Noble v. Farmers Union Trading Co.

• Decision Date: 06 April 1950
• Docket Number: No. 8938,8938
• Citation: 216 P.2d 925,123 Mont. 518
• Parties: NOBLE v. FARMERS UNION TRADING CO. et al.
• Court: Montana Supreme Court

Page 925

216 P.2d 925

123 Mont. 518

NOBLE v. FARMERS UNION TRADING CO. et al.

No. 8938.

Supreme Court of Montana.

April 6, 1950.

Collins & Burns, Dillon, John Collins argued the case orally, for appellant.

Frank E. Blair, Virginia City, J. J. McCaffery, Jr., Butte, Frank J. Roe, Butte, Blair argued the case orally, for respondents.

ADAIR, Chief Justice.

On March 20, 1947, the plaintiff R. F. Noble, owner of one share of the voting stock of Farmers Union Trading Company, a corporation, commenced this suit in equity in the district court of Madison county, seeking to quiet title to the south 51 feet of two town lots in Sheridan, Montana, of which he avers the corporation 'is the sole and exclusive owner in fee simple title,' and naming the corporation and one Charles Wiggins as defendants therein. In the district court plaintiff experienced no little difficulty in pleading ultimate facts sufficient to show a right in himself to institute and prosecute the action and to justify interference by a court of equity with the conduct, management and internal workings and business of the corporation prima facie vested, by law, in its officers and directors. Upon demurrer allowed to his second amended and supplemental complaint, plaintiff stood on his pleadings and suffered judgment of dismissal to be entered against him. This is an appeal from that judgment.

The question presented by the appeal is: Do the averments in plaintiff's pleading show a right in him to maintain this suit in his own name and as a stockholder?

The second amended complaint here involved alleges: That the defendant Farmers Union Trading Company is 'a farmers cooperative association, duly incorporated and existing under and by virtue of the laws of the state of Montana;' that its stockholders number 75 or more persons; that the plaintiff R. F. Noble is one of such stockholders owning corporate stock of the par value of $500; that plaintiff has never been a director of the corporation; that the by-laws of the corporation provide for the holding of the regular annual meeting of the stockholders for the election of directors on the first Monday of December of each year and at no other time; that the corporation has frequently permitted a full year to pass without calling or holding any meeting of the stockholders; that plaintiff has no information as to when, if ever, another stockholders meeting will be held; that since January 1937 the corporation 'has been and still is the sole and exclusive owner in fee simple title' of the south 51 feet of lots 5 and 11 in block 36 of the town of Sheridan Madison county, Montana, which is the only land owned by the corporation; that the defendant Charles Wiggins 'claims some right, title, interest or estate in, or lien or encumbrance upon the real property above described; but that every such alleged claim is without foundation and void;' that 'on information and belief' the defendant Wiggins has demanded and received from the defendant corporation $70 per month as alleged rental for the use and occupancy of part of such real property; that 'upon information and belief' since the commencement of this suit the defendant Wiggins has demanded that such payments be increased to $100 per month; that 'unless the sum last mentioned is regularly paid to him, he [Wiggins] will commence an action in court to compel the payment thereof, or to obtain possession of said lands with damages;' that before commencing this action plaintiff made demand upon the directors and officers of the corporation 'that they take the necessary proceedings in court to quiet the title * * * as against all claims, alleged claims and pretentions' of the defendant Wiggins; that the 'board of directors have failed and refused and till fail and refuse to institute any action for that purpose, or to take steps to establish or quiet the title' of the corporation in the properties or any part thereof; that the question of quieting title to the lands of the corporation is one of common and general interest to the stockholders; that 'it is impractical to join' the stockholders 'as parties to this action or to bring them to court within a reasonable time; for which reason this action is brought by the plaintiff for his own benefit and also for the benefit of all others similarly interested, who may elect to come in and contribute to the expenses of this action.' (Emphasis supplied.) The prayer for relief is that the defendant Wiggins be required to appear and set forth the nature of all claims by him asserted in the described lands adversely to the ownership of the corporation to the end that such claims be cancelled and held for naught; that title to the property be established and forever quieted in the defendant corporation; that defendant Wiggins and all persons in privity with him be forever foreclosed from asserting any claim against the lands adversely to the corporation and that plaintiff recover his costs.

A corporation is not a person. In re Clarke's Will, 204 Minn. 574, 284 N.W. 876. It is merely a legal fiction created for convenience in conducting business. Whipple v. Industrial Commission, 59 Ariz. 1, 121 P.2d 876, 878. It can be created only by or under legislative authority. 1 Fletcher Cyc., Corporations (Perm.Ed.), sec. 15, pp. 36, 37, note 65. Being a mere creature of law established for special purposes a corporation receives all its powers from the Act creating it. People ex rel. Cairo & St. L. R. Co. v. Dupuyt, 71 Ill. 651, 655. It acts through its board of directors and officers (R.C.M. 1947, sec. 14-206 and sec. 15-401) and its property is not subject to the control or disposition of its members or stockholders. Sellers v. Greer, 172 Ill. 549, 50 N.E. 246, 248, 40 L.R.A. 589. Compare: North Hudson County R. Co. v. May, 48 N.J.L. 401, 19 Vroom 401, 5 A. 276; Judd v. City Trust & Savings Bank, 133 Ohio St. 81, 12 N.E.2d 288; Stokes v. Continental Trust Co., 186 N.Y. 285, 78 N.E. 1090, 1093, 12 L.R.A.,N.S., 969, 9 Ann.Cas. 738; Frank Gilbert Paper Co. v. Prankard, 204 App.Div. 83, 198 N.Y.S. 25, 27.

The term 'corporation' includes all associations and joint stock companies having or exercising any of the powers or privileges of corporations not possessed by individuals or partnerships. Constitution of Montana, Art. XV, sec. 18; R.C.M. 1947, secs. 14-201 to 14-222.

A corporation has a real individuality, In re Clarke's Will, supra, and is in law an entity entirely separate and distinct from its stockholders. McCarroll v. Ozarks Rural Electric Co-op. Corp., 201 Ark. 329, 146 S.W.2d 693, 695; Matthews v. Minnesota Tribune Co., 215 Minn. 369, 10 N.W.2d 230, 232, 147 A.L.R. 147, 150; State ex rel. Oklahoma Employment Security Commission v. Tulsa Flower Exchange, 192 Okl. 293, 135 P.2d 46, 48; Department of Treasury of Indiana v. Crowder 214 Ind. 252, 15 N.E.2d 89, 91; Rapides Dairy Dealers' Co-op. Ass'n v. Mathews, La.App., 158 So. 247, 249; Wild v. Standard General Realty Co., La.App., 145 So. 58, 59; Levert v. Shirley Planting Co., 135 La. 929, 66 So. 301; Commonwealth v. Muir, 170 Ky. 435, 186 S.W. 194, 196; Ulmer v. Lime Rock R. Co., 98 Me. 579, 57 A. 1001, 1006, 1007, 66 L.R.A. 387; Jackson v. Hooper, 76 N.J.Eq. 592, 593, 75 A. 568, 571, 27 L.R.A.,N.S., 658; Ex parte Rickey, 31 Nev. 82, 100 P. 134, 140, 135 Am.St.Rep. 651; People's Pleasure Park Co. v. Rohleder, 109 Va. 439, 61 S.E. 794, 796, 63 S.E. 981; State ex rel. City of Tacoma v. Tacoma Ry. & Power Co., 61 Wash. 507, 112 P. 506, 508, 32 L.R.A.,N.S., 720; Aiello v. Crampton, 8 Cir., 201 F. 891, 893.

R.C.M.1947, Title 14, Chapter 2, sections 14-201 to 14-222 set forth the special statutes of this state governing the incorporation and management of cooperative associations for the purpose of trade or prosecuting any branch of industry, or the purchase and distribution of commodities for consumption, or the borrowing or lending of money among members for industrial purposes.

R.C.M.1947, sec. 14-202 provides: 'No person shall be permitted to subscribe for or control or own more or less than one share of the common stock of such association.'

R.C.M.1947, sec. 14-205 provides that associations formed under such Chapter 'shall be bodies corporate and politic for the period for which they are organized, not exceeding forty years; may sue and be sued; * * * may own, possess, and enjoy so much real and personal property as shall be necessary for the transaction of their business, and may sell and dispose of the same. They may borrow money and may pledge their property, both real and personal, to secure the payment thereof, and they shall have and exercise all powers necessary and requisite to carry into effect the objects for which they may be formed, and such as are usually exercised by co-operative association, subject to all duties, restrictions, and liabilities set forth in the general laws in relation to similar corporations, except so far as the same may be limited or enlarged by this act.' (Emphasis supplied.)

R.C.M.1947, sec. 14-206 provides: 'The officers of the association shall consist of a board of directors, who shall exercise the corporate powers invested in such association * * * a president, vice-president, secretary, and treasurer, to be elected by the stockholders as provided by the by-laws. All by-laws shall be adopted by the stockholders of the association.' (Emphasis supplied.)

R.C.M.1947, sec. 14-214 provides: 'The profits or net earnings of such associations shall be distributed to those entitled thereto, at such times as the by-laws shall prescribe, which shall be as often as once in twelve months. If such associations for five consecutive years shall fail to declare a dividend upon the shares of its paid-up capital, the holders of the majority of the par value of the issued and outstanding capital stock, by petition, setting forth such fact, may apply to the district court of the county, wherein is situated its principal place of...