Morrill v. Little Falls Manuf'g Co.

• Decision Date: 08 June 1891
• Citation: 48 N.W. 1124,46 Minn. 260
• Parties: MORRILL v LITTLE FALLS MANUF'G CO. ET AL.
• Court: Minnesota Supreme Court

46 Minn. 260

48 N.W. 1124

MORRILLvLITTLE FALLS MANUF'G CO. ET AL.

Supreme Court of Minnesota.

June 8, 1891.

(Syllabus by the Court.)

1. A stockholder in a corporation may sue both at law and in equity in his own name in behalf of its interest and to vindicate a wrong done to it, when it cannot or will not do so in its corporate capacity; and under like circumstances a stockholder may defend in his own name an action brought against a corporation.

2. The rules by which a stockholder's right to defend in behalf of a corporation considered and applied in an action brought by a plaintiff against a corporation of which he claims to be the president, and has caused the summons upon it to be served upon himself as such president and upon another person as its secretary, and where, after the corporation is in default for want of answer, stockholders, also made defendants in such action, but not served with the summons until long after the corporation has defaulted, make application to defend in its behalf, their proposed answer disclosing a meritorious defense on the part of the corporation, and also alleging that the plaintiff is not the president, and that the person whom he has recognized as secretary is not the secretary, of the corporation.

3. In the consideration of such an application, and as against the plaintiff at least, the court must treat the corporation as having been duly served with the summons, and as in default for want of answer, through the inexcusable neglect of its officers.

4. When an application by the stockholders to answer under such circumstances, or to amend an answer already made, has been passed upon by the district court, the merits of the proposed defense, and the right of the stockholders to defend in behalf of the corporation, have been determined, and are at rest. The same questions cannot thereafter be litigated in a motion made by plaintiff for judgment on the pleadings.

Appeal from district court, Morrison county; BAXTER, Judge.

F. W. Lyon, (James E. Markham and W. F. Bailey, of counsel,) for appellants.

Taylor, Calhoun & Rhodes, for respondent.

COLLINS, J.

This action was brought to determine an adverse claim to real property in Morrison county, plaintiff in his complaint alleging himself to be the owner and in actual possession thereof. He caused personal service of the summons to be made upon himself as president of the defendant corporation, and also upon one Townsend as its secretary, on November 19, 1888. More than 60 days thereafter (January 30, 1889) personal service of the summons was had upon defendants Roach, Thompson, and Laura B. Herrick, and on the same day service was duly made on defendant Nathan Herrick, by leaving a copy of the summons at the house of his usual abode. The remaining defendants, said to have been non-residents, were served by publication of the summons, which publication commenced February 1 and terminated March 15, 1889. No answer was interposed by either of the defendants Roach, Thompson, or the Herricks; nor was an answer made in behalf of the corporation, except as hereinafter stated, and long after it was in default, if properly served,-that is, if the service upon it, before mentioned, was upon the proper persons as its officers. For the purposes of this appeal we must assume Morrill to have been the president and Townsend its secretary, as claimed by the plaintiff, and hence that the period of time within which it was required to answer expired long before service was made, personally, or by publication, upon the remaining defendants. A few days before the time expired within which such defendants as had been served by publication could answer,-the exact date not appearing,-an answer was filed in behalf of the corporation and defendants Bullen and Mayhew. Such answer simply put in issue the plaintiff's alleged title to the property, denying that he had any rights or interest therein. The answering defendants failed to assert title in themselves, or a claim to the property of any description, and therefore the answer merely amounted to a disclaimer, the plaintiff being entitled to judgment on the pleadings. Perkins v. Morse, 30 Minn. 11,13 N. W. Rep. 911, and 14 N. W. Rep. 879;Donohue v. Ladd, 31 Minn. 244,17 N. W. Rep. 381. In the month of August, 1889, an application to amend this answer, based upon certain affidavits and the proposed amended answer, was denied as to the defendant corporation, but allowed as to the defendants Bullen and Mayhew, the proposed amendment to stand as their answer. From this order no appeal was taken. A reply was duly served, and thereafter, upon plaintiff's motion, judgment on the pleadings was ordered in his favor as against the defendants last named. The appeal, taken by the defendant corporation and by Bullen and Mayhew, is from a judgment entered in accordance with the demand for relief found in the complaint against all of the defendants.

As we view the cause now before us, the rights of defendants Bullen and Mayhew, only, are proper subjects for consideration, the entire controversy being made to depend upon the regularity of the order granting plaintiff's motion for judgment on the pleadings, which then, so far as involved by the motion, consisted of the complaint, the amended answer of these two defendants, and plaintiff's reply. This bring us to a brief statement of the allegations in the answer. The answering defendants admitted the incorporation of defendant company in the year 1856, setting forth that they then became, and had ever since remained, shareholders, Bullen owning 42 and Mayhew 38 shares of its stock, of the par value of $100 per share. Defendants Roach and Nathan Herrick were also shareholders, and from the year 1883 said Bullen, Mayhew, Roach, Nathan Herrick, and one Babbitt had constituted the board of directors; and that Bullen was the president, and Mayhew the secretary, of the corporation, both of whom had resided in the state of Wisconsin for more than 20 years last past. The answer set forth a series of transactions, including the making and recording of a number of quitclaim deeds by persons who pretended to be the president and secretary of the corporation, pretending to convey in its behalf and to one Eustis the property in controversy, and by the latter to Thayer, the pretended president, and from Thayer to this plaintiff, through and by means of which Thayer and plaintiff had conspired and attempted to cheat and defraud the corporation out of all its property except its franchise. All of these deeds it averred were made without consideration, and in furtherance of the plan mentioned. There were other allegations in the answer in respect to the time when the answering defendants first learned of the manner and fraudulent nature of these various conveyances, putting it as within five days prior to the date of the amended answer; and it was also alleged that plaintiff, without claim of right, had been and was pretending to act and to be the president of said corporation, and that persons selected by him were pretending to be and to act as a board of directors thereof, equally without right; that any defense made by them would but aid and further the plaintiff's alleged fraudulent scheme, the defendants, as stockholders, having no redress, and being without opportunity for relief, unless permitted to interpose the proposed amended answer. The relief prayed for was, in substance, that the deeds before mentioned, and each of the same, be declared null and void, and that the title to said real property be adjudged and decreed to be in the defendant corporation. It will be observed that neither of these defendants Bullen and Mayhew asserts any right, title, or interest in this property, except such as they may have as the owners and holders of 80 shares in the aggregate of the capital stock of the corporation. They expressly allege the corporation to be the owner in fee, and it is apparent that their answer, to be available for any purpose, must be made available in behalf of the corporation. Nor do they claim more than this, as is clearly indicated by their demand for relief, which, if obtained, would be wholly in the interest of the corporation. To be brief, the answer, if of value or service...