Glenwood Mfg. Co. v. Syme

• Decision Date: 26 February 1901
• Parties: GLENWOOD MFG. CO. v. SYME ET AL.
• Court: Wisconsin Supreme Court

109 Wis. 355

85 N.W. 432

GLENWOOD MFG. CO.

v.SYME ET AL.

Supreme Court of Wisconsin.

Feb. 26, 1901.

Appeal from circuit court, St. Croix county; E. W. Helms, Judge.

Action by the Glenwood Manufacturing Company against Mary Syme and others. From an order sustaining a demurrer to the complaint, plaintiff appeals. Affirmed.

This is an appeal from an order sustaining a demurrer to the complaint on the ground that it failed to state facts sufficient to constitute a cause of action. The complaint is of great length, but may be summarized as follows: It first states the corporate character of plaintiff, the amount of its capital stock, the amount issued, the names of stockholders, and the amount held by each. Alexander Syme was president and a director. Plaintiff's business was manufacturing and selling wood products at Glenwood, Wis. The value of its property and assets was $300,000, and its liabilities other than its capital stock were $227,000. On November 1, 1896, and for a considerable time thereafter, the company was embarrassed for want of ready money, and unable to pay its debts as they matured. On and prior to said date a co–partnership was conducting a general store at Glenwood, known as Johnston, Syme & Baldwin, composed of the following named persons, whose interests in said firm were: James Johnston, three–eighths; Alexander Syme, one–fourth; H. J. Baldwin, one–fourth; and David Syme, one–eighth. The first two named were stockholders in the plaintiff corporation. The value of James Johnston's interest in said firm was $30,000. The prosperity of said firm depended largely upon the continuation of the business of the plaintiff. The firm dealt with its employés and extended credit to plaintiff during 1896 and early part of 1897 of not less than $30,000. On November 1, 1896, plaintiff was indebted to one H. L. Humphrey, as assignee of Alfred J. Goss, on two notes of $9,000 each, but which had been reduced by payments to the sum of $11,000. Alexander Syme and William and James Johnston were guarantors. At the same time the Johnstons were indebted to Humphrey in a large amount, who held as collateral security for all of said indebtedness, among other things, 427 shares of plaintiff's stock, and the three–eighths interest of said James Johnston in the firm of Johnston, Syme & Baldwin, which had been pledged by the Johnstons, or one of them, to secure said indebtedness. Humphrey offered to sell the notes of plaintiff, the 427 shares of stock, and the three–eighths interest in said firm for $15,000, then worth in the aggregate at least $45,000. Alexander Syme purchased the same for $15,000, for himself, without the knowledge or consent of any of plaintiff's stockholders, knowing that the purchase by plaintiff would be greatly for its interest. To conceal the true character of the transaction, Syme caused the purchase to be made in the name of W. P. Hewitt, who held the same until October 11, 1897, when it was turned over to Syme. The latter took and controlled the three–eighths interest in said firm, and had it until his death, in March, 1898. The firm name was thereafter changed to Syme, Baldwin & Co. No accounting has been had, and, unless otherwise decreed, the surviving parties will pay over the value of said three–eighths interest to Syme's heirs. In February, 1897, plaintiff was indebted on a note of $18,000 to the Skowhegan Savings Bank, upon which Syme was indorser or guarantor. Without the knowledge or consent of any of the stockholders, or without any effort to purchase the same for plaintiff, Syme purchased the same for $9,000 with his own funds. At the time of the purchase from Humphrey, plaintiff was indebted to Johnston, Syme & Baldwin over $30,000. During his lifetime Syme caused plaintiff to pay on said indebtedness $4,006.17 August 10, 1897, and $3,810.12 October 4, 1897, at a time when plaintiff was still in need of ready money to pay pressing demands. On October 16, 1897, Syme caused plaintiff to execute to him two notes,––one for $11,743.93, and the other for $14,500,––for the indebtedness of plaintiff to the firm of Syme, Baldwin & Co., which were charged to said Syme on their books, and the only right he had thereto was by virtue of his five–eighths interest therein, and at least $20,432.43 of said amount was received by him on account of the three–eighths interest purchased from Humphrey. On October 11, 1897, Syme presented the notes he had purchased from the bank and from Humphrey to plaintiff, and demanded and received a note for the sum of $29,531.18, which note is now held by his heirs. Between August, 1897, and April, 1900, Syme during his lifetime, and his heirs after his death, by using the 427 shares purchased from Humphrey, were enabled to control the election of plaintiff's officers and the business policy of the corporation. Syme died intestate, holding said claims. Administration was granted on his estate December 22, 1898, and the time for presentation of claims expired the first Tuesday of September, 1899. It is alleged that the notice thereof was never published for four successive weeks as required by law, but was published December 29, 1898, and January 5, 12, and 19, 1899. The administrator inventoried the three–eighths interest aforesaid at $20,084.88; said 427 shares of plaintiff's stock, $8,540; and said three notes of plaintiff, $45,277.52. During the course of administration plaintiff paid the two notes of $11,743.93 and $14,500 to the administrator. Some of the money was used to pay debts of the estate, and the remainder has been distributed to the defendant heirs. Defendants are alleged to have had knowledge of the acts of Syme in the premises. The prayer for relief is for an accounting regarding the three–eighths interest in the aforesaid firm, and a settlement on the theory that plaintiff was entitled to the benefit thereof; also that plaintiff is entitled to the 427 shares of stock, and a surrender of the notes taken in renewal of the ones purchased from Humphrey and the bank, upon allowance of the sum actually paid out by Syme.

Geo. P. Knowles and Clapp & Macartney, for appellant.

S. J. Bradford and Warner & Lawrence, for respondents.

BARDEEN, J. (after stating the facts).

The sole question for determination is whether we can spell out from the allegations of this complaint a cause of action in favor of the plaintiff and against Alexander Syme. An attempt has been made to allege facts sufficient to show that he was guilty of a breach of duty towards the corporation, which rendered him liable thereto, and for which the defendants, as his heirs, are answerable. As a premise it is to be said that during the pendency of all of the transactions set forth in the complaint the plaintiff was a going corporation, in debt, and embarrassed for want of ready money with which to meet current demands. Alexander Syme was its president and a director, and was familiar with its business affairs. At the time of the transaction with Humphrey the company was unable to meet current demands. It is not shown whether the notes of the corporation held by Humphrey were past due or not. Although the corporation had no funds and had other pressing obligations, it is alleged that Syme, knowing that the purchase of the notes and collateral held by Humphrey “would greatly benefit this plaintiff and all the stockholders thereof, without making any effort to buy the same for this plaintiff, and without the knowledge or consent of any of the other stockholders of the plaintiff,” made the purchase for himself in the name of his brother–in–law, Hewitt. How much was paid for plaintiff's notes, or how much for the collateral, is not stated. In the aggregate, the notes and the other securities are said to have been worth $45,000. If it be admitted that the 427 shares of stock and the three–eighths interest in the firm of Johnston, Syme & Baldwin were pledged as security for plaintiff's note,––a fact concerning which the complaint leaves some doubt,––we are at a loss to understand upon what principle of law or equity the plaintiff can claim any interest in the same. Certainly, if plaintiff had paid its notes, the guarantors who put up the collaterals would have been released. It had no claim thereon, and, if it had purchased the same, could not have enforced such purchase against the guarantors of its notes. If the corporation could have raised the money, it would have been its clear duty to have paid the notes, and...