Investors' Syndicate v. North American Coal & Mining Co.

• Decision Date: 04 June 1915
• Docket Number: 1915
• Citation: 153 N.W. 472,31 N.D. 259
• Court: North Dakota Supreme Court

153 N.W. 472

31 N.D. 259

INVESTORS' SYNDICATE v. NORTH AMERICAN COAL & MINING COMPANY, a Corporation, Herbert Williams, and Producers & Consumers Co-operative Company, a Corporation, John F. Beyer, Intervener

No. 1915

Supreme Court of North Dakota

June 4, 1915

Rehearing denied July 2, 1915.

Appeal from the District Court of Stark County, Crawford, J.

Affirmed.

Bangs Netcher, & Hamilton, and W. J. Mayer (Charles E. Purdy, of counsel), for appellant.

The intervener has no interest in the subject-matter of this litigation, other than that of a mere stockholder. He has no right to participate in the management of the affairs of the corporation of which he is a mere stockholder. 26 Am. & Eng Enc. Law, pp. 947, 970, §§ 3, 18.

A person has an "interest in the matter in litigation" only when he has a claim or demand, or a claim to a lien upon the property which is the subject of the litigation. The case of the intervener here does not even approximate this condition. Yetzer v. Young, 3 S.D 267, 52 N.W. 1054; McClurg v. State Bindery Co. 3 S.D. 363, 44 Am. St. Rep. 799, 53 N.W. 428; Horn v. Volcano Water Co. 13 Cal. 70, 73 Am. Dec. 569; Smith v. Gale, 144 U.S. 509, 518, 36 L. ed. 521, 524, 12 S.Ct. 674. Note distinction drawn in Dizonno v. Great Northern R. Co. 103 Minn. 120, 114 N.W. 736; Bray v. Booker, 6 N.D. 526, 72 N.W. 933; Wightman v. Evanston Yaryan Co. 217 Ill. 376, 108 Am. St. Rep. 258, 75 N.E. 502, 3 Ann. Cas. 1089; 17 Am. & Eng. Enc. Law, 181 (note 2); Bennett v. Whitcomb, 25 Minn. 153; Goodrich v. Williamson, 10 Okla. 599, 63 P. 974; Dickson v. Dows, 11 N.D. 407, 92 N.W. 798.

An intervener must bring himself strictly within the provisions of the statute. Bank of Commerce v. Timbrell, 113 Iowa 714, 84 N.W. 519; Harlan v. Eureka Min. Co. 10 Nev. 92; Steele v. Taylor, 1 Minn. 285, Gil. 210; Hoe v. Wilson, 9 Wall. 501, 504, 19 L. ed. 762, 763; Wightman v. Evanston Yaryan Co. 217 Ill. 371, 108 Am. St. Rep. 258, 75 N.E. 502, 3 Ann. Cas. 1089.

Intervention offers not a mere defense, but proposes to litigate a new issue requiring new parties. This intervener does not "join" either plaintiff or defendant, nor does he demand a right adverse to either or both. He does not unite with plaintiff in claiming, nor does he join defendants in resisting. He seeks judgment on an independent issue. He is not within the statute. Mayer v. Stahr, 35 La.Ann. 57; Clapp v. Phelps, 19 La.Ann. 461, 92 Am. Dec. 545.

Neither has he served his complaint upon all of the original parties. 29 Cyc. 1119, notes 55, 59; 32 Cyc. 448, 455 notes 41, 44; First Nat. Bank v. Holmes, 12 N.D. 38, 94 N.W. 764.

A stockholder may only sue for the benefit of the corporation, and the fruits of such suit belong to the corporation. 26 Am. & Eng. Enc. Law, 970, 972, subdiv. B.

A mere stockholder cannot rescind a corporate act, though such act be voidable; contracts affected by fraud are not void, but voidable. 2 Pom. Eq. Jur. 3d ed. § 915; Pearsoll v. Chapin, 44 Pa. 13; Kearney v. Vaughan, 50 Mo. 287; Alexander v. Nelson, 42 Ala. 469; National Bank v. Wheelock, 52 Ohio St. 550, 49 Am. St. Rep. 738, 40 N.E. 636.

If Beyer proposes to substitute a minority stockholders' bill in equity for rescission and cancelation, for a defense in intervention, he must conform to equitable rules as to parties and issues. Shields v. Barrow, 17 How. 130, 139, 15 L. ed. 158, 160; Russell v. Clark, 7 Cranch, 69-98, 3 L. ed. 271-281; Barney v. Baltimore, 6 Wall. 280, 286, 18 L. ed. 825, 826; Mallow v. Hinde, 12 Wheat. 193, 198, 6 L. ed. 599, 600; 16 Cyc. 183, 189, 190; 15 Enc. Pl. & Pr. 611-615, 687-689; Minnesota v. Northern Securities Co. 184 U.S. 199, 46 L. ed. 499, 22 S.Ct. 308; Donovan v. Champion, 29 C. C. A. 30, 56 U.S. App. 388, 85 F. 71, 19 Mor. Min. Rep. 247; Mahr v. Norwich Union F. Ins. Soc. 127 N.Y. 452, 28 N.E. 391; Miller v. Mahaffy, 45 Iowa 289.

The board of directors and all parties taking part in the proceedings, or charged by the intervener with conspiracy, would be necessary parties. 10 Cyc. 997, C; Ribon v. Chicago, R. I. & P. R. Co. 16 Wall. 446, 450, 451, 21 L. ed. 367, 368, 369; Shields v. Barrow, 17 How. 130, 15 L. ed. 158; Griffin v. St. Louis Vine & Fruit Growers' Asso. 4 Mo.App. 596; Slattery v. St. Louis & N. O. Transp. Co. 91 Mo. 217, 60 Am. Rep. 245, 4 S.W. 79; 20 Enc. Pl. & Pr. 771; 10 Cyc. 994; Davis v. Peabody, 170 Mass. 397, 49 N.E. 750; Westcott v. Minnesota Min. Co. 23 Mich. 151. 6 Mor. Min. Rep. 336; Hersey v. Veazie, 41 Am. Dec. 370, note.

An intervener cannot inject into a case, or litigate, questions calling for new parties. He must take the case, or come into it, as he finds it, not disturbing or delaying the orderly course of the action in which he intermeddles, but subject to all the rules of law and practice. Mayer v. Stahr, 35 La.Ann. 57; Ragland v. Wisrock, 61 Tex. 391; Tompkins v. Continental Nat. Bank, 71 A.D. 330, 75 N.Y.S. 1099; Cahn v. Ford, 42 La.Ann. 965, 8 So. 477; 11 Enc. Pl. & Pr. 509; 31 Cyc. 518; Osterhoudt v. Ulster County, 98 N.Y. 239; Steinbach v. Prudential Ins. Co. 172 N.Y. 471, 65 N.E. 281; McDougald v. New Richmond Roller Mills Co. 125 Wis. 121, 103 N.W. 244; O'Connor v. Irvine, 74 Cal. 435, 16 P. 236; 15 Enc. Pl. & Pr. 688; Hoe v. Wilson, 9 Wall. 501, 19 L. ed. 762; 11 Enc. Pl. & Pr. 509; 31 Cyc. 522; 17 Am. & Eng. Enc. Law, 185, notes 14 and 15; Gillis v. Carter, 29 La.Ann. 700; Kenner v. Holliday, 19 La. 154; Cahn v. Ford, 42 La.Ann. 965, 8 So. 477; Van Gorden v. Ormsby Bros. 55 Iowa 657, 8 N.W. 625; Carraby v. Morgan, 5 Mart. N. S. 499; Kassing v. Walter, Iowa , 65 N.W. 832.

One cannot secure the rescission of a contract fully executed, without placing or offering to place his obligation in statu quo. 16 Cyc. 143, note 78; 2 Pom. Eq. Jur. 3d ed. § 915; Gardner v. Butler, 30 N.J.Eq. 702; Lynch v. Burt, 67 C. C. A. 305, 132 F. 417; Pickett v. School Dist. 25 Wis. 551, 3 Am. Rep. 105; Daisy Roller Mills v. Ward, 6 N.D. 317, 70 N.W. 271, and cases cited; Harts v. Brown, 77 Ill. 226, 4 Mor. Min. Rep. 1; Rev. Codes 1905, § 5378, Comp. Laws 1913, § 5934; Rev. Codes 1905, § 5380, subdiv. 1, Comp. Laws 1913, § 5936.

Neither of the parties hereto has rescinded, and Beyer has no such power or authority. Any such relief sought by him is now barred by the statute of limitation. N.D. Rev. Codes 1905, § 6787, subdiv. 6, Comp. Laws 1913, § 7375; 25 Cyc. 1186; 26 Am. & Eng. Enc. Law, 986, note 2; 13 Enc. Pl. & Pr. 243-245; Wood v. Carpenter, 101 U.S. 135, 25 L. ed. 807; Dannmeyer v. Coleman, 8 Sawy. 51, 11 F. 97, 5 Mor. Min. Rep. 474; Morrill v. Little Falls Mfg. Co. 53 Minn. 371, 21 L.R.A. 174, 55 N.W. 547; Brasie v. Minneapolis Brewing Co. 87 Minn. 456, 67 L.R.A. 865, 94 Am. St. Rep. 709, 92 N.W. 340; Howard v. Farr, 115 Minn. 86, 131 N.W. 1071.

Beyer sought affirmative relief years ago, on the same grounds as he now defends upon, and both he and his counsel knew of all the existing facts and conditions. 25 Cyc. 1192, note 87; New Albany v. Burke, 11 Wall. 96, 20 L. ed. 155; Deering v. Holcomb, 26 Wash. 588, 67 P. 240, 561; 4 Cyc. 933, note 98 and 99; Galbes v. Girard, 46 F. 500; Bater v. A. E. Johnson Co. 79 Minn. 354, 82 N.W. 649; Riley v. Pearson, 120 Minn. 210, L.R.A. , , 139 N.W. 361; 16 Cyc. 172.

It is immaterial whether or not the property in question represents all the assets of the company. Beyer's rights are not affected or enlarged by such fact. 26 Am. & Eng. Enc. Law, 970, § 18.

Mere failure to pay for the stock subscribed does not render the subscriber any the less a stockholder. 26 Am. & Eng. Enc. Law, 895.

Directors of a corporation may vote a salary to an officer though he is one of their number. Jones v. Morrison, 31 Minn. 140, 16 N.W. 854; Cook, Corp. 6th ed. § 657.

A corporation has the power to incur indebtedness and to mortgage, unless its charter expressly forbids it. Cook, Corp. 6th ed. §§ 709, 725, 779 and 808; Louisville, N. A. & C. R. Co. v. Louisville Trust Co. 174 U.S. 552, 43 L. ed. 1081, 19 S.Ct. 817.

There is no better established doctrine in equity than that of the immunity of a bona fide purchaser. 23 Am. & Eng. Enc. Law, 475.

Purchases for value and without notice have been pronounced as raising "an absolute, unqualified, unanswerable defense." Pilcher v. Ralins, L. R. 7 Ch. 259, 41 L. J. Ch. N. S. 485, 25 L. T. N. S. 921, 20 Week. Rep. 281, 21 Eng. Rul. Cas. 729; 23 Am. & Eng. Enc. Law, 475; Braxton v. Bell, 92 Va. 229, 23 S.E. 289; Cogel v. Raph, 24 Minn. 194; United States v. Des Moines Nav. & R. Co. 142 U.S. 510, 35 L. ed. 1099, 12 S.Ct. 308; Woolridge v. Thiele, 55 Ark. 45, 17 S.W. 340; 39 Cyc. 1687; 23 Am. & Eng. Enc. Law, 476; 20 Cyc. 653; 14 Am. & Eng. Enc. Law, note 1, 23 Am. & Eng. Enc. Law, 476; 1 Jones, Mortg. 6th ed. § 459; Willoughby v. Willoughby, 1 Term Rep. 763, 1 Revised Rep. 397; Porter v. Green, 4 Iowa 571; Evans v. Greenhow, 15 Gratt. 153; New Orleans Canal & Bkg. Co. v. Montgomery, 95 U.S. 16, 24 L. ed. 346.

The burden of proof rests upon the intervener to show plaintiff had notice of fraud. Mehlhop v. Pettibone, 54 Wis. 652, 11 N.W. 553, 12 N.W. 443; Jones v. Dunbar, 52 Neb. 151, 71 N.W. 976; Thorington v. Montgomery, 88 Ala. 548, 7 So. 363; Evans v. Mansur & T. Implement Co. 30 C. C. A. 640, 58 U.S. App. 261, 87 F. 275; Flagg v. Mann, 2 Sumn. 486, F. Cas. No. 4,847; Johnson v. Erlandson, 14 N.D. 518, 105 N.W. 722; Anderson v. Blood, 152 N.Y. 285, 57 Am. St. Rep. 515, 46 N.E. 493; 20 Cyc. 265; 29 Cyc. 1115; 21 Am. & Eng. Enc. Law, 585; 23 Am. & Eng. Enc. Law, 496; 1 Bigelow, Fr. p. 388; 21 Am. & Eng. Enc. Law, 589, note 6; Morris v. Daniels, 35 Ohio St. 406; Bartlett v. Varner, 56 Ala. 580; State use of Salomon v. Mason, 112 Mo. 374, 34 Am. St. Rep. 390, 20 S.W. 629 and cases cited.

M. A. Hildreth, for respondent John F. Beyer.

The Investors' Syndicate, through...