Just v. Idaho Canal & Improvement Co., Ltd.

• Court: Idaho Supreme Court
• Writing for the Court: AILSHIE, J.
• Citation: 102 P. 381,16 Idaho 639
• Decision Date: 04 June 1909
• Parties: JAMES JUST et al., Respondents, v. IDAHO CANAL & IMPROVEMENT COMPANY, LTD., a Corporation, et al., Appellants

102 P. 381

16 Idaho 639

JAMES JUST et al., Respondents,
v.
IDAHO CANAL & IMPROVEMENT COMPANY, LTD., a Corporation, et al., Appellants

Supreme Court of Idaho

June 4, 1909

ACTION OF MINORITY STOCKHOLDERS ON BEHALF OF CORPORATION-RIGHT OF TRANSFEREE TO SUE ON CAUSE OF ACTION ACCRUING PRIOR TO PURCHASE OF STOCK-CONFLICT OF INTEREST AND DUTY AMONG OFFICERS-POWERS OF COURT OF EQUITY-LACHES IN PROSECUTION OF ACTION-PAROL EVIDENCE TO CONTRADICT MINUTES OF CORPORATION-INSTRUCTIONS-SUFFICIENCY OF EVIDENCE - CROSS-EXAMINATION OF WITNESSES.

1. A stockholder suing on behalf of his corporation which is unable or unwilling to bring suit, and pleading a good cause of action, may maintain the same, though he was not an owner of stock at the time the breach of duty was committed or the cause of action accrued, except in cases where it is shown that he purchased the stock with the purpose of bringing suit, or where his vendor was for some reason estopped from maintaining the action and the purchaser had notice of such bar.

2. Where two competing corporations enter into a contract, and before the same is fully performed and the debt thereby contracted is due, one of the corporations obtains control of the other and elects a board of directors, and thereafter the directors and officers of the one corporation refuse to pay the debt contracted, and the directors and officers of the other corporation refuse to prosecute an action for the collection of such debt and obligation, such a conflict of interest and duty arises among the directors and officers, aside from and independently of any fraudulent motive, that a court of equity is warranted in permitting the minority stockholders to maintain their action on the contract.

3. The doctrine of laches in the prosecution of an action, when the delay does not amount to a bar by any statute of limitations, does not apply where the relative position of the parties has not been materially changed since the time when the cause of action accrued, and the delay has worked no wrong or serious inconvenience to the adverse party, so that substantial justice can still be done between the parties.

4. Where the verity of the records of a corporation is attacked by minority stockholders, who deny that the transactions therein purporting to be recorded ever occurred, and they contend that the true minutes of a given meeting show the very contrary of [16 Idaho 640] that shown by the official record, parol evidence is admissible to show what actually occurred at such meeting.

5. The instructions given in a particular case must all be read and viewed together, and if they are not in conflict with each other, and correctly state the law as far as they go, the circumstance that an isolated sentence or paragraph is obscure, incomplete or indefinite will not of itself constitute a ground of reversal.

6. A wide latitude should be allowed in the cross-examination of parties to the suit, but the action of the trial court in sustaining objections to immaterial questions is not prejudicial error.

7. Evidence in this case examined, and held sufficient to support the verdict.

8. A judgment will not be reversed where the evidence is conflicting and there is substantial evidence to support the verdict of the jury. (Citing sec. 4824, Rev. Codes.)

(Syllabus by the court.)

APPEAL from the District Court of the Sixth Judicial District, for Bingham County. Hon. J. M. Stevens, Judge.

Action by minority stockholders of the Taylor & Goshen Canal Company to collect a debt due their corporation from the Idaho Canal and Improvement Company, Ltd. Judgment for plaintiffs for use and benefit of Taylor & Goshen Company. Both defendant corporations appeal. Affirmed.

Judgment affirmed, with costs in favor of respondents.

Standrod & Terrell, for Appellants.

In order for the complaint in this case to state a cause of action in favor of the plaintiffs as minority stockholders of the said corporation, it must allege, fully and accurately, the ultra vires acts, or the fraud complained of; that respondents and each of them were owners of the stock claimed by them respectively at the time of the fraudulent acts complained of; or that they thereafter received it by operation of law; and that the plaintiffs acquired such stock in good faith and not for vexatious purposes. (Moore v. Silver etc. Co., 104 N.C. 534, 10 S.E. 679; Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827; Dimpfel v. Ohio etc. R. Co., 110 U.S. 209, 3 S.Ct. 573, 28 L.Ed. 121; Taylor v. Holmes, 127 U.S. 489, 8 S.Ct. 1192, 32 L.Ed. 179; Merchants' etc. Planter Line v. Waganer, 71 Ala. 581; Shawhan v. Zinn, 79 Ky. 300; Bimber v. Calivada Co., 110 F. 58; Home Fire Ins. Co. v. Barber, 67 Neb. 644, 108 Am. St. 716, 93 N.W. 1024, 60 L. R. A. 927; Ulmer v. Maine R. E. Co., 93 Me. 324, 45 A. 40; United Electric Co. v. Electric Light Co., 68 F. 673; Woods v. Corry Water Co., 44 F. 146; Alexander v. Searcy, 81 Ga. 536, 12 Am. St. 337, 8 S.E. 630; Dunphy v. Travelers' etc. Assn., 146 Mass. 495, 16 N.E. 426.)

"Delay in the assertion of a right, unless satisfactorily explained, even when it does not constitute a positive statutory bar, operates in equity as evidence of assent, acquiescence or waiver." (Spidel v. Henrici, 120 U.S. 377-387, 7 S.Ct. 610, 30 L.Ed. 718, and authorities cited in opinion.)

While a minority of the stockholders of a corporation may maintain a bill in equity on behalf of themselves and other stockholders, for fraud, conspiracy, or acts ultra vires against a corporation, its officers, and others who participated therein, when the minority stockholders have been injured or damaged by said acts, they must act promptly and not wait an unreasonable length of time. (Boyce v. Montauk Co., 37 W.Va. 73, 16 S.E. 501; Alexander v. Searcy, supra; Dunphy v. Travelers' etc. Assn., supra; Dimpfel v. Ohio etc. R. Co., supra; Allen v. Wilson, 28 F. 677.)

"The minute-book of directors' meetings is the proper evidence to prove a corporate contract, or the authority of a corporate agent to act or contract for it." (2 Cook on Corporations, sec. 714; Torras v. Raeburn, 108 Ga. 345, 33 S.E. 989.)

"The rough notes of the meetings were as much secondary evidence as the testimony of the witnesses, and if produced would only have been admissible like any other secondary fact as tending to show what took place." (Boggs v. Lakeport Pk. Assn., 111 Cal. 354, 43 P. 1106; Guadalupe etc. Assn. v. West, 76 Tex. 461, 13 S.W. 307; Dennis v. Joslin Mfg. Co., 19 R. I. 666, 61 Am. St. 805, 36 A. 129.)

"The books and records of a corporation are competent evidence as against the corporation and members thereof who had access to the books, to show the accounts of the corporation." (3 Ency. of Evidence, 655; Hubbell v. Meigs, 50 N.Y. 480; Booth v. Dexter S. F. Co., 118 Ala. 369, 24 So. 405.) "The rule forbidding parol evidence to vary or contradict a writing applies to the records of a corporation." (3 Ency. of Evidence, 657; Williams v. Ingell, 21 Pick. (Mass.) 288; Davis Mill Co. v. Bennett, 39 Mo.App. 460; Gould v. Norfolk Lead Co., 9 Cush. (Mass.) 338, 57 Am. Dec. 50; Dennis v. Joslin Mfg. Co., 19 R. I. 666, 61 Am. St. 805, 36 A. 129.)

Where a party to an action offers himself as a witness, he may be subjected to a thorough and rigid cross-examination. (3 Ency. of Evidence, 902.) A stockholder cannot control the discretion of the directors as to whether to bring suit or not. (3 Cook on Corporations, sec. 750; Dickerman v. Northern T. Co., 176 U.S. 181, 20 S.Ct. 311, 44 L.Ed. 423; La Grange v. State Treasurer, 24 Mich. 468.)

"In general, a corporation represents and binds the stockholders in bringing and defending suits which involve the rights and obligations of the corporation, and binds them as fully as in the making of contracts." (Farnum v. Ballard etc., 66 Mass. (12 Cush.) 507; Oglesby v. Attrell, 105 U.S. 605, 26 L.Ed. 1186; Came v. Brigham, 39 Me. 35; Lane v. Inhabitants etc. Weymouth, 10 Met. (51 Mass.) 462; Graham v. Boston etc. R. Co., 118 U.S. 161, 6 S.Ct. 1009, 30 L.Ed. 196; Graham v. Boston etc. Co., 14 F. 653.)

A. M. Bowen, for Respondents.

When one corporation refuses to sue on a corporate cause of action, because of it being controlled by the debtor, it is a fraud on the minority; it is a breach of trust on the part of the board whose duties are to their own corporation and not the debtor, and equity permits the minority stockholders to sue. (Thompson Com. on Corp., sec. 4488; Brewer v. Proprietors of Boston Theater, 104 Mass. 378; Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827; De Neuville v. New York etc. R. Co., 81 F. 11, 26 C. C. A. 306; Barnes v. Kornegay, 62 F. 671; Morrill v. Little Falls Mfg. Co., 46 Minn. 260, 48 N.W. 1124; Fitzgerald v. Fitzgerald Con. Co., 41 Neb. 374, 59 N.W. 838; Carpenter v. Roberts, 56 How. Pr. 216; Brinkerhoff v. Bostwick, 88 N.Y. 52; O'Conners v. Passenger Co., 46 Misc. 530, 92 N.Y.S. 525; Bloom v. National etc. Savings Co., 81 Hun, 120, 30 N.Y.S. 700; Pittsburg etc. Ry. Co. v. Dodd, 115 Ky. 176, 72 S.W. 822; Barr v. New York etc. Ry. Co., 96 N.Y. 444; Rogers v. Lafayette Agr. Works, 52 Ind. 297; Burnes v. City of Atchison, 48 Kan. 507, 29 P. 579; Fletcher v. Alpena etc. Judge, 136 Mich. 511, 99 N.W. 748; Decatur Land Co. v. Palm, 113 Ala. 531, 59 Am. St. 140, 21 So. 315; Wickersham v. Crittenden, 106 Cal. 329, 39 P. 603; Beach v. Cooper, 72 Cal. 99, 13 P. 161; People's Sav. Bank v. Colorado etc. Bldg., 8 Colo. App. 354, 46 P. 620.)

Actual fraud, or, in other words, dishonest motives need not be shown. (Thompson on Corp., sec. 4493; Carpenter v. Roberts, supra; Pittsburg v. Dodd, supra.)

Where there is a community of interest between the "control" of two corporations, or where one corporation is controlling another in its own interest, or where the board of directors of one corporation are violating their duties in the interest of another or refusing to sue or defend as...