Roberts v. Kennedy

• Decision Date: 21 February 1922
• Parties: WILLIAM D. ROBERTS AND DAVID M. ARMOUR, members of the United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers, in behalf of themselves and also in behalf of such other members of said Brotherhood as may desire to join as complainants herein, v. LEO I. KENNEDY, WILLIAM T. HAINES, CLYDE A. RIEGEL, JOHN T. REDMON, CLYDE L. HAWKINS, JAMES F. OWEN, FRANK B. COLLIER, PEARL D. BALLINGER, A. W. WITKOP, CHARLES B. O'FLANAGAN, WILLIAM H. KANE, WILLIAM C. WEAVER, SR., DANIEL REDMON AND CHARLES H. MILLS
• Court: Court of Chancery of Delaware

116 A. 253

13 Del.Ch. 133

WILLIAM D. ROBERTS AND DAVID M. ARMOUR, members of the United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers, in behalf of themselves and also in behalf of such other members of said Brotherhood as may desire to join as complainants herein, v. LEO I. KENNEDY, WILLIAM T. HAINES, CLYDE A. RIEGEL, JOHN T. REDMON, CLYDE L. HAWKINS, JAMES F. OWEN, FRANK B. COLLIER, PEARL D. BALLINGER, A. W. WITKOP, CHARLES B. O'FLANAGAN, WILLIAM H. KANE, WILLIAM C. WEAVER, SR., DANIEL REDMON AND CHARLES H. MILLS

Court of Chancery of Delaware, New Castle

February 21, 1922

DEMURRER TO AMENDED BILL. The bill, as amended, is by two members of United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers, in behalf of themselves and such other members as may desire to join as complainants, against defendants who are alleged to be members of the Brotherhood and also agents and subordinate officers thereof. The bill charges that the defendants, in violation of their duties and obligations, have and are endeavoring by various means to break up the Brotherhood, to wrongfully apply its funds and misuse its property. It prays an accounting and injunction.

The cause came before the Chancellor on an objection to allowing the filing of an amended bill, ante p. 93, 115 A. 585, and again on a demurrer to the amended bill allowed to be filed ante p. 106, 115 A. 587. The demurrer was sustained. A further amended bill was filed and the cause now comes on to be heard on a demurrer to the further amended bill.

Fourth ground of demurrer well taken.

David J. Reinhardt and Alexander Jamison for the complainant.

J Frank Ball and Robert G. Harman, for the defendants.

OPINION

THE CHANCELLOR

The first ground of demurrer is:

"That the said bill of complainant has introduced an entirely new cause of action for that alleged in said prior amended bill of complaint, in that Roberts and Armour have instituted a class suit in lieu of the suit on behalf of themselves as individuals, as in the prior amended bill."

The fact that the complainants now seek relief as representatives of a class, whereas by their prior bill they sought relief in their individual capacities, the substance of the complaint remaining the same, does not constitute the introduction of a new cause of action. 1 Daniell's Chancery Practice, (5th Am. Ed.) 234 (star page 245); Id. 226 (star page 236), note; Richmond v. Irons, 121 U.S. 27, 46, 7 S.Ct. 788, 30 L.Ed. 864; Redmond v. Hoge, 3 Hun (N. Y.) 171; Lloyd v Loaring, 6 Ves. 773, 31 Eng. Rep. 1302; Mozley v. Alston, 1 Phil. 790, 799, 41 Eng. Rep. 833, 837.

2. The second ground of demurrer is:

"That said bill of complaint has failed to make the United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers a party respondent in said amended bill of complaint, the said United Brotherhood of Maintenance of Way and Railway Shop Laborers being an indispensable party to said bill of complaint."

In view of the decision heretofore made in this cause upon the demurrer to the prior amended bill, ante p. 106, 115 A. 587, the second ground of demurrer is not tenable.

3. The third ground of demurrer is:

"That said bill of complaint has failed to set out therein, notice of said alleged wrong doing on the part of the said respondents to the said United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers, or the officers thereof, and to request the same to bring suit in its name, or their names, and the refusal so to do on behalf of said United Brotherhood of Maintenance of Way Employes and Railway Shop Laborers, or the proper officers thereof."

This contention is based on the supposed analogy which the case bears to a stockholder's bill wherein it is sought to assert rights belonging to, or to redress wrongs done against, a corporation. In such cases, it is said, before the stockholder will be permitted to sue on behalf of himself and all other stockholders, he must first apply to the corporation through its proper officers and request it to act; if this is done and the officers refuse to act, then, and not until then (except in cases where the circumstances render a request manifestly useless), the general rule is that the stockholder is permitted to sue. Similarly, it is urged, in this case there should have been a prior demand upon the Brotherhood's officers and a refusal, before the members may be permitted to sue.

In answering this contention, it may be observed that one of the complainants, Roberts, is a Grand Vice-President of the Brotherhood, and as such is alleged to have "authority, under the constitution and by-laws of said Brotherhood, to supervise the affairs of said Brotherhood in a certain section of the United States," etc. This section of the United States, the bill shows, embraces the territory where the matters in controversy in this cause have arisen. It may, therefore, be said that the suit is conducted by a properly designated officer competent as such to act for the Brotherhood. In suing for the organization, it is entirely proper for him to institute the suit in the names of himself and other members in behalf of all. See ante p. 106, 115 A. 587.

If, therefore the analogy of the rule applicable in a corporation stockholder's suit is to be applied, it is very doubtful if the conditions calling or the application of the rule exist.

But, aside from this, it is the opinion of the court that the rule referred to can have no analogous application to a case of the kind now before the court. This view is entertained because of the fundamental difference existing between a corporation on the one hand and an unincorporated association of individuals on the other. The corporation, being an artificial person, has a distinct entity of its own, can hold and possess property, own choses in action, and sue and be sued in its own name. Therefore, when its stockholders undertake to sue in its behalf, they assert rights that are the corporation's and which the corporation is capable of litigating in its own name. Hence, while the stockholders have an interest in the corporation's property, an interest which a court of equity will in proper cases protect, they cannot, in the absence of exceptional circumstances, litigate such interest unless the corporation, through its proper officers, first refuses to do so. The primary right is in the corporation. At law, so inflexible is this view, that in no case, it is said, can an action be maintained for the corporation except in its corporate name. 6 Fletcher's Cyc. Corp., par. 4052. But owing to the fact that equity will look beyond the corporate entity and its legal rights and have regard for the stockholders as the beneficial and equitable owners of its assets, such stockholders may, in case the corporation refuses, invoke the aid of equity in proper cases for their protection. Id. par. 4053, and cases cited.

But in such cases it is the right of the corporation that is asserted, a consideration with supplies the rationale of the rule expressed by Pomeroy in his work on Equity Jurisprudence, (3d Ed.) par. 1095, that:

"The corporation is, therefore, an indispensably necessary party, not simply on the general principle of equity pleading in order that it may be bound by the decree, but in order that the relief, when granted may be awarded to it, as a party to the record, by the decree."

But an unincorporated association of individuals such as is the Brotherhood in this case, has no identity of its own and cannot sue. The property and rights which are said to belong to it, belong in fact to its members. Smith, et al., v Swormstedt, et al., 57 U.S. 288, 16 HOW 288, 14 L.Ed. 942; Ahlendorf v. Barkous, 20 Ind.App....