Tri-City Electric Serv. Co. v. Jarvis

• Decision Date: 02 January 1934
• Docket Number: No. 25387.,25387.
• Parties: TRI-CITY ELECTRIC SERVICE CO. et al. v. JARVIS et al.
• Court: Indiana Supreme Court

206 Ind. 5

185 N.E. 136

TRI-CITY ELECTRIC SERVICE CO. et al.

v.JARVIS et al.

No. 25387.

Supreme Court of Indiana.

March 28, 1933.

Petition for Rehearing Denied Jan. 2, 1934.

Appeal from Lake Circuit Court; Frank B. Pattee, Special Judge.

Suit by Almira Jarvis and others against the Tri-City Electric Service Company and others. From a judgment in favor of the plaintiffs, the defendants appeal.

Affirmed in part, reversed in part, and cause remanded, with instructions.

Transferred to Supreme Court from Appellate Court pursuant to section 1351. Burns' Ann. Ind. St. 1926, Acts 1901, c. 247, § 15.

W. J. Whinery, of Hammond, for appellants.

Crumpacker & Friedrich, of Hammond, for appellees.

TREANOR, Chief Justice.

Appellee Almira Jarvis brought suit in the Lake circuit court as a minority stockholder in the Tri-City Electric Service Company, a corporation, praying for an accounting to said corporation by appellants Leon J. Granger and Emma J. Granger for certain property alleged to belong to the corporation and held by said Grangers; that appellant Emma J. Granger be decreed to be constructive trustee of certain real estate, and that the Grangers be decreed to execute their deed conveying the property to the company and be enjoined from transferring or otherwise disposing of such property; that a receiver be appointed to take charge of and manage the corporation, and that the appellant Leon J. Granger be enjoined from acting in any trust capacity in the management of the corporation.

Appellants' separate and several demurrers were overruled, and the issue was joined by an answer in general denial. Trial was begun on May 18, 1922, before Special Judge Frank B. Pattee, and on June 21, 1924, the court made, filed, and entered its special findings of facts, and stated conclusions of law thereon, to which conclusions appellants excepted and at the same time filed their motion for a new trial, motion in arrest of judgment, and motion for venire de novo, which motions were overruled and final judgment and decree entered. On the same day, June 21, 1924, appellants prayed for a term time appeal which was granted, and on June 26th they filed their appeal bond which was approved by the court. On July 2d, during the same term of court, upon its own motion, the court vacated its fifth conclusion of law and so much of the decree as was based thereon, and restated its fifth conclusion of law and that part of the decree based thereon.

Appellants' assignment of errors contains eighteen assignments which, in appellants' brief, are grouped under five points. They may be summarized as follows: (1) The court erred in overruling appellants' demurrer to the complaint. (2) The court erred in overruling appellants' motion for a new trial. (3) The court erred in overruling appellants' motion for a venire de novo. (4) The court erred in each of its conclusions of law upon the special findings of facts. (5) The court erred in vacating its fifth conclusion of law after judgment had been entered and restating its fifth conclusion of law.

Appellants' demurrer to the complaint was upon the grounds that (1) the amended complaint did not state facts sufficient to constitute a cause of action; and (2) there is a defect of parties, in that it appears by the complaint that M. H. Wolf is a stockholder of the corporation but is not a party plaintiff and has not been made a party defendant.

In support of the first ground of demurrer, appellants urge in their brief that “the general rule of law is, that neither a stockholder nor any number of stockholders, have the right to sue in their own names, or to use the corporate name, for the prosecution of an action at law, or in equity, on account of any right of action which may exist in favor of the corporation” (page 285 of appellants' brief), citing authority in support of that proposition, and also that “the amended complaint in the instant case states no cause of action upon any theory whatever in favor of the Tri-City Electric Service Company, appellant; and, this being a suit brought by appellee, Jarvis, on the theory of a minority stockholder, suing for and on behalf of the corporation, the complaint is insufficient for any purpose or upon any theory whatsoever.” Appellants further contend that the amended complaint wholly fails to state any cause of action in favor of the Tri-City Electric Service Company, as against the appellant, Emma J. Granger.

The amended complaint alleges, in substance, that the appellant corporation was organized in 1913 and was engaged in the electric contracting business; that its capital stock is $10,000, divided into 100 shares of $100 each; that plaintiff is and has been the owner of 30 shares since 1915, and that Leon J. Granger, who is president and managing director, owns approximately 50 shares, and that there is no other stock outstanding except one share held by M. J. Wolf, secretary of the company, which share was issued to M. J. Wolf by Leon J. Granger to enable said Wolf to qualify and act as an officer of the corporation; that the plaintiff brings this action as a minority stockholder on behalf of herself and the defendant corporation and all other stockholders singularly with plaintiff; that ever since its incorporation Leon J. Granger has owned a majority of the stock of the corporation and has conducted all its business affairs, made all contracts, received all moneys, and decided all policies of the corporation, and is in entire control of all its property and assets; that the first stockholders' meeting was held on May 19, 1913, and no subsequent meetings of directors or stockholders were held until April 26, 1920; that the defendant Leon J. Granger has fraudulently and wrongfully misappropriated and converted to his own use and benefit the assets and earnings of the corporation amounting to in excess of $30,000; that prior to the year 1915 plaintiff and defendant, who are brother and sister, and plaintiff's husband, agreed that the corporation should buy a lot and erect a building thereon for the use of the corporation; that title to the lot should be taken in the names of the plaintiff and the defendant Emma J. Granger, wife of Leon J. Granger, jointly as trustees for the corporation, the details of the purchase being left to Leon J. Granger; that, in violation of such agreement and in breach of his duties of trust as stockholder and corporate officer, Leon J. Granger in 1915 procured a deed conveying the property to Emma J. Granger personally and thereafter erected a building on the lot; that the purchase price of the lot was approximately $2,800, and that the building cost approximately $8,000, both of which were paid out of the money and property of the corporation; that the defendant Leon J. Granger paid himself and wife $75 per month out of the corporation as rentals for the property; that the foregoing acts have been carried on by him as part of a general scheme to fraudulently and wrongfully manage the corporation for his own exclusive use and benefit. The complaint further recites other instances of alleged misuse of property and money of the corporation by the defendants in acquiring real estate to be held in the name of Emma J. Granger for the private use and benefit of the Grangers, and alleges that the books and accounts of the corporation have been exclusively in the control of the defendant; that an examination of them will disclose other fraudulent and wrongful transactions carried on by him; that an accounting is necessary to determine the exact amount that the Grangers owe the corporation by reason of the alleged misappropriations; that plaintiff has received not more than $700 in the form of advancements from the defendant, but that no dividends have ever been declared or paid upon her stock; that the corporation's net profits from its organization in 1913 to December 31, 1919, were approximately $28,000; that by reason of the fact that the corporation is exclusively within the control of the defendant Granger, and because of his wrongful schemes and designs, it is futile for plaintiff to make any demands on the corporation to commence this or any action against the defendants; that plaintiff has never acquiesced in any of defendants' acts or purposes, and that plaintiff has no redress to correct the acts complained of through the corporate management and is without any plain, adequate, certain, and speedy remedy at law; that, as a result of said fraudulent and unlawful acts, schemes, and designs of the defendant Leon J. Granger, plaintiff has been and is deprived of the use of her investment in the corporation; that her stock holding is impaired in value, and, if the control of the company remains in Granger, she believes there will be further unlawful and fraudulent acts of misappropriation and diversion which will entirely destroy and render worthless her stock; that, in order to protect her as a minority stockholder and her investment, it is necessary that a receiver be appointed to take charge of the company and its assets and to protect the plaintiff and her investment from substantial loss.

Appellee's supplemental complaint alleges that the appellant Leon J. Granger has withdrawn and taken from the company, $2,800 in money, merchandise, and other items in addition to his salary; that since the commencement of this action he has continued in his refusal to issue dividends upon the stock of the company notwithstanding during said period said company has had a large and prosperous business; that its net profits from operations for a period from the beginning of the company, in 1913, to December 31, 1920, was approximately $52,000; that the net profits and surplus are fully sufficient to justify and require that dividends be issued upon the stock of the company; that Leon J. Granger continues to refuse and decline to permit the issuing of dividends as part of his scheme and design to deprive the plaintiff of the use...