoln County; V. J. TIDBALL Judge.

Action by Anna L. Drew and others against Beckwith Quinn & Company and others to have a receiver appointed for the named defendant and to have its affairs wound up. From a judgment dismissing the action, plaintiffs appeal. Rehearing denied July 29, 1941--see 115 P.2d 651.

Affirmed.

For the appellants, there was a brief and an oral argument by Louis Kabell, Jr. of Evanston.

Defendant corporation was organized under the laws of Wyoming Territory for a term of fifty years. As there was no territorial law authorizing an extension of its existence, its affairs should be wound up. Sec. 28-159, R. S. has no application to corporations other than those organized under laws of the State. The attempted extension of the existence of the corporation did not meet the requirements of law, and by reason of corporate mismanagement and expiration of existence the company should be dissolved and its assets distributed among stockholders. Appellants are holders of 290 shares of the stock. The Company has paid no dividends. The territorial charter constituted a contract between the corporation and its stockholders and between the stockholders and the territory. 12 C. J. 1023, 1024, 1028. The sovereignty of the Territory ceased by the act of its admission as a state. Upon the expiration of its charter, nothing remained of the corporation except its obligation to protect the rights of individuals. Article X, Secs. 5, 16, Constitution; 14 C. J 188. Even where the stockholders act unanimously for the renewal of their corporate franchise, such action must be taken before its charter expires, and then only by statutory authority. 12 C. J. 1027; State v. Leader Co., 37 P.2d 561; Merges v. Altenbrand, 123 P. 21; Annotation in 108 A. L. R. 72; C. B. & Q. Ry. v. Doyle, 102 N.E. 260; 14 C. J. 180 and cases cited. The case of Keetch v. Cordner (Utah) 62 P.2d 273, annotated at 108 A. L. R. 52, relied upon by respondents, is not in point, because of difference in the provisions of the Utah statutes and constitution. An attempted extension by a mere majority of stockholders is an impairment of the obligations of the contract between a corporation and its members. Garey v. Mining Company (Utah) 91 P. 369, 12 L. R. A. (N. S.) 554; McCarthy Co. v. Central Lumber (Iowa) 54 A. L. R. 1123; 108 A. L. R. 59; State v. Yoder, 103 P. 499. The coming into or going out of corporate existence is determined by the laws of its creation. Matson v. Mines Company (Washington) 171 P. 1040; Bonfils v. Hayes, 201 P. 678. Stockholders who continue the business of an expired corporation are liable as partners. 14 (a) C. J. 1189; Clark v. Coal Co. (Ind.) 73 N.E. 1083; Attorney General v. Perkins (Mich.) 41 N.W. 426; Bird v. Gay (Mich.) 127 N.W. 814; McKemie v. Grocery Co. (Ga.) 92 S.E. 282; Kaiser v. Kaiser (Ga.) 175 S.E. 649; Home Bldg. Association v. Bruner, 120 S.W. 306; Smith v. Mfg. Co. (N. J.) 43 A. 567; St. Louis Ry. v. James, 161 U.S. 545; 14 (a) C. J. 260 and cases cited. Peters v. Mortgage Co. (Del.) 105 A. L. R. 1457 and cases cited. A corporate entity ceases upon the expiration of its charter. McCarthy Co. v. Dubuque Ct. (Iowa) 208 N.W. 505; Clinton v. Coopedge, 47 A. L. R. 477; 13 Amer. Jur. 224-231; Trust Company v. Bldg. Corporation, 302 U.S. 120. The Act of 1911 relating to corporation certificate amendments is void. 36 Cyc. 1000; Quinn v. Whittaker Ranch Co., 92 P.2d 526. Section 28-159, R. S. cannot apply to territorial corporations without a violation of stockholders' rights. 12 C. J. 703, 714. If the legislature had intended that Section 28-159, R. S. authorize the extension of territorial corporations, it would have so stated. The certified copy of the articles of incorporation in evidence declares the object of the company to be engaged in two distinct lines of corporate endeavor, in violation of Article X, Section 6 of the Constitution. The Beckwith Company, organized under the laws of the Territory, was a foreign corporation after statehood and was not entitled to recognition. 14 (a) C. J. 1219, 1233; Myers v. Manhattan Bank, 20 Ohio Rep. 283. Defendant directors are liable as fiduciaries. Pepper v. Litton, 69 S.Ct. 238; Southern P. v. Bogert, 250 U.S. 483. It is clear from the evidence that they have managed the company in a manner prejudicial to the interests of the minority stockholders. 54 A. L. R. 1134; Sec. 28-1106, R. S. A receiver should be appointed. Stockmen's Nat. Bank v. Calloway Shops, 41 Wyo. 232; 19 C. J. S. 448; Goodwin v. Lithographing Co., 177 N.W. 618; 19 C. J. 1472. Minority stockholders are entitled to a dissolution of the company and a distribution of its assets. Hoeppler v. Crocker Company, 105 A. L. R. 1464. The Legislature of 1911, in the enactment of Chapter 32 of its session laws, clearly intended that what is now Section 28-159, R. S. 1931 should relate only to corporations organized under the laws of the State. 19 C. J. S. 1430-31; People v. United Medical Service, 200 N.E. 157. The record in this case shows collusion between the two Boards of Directors referred to, in the mismanagement and appropriation of benefits collected for their own use. Plaintiffs had to follow the rules laid down in 13 Amer. Jur. 940 in bringing this action. Appellants are entitled to relief and a reversal of the judgment of the court below.

For the respondent P. W. Spaulding, there was a brief and argument on his own behalf.

The main legal questions involved in this appeal are: Whether there is any law under which a territorial corporation may extend its existence, and secondly, whether the enactment of such a law by the state would be constitutional. There was no provision for extending the period of existence of any corporation organized under the territorial law. R. S. 1887, § 543. There was a provision for extending the business, but not the corporate existence of such corporations. R. S. 1887, Sec. 522. Sec. 28-159, R. S. 1931, authorizing the extension of terms of corporations, applies to such as have been organized under laws of the state. 8 Cook on Corporations, Vol. III, § 641; Pratt v. So. Pueblo Ass'n., 1 Colo. Dec. Supp. 171. A material and fundamental change in the charter by an amendment is a violation of stockholders' rights. 2 Cook on Corporations, 8th Ed., § 500; Marietta R. R. v. Elliot, 10 Oh. St. 57; 8 Fletcher, § 4092. Article X, Section 1 of the Constitution acts in futuro. No extension is valid without a statute authorizing it. 14 C. J. 180; St. Louis Co. v. James, 161 U.S. 545. Renewal proceedings must be commenced before the expiration of the charter term. Kaiser v. Kaiser, 175 S.E. 649; Home Building Association v. Bruner (Ky.) 120 S.W. 307; Augusta R. Co. v. City Council (Ga.) 28 S.E. 131. In Wyoming, the right to extend is confined to corporations organized under laws of the state. Sec. 28-159, R. S., Utah Construction Company case, 45 Wyo. 403.

W. A. Muir in reply.

Upon the admission of a territory as a state, corporations theretofore created by the territory are considered as corporations of the state. The provisions of Sec. 28-159, R. S. do not make a material change in the enterprise of the defendant corporation. The decisions and text cited by respondent Spaulding are not applicable upon the facts in this case. A stockholder who takes part, even by proxy, in a meeting extending the life of a corporation under a statute, is estopped to deny the extension of the corporation's existence. Boca Mill Co. v. Curry (Calif.) 97 P. 1117. The case of Kaiser v. Kaiser, cited by respondent Spaulding, turned upon a Georgia statute, and is inapplicable. The record shows that steps had been taken for the extension of the corporate term of the Beckwith Company long prior to the expiration of its charter.

BLUME, Justice. RINER, Ch. J., and KIMBALL, J., concur.

OPINION

BLUME, Justice.

This is an action brought by the plaintiffs, minority stockholders in Beckwith, Quinn and Company, a corporation, on behalf of themselves and others similarly situated, to have the affairs of that corporation wound up, and have a receiver appointed, claiming that the term of existence of the corporation has expired, and that the directors have mismanaged the affairs thereof. The defendants are the corporation, the directors and certain stockholders thereof. After issues joined, and trial had, the court dismissed the action at the costs of plaintiffs, and from that judgment the latter have appealed.

The corporation was organized on October 19, 1885, under the laws of Wyoming Territory, for a period of fifty years, the utmost limit of time for which a corporation was authorized by law to be organized. Its property consists mainly of 14,000 acres of land, appurtenances thereto, and personal property held in connection therewith, situated in what is now Lincoln County, Wyoming. Its principal office is located at Evanston, Uinta County, which county, prior to 1911, included the territory now included in Lincoln County. In 1890, after the organization of the territory into a state, the corporation duly accepted the constitution of this state. Ever since its organization, it has conducted its business for which it was organized, and has continued to do so to the present time. Its capital stock consists of 5333 shares, of the par value of $ 100 each, more than two-thirds of which were, up to the spring of 1939, owned by certain stockholders residing in and about the city of Chicago, or east thereof herein briefly called Chicago stockholders. The plaintiffs are owners of 269 shares. The corporation has...