People ex rel. Daniels v. District Court of City and County of Denver

• Citation: 80 P. 908,33 Colo. 293
• Parties: PEOPLE ex rel. DANIELS et al. v. DISTRICT COURT OF CITY AND COUNTY OF DENVER et al.
• Decision Date: 20 March 1905
• Court: Supreme Court of Colorado

80 P. 908

33 Colo. 293

PEOPLE ex rel. DANIELS et al. v. DISTRICT COURT OF CITY AND COUNTY OF DENVER et al.

Supreme Court of Colorado

March 20, 1905

Petition by the people, on the relation of William P. Daniels and others, for a writ of prohibition against the district court of the city and county of Denver and John I. Mullins, one of the judges thereof. Writ allowed.

This is an original application for a writ to prohibit the district court of the city and county of Denver from proceeding further in an action there pending, on the grounds that it has not jurisdiction of the subject-matter of the suit, and has acted therein beyond its legitimate powers. That action was brought by George A. Suffa against four mining corporations organized under the laws of the state of Colorado, and a fifth one incorporated under the laws of the state of Iowa, and William P. Daniels and Nathan C. Merrill their president and secretary, respectively. Plaintiff sued in the capacity of a stockholder of each of the companies, in his own behalf and in behalf of other stockholders similarly situated.

The complaint is voluminous and abounds in repetitions and indefinite statements. This is admitted, but the defects are said to be unavoidable, for more accurate information could be had only from defendants, who refused to give it. There are mingled in one statement, with no attempt at separation several distinct causes of action, some of them against the natural persons, some against the corporations, defendants. For our present purposes the pleading may be condensed into a few general statements. It avers, or attempts to do so, that of the capital stock of the corporations, which at par value aggregates several millions of dollars, the plaintiff is the owner of certain shares, for which he paid the sum of $3,716.50. Becoming dissatisfied with the management of the corporations, and desiring to examine their books, records and lists of stockholders, he applied for, and was denied access thereto, whereupon he brought an action in the district court to compel the official custodians of the same to permit an inspection, and such relief was granted, whereupon defendants took the case by appeal to our Court of Appeals, where the action was, and still is, pending and undetermined; that he was compelled to come to Colorado from the state of Massachusetts, his residence, for the purpose of protecting his interests as such shareholder, and to expend large sums of money in prosecuting the mandamus suit, for which he asks judgment against defendants Daniels and Merrill, whose wrongful conduct forced him to make these expenditures; that Merrill and Daniels caused certain libelous and scandalous publications to be made of and concerning the plaintiff, because of the differences between the parties respecting the corporate management, for which plaintiff also claims damages against them; that he was induced to purchase stock through fraudulent representations of Merrill and Daniels as to the value of the corporate properties, and, because of their certain fraudulent representations after the purchase of the stock, which were made with a view to induce him to retain his stock, and not to become dissatisfied with his investment, he was further damaged. It is alleged that the individual defendants have transferred to what is called the 'purchasing department,' the nature and object of which are not fully understood by plaintiff, and certainly not comprehended by us, some of the property of these corporations, and, unless prevented by the court, they will transfer thereto and dispose of other corporate property, to the injury of plaintiff and other stockholders.

There are general charges that these corporations were fraudulently organized by the individual defendants for the purpose of perpetrating frauds upon contemplated stockholders, of whom plaintiff is one, and for defrauding and deceiving the public generally, and that from the sales of their capital stock the sum of nearly a million dollars has been received, and that the present assets of all the corporations do not exceed the sum of $100,000--the deduction evidently intended being that these defendants have converted the remainder of the receipts to their own use--and that they have confederated and conspired together for the purpose of controlling the management of the corporations, to the damage of their stockholders; that the officers of the companies are under the control of the individual defendants, who also control the majority of the capital stock, and they have declared fictitious dividends, not out of the earnings of the company, but from the sale of stock; that, before these corporations were organized by Daniels and Merrill, they were bankrupt; since that time they have become wealthy, and have a large amount of property, though not standing in their own names, and these properties have been acquired by them from money which they have wrongfully diverted from the corporations and appropriated to their own use.

In brief, the allegations of the complaint charge mismanagement, fraud, and ultra vires acts against the officers of the corporations, already committed, and plaintiff fears that similar acts will be perpetrated. Some of these charges, made against Daniels and Merrill, are, if true, wrongs against the plaintiff as a stockholder, and some wrongs against him in his individual capacity. The prayer for relief is for damages against the defendants in the sum of over $17,000; for a decree setting aside the charter and corporate powers of the different corporations, dissolving them, and closing up their business; for an injunction pending the litigation restraining the defendants from further wrongful acts in their management, and from disposing of the corporate property or assets; and for the appointment of a receiver.

To this complaint the defendants filed a demurrer containing almost all of the grounds designated in our Code, and also a motion specifically challenging the jurisdiction of the court over the subject-matter of the action, and particularly questioning its jurisdiction to appoint a receiver.

The demurrer and motion were heard at the same time, and the court overruled them; and, as appears from its opinion in passing upon the same, without giving the defendants an opportunity to answer, immediately, and, indeed, before the formal order overruling the motion and demurrer was announced, appointed a receiver of the property, naming him, and on the same day approved his bond, and ordered the corporation officers at once to turn over to the receiver all their properties and effects, books, deeds, contracts, etc.--in effect, substituting its own receiver for the officers of all these corporations, and assuming to confer upon him all the corporate powers which the legally elected officers could exercise under the law. The receiver at once took possession of some property and effects of the corporations within his reach, but, before he could get possession of all, this application was made; and, upon the preliminary hearing which resulted in the issuance of a rule to show cause, the district court was directed to take no further action until further order of the Supreme Court.any other issue, contemplates that the adverse party should have notice of the petition and a right to file an answer thereto, and that evidence should be heard before a decision is made.

Geo. S. Redd and Geo. Stidger, for petitioners.

Horace G. Benson and De Witt C. Webber, for respondents.

PER CURIAM.

1. From the foregoing summary of the complaint, it will be noted that the money judgment prayed for was on account of alleged frauds committed and ultra vires acts done by the individual defendants, for which their companies could not, under the averments, and, indeed, were not asked to, be held liable. The only object of the action, and the only judgment prayed for against the corporations, were their dissolution and the winding up of their affairs. Neither an injunction nor a receivership was appropriate, under the allegations of the complaint, to the relief of a money judgment, and, indeed, no such contention is made. If they are appropriate or ancillary to any phase of the case made, it is to that part of the relief which consists of a prayer for a dissolution of the corporations, and that is the claim made here by respondents. It follows, then, that we are to consider the question of the trial court's power in appointing the receiver as an ancillary remedy--as if this were merely an action against a going, solvent, private business corporation, instituted by...