Healey v. Steele Center Creamery Association
| Decision Date | 27 October 1911 |
| Docket Number | 17,116 - (17) |
| Citation | 133 N.W. 69,115 Minn. 451 |
| Parties | JAMES H. HEALEY and Another v. STEELE CENTER CREAMERY ASSOCIATION |
| Court | Minnesota Supreme Court |
Action in the district court for Steele county to compel the transfer of a certificate of stock upon the books of defendant corporation to plaintiff Healey, and to allow him to vote at the meetings of defendant. The answer, among other allegations, set up that defendant adopted a rule on December 28, 1907, among others, that shares of stock as then held should not be transferable off the farm on which the owner then resided, and that the alleged transfer from plaintiff Smith to plaintiff Healey was an attempt to avoid that rule.
The case was tried before Buckham, J., who made findings and as conclusions of law found that plaintiff Healey, by purchase of the certificate of stock from plaintiff Smith, became a shareholder in defendant and entitled to a transfer of the stock to him upon the books of defendant, and to all the privileges of membership, and that it was not necessary to secure the consent of the managers of defendant as a condition to such membership. From an order denying defendant's motion for a new trial, it appealed. Reversed with directions to amend the conclusions of law and enter judgment in favor of defendant.
De facto corporation -- findings.
Defendant was organized in 1892 as a co-operative association. Held that the findings of fact show an attempt to organize a corporation under chapter 29, Laws 1870, and a user as a corporation under such attempted incorporation, and therefore show that defendant was a de facto corporation under such law.
Statutory powers -- curative act.
Laws 1909, c. 298, changed defendant from a de facto corporation to a de jure corporation; but Laws 1870, c. 29, under which it was organized, still controls as to the powers of defendant and of its officers, directors, or managers, and as to the rights of stockholders in such corporation.
Statutory powers -- shareholders.
The provision in said chapter 29, Laws 1870, that "no person shall be allowed to become a shareholder in such association except by the consent of the managers of the same," is valid, and applies to defendant. Such provision is not repealed by R.L. 1905, § 2863.
Leach & Reigard, for appellant.
J. A. & A. W. Sawyer, for respondents.
Defendant is a co-operative association organized in 1892 located in Steele county. On June 19, 1909, plaintiff Smith was the owner of one share of stock in the association. On that date he assigned and delivered his certificate to plaintiff Healey, who demanded of defendant that it transfer the stock to him on the books of the association which defendant refused to do. Thereupon plaintiffs brought this action to compel defendant to transfer said share of stock on its books to plaintiff Healey, and to recognize Healey as a stockholder. The case was tried and resulted in a decision in plaintiff's favor, granting the relief asked. This appeal is from an order denying defendant's motion for a new trial.
The ultimate question before us is whether the conclusions of law are justified by the findings of fact. The precise question is: Do the findings show that defendant was a corporation either de jure or de facto, organized under chapter 29, p. 50, Laws 1870? This law is entitled "An act in relation to the formation of co-operative associations," and contained this provision: "No person shall be allowed to become a shareholder in such association except by the consent of the managers of the same." If defendant was organized under this law plaintiffs were not entitled to the transfer of the stock on defendant's books, as the managers refused their consent to plaintiff Healey's becoming a stockholder. If, however, defendant was a corporation de jure or de facto under some other law of the state, the conclusions of the trial court were correct.
The problem is to be solved by looking to the findings to discover what was done in organizing the association and in conducting its business, and by looking to the laws in force at the time the association was formed.
Prior to February 18, 1892, residents of Somerset, in Steele county, more than seven in number and of lawful age, associated themselves together under the name of "The Steele Center Creamery Association," for the purpose of manufacturing butter and cheese from whole milk at actual cost at a plant to be located in the town of Somerset, and adopted articles of agreement and by-laws. The articles of agreement begin in this way:
"We, whose names are hereunto subscribed and whose residences are within the county of Steele in the state of Minnesota, do hereby associate ourselves together as a co-operative association under the laws of the state of Minnesota, to which end we have adopted the following constitution." Then followed the "articles."
Article 1 gives the name and place of business. Article 2 specifies the object of the association; article 3, the officers, the time of their election, and their term of office. It is provided that the officers shall be a president, vice president, secretary and treasurer, and three trustees. Article 4 defines the duties of the officers, and provides for the furnishing of milk by members, the creation of a sinking fund, the payment of running expenses, and the division of the net receipts among the members who have furnished the milk. The board of directors were authorized to borrow $3,000 to be used in erecting and furnishing a creamery building, the amount borrowed to be paid out of the sinking fund. Article 5 provided that the members of the association should furnish all the milk from the number of cows subscribed by each, and that patrons not members might furnish milk by agreement with the board of trustees. The association was to receive all milk so furnished, manufacture it into cheese or butter, and sell the product. Of the money so received, after deducting such a number of cents per hundred pounds of milk as should be agreed upon by the association in its by-laws or otherwise for the sinking fund, and deducting the expenses, the remainder was to be distributed as provided by article 4. Article 6 provided that each member should have one vote, and authorized the admission of new members and the withdrawal of members, as provided by the by-laws.
By-laws were adopted. The "articles of agreement" were filed for record in the office of the town clerk of the town of Somerset February 18, 1892, but were never in fact recorded. They remained in the office of the town clerk until 1896, when they were taken from such office by the secretary of the association and never returned.
After executing and filing these articles of agreement, the persons forming the association borrowed $3,000, and with that sum erected a creamery building and commenced to manufacture butter. Ever since such time the business has been carried on in good faith by the association at the same place, through officers and a board of directors elected from time to time by the stockholders at their meetings. On the formation of the association, certificates of stock, so called, were issued to its members, one share of stock being issued for each cow whose milk was furnished. No capital stock of the association was ever subscribed for or paid into the treasury, except as those who furnished milk, nonmembers as well as shareholders, contributed to the sinking fund by the setting aside of five cents for each one hundred pounds of milk furnished. The nonmembers who thus contributed to the sinking fund never received any return therefor. Both plaintiffs were original members of the association, furnished milk to its creamery, and contributed to the sinking fund, which was used in paying for the creamery plant.
Prior to 1905, out of the money in the sinking fund, the defendant erected and furnished a new creamery, and has ever since carried on its business in said creamery, which is worth $6,000 and is the only property of such association. In 1905 defendant took up its certificates of stock, and issued in lieu thereof new certificates, assigning one share to each member. Plaintiff Healey furnished milk to the creamery until shortly before the erection of the new plant, when he withdrew from the association, ceased to be a member thereof and did not furnish milk until in June, 1909, when he commenced again, and has ever since continued to deliver milk, receiving as pay his pro rata share of the receipts for butter after deducting the expenses and the amount specified for the sinking fund. Plaintiff Smith had furnished milk to the association and contributed to its sinking fund at all times prior to March 16, 1905. On that date defendant issued to him a share of stock. He continued to deliver milk until June 19, 1909, when he sold and assigned his share of stock to plaintiff Healey, who has ever since continued to deliver the milk from all his cows to the creamery. Healey purchased the certificate with full notice that defendant would not admit him as a...
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