Dudley v. Dakota Hot Springs Co.

• Decision Date: 26 June 1899
• Citation: 11 S.D. 559,79 N.W. 839
• Parties: DUDLEY v. DAKOTA HOT SPRINGS CO. et al. (PHILLIPS, Intervener).
• Court: South Dakota Supreme Court

11 S.D. 559

79 N.W. 839

DUDLEY

v.DAKOTA HOT SPRINGS CO. et al. (PHILLIPS, Intervener).

Supreme Court of South Dakota.

June 26, 1899.

Appeal from circuit court, Fall River county; William Gardner, Judge.

Action by Erwin G. Dudley against the Dakota Hot Springs Company and others for an accounting and a dissolution of the corporation and appointment of a receiver. William P. Phillips intervenes. There was a judgment for plaintiff, and certain defendants appeal. Modified.Charles W. Brown, Steele & Dwinnell, and Fowler, Cull & Whitfield, for appellants.

FULLER, J.

In conformity with the complaint of a stockholder on his own behalf, “and all others similarly situated,” alleging that the defendant corporation owns property the value of which is greatly in excess of its liabilities, and which the managing officers and principal shareholders, made defendants herein, are sacrificing by fraud and mismanagement, the court entered judgment, upon a referee's findings of fact and conclusions of law, decreeing that such officers be removed, the corporation dissolved, and a receiver appointed to wind up its corporate affairs. This appeal is by the defendants, and the power of the court to thus consummate the dissolution of a corporation is the only point requiring notice. At common law, a corporation was dissolved only by the death of all its members; by legislative enactment; by a surrender of its charter, accepted by the government; or by forfeiture of its franchise, effected by the judgment of a competent tribunal on a direct proceeding in the name and on behalf of the state; and at the suit of a private person no court had jurisdiction in the premises. Upon the theory of a contract between the state and the corporators, Chancellor Kent says: “There are two modes of proceeding judicially to ascertain and enforce the forfeiture of a charter for default or abuse of power. The one is by scire facias, and that process is proper where there is a legal existing body, capable of acting, but who have abused their power. The other mode is by information in the nature of a quo warranto, which is in form a criminal, and in its nature a civil, remedy; and that proceeding applies where there is a body corporate de facto only, but who take upon themselves to act, though, from some defect in their constitution, they cannot legally exercise their powers. Both these modes of proceeding against corporations are at the instance and on behalf of the government. The state must be a party to the prosecution, for the judgment is that the parties must be ousted, and the franchises seized into the hands of the government. *** A court of chancery never deals with the question of forfeiture. It may hold trustees of a corporation accountable for abuse of trust, but the court cannot, without special statute authority, devest corporations of their corporate character and capacity.” 2 Kent, Comm. p. 427. It is the settled doctrine that, at the suit of a stockholder, corporate...