Fitzgerald v. Fitzgerald & Mallory Const. Co.

• Decision Date: 26 June 1894
• Citation: 59 N.W. 838,41 Neb. 374
• Parties: FITZGERALD v. FITZGERALD & MALLORY CONST. CO. ET AL.
• Court: Nebraska Supreme Court

41 Neb. 374

59 N.W. 838

FITZGERALD

v.FITZGERALD & MALLORY CONST. CO. ET AL.

Supreme Court of Nebraska.

June 26, 1894.

Syllabus by the Court.

1. Where the officers of a corporation, responsible for its management, are shown to have abused their trust, to the great damage of such corporation, in the interest of another corporation, of which they were then, and still remain, managing officers, any stockholder of the corporation wronged may bring an action in his own name for the benefit of the wronged corporation against the other corporation above referred to for the redress of such grievance, and for an accounting between said corporations; and for these purposes may properly join both corporations as defendants.

2. A receiver, appointed by a court in another state than Nebraska, is not a necessary party, in this state, to a suit on behalf of or against the corporation for which such receiver was so appointed.

3. A corporation is liable civilly for all damages occasioned by the torts of its officers or agents committed within the scope of their employment as such.

4. The acquiescence of a stockholder will not preclude a recovery in an action brought by him in a proper case for the benefit of such corporation in respect of wrongs committed by the managing officers of said corporation against it for the benefit of another corporation in which they are also officers. In such case, while the stockholder is nominally the plaintiff, he is only nominally so; the action is in reality between the corporations joined as defendants,--the one as the party wronged, the other as the party which profited by the wrong.

5. The agreement of a construction company to commute its contract rate of compensation for finished work to a lower rate because of the work not being completed as agreed, in consideration of which commutation the other contracting party consented to presently accept the work in its unfinished condition, afforded a sufficient consideration to sustain the stipulated reduction as a compromise between the parties.

6. Where a construction company had contracted to build a certain railroad line, and had completed the work according to contract, an agreement, by its president, without authority, to accept payment at less than the contract price, was without consideration, and did not release the other contracting party from liability for payment at the full rate fixed by the original contract.

7. In an action on behalf of a corporation to recover the discount at which certain bonds held by said corporation had been by its board of directors ostensibly authorized to be sold to the stockholders of said corporation, resulting, however, in such sale only to the individual directors who voted to authorize it, and to parties in privity with them in wrongfully making such sale, held, that the burden of proof strongly devolved upon the purchasers of said bonds at the discount authorized to show affirmatively that the price paid was the fair value of such bonds; and, the proofs as well as the finding of the trial court having been adverse to such showing, held, further, that the discount was properly recoverable.

8. Where the contract of a construction company contemplated only the building of a specified line of railroad, the expenses incidental to preliminary surveys made by the construction company with a view to the location of other lines where muncipal donations could readily and freely be secured in large part for the benefit of the said construction company, are not properly recoverable by said construction company as against the railroad company for which the work of construction was being done, even though some of the officers of the said railroad company, by their conversation, in a measure countenanced the making of said surveys for the purposes above stated.

9. A written contract for the construction of a line of railroad alone does not render incompetent oral evidence of a subsequent contract for supplying the cattle yards, a telegraph line, turntables, etc., necessary or proper for the equipment or operation of such line of railroad when completed. The same rule applies as to furnishing nut fasteners and extra ties not within the terms of the original written contract.

10. Proof of a defective compliance with the laws of congress as to acquiring a railroad right of way across the public domain, without more, cannot be made a ground for the recovery of damages as against the party whose duty it was to properly secure such right of way.

11. The act of congress entitled “An act to regulate commerce,” when it took effect, abrogated all existing contracts with common carriers for special interstate commercial rates, and specially vested in the federal tribunals described in that act, exclusive jurisdiction to inquire into and adjust such interstate rates as are alleged to be unfair or discriminative.

12. In the entire absence of proof upon the subject, it is presumed that the rate of interest in another state is the same as that fixed by the statutes of Nebraska.

Appeal from district court, Lancaster county; Tibbetts, Judge.

Action by John Fitzgerald against the Fitzgerald & Mallory Construction Company and the Missouri Pacific Railway Company. From the decree rendered, said plaintiff appeals. Modified.

Marquett, Deweese & Hall, for appellant.

B. P. Waggener, A. R. Talbot, and J. L. Webster, for appellees.

RYAN, C.

1. In the district court of Lancaster county, Neb., John Fitzgerald, on behalf of himself and all other stockholders of the Fitzgerald & Mallory Construction Company, filed his petition against said construction company and the Missouri Pacific Railway Company as defendants. This petition stated that the capital stock of the aforesaid construction company amounted to $1,500,000, divided into shares of $100 each; that of these, at the time of bringing suit, John Fitzgerald was the owner of 1,500 shares, Jay Gould of 4,000 shares, Sidney Dillon of 1,000 shares, Morton, Bliss & Co. of 2,000 shares, Russell Sage of 2,700 shares, George J. Gould of 500 shares, and S. H. Mallory of 1,500 shares. The matters complained of in the petition for the most part arose out of a written contract made between the said construction company and the Denver, Memphis & Atlantic Railroad Company, whereby was undertaken by the construction company the building of the line of road of the railroad company. Following this contract there was entered into another between the aforesaid construction company and the Missouri Pacific Railway Company, whereby the last-named company became entitled to the stock and bonds of the Denver, Memphis & Atlantic Railroad Company to be issued to the construction company in consideration of its construction of the railroad aforesaid. The other matters which gave rise to this controversy had their origin in the construction by said construction company of the line of railroad of the Pueblo & State Line Railroad, and the subsequent ownership of the stock and bonds of said Pueblo & State Line Railroad Company issued to the construction company, and by said construction company turned over to the Missouri Pacific Railway Company. For the stock and bonds of both railroads to be constructed as aforesaid the Missouri Pacific Railway Company agreed to give to the construction company first mortgage bonds of the said Missouri Pacific Railway Company equal to $11,000 per mile of the railroads completely constructed by the said construction company as aforesaid. The petition averred that payment in bonds was in fact only made at the rate of $10,000 per mile, though the roads had been fully constructed; that the Missouri Pacific bonds received at that rate were purchased by certain named officers of the Missouri Pacific Railway Company at a discount of 10 per cent., though said bonds were worth par; that, though the agreed rate at which the Missouri Pacific Railway Company was to transport material necessary for the construction of the work aforesaid was at the rate of three-fourths of a cent per ton per mile, in fact for a large amount of said material there was charged and collected from the construction company payment at the rate of three cents per ton per mile, which excess, the said petition alleged, was still due the said construction company; that said Missouri Pacific Railway Company's officers, by collecting interest which was not in fact due, and upon other unfounded pretenses, had exacted and withheld from the construction company large sums of money, for which said Missouri Pacific Railway Company ought to be held to account. There were other matters complained of in the petition, but for our present purpose the above-described causes of action are amply sufficient.

That it may appear why this suit was brought by Mr. Fitzgerald as a stockholder of the construction company, he made the following averments in reference to certain of the matters above described:

“Complainant says that, shortly after said contracts were made, those owning a controlling share of the stock of the Missouri Pacific Railway Company procured a controlling share of the stock of the construction company, notably Jay Gould, Russell Sage, George J. Gould, and Sidney Dillon. That at the date of said contracts the directors of the construction company were as follows: John Fitzgerald, S. H. Mallory, S. S. King, T. M. Stewart, and Edward A. Temple, who were the directors at the time the said contracts were made and entered into. That after they had obtained control of this stock they demanded the resignation of all the directors except Fitzgerald and S. H. Mallory, and on November 3, 1886, the said board of directors was changed, and in place of Messrs. King, Stewart, and Temple were elected George J. Gould, Russell Sage, and Richard Cross. That two of said directors, complainant afterwards found out, were directors in the Missouri Pacific Railway Company, and that said Richard Cross was a member of a firm...