Strong v. McCogg

• Citation: 13 N.W. 895,55 Wis. 624
• Parties: STRONG v. MCCOGG, IMPLEADED, ETC.
• Decision Date: 31 October 1882
• Court: United States State Supreme Court of Wisconsin

55 Wis. 624

13 N.W. 895

STRONG

v.MCCOGG, IMPLEADED, ETC.

Supreme Court of Wisconsin.

Filed October 31, 1882.

Appeal from circuit court, La Fayette county.Moses M. Strong and S. U. Pinney, for respondent, Moses M. Strong.

Orton & Osborn, for apppellant, E. P. McCogg, impleaded, etc.

This is an action by the plaintiff as one of the stockholders of the Oakland Mining Company against that company and over 20 of its alleged stockholders, including the appellant and James H. Earnest, for the purpose of determining the names of the stockholders, the number of shares owned by each upon the production of the certificates, and for judgment that the corporation had forfeited its corporate rights, privileges, and franchises, and that the same be excluded from such corporate rights, privileges, and franchises, and that the corporation be dissolved; that a receiver be appointed, under whose direction the affairs of the corporation should be wound up, and its property, subject to the rights of lessees and their assigns, be sold and converted into money; that the proceeds, after the payment of costs, expenses, and disbursements of the action and the receiver, be distributed as provided in section 3245, Rev. St. The complaint, among other things, alleged that the capital stock of the corporation was fixed at $3,000,000, and divided into 30,000 shares of $100 each, and that the plaintiff owned 12,480 shares, and the defendant James H. Earnest 4,340 shares, and the remainder of the stock was held by the other defendants. The appellant, among several others, was served by publication as non-residents of the state, and persons whose residence was unknown. On default being made the cause was referred to Joseph H. Clary, December 10, 1879, who on the same day made his report to the court in writing, among other things, that the only persons who produced before him certificates of stock, or any other evidence that any of the capital stock was held and owned by such person, were the plaintiff and the defendant James H. Earnest, and that the plaintiff owned and held 12,480 shares, and James H. Earnest 4,340 shares. December 16, 1879, the court confirmed the report, and among other things adjudged that the corporation, to-wit, the Oakland Mining Company, had, in pursuance of section 1763, Rev. St., surrendered the rights, privileges, and franchises, granted or acquired under any law, and that the same be dissolved; that said corporation had forfeited all its corporate rights, privileges, and franchises, and the same was thereby excluded from such corporate rights, privileges, and franchises, and dissolved, and that the plaintiff recover of the corporation $149.55 for costs and disbursements; that the affairs of the corporation be wound up by and under the direction of the receiver thereby appointed for that purpose; that all the property, real and personal, of said corporation be sold and converted into money; that out of the moneys arising from such sale the receiver was to deduct his fees and expenses, and then pay the plaintiff his costs and disbursements, and then pay to the county clerk such sum as may be required to redeem the lands of the corporation from the sales thereof for taxes, and that after making such payment he divide the surplus moneys, if any, into 16,820 equal parts, and thereupon pay over to the plaintiff, Moses M. Strong, 12,480 of such equal parts so divided, and to the defendant James H. Earnest 4,340 of such equal parts so divided, and to make his report of all his transactions as such receiver, and file it with the clerk of the court; that each and every one of the parties to the action who may be in possession of any of the lands so sold, should deliver such possession to the grantees named in the receiver's deed thereof, subject to the paramount rights of said Strong and Earnest, as thereby adjudged; that said corporation, and its successors and assigns, and the other defendants, and their heirs and assigns respectively, be forever barred and foreclosed of all right, title, and interest in said lands, and of all equity of redemption therein. Thereupon the receiver advertised and sold the personal property of the corporation to Moses M. Strong for $84.10, and the real estate to said Strong for $4,006.55, making in all $4,090.65: that out of said sum he retained $44.60 for his fees and expenses as receiver; paid to the plaintiff $143.06 for his costs and his disbursements, and $1,293.02 to the county clerk to redeem the lands from taxes, and $86.97 to the town-treasurer to pay the taxes, making $1,567.65, and leaving a balance in his hands of $2,523, which he divided between said Strong and Earnest as follows: to Moses M. Strong $1,872, and to James H. Earnest $651; all of which was reported by said receiver to the court, and which report was by the court confirmed March 23, 1880. From the judgment so entered December 16, 1879, the defendant E. P. McCogg brings this appeal to this court.

CASSODAY, J.

The question is not whether a court of equity has power to control and regulate the management of corporations, or protect or enforce the rights of stockholders, but whether a stockholder may, in his own name and without first obtaining leave of the court, maintain a bill in equity to dissolve and terminate a corporation, and convert its property into money and divide the same among a portion of its stockholders on the ground of nonuser or misuser? It would seem that, independent of the statute, the general equity powers of the court do not extend to such a question. In the absence of a statute conferring jurisdiction upon courts of chancery, the question whether or not a corporation has violated its charter or forfeited its franchise is a question for the sole determination of a court of law. Society v. Morris Canal Co. 1 N. J. Eq. 157;Atty. Gen. v. Stevens, Id. 369; President, Managers, etc., v. Trenton City Bridge Co. 13 N. J. Ch. 57; State v. Merchants' Ins. & T. Co. 8 Humph. 235;Hodges v. N. E. Screw Co. 3 R. I. 9;Bayless v. Onre, 1 Freeman, (Miss.) 161; Com. v. Union Ins. Co. 5 Mass. 232;Folger v. Columbian Ins. Co. 99 Mass. 274. In the State v. Merchants' Ins. & T. Co. supra, the court says: “By the common law the forfeiture of a charter can be enforced in a court of law only, and the proceeding to repeal it is by a scire facias, or an information in the nature of a writ of quo warranto. A scire facias is the proper remedy where there is a legal, existing body capable of acting, but which had been guilty of an abuse of the power intrusted to it. A quo warranto, where there is a body corporate de facto, which takes upon itself to act as a body corporate, but from some defect in its constitution it cannot legally exercise the power it affects to use. But a court of chancery, unless especially empowered by statute, cannot decree a forfeiture, though it may hold trustees of a corporation accountable for an abuse of trust.” Page 252.

In the Com. v. Union Ins. Co. supra, Parsons, C. J., said: “But an information for the purpose of dissolving the corporation, or of seizing its franchises, cannot be prosecuted but by the authority of the commonwealth, to be exercised by the legislature, or by the attorney or solicitor general, acting under its direction, or ex officio in its behalf. For the commonwealth may waive any condition, expressed or implied, on which the corporation was created, and we cannot give judgment for the seizure, by the commonwealth, of the franchises of any corporation, unless the commonwealth be a party in interest to the suit, and those assenting to the judgment.”

In Folger v. Columbia Ins. Co. supra, Mr. Justice Gray took occasion to say: “But general jurisdiction of writs against corporations no more implies a power to destroy a corporation at the suit of an individual, than jurisdiction of private suits against individuals authorizes the court to entertain a prosecution for crime, to pass sentence of death, and to issue a warrant for execution. The only modes of dissolving a corporation known to the common law, were by the death of all its members; by act of the legislature; by a surrender of the charter, accepted by the government; or by forfeiture of the franchise, which could only take effect upon a judgment of a competent tribunal on a proceeding in behalf of the state; and neither a court of law nor a court of equity had jurisdiction to decree a forfeiture of the charter or dissolution of the corporation at the suit of an individual. Such, in effect, is conceded to be the rule at common law by several of the New York courts, notwithstanding, as said by the court in Bayles v. Orne, supra, in that state such “power is conferred by express statute.” Slee v. Bloom, 5 Johns. Ch. 366;Verplank v. Mercantile Ins. Co. Edw. Ch. 84; Doyle v. Peerless P. Co. 44 Barb. 239;Gilman v. Green Point Sugar Co. 61 Barb. 9. It is true, the decision by Chancellor Kent in Slee v. Bloom, supra, was reversed by the court of errors in 19 Johns. 456. That last decision seems to be based upon the theory, to use the language of Chief Justice Spencer, that “incorporations under the statute differ from corporations, to whom some exclusive or peculiar privileges are granted.” He says: “There is nothing of an exclusive nature in the statute, (authorizing the association of individuals for manufacturing purposes,) but the benefits from associating and becoming incorporated, for the purposes held out in the act, are offered to all who will conform to its requisitions. There are no franchises or privileges which are not common to the whole community.” Page 473. This is the view taken in Penniman v. Briggs, 1 Hopk. 303-4; S. C. 8 Cow. 387. The suit of Slee v. Bloom, 19 Johns. 456, was by a creditor to charge a stockholder, and went upon the theory that the corporation had been ipso facto dissolved.

The court in Bradt v. Benedict, 17 N. Y. 99, said: “Whether the court did not, by that decision, (19...