Mussina v. Goldthwaite

• Decision Date: 01 January 1870
• Citation: 34 Tex. 125
• Parties: SIMON MUSSINA v. GEORGE GOLDTHWAITE, TRUSTEE, ETC.
• Court: Texas Supreme Court

34 Tex. 125

SIMON MUSSINA

v.GEORGE GOLDTHWAITE, TRUSTEE, ETC.

Supreme Court of Texas.

1870.

1. An intervenor who claims an interest in the subject-matter of the suit may, by leave of the court, interpose his claim as a defendant, for the protection of his interests; and if there be fraud or collusion between the original parties to the suit, whereby his interests may be prejudiced, he may allege and prove it, and thereby frustrate any fraudulent purpose designed to be effectuated by the suit.

2. An individual stockholder in a corporation may maintain an equitable action against the directors, for misconduct in office, when the corporation itself is unable or, through fraud or collusion, omits to sue; and when the directors are charged with fraud, it is not necessary for the stockholder to apply to them for the use of the corporate name in bringing the suit.

3. If a party states facts in his pleadings, from which, if proved, the court must infer fraud as a legal sequence, it is not necessary that he should specifically charge fraud.

4. In a suit to foreclose a mortgage given by a stock company to secure certain of its bonds, there was a judgment by default taken against the company, an intervention of an individual stockholder, who denied the validity of the bonds, and charged collusion between the plaintiff and the officers of the company, and a jury impaneled to try the issues between the plaintiff and the intervenor, and also as a jury of inquiry upon the default taken against the company. The verdict was that “we the jury find the material allegations in the petition true;” and the court thereupon decreed forclosure and sale, directing the proceeds of sale to be first applied to costs, and afterwards to the interest and principal of the bonds, but nowhere adjudging any specific amount in favor of the plaintiff. Held, that the judgment is objectionable on the ground of uncertainty, and that there should have been a finding by the jury of the amount due the plaintiff.

APPEAL from Harris. Tried below before the Hon. James Masterson.

The character of this litigation and its material features are summed up in the opinion of the court. At the trial of the case in the court below, Mussina, the intervenor, put W. R. Baker, the secretary, and B. A. Shepherd, the president of the company, on the witness stand, and proceeded to propound to them questions as to the persons by whom the bonds were held, designating certain directors; and the witness Shepherd was asked whether he was the owner of any of the bonds, and whether the suit had been brought at his request. The plaintiff objected to these questions on the ground of irrelevancy, and the court sustained the objection, to which the intervenor excepted. The verdict and judgment are set forth, substantially, in the head notes.

W. P. Hamblin, for the appellant. The petition of the intervenor sets forth the facts which show that the corporate officers, when only $75,000 of stock had been taken, issued $100,000 of bonds to themselves, or for their own use, when there was no necessity for the issue, and in order to wrong the stockholders whose trustees they were. McMahan v. Wright, 16 Tex. 335.

The testimony of Shepherd, the president of the company, which was sought to be elicited by the intervening stockholder, was improperly and against law excluded.

The questions propounded, in view of the allegations of the stockholder intervening, were not irrelevant.

The judgment being by default, as between the original parties, was collusive, and as it specifies no sum of money and its amount can only be ascertained aliunde, is contrary to the statute, and the decisions of the supreme court. Hart. Dig. §§ 773 and 2503, or Pas. Dig. 785; Claiborne et al. v. Tanner's Heirs, 18 Tex. 68;Spiva v. Williams, 20 Tex. 442;May v. Taylor, Administrator, 22 Tex. 348.

Geo. Goldthwaite, for the appellee. The right of a party to intervene in a proper case is not denied. An intervenor must take the case as made by the original parties. He cannot change the character of the suit, and cannot make another party. Sayles, Prac. citing Canaway v. Morgan, 5 Mart. N. S. 499;Walker v. Dunbar, 7 Mart. N. S. 586.

The proper parties for the purpose of the intervenor's plea are not before the court. If any fraud has been committed the fraudulent parties are not before the court, and the intervenor could not make them parties.

Singly and alone, the intervenor, as a stockholder, cannot prosecute such a suit.

It is a general rule in equity, “that all persons materially interested, either legally or beneficially, in the subject-matter of the suit, are to be made parties to it, either as plaintiffs or as defendants, however numerous they may be, so that there may be a complete decree, which shall bind them all. By this means the court is enabled to make a complete decree between the parties, to prevent future litigation by taking away the necessity of a multiplicity of suits, and to make it perfectly certain that no injustice is done, either to the parties before it, or to others who are interested in the subject-matter by a decree which might otherwise be grounded upon a partial view only of the real merits.” Story, Eq. Pl. §§ 72 to 78.

This is the general rule, and the exception is when the parties are very numerous, in which case some are permitted to bring suit for themselves, and in behalf of all others beneficially interested, but there must be a fair proportion of those interested before the court. Story, Eq. Pl. §§ 130, 135.

One stockholder of a manufacturing corporation cannot alone maintain a bill in equity to compel the execution of a trust by a person who has taken a conveyance of the company property in trust to pay its debts, because he stands in the same right with all other stockholders who have a common interest with him in enforcing the trust, and all of whom should be made parties if not too numerous, or if too numerous the bill should be brought by some in behalf of all, so that the rights of all may be duly adjudicated in the final decree. Heath v. Elliot, 12 Cush. 601;Allen v. Curtis, 26 Conn. 456.

The intervenor prays, “that upon a hearing said bonds and the said deed of trust be declared invalid and not binding on said company, and that said George Goldthwaite, trustee, be prohibited from foreclosing said deed of trust or mortgage made part of his petition, and attached thereto; that the stockholders be declared and adjudged the proper owners of the said Houston City Mills Manufacturing Company, its property and franchise, free from said pretended incumbrance, and for general relief,” etc., and this in a suit in which there are no parties before the court except the trustee for the bondholders and the corporation, the artificial being, invisible, intangible, and existing only in contemplation of law, no bondholders whose interests are at stake--no stockholders and no directors who are charged with fraud.

Suppose Simon Mussina, the intervenor in this case, had brought an original bill in equity against George Goldthwaite, trustee, and the Houston City Mills Manufacturing Company, without being joined in his suit by any other stockholder as plaintiff, and without any other party defendant, praying, as he has prayed, in his plea of intervention, and the said defendants had demurred to his bill, and the demurrer had been sustained! That this court, on an appeal, would have affirmed the judgment, admits not of a doubt.

Nor can the intervenor find any relief under the remedy he has chosen, for as an intervenor he can make no party, and the plaintiff desires to make none, having before the court the only party necessary for the purposes of his suit.

Now, if the intervenor were without an adequate remedy, he might claim from the court some tender consideration, but his remedy is adequate, ample and complete. Let him file his original bill in equity, and bring before the court the parties who have combined and confederated to wrong, cheat and defraud him, and the court will not turn a deaf ear to his complaint, but grant speedy and impartial justice, with due regard, however, to the rights of all parties who claim an interest in the subject-matter of the litigation.

That he has his remedy by original bill is abundantly established by the following authorities: “An individual stockholder may maintain a suit in equity against the directors of a corporation for misconduct in office.” Allen v. Curtis, 26 Conn. 456;Schley v. Dixon, 24 Ga. 273;Kean v. Johnson, 1 Stockt. 401;Revere v. Boston...