Elliott v. Puget Sound Wood Products Co.

• Citation: 101 P. 228,52 Wash. 637
• Parties: ELLIOTT et al. v. PUGET SOUND WOOD PRODUCTS CO. et al.
• Decision Date: 19 April 1909
• Court: United States State Supreme Court of Washington

101 P. 228

52 Wash. 637

ELLIOTT et al. v. PUGET SOUND WOOD PRODUCTS CO. et al.

Supreme Court of Washington

April 19, 1909

Appeal from Superior Court, King County; Geo. E. Morris, Judge.

Action by P.J. Elliott and others against the Puget Sound Wood Products Company and others. Judgment dismissing the action and plaintiffs appeal. Affirmed.

Jay C Allen, for appellants.

Ballinger Ronald, Battle & Tennant, Walter S. Fulton, and C.J. France for respondents.

DUNBAR J.

This is an equitable action against a corporation. The complaint in this case is so extremely lengthy that it is impossible possible to reproduce it here, and it is difficult to condense the essential statements of the complaint so that it may be intelligently understood or discussed. We will, however, accept practically the appellants' statement of the case. The action was brought by several stockholders, for themselves and other stockholders, of the Puget Sound Wood Products Company, a corporation, against the corporation and B. W. Bell, R. N. Calkins, and R. S. Green, as president, manager, and secretary-treasurer, respectively, of the corporation, and against the Monarch Wood Products Company, a corporation, for the purpose of testing the validity of a contract entered into between the Puget Sound Wood Products Company and the Monarch Wood Products Company, whereby, for an alleged secret process for the distillation of wood, the Puget Sound Wood Products Corpany gave the Monarch Wood Products Company 51 per cent. of its stock. The action is also brought for the appointment of a receiver. The complaint alleges that the plaintiffs are stockholders in the Puget Sound Wood Products Company, and states the organization of the Puget Sound Wood Products Company with 1,000,000 shares of the par value of $1 each, of which stock the defendants Bell and Calkins signed a subscription list for five shares each, and R. S. Green for the remaining 999,990 shares, and alleges: That the subscription of Green was sham, fraudulent, and not in good faith and void; that the three above-named defendants then held a metting for the election of trustees and officers; that at said meeting the total of shares represented was 15; and that the remaining shares, as shown by the minutes of that meeting, had not been subscribed or represented. This was on the 2d day of February, 1907. It alleges: That on the 6th day of July, 1907, two of the defendants, Bell and Green, together with one Andrew Quigley, organized the Monarch Wood Products Company, with a capital stock of 1,000,000 shares, of the year value of $1 each; that Bell and Quigley subscribed for 1 share each of the Monarch Wood Products Company, Green for 10 shares, the remaining shares being held by one Holbrook and the defendant Calkins; that a board of directors of the last-mentioned company was elected on the same day by a meeting between the defendants Bell and Green, each representing 1 share only of the stock; that the defendant Green caused himself to be elected secretary and treasurer of both corporations; that he refused to give the bond of $5,000 required by the laws of the Puget Sound Wood Products Company; that on the day of the formation of the Monarch Wood Products Company, Bell and Green, as president and secretary of the Puget Sound Wood Products Company, without authority and without any consideration, made and entered into a written contract with themselves, as president and secretary of the Monarch Wood Products Company, for the purchase of an alleged secret process for the distillation of wood, which the Monarch Wood Products Company claimed to own, and delivered to the Monarch Wood Products Company 510 shares of the Puget Sound Wood Products Company. Plaintiffs deny that the Monarch Wood Products Company ever had any interest, right, or title to any such process, and allege that the process which it at that time claimed to hold was valueless, and alleged: That the plaintiffs had no knowledge, when they subscribed and paid for their stock in the Puget Sound Company, of the existence of any such contract; that such information was knowingly and willfully withheld from all the bona fide owners of the stock of said company; that the Puget Sound Company had no authority to transact business as such corporation when it entered into the contract, because at that time, its stock had not been subscribed for; that the affairs of the company are being grossly mismanaged; that the company is insolvent; and that, unless a receiver is appointed, they and other bona fide stockholders who have paid cash for their stock would lose the whole thereof. This is, in substance, the complaint. The defendants all appeared, and filed a demurrer upon the ground that the complaint did not state facts sufficient to constitute a cause of action. The court took the demurrer under advisement, and proceeded to hear the affidavits filed by each party in support of, and against the appointment of, a receiver. Subsequently the court sustained the demurrer to the complaint, and of course denied the appointment of a receiver. Afterwards the action was dismissed, judgment was entered, and plaintiffs, standing on their complaint, appealed.

It is urged that the court erred in sustaining the demurrer to the complaint and refusing to appoint a receiver. In support of the judgment of the court, it is contended by the respondents that the complaint, inasmuch as it states that the Puget Sound Wood...