Nicollet National Bank v. Frisk-Turner Co.
| Decision Date | 03 February 1898 |
| Docket Number | Nos. 10,827 - (250).,s. 10,827 - (250). |
| Citation | 71 Minn. 413 |
| Parties | NICOLLET NATIONAL BANK v. FRISK-TURNER COMPANY and Others.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
A. B. Jackson, for appellant.
Koon, Whelan & Bennett, Keith, Evans, Thompson & Fairchild, Wilson & Van Derlip, C. J. Rockwood and H. M. Farnam, for respondents.
The plaintiff bank recovered a judgment against the Frisk-Turner Company on July 28, 1896, for the sum of $14,443.16, on which an execution was returned unsatisfied. On July 24, 1896, said company made an assignment, under the insolvency laws of this state, to Willard T. Atwater, one of these defendants. The total value of the assets which came into the assignee's possession and control did not exceed $3,000. The plaintiff brought this action, by supplemental complaint, to enforce the individual liability of the shareholders of the Frisk-Turner Company. The receiver of the City Bank of Minneapolis filed an intervening complaint, asking permission to participate in the sum recovered on a claim which said City Bank had against the Frisk-Turner Company.
The question involved in this issue is whether the stockholders of the Frisk-Turner Company are liable for the plaintiff's debt evidenced by the judgment so rendered against it. The company was organized as a corporation under the laws of this state, and the material article of the corporation is article 1, which reads as follows:
"The name of the corporation shall be Frisk-Turner Company, and the principal place of transacting its business shall be at Minneapolis, in the state of Minnesota, and its business shall be the manufacturing of clothing of every description, and the sale of clothing so manufactured, and the transaction of all other business necessary and incidental to such manufacture and sale of clothing."
The corporation, after publishing its articles and completing its organization, began active business November 1, 1890. In addition to its own manufacture of men's and youth's clothing, and the sale thereof, it, as part of its business, bought, handled and sold large invoices of children's manufactured ready-made clothing. These ready-made goods were purchased and handled by defendant in the ordinary course of jobbing business. The ordinary jobber's profit was added to the cost price, and the goods were then put on the market for sale. Defendant's salesmen solicited orders for them, as well as for the goods manufactured by defendant, and sold these ready-made goods either independently and separate from the goods of defendant's manufacture, or in conjunction with the latter, as customers might desire. They were not bought to fill orders previously received from customers, but were bought and sold, for profit, independently of the goods manufactured by defendant. The total sales made by defendant company while engaged in business aggregated about $1,000,000. The sales of children's clothing bought by defendant ready-made aggregated from five to seven per cent. of the total volume of sales, or from $50,000 to $70,000.
The defendants contend that, under these articles of incorporation, they are authorized to manufacture in part, and buy in part from other manufacturers, and to sell all the stock so acquired, as ordinary jobbers or wholesalers, without incurring the shareholders' liability which would have attached if they had declared these double purposes plainly in their articles. On the other hand, plaintiff alleges that this suit is brought upon the ground that the corporation was in fact organized for mercantile as well as manufacturing purposes, and depends wholly on the provisions of the constitution, and that any competent evidence to show that the defendant company was not organized exclusively for manufacturing purposes, so as to come within the exception to that provision, was admissible.
A corporation, being the mere creature of the law, "possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence." Marshall, C. J., in Trustees v. Woodward, 4 Wheat. 518-636. The articles of incorporation in question do not authorize the Frisk-Turner Company to buy and sell clothing manufactured by concerns other than itself. Such business would be a purely "mercantile business," and the latter words and "manufacturing or mechanical business" are not interchangeable terms. Both kinds of business might, under the constitution and laws, be carried on in conjunction by one corporation, if the articles so provided; but the liabilities of the stockholders would in such case be different from those of a corporation organized to carry on an exclusively manufacturing or mechanical business, under article 10, § 3, of the constitution.
In the phrase, "the transaction of all other business necessary and incidental to such manufacture and sale of clothing," we find no warrant for such corporation including in its business a purely mercantile business, such as buying and selling ready-made clothing.
"An incidental power is one that is directly and immediately appropriate to the execution of the specific power granted, and not one that has a slight or remote relation to it." Hood v. New York, 22 Conn. 1, 16.
The exercise of a power which might be beneficial to the principal business is not necessarily incident to it. It might be the exercise of a power inhibited by the constitution, or one not warranted by law, while the principal business might be permitted by both. The constitution exempts the stockholders in any corporation carrying on a manufacturing or mechanical business from liability to the amount of the stock held or owned by him, and its purpose is self-evident. "That purpose was to encourage manufacturing enterprises, by exempting those investing their capital in that business from personal liability." State v. Minnesota, 40 Minn. 213, 222, 41 N. W. 1020.
In this case, if the buying and selling of ready-made clothing by virtue of its articles of incorporation is authorized, under the guise of being incidental to the manufacturing and selling of its...
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Nicollet Nat. Bank v. Frisk-Turner Co.
... ... Johnson, Judge.Action by the Nicollet National Bank against the Frisk-Turner Company and others. D. C. Bell, receiver of the State Bank of Minneapolis, filed an intervening petition. Verdict for defendants. From an order denying a new trial, plaintiff appeals. Affirmed.A. B. Jackson, for appellant.Koon, Whelan & Bennett, Keith, Evans, Thompson ... ...