Gaines v. Gaines Bros. Co.

• Decision Date: 04 February 1936
• Docket Number: Case Number: 25089
• Parties: GAINES v. GAINES BROS. CO. et al.
• Court: Oklahoma Supreme Court

1936 OK 113

56 P.2d 863

176 Okla. 583

GAINES v. GAINES BROS. CO. et al.

Case Number: 25089

Supreme Court of Oklahoma

Decided: February 4, 1936

Syllabus

¶0 1. PLEADING - Effect of Admission of Execution of Written Instrument by Pleadings.

The admission of the execution of a written instrument by the pleadings admits them with all their legal effect that must of necessity follow, and this legal effect is to place them before the court with all of their contents, terms, conditions, and stipulations expressed therein, and it is unnecessary to introduce them in evidence.

2. CORPORATIONS - When Shareholders May Sue to Redress Wrongs Done to Corporation.

The rule is that shareholders cannot, ordinarily, sue in equity to redress wrongs done to the corporation. The ordinary remedy for such injuries is to be sought primarily through corporate action. But if the directors are guilty of a breach of trust, injurious to the corporate assets, or to the rights of the shareholders or some of them, and if the corporation refuses to institute proper proceedings to restrain or redress such injuries, one or more of the shareholders may proceed in their individual names. In such case, however, it is necessary that the petition contain averments sufficient to create an exception to the general rule, and to establish in petitioners the right to thus proceed.

3. CORPORATIONS - Action by Managing Director Based on Quantum Meruit for Past Services not Maintainable Where Compensation not Provided in Charter or BY-Laws or in Prior Resolution.

A managing director of a corporation cannot maintain an action based on a quantum meruit for past services rendered as such when no compensation for such services is provided in the charter or by-laws and no compensation is fixed by any valid resolution passed, prior to the rendition of such services, providing for compensation for same.

4. APPEAL AND ERROR - Review - Question Raised for First Time on Appeal.

Where a proposition of law is not raised in the trial court either directly or by implication, and no objection or exception made or saved, there is nothing for this court to review, and the question cannot be presented in this court for the first time.

Appeal from District Court, Ottawa County; Dennis H. Wilson, Judge.

Action by Frank Gaines against the Gaines Brothers Company et al. Judgment for defendants and plaintiff appeals. Affirmed.

Marshall W. Hinch and Frank W. Nesbitt, for plaintiff in error.

Vern E. Thompson, for defendants in error.

PER CURIAM.

¶1 This appeal is from a judgment of the district court of Ottawa county, Okla., from an order sustaining an objection to the introduction of testimony on the part of the plaintiff based upon the pleadings in the case.

¶2 It was alleged by the plaintiff, Frank Gaines, that he and his brother, James Henry Gaines, organized a partnership in Ottawa county, Okla., in the year 1893 under the firm name of Gaines Brothers for the purpose of farming, stock raising, buying and selling hay, grain and other commodities and doing a general trading business; that as to the initial amount of the capital of said partnership James Henry Gaines contributed $1,000 more than the plaintiff, Frank Gaines, with the understanding that he would be reimbursed at some future date. Said partnership operated as such until the 20th day of June, 1907, when a corporation was organized with a capital stock of $40,000, divided into 1,600 shares of $25 each; that all the assets of said partnership except the real estate were transferred to the corporation and that it was understood and agreed at that time between the brothers that the $1,000 excess contribution made by James Henry Gaines at the organization of said partnership should be carried forward in the corporation as a debt owing to the said James Henry Gaines; that no corporate certificates of stock were ever issued by said corporation: that no salaries as such were paid to any of its officers, directors, or agents. Each officer actively engaged in the management of the corporation drew from the corporation such funds as were necessary for living or other actual expenses; that in March, 1914, James Henry Gaines died and his heirs succeeded to his interest in the corporation; that two elevators were built, one at Fairland and one at Narcissa, Okla., at an approximate cost of $2,500 each; that the plaintiff operated the elevator at Fairland, and during the last few years it had shown a profit of about $30,000, and that the elevator at Narcissa, operated by Walter Gaines, one of the heirs of James Henry Gaines, deceased, during the same time showed a loss of approximately $30,000; that during the last few years the plaintiff had purchased a quantity of oil land in Texas with funds withdrawn from the corporation, and, for convenience, title was taken in the plaintiff's individual name; that said lands were afterward sold for a profit of more than $50,000, which was turned into the corporation; that the plaintiff expended a great deal of time, labor, and skill and a large amount of his individual money for expenses in the purchase of said lands, and no compensation for plaintiff having been agreed upon by the corporation, he claims reasonable compensation for such services in the sum of $5,000; that for the past two or three years dissatisfaction has arisen in said corporation among the stockholders and directors, and that said defendants are now claiming that their stock interest is greater than that of the plaintiff and that they are entitled to dividends and a distribution of the property of the corporation based upon their claim of 820 shares of the capital stock thereof; that the defendants are about to call a meeting to vote upon the question of dissolving the corporation and to effect an inequitable distribution of its assets; that said corporation should not be dissolved, for the reason that its charter alone is a valuable asset, being perpetual and having broad powers, and the business of said corporation has been conducted in a profitable manner; that dividends in the sum of $260,000 have recently been declared and paid, which dividends were "incorrectly apportioned among the stockholders"; that according to an oral agreement had between the plaintiff and his brother, James Henry Gaines, at the time of the transfer of its partnership property to the corporation, each of said brothers was to have an equal share in said corporation and was to receive 800 shares of the 1,600 shares into which the $40,000 capital of said corporation had been divided. Plaintiff prayed for judgment as follows:

"Wherefore plaintiff asks that judgment be rendered herein in his favor, against the defendants as follows:

"First. That plaintiff be decreed and adjudged the owner and entitled to all the benefits of 800 shares of the capital stock of said corporation.

"Second. That said corporation be required correctly to distribute by dividends or division all money and property based upon the ownership by this plaintiff of 800 shares of the capital stock of said corporation, whether heretofore or hereafter declared.

"Third. That the individual defendants herein be required to account to said corporation for the sum of $39,118 heretofore withdrawn, upon the basis of the purchase and ownership by plaintiff of 800 shares of capital stock of said corporation, as against the sum of $18,618 withdrawn by plaintiff.

"Fourth. That upon any distribution of the corporate property this plaintiff be awarded said Fairland elevator at its original cost and the improvements thereon, and the individual defendants be required to take the Narcissa elevator at the original cost thereof together with the improvements made thereon, as of July 1, 1931.

"Fifth. That pending final determination of this action the defendants and each of them, be restrained from proceeding to hold any stockholders' or directors' meeting for the purpose of dissolution of the corporation, division of assets, or declaration of dividends.

"Sixth. That plaintiff be allowed the sum of $5,000 as compensation for his services in the transaction wherein he purchased and sold said Texas land for the benefit of said corporation.

"Seventh. That plaintiff recover his cost herein expended."

¶3 The defendants answered by denying all the allegations of the petition not specifically admitted; they admit the partnership prior to the organization of the corporation and that James Henry Gaines contributed $1,000 in excess of the amount contributed by the plaintiff at the time the partnership was formed; that the corporation was organized on the 20th day of June, 1907, and a charter was issued under the laws of the United States then in effect in the Indian Territory; that articles of agreement and incorporation were filed in the office of the Clerk of the United States Court of Appeals in the Indian Territory on the 21st day of June, 1907, and a copy of the same attached to the answer as Exhibit "A" and made a part thereof. The articles of incorporation provided for a corporation with $40,000 capital divided into 1,600 shares of $25 each. The tenth clause of said articles provided:

"The first meeting of said corporators for organization shall be held in Vinita, I. T., at the office of W.H. Kornegay at 2 o'clock p. m. on the 20th day of June, 1907, and each subscribes for the number of shares set opposite his respective name.

"In testimony whereof, we have hereunto set our hands, on this the 20th day of June, 1907.

"James Henry Gaines, 820 shares

"Frank Gaines 776 shares

"Walter Gaines 4 shares"

¶4 That attached to the articles of incorporation was a certificate executed, signed, and verified by James Henry Gaines, president, Frank Gaines and Walter Gaines, directors on June 20, 1907. The fourth paragraph of the certificate provides:

"Fourth: The names of the stockholders and the number of shares owned by them, respectively, is as follows:

"James Henry Gaines, 820 shares

"Frank Gaines, 776 shares

"

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