Fisher v. National Mortg. Loan Co.

• Decision Date: 11 February 1937
• Docket Number: 29728.
• Citation: 271 N.W. 433,132 Neb. 185
• Parties: FISHER v. NATIONAL MORTG. LOAN CO. ET AL.
• Court: Nebraska Supreme Court

271 N.W. 433

132 Neb. 185

FISHER v. NATIONAL MORTG. LOAN CO. ET AL.

No. 29728.

Supreme Court of Nebraska.

February 11, 1937

Syllabus by the Court.

1. An officer or director of a corporation occupies a fiduciary relation towards the corporation and its stockholders.

2. An officer or director of a corporation will not be permitted without authority to divert corporate property to the payment or securing of a debt of the corporation to himself.

3. A lien on the property of a corporation can only be fixed by an agreement between the corporation and the lienholder or by some fixed rule of law.

4. An officer or director of a corporation cannot acquire a lien on the property of a corporation as a consequence of his own breach of duty.

5. When a defendant, after the institution of a suit against him concedes at the trial a portion of the relief demanded against him, such concession does not prevent the entering of a judgment in favor of the plaintiff.

6. A receiver may be appointed for a solvent corporation when there is gross mismanagement or other situation calling for equitable relief.

7. Evidence examined and held not sufficient to require the appointment of a receiver for the defendant corporation.

8. Evidence examined and held that the plaintiff brought the action in good faith to protect the interest of the corporation.

9. When an individual stockholder of a corporation makes a demand of the directors of the corporation to take immediate action for the recovery of property converted by an officer and director of the corporation, and the directors refuse or neglect to do so, it is not necessary for such stockholder, before he brings a representative suit, in the interest of all stockholders and the corporation, against such officer corporation and its directors, to request the stockholders that they, as a body, bring suit, when such request would be useless or unavailing.

Appeal from District Court, Lancaster County; Broady, Judge.

Action by George A. Fisher against the National Mortgage Loan Company and others. Judgment for defendants, and plaintiff appeals.

Affirmed in part, and reversed in part.

Stewart, Stewart & Whitworth, Charles B. Paine, and Bernard S. Gradwohl, all of Lincoln, for appellant.

Peterson & Devoe and Meredith K. Nelson, all of Lincoln, and E. S. Nickerson, of Papillion, for appellees.

Heard before GOSS, C. J., GOOD, EBERLY, DAY, and CARTER, JJ., and MUNDAY, District Judge.

MUNDAY, District Judge.

Appellant, George A. Fisher, brought this action in equity as a stockholder in the National Mortgage Loan Company, a corporation, upon behalf of himself and all other stockholders similarly situated, against said corporation and John C. Hartigan, Albert F. Ackerman, Frank Simodynes, Otto H. Brockman, William Mueller and P. A. Bindernagle, its directors. In his petition he alleged in substance that the plaintiff for many years had been the owner of 400 shares of stock in said corporation; that the defendants John C. Hartigan and Albert F. Ackerman have been, for more than 10 years last past, president and secretary, respectively, and managing officers of said corporation; that said defendants Hartigan and Ackerman for many years last past have grossly mismanaged the business of the corporation and have wrongfully and fraudulently disposed of its property and assets; that defendant Hartigan has at all times been an attorney and devoted only a very small portion of his time to the business of the corporation, but caused the corporation to pay him an exorbitant salary of several hundred dollars a month for over 10 years; that the company has not been in active business for many years, and its management only required a small portion of defendant Ackerman's time as secretary, and that he was paid an exorbitant salary for over 10 years last past; that the stockholders of the company voted to liquidate the business of the company in April, 1930, and that said officers and directors have not complied with the stockholders' vote; that on or about January 2, 1934, defendant Hartigan as such president and attorney of the corporation, and with approval of defendant Ackerman, wrongfully and unlawfully and without right or authority, took from the assets of the corporation and converted to his own use $10,000 in United States government bonds and $20,000 in Lincoln Joint Stock Land Bank bonds of the par value of $20,000, and wrongfully claimed he was entitled to said bonds for services rendered said corporation; that on April 16, 1934, plaintiff caused a written demand to be made on the defendant Hartigan to return said bonds to the defendant company and at the same time caused a written demand on each and all of the directors of the company to require defendant Hartigan to return said bonds to the corporation, but the defendants and each of them have failed to comply with the demand; that said directors and officers have held no directors' meeting for more than four years and said directors have wrongfully and negligently permitted the aforesaid mismanagement of the defendant company by its officers; that the assets of the company are largely real estate of value of about 75 to 100 thousand dollars; that plaintiff has no adequate remedy at law. Plaintiff prayed that the defendant Hartigan be required to return said bonds or the proceeds thereof to said corporation; that defendants Hartigan and Ackerman be required to account to the company for mismanagement and for excessive salaries; that a trust company be appointed to liquidate the assets of the company and that the defendant company be required to pay the plaintiff a reasonable attorney's fee and costs of the action and for general equitable relief.

The joint answer of the president, secretary, the corporation, and all directors save one, admitted that the company was a corporation; that the parties named as directors were such; that liquidation was voted in 1930, but owing to adverse conditions it could not be carried out without sacrifice, and that the same will be completed when in the judgment of the board of directors the same can be done without unnecessary loss; that the plaintiff does not bring this action in good faith, but on behalf of a judgment creditor of said corporation named Baxter to assist said creditor in the collection of an unsuperseded judgment in the sum of $72,000, and denied the other allegations of the petition.

The defendant Mueller answered and alleged substantially the same facts as the other defendants, except the allegations as to the details of the work of liquidation of the company, which allegations he denied.

On March 12, 1935, the defendant Hartigan filed a separate and amended answer in which, in addition to the allegations of his original answer, he alleged that for many years last past he had been attorney for said corporation and its predecessor and had represented it in matters connected with its business, and that for the last 13 years continuously until the present time has acted as legal adviser of the defendant corporation and has conducted the defense of many cases in Nebraska and Colorado and that one case was then pending in the supreme court of Nebraska; that he employed attorneys for said case in the supreme court, the judgment in which was not superseded, and for the purpose of securing payment to his attorneys in said case in the supreme court and himself of attorneys' fees earned and to be earned in the trial and in the ultimate disposition of said cause, and for the purpose of procuring payment to himself of attorney's fees which he had theretofore earned for legal services rendered to said company as above set out and for money expended by him in the preparation and trial of said case and his expenses while so employed as attorney, there was turned over to him by defendant corporation for said purposes the bonds belonging to said corporation in the value of $24,800; that the reasonable value of the services rendered by the defendant and his said attorneys exceeds $30,000; that from the proceeds of said bonds he had paid out $500 to his said attorneys, on attorneys' fees, $1,200 in preparing said case in the supreme court, $250 in preparing the appeal of said case, and $3,000 to the company for operating expenses of its business, $3,500 in cash as security for appeal bond, and $4,000 to himself for salary.

For reply plaintiff filed a general denial, also alleging payment for all of the past services of the defendant Hartigan; and the statute of limitations was pleaded as to said claims and that the defendant Hartigan was estopped to claim that he took said bonds as security. The defendant Mueller filed a reply in the nature of a general denial, but alleging that defendant Hartigan was not to collect for any legal services other than his salary as president, and also pleaded the statute of limitations.

There is not much dispute in the evidence as to the principal facts. The record is quite voluminous.

On the facts material to this appeal, the plaintiff, Fisher testified that he was a farmer living near Malcolm, Nebraska, and owned 400 shares of stock in the corporation acquired in 1917; that he paid $10,000 for this stock; that it was determined by the stockholders in 1930 that the assets of the corporation were to be liquidated as rapidly as possible; that he had called at the office of the corporation many times since liquidation was voted and it was closed and locked even during the middle of the day; that after he had signed the agreement to bring this suit the secretary told him that Baxter had a judgment against the corporation, and that was the first he knew about it and the first he knew that his present attorneys represented Baxter; that he went to see his present...