Town of Hinckley v. Kettle River Railroad Company

• Decision Date: 28 May 1900
• Docket Number: 12,096 - (50)
• Citation: 82 N.W. 1088,80 Minn. 32
• Parties: TOWN OF HINCKLEY v. KETTLE RIVER RAILROAD COMPANY and Others
• Court: Minnesota Supreme Court

82 N.W. 1088

80 Minn. 32

TOWN OF HINCKLEY v. KETTLE RIVER RAILROAD COMPANY and Others

Nos. 12,096 - (50)

Supreme Court of Minnesota

May 28, 1900

In an action pending in the district court for Pine county between the town of Hinckley, plaintiff, and Kettle River Railroad Company, defendant, plaintiff filed a supplemental complaint seeking to enforce the liability of stockholders in defendant company, and they were made parties defendant, and appeared and answered. The case was tried before Crosby, J., who found in favor of plaintiff, and pursuant to the findings judgment was entered adjudging that there was due from defendant company to plaintiff the sum of $15,052.25 with interest, and that plaintiff recover of defendant stockholders in amounts specified. From the judgment, defendant stockholders appealed. Affirmed.

SYLLABUS

Service of Process on Domestic Corporations.

G.S 1894, § 5203, provides for substituted service of process in civil actions upon domestic corporations whose officers may be within the state, but not known or accessible to service.

Default Judgment against Corporation -- Attack by Stockholders.

A judgment against a corporation, secured by default, may be attacked by the stockholders in a supplemental suit to recover under G.S. 1894, c. 76, upon their stockholdings, for fraud or collusion.

Fraud -- Finding Sustained by Evidence.

Held upon the evidence in this case, that the finding of the trial court that there was no fraud in securing substituted service on the corporation is supported by evidence.

Res Judicata.

That the decision of this court in Town of Hinckley v. Kettle River R. Co., 70 Minn. 105, is res judicata, and conclusive upon the stockholders in this case as to the amount of the judgment, and their consequent liability for such amount.

M. D. Grover and Geo. B. Young, for appellants.

Each judgment was void for want of jurisdiction, there having been no legal service of the summons, and the defendant not having appeared.

Laws 1874, c. 27, § 1, required every domestic railroad company to keep an office in the state and an officer there upon whom service of all legal process could be made. G.S. 1894, § 2759. Laws 1875, c. 43, § 1, provided how action could be begun whenever any domestic corporation did not have an officer in the state upon whom legal service of process could be made. G.S. 1878, c. 66, § 63. In 1885 this section was amended "so as to read as follows": "Sec. 63. Service on domestic corporations without resident officers: Whenever any corporation," etc. G.S. 1894, § 5203, omits the words: "Service on domestic corporations without resident officers," and inserts them as black letter catch words preceding the section. By Laws 1878, c. 14, a proviso regulating service on a corporation whose officers cannot be found within the state was added to G.S. 1866, c. 46, § 48, subd. 1. G.S. 1894, § 5199. Statutes providing for substituted service, being in derogation of common right, and contrary to the general policy of the law, are to be strictly construed. Bardwell v. Collins, 44 Minn. 97, 103; Corson v. Shoemaker, 55 Minn. 386. Each judgment is void as against these defendants, because the proceedings, in their inception and at all subsequent stages, were had in fraud of these defendants, and were a fraud upon the court and the administration of justice. It is open to defendant stockholders to attack in this action the judgments in the former action and in this action, for fraud or for want of jurisdiction, or both. 1 Cook, Stockh. § 224; 3 Thompson, Corp. § 3392; Holland v. Duluth I.M. & D. Co., 65 Minn. 324, 331; Ball v. Reese, 58 Kan. 614; Choat v. Boyd, 59 Kan. 682; Prescott v. Farmers (Kan. App.) 53 P. 769, 770; Barron v. Paine, 83 Me. 312.

The application of the Kettle River company in the former suit for a vacation of the judgment and the proceedings thereon are not a bar to the attack made in this suit. Neither the parties nor the grounds of attack are the same. The judgment is here attacked for fraud. A cause of action to set aside a judgment for fraud is a different cause of action from one to set it aside for want of jurisdiction; and a judgment against plaintiff in an action based on one of those grounds will not bar a subsequent action on the other. Dixon v. Merritt, 21 Minn. 196. While the former application attacked the judgment for want of jurisdiction, it was on a wholly different ground from that on which this attack is made. See Nesbit v. Riverside I. District, 144 U.S. 610. The motion made by the company had no retroactive effect, and did not validate the judgment. Godfrey v. Valentine, 39 Minn. 336. And even if the decision of the motion in the district court and in this court on appeal had the effect of validating the judgment as against the company, it did not validate it as against those shareholders, so as to preclude them from attacking it for fraud, or because the service was not authorized by the act of 1885. And though the courts are not wholly agreed, the better opinion is that, as a general rule, the adverse decision of a motion, whether in the original or the appellate court, does not bar a subsequent action for the same relief Heidel v. Benedict, 61 Minn. 170. The reason is that as motions are made, resisted, and decided on affidavits and in a summary way, and neither party can compel the making of an affidavit by any one, the determination made, whether of fact or law, is not entitled to the weight attached to judgments after trial of formal issues, and by the testimony (not affidavits) of witnesses. And hence where, as under the New York practice in some cases, the issues made on a motion are fully tried by the court or a referee, on oral testimony, the order thereupon made may have the conclusive effect of a judgment. This was the case in Dwight v. St. John, 25 N.Y. 203, where there was a reference, and the hearing was upon full proofs. Riggs v. Pursell, 74 N.Y. 370; Blank v. Blank, 107 N.Y. 91; Choat v. Boyd, supra.

John F. Fitzpatrick and Robert C. Saunders, for respondent.

OPINION

LOVELY, J.

Plaintiff obtained a default judgment against the Kettle River Railroad Company. After five months an effort was made to open this judgment, upon affidavits attempting to show that the substituted service made upon the secretary of state under G.S. 1894, § 5203, was in fraud of defendant's rights, for the reason that the party making the same had sufficient knowledge of facts to have made an actual, rather than a substituted, service. It was also contended that such service was not valid, as a matter of law; and, upon the ground of mistake, inadvertence, and excusable neglect, the court's discretion was likewise invoked to open the judgment upon a claim that a meritorious defense to plaintiff's cause of action existed.

The attack upon the substituted service was made upon a discussion of the law in support of the claims of fraud, upon affidavits, with an answer, properly tendered, showing facts which defendant claimed to be a sufficient defense. The district court denied the motion to reopen the judgment, and upon appeal to this court the order of the trial court was affirmed (Town of Hinckley v. Kettle River R. Co., 70 Minn. 105, 72 N.W. 835); the court holding, in brief, that substituted service had been properly made, under the statute, on the secretary of state; that it was fully within the power of the legislature to prescribe such a form of substituted service, which in the case at bar was due process of law and valid; also, that the affidavits did not show an abuse of discretion by the trial court in refusing to set aside and open the judgment. A careful reading of the opinion of Justice Mitchell in that case may be necessary to understand the full history of the litigation, and the legal conclusions which we are required to adopt in this case.

In the meantime the receiver appointed by the court in a proper proceeding in that behalf had collected some $11,000, in round numbers, which, as appears, constituted all the property of the railroad company obtainable; and this action is continued upon the original controversy by a supplemental complaint and proceeding, wherein the stockholders of the Kettle River Railroad Company are made parties, and it is sought, under the statute (G.S. 1894, c. 76), to hold them liable for the deficiency due upon the balance of the unpaid judgment against the company. The new defendant stockholders were duly served, appeared, and set forth by way of defense that the original judgment was obtained by fraud, in making substituted service upon the secretary of state, when officers of the corporation were known to the plaintiff, and might have been personally served; that the Kettle River Railroad Company had been paralleled by another and better road to and beyond the point of its termination, and its business destroyed; also, that it had been transferred to another company, which found it useless and unprofitable to operate it, and...