Porter v. Mesilla Valley Cotton Products Co.
Decision Date | 10 December 1937 |
Docket Number | No. 4269.,4269. |
Parties | PORTER et al.v.MESILLA VALLEY COTTON PRODUCTS CO. et al. |
Court | New Mexico Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Dona Ana County; Numa C. Frenger, Judge.
Suit by R. P. Porter and another on behalf of the Mesilla Valley Cotton Products Company for an accounting against J. B. Wray, for whom the El Paso National Bank, executor, was substituted following his death. Judgment in favor of the corporation against the defendant, and defendant appeals.
Reversed and remanded, with instructions to dismiss the suit.
Supreme Court was not precluded from directing that suit by directors on behalf of corporation be dismissed for failure of directors to comply with conditions precedent notwithstanding a purported finding that directors had exhausted every reasonable means available for obtaining an accounting prior to suit, since such finding was a “conclusion of fact” or of “fact and law” rather than a “finding of ultimate fact” from which such conclusion might be drawn, and was not binding upon Supreme Court. Comp.St.1929, § 105-813.
W. C. Whatley and Edwin Mechem, both of Las Cruces, for appellant.
Holt & Holt, of Las Cruces, for appellees.
This is a stockholders' suit, brought by the appellees (minority stockholders) in behalf of the Mesilla Valley Cotton Products Company, a corporation, for an accounting against J. B. Wray, its president and active manager. Wray alone answered. While the suit was pending in the district court, Wray died, and the El Paso National Bank, the executor of his last will and testament, was substituted for him as defendant. From a judgment in favor of the corporation and against the defendant, defendant has appealed.
J. B. Wray will be styled “Wray”; the appellees Porter and Heid, “plaintiffs”; the Mesilla Valley Cotton Products Company, “the corporation”; and the El Paso National Bank, executor, etc, “defendant.”
The material findings of fact made by the court, supplemented by admissions in the pleadings, are in substance as follows:
The defendant Mesilla Valley Cotton Products Company is a corporation organized under the laws of New Mexico for the purpose of ginning cotton. The plaintiffs were stockholders, and Wray a stockholder, president, and active manager of the corporation. In the month of December, 1925, Wray purchased in the name of the corporation and the corporation paid for, a carload of farm implements at a cost of $4,607.40, the freight on which was $663.35. Wray undertook to sell these implements in behalf of the corporation; and for such purpose retained the implements in his own custody and possession, and sold or disposed of certain of them. On July 31, 1926, there was on hand and undisposed of in implements $4,132.92. Wray failed to account to the corporation for said implements or the proceeds thereof, save and except the sum of $381. In 1926 the corporation sold its gins and proceeded toward winding up its business with a view to dissolution, and has not otherwise been in business since.
Plaintiffs were the owners of more than one-tenth of the capital stock of the corporation; they never called a stockholders' meeting for the purpose of directing suit to be brought by the corporation against Wray, nor made any demand upon the corporation or upon its officers to bring such suit, nor did the corporation refuse to file one. Plaintiffs were directors of the defendant corporation.
The court entered judgment against defendant, executor and for the corporation, for $3,761.92.
[1] These findings of fact are not questioned by any of the parties, and are binding on this court.
[2] The conditions precedent, upon which stockholders are authorized to sue in behalf of a corporation, are stated in the leading case of Hawes v. Contra Costa Water Co., 104 U.S. 450, 461, 26 L.Ed. 827, as follows:
[3] The plaintiffs were burdened with proving the facts authorizing them to sue, or failing this, then that a resort thereto would have been futile. Not only is there no finding that demand was made for corporate action, but the court finds the contrary; and the futility of such demand does not appear in the findings.
[4] It is true that plaintiffs were not required to attempt redress through the corporation or directors before taking court action, if it would have been vain and futile to do so. The cases so hold.
***”6 Fletcher Cyclopedia of Corporations, § 4070.
[5] If there had been nothing more in the findings than the facts we have stated, the appellees were not authorized to sue in behalf of the corporation, under the rule quoted from the Hawes Case, supra; but among the findings of fact is the following:
If this is a finding of ultimate facts, as contemplated by section 105-813 N.M. Comp.St.1929, then it may be inferred that the failure to call upon the corporation through its officers and directors for action against Wray, was because of the futility of so doing. But this is a conclusion of fact, or of fact and law, and not a finding of those ultimate facts from which such a conclusion may be drawn.
The statute in question provides that “the court shall find the facts and give its conclusions of law pertinent to the case.” It was construed in Luna v. Cerrillos Coal R. Co., 16 N.M. 71, 113 P. 831, 834, an action in ejectment. The district court made such general conclusions of fact as we have here; and in passing thereon it was stated that the majority of courts held such findings sufficient; but disapproving the rule, the Territorial Supreme Court stated:
This case was cited with approval in Merrick v. Deering et al., 30 N.M. 431, 236 P. 735, 738, in which...
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