State v. Milwaukee Elec. Ry. & Light Co.

• Decision Date: 05 June 1908
• Citation: 136 Wis. 179,116 N.W. 900
• Court: Wisconsin Supreme Court
• Parties: STATE v. MILWAUKEE ELECTRIC RY. & LIGHT CO. ET AL.

136 Wis. 179

116 N.W. 900

STATE

v.MILWAUKEE ELECTRIC RY. & LIGHT CO. ET AL.

Supreme Court of Wisconsin.

June 5, 1908.

Appeal from Circuit Court, Milwaukee County; John C. Ludwig, Judge.

Action by the state against the Milwaukee Electric Railway & Light Company and others. From orders denying petitions of some of the defendants to disallow an examination or discovery on behalf of plaintiff, said defendants appeal. Reversed and remanded, with directions to dismiss the action.

This was an action commenced by the Attorney General, without special authority and without leave of any court, against numerous defendants, who may be classified as follows: (1) The railway company, hereinafter called the corporation; (2) several directors of that company who were such in 1899 and 1900 and also at the time of the commencement of the suit; (3) several persons, some of them included in the second class, who were and still are directors of the North American Company; (4) Fred Vogel, who was a director of the North American Company at the commencement of the action, but not at the time of the acts complained of in 1899 and 1900; (5) the North American Company; and (6) several persons who were mayor and aldermen of the city of Milwaukee in 1899 and 1900. Attempted service of summons on all of said defendants in the month of August, 1907, having been made, the plaintiff gave notice of examination under section 4096, St. 1898, of those in Wisconsin, and filed an affidavit that, in order to enable it to plead, an examination of said persons was necessary. It set forth on information and belief that in the months of December, 1899, and January, 1900, the defendants constituting the directors of the corporation unlawfully and by collusion paid over large amounts of the corporation's money or property to the defendant North American Company and its directors, which was intended to be and was unlawfully paid over to the defendants, who were then mayor and several aldermen of the city of Milwaukee, whereby was induced the granting of an amended and extended franchise under which the corporation has since operated its street railway business in Milwaukee. Plaintiff asserted as the general nature of this action (1) to compel the defendant directors and officers of the corporation to account for their said official conduct in the management and disposition of its funds; (2) to compel the defendant directors of the corporation and also the defendant directors of the North American Company, to account for their official conduct in management and disposition of the funds and property of that corporation; (3) to compel both such directors to pay to the corporation all sums of money and value of all property which any of them had acquired to himself or transferred to others or had lost or wasted by any failure of duty; (4) to suspend the said defendant officers of the corporation for abuse of their trust; (5) to remove said defendant directors and officers of the corporation for gross misconduct; (6) to set aside all alienations of property of the corporation made by said defendant directors and officers contrary to the provisions of law or for purposes foreign to the lawful business and objects of said corporation in all cases where the person receiving the property so alienated knew the purpose; (7) to compel the defendant directors and officers of the corporation, and also the defendant directors and officers of the North American Company, to account for all funds and property illegally and fraudulently obtained and used by them in fraudulently and corruptly securing the franchise aforesaid of January 2, 1900; (8) to compel said defendants mayor and aldermen to account for all funds and property of the corporation illegally or fraudulently paid to them for said purpose and to disclose the names of all persons making any such payment and the time, place, and circumstances thereof; and (9) to restrain the defendant corporation from exercising any rights under, and to set aside, vacate, and annul, the said franchise ordinance of January 2, 1900. The corporation, the several directors thereof, Fred Vogel, Jr., director of the North American Company, the mayor, each separately, and the several defendant aldermen, together, filed petitions with the circuit court, praying it to adjudge and determine that the plaintiff be not entitled to such or any examination or discovery as against the petitioners, and that the notice and subpœna be suppressed; each of said petitions asserting that all cause of action for accounting or recovery of money or property was barred by the statute of limitations. These petitions were all denied, and the same defendants, respectively, appeal from the orders of denial.Miller, Mack & Fairchild for appellants, Milwaukee Electric Ry. & Light Co.

John I. Beggs, Fred Vogel, Jr., and Quarles, Spence & Quarles, for appellant Pfister.

Ryan, Ogden & Bottum, for appellants Rose et al.

F. L. Gilbert, Atty. Gen., Russell Jackson, Deputy Atty. Gen., and Franz C. Eschweiler, Sp. Dist. Atty. Milwaukee County, for the State.

DODGE, J. (after stating the facts as above).

The Attorney General asserts that his cause of action is that declared or created by section 3237, St. 1898, and placed in the state, to be exercised by the Attorney General, by section 3239, St. 1898. These statutes have their origin in the legislation of New York (part 3, c. 8, tit. 4, §§ 33, 35, N. Y. Rev. St. [2d Ed.] 1829), enacted in response to the opinion, or doubt, of Chancellor Kent that no power of supervision or control over other than charitable corporations was vested in the court of chancery. Atty. Gen. v. Utica Ins. Co., 2 Johns. Ch. (N. Y.) 371. Their purpose was to confer new jurisdiction on the court. In this state, apparently, Chancellor Kent's doubt of the power of the court has not been considered serious. In Gores v. Day, 99 Wis. 276, 74 N. W. 787, it is said: “Section 3237, Rev. St. 1878, does not materially add to the jurisdiction of the court, that existed under its general equity powers.” The same idea was reaffirmed most definitely in Harrigan v. Gilchrist, 121 Wis. 127, 293, 99 N. W. 909, citing Adler v. Mil. P. B. Mfg. Co., 13 Wis. 57. However, it is now beyond debate that the circuit courts are vested with such jurisdiction, and that the statutes in question were framed for the purpose of declaring it. By section 3239 the courts are required to exercise that jurisdiction when moved thereto by the Attorney General in the name of the state, by a creditor, or by a managing officer of the corporation, but this category is not exclusive, for the action may equally be instituted by a member or stockholder. Gores v. Day, supra; Land, Log & Lumber Co. v. McIntyre, 100 Wis. 245, 256, 75 N. W. 964, 69 Am. St. Rep. 915;Luther v. Luther, 118 Wis. 112, 94 N. W. 69, 99 Am. St. Rep. 977;Brahm v. Gehl, 132 Wis. 674, 112 N. W. 1097. Counsel for plaintiff contend, however, that such section does expressly empower the state to bring the action whenever the relief described in section 3237 is sought. If such be the meaning and purpose, then the section equally authorizes a creditor to sue in all cases. There is no difference in the language in its application to one or the other. But this court has declared that it does not authorize a creditor to sue unless he has a direct personal interest in the relief sought. Killen v. Barnes, 106 Wis. 546, 82 N. W. 536. But the plaintiff's contention that the statute is to be so construed is directly contradicted both in New York and Wisconsin. People v. Booth, 32 N. Y. 397;People v. Railway Co., 57 N. Y. 161;People v. Ingersoll, 58 N. Y. 1, 17 Am. Rep. 178;People v. Brooklyn Ry., 89 N. Y. 75, 93;People v. Lowe, 117 N. Y. 191, 22 N. E. 1016;Swan v. Mutual etc., Life Association, 155 N. Y. 9, 18, 49 N. E. 258;Atty. Gen. v. Albion Academy, 52 Wis. 469, 9 N. W. 391. These decisions fully sustain the view that section 3239 evinces no legislative purpose in conflict with section 2605, St. 1898, commanding that every action shall be prosecuted in the name of the real party in interest, but merely declares that the action for the relief mentioned shall be entertained by the court when brought by either of the kinds of plaintiff described when he is the real party in interest; in other words, when the right to the relief is in him. It would be subversive of all principle to permit a creditor to demand removal of officers for misconduct which in no wise affected his interests, or even to call them to account, or to reclaim assets when the corporation is entirely solvent and the creditors' rights not jeopardized, or when the corporation is competent and ready to enforce such right. So, also, it is anomalous for the state to sue to protect merely private rights which the real owners are entirely competent to protect either with or without suit, or to surrender them if they choose. Such mere sentimental or remote interest as the whole public may have that corporate officers, or other persons, behave well, or that private corporations, or, indeed, individuals, do not squander their own money, is not that sort of right which constitutes the state the “real party in interest” in a suit to relieve a private corporation of recreant officers, or to recall assets to the treasury of a corporation or the pockets of an individual. It is not here denied or affirmed that the Legislature, which is empowered to declare the public policy, might by appropriate legislation assert a public interest in some such situation sufficiently direct to warrant the state to bring suit. The one case in New York relied on by respondent turned upon a statute to which such effect has been given by construction. People v. Ballard, 134 N. Y. 269, 32 N. E. 54, 17 L. R. A. 737. There the Attorney General brought suit for removal of officers of a private corporation, and to set aside transfer of entire assets to a foreign corporation against...