Tri-City Electric Service Comp. v. Jarvis

• Decision Date: 28 March 1933
• Docket Number: 25,387
• Citation: 206 Ind. 5
• Parties: Tri-City Electric Service Company Et Al. v. Jarvis Et Al.
• Court: Indiana Supreme Court

206 Ind. 5

Tri-City Electric Service Company Et Al. v. Jarvis Et Al.

No. 25,387

Supreme Court of Indiana

March 28, 1933

[Rehearing denied January 2, 1934.]

1. CORPORATIONS---Stockholders---Action by Minority Stockholder for Accounting---Complaint.---Allegations of complaint by minority stockholder for accounting as to corporate property alleged misappropriated by majority stockholder and managing official, held sufficient. p. 12.

2. CORPORATIONS---Stockholders---Action by Minority Stockholder for Accounting---Parties.---A corporate stockholder holding only one share as a qualifying member is not a necessary party to action by a minority stockholder for an accounting as to corporate property. p. 13.

3. CORPORATIONS---Stockholders---Majority Mismanagement---Action for Receiver---Parties.---A corporate stockholder holding only one share as a qualifying member is a necessary party to an action for the appointment of a receiver on ground of mismanagement and misappropriation of assets by majority stockholders. p. 13.

4. TRUSTS---Constructive Trust---In Real Estate.---Where majority stockholder in control of corporation purchased real estate for use of the corporation with corporate funds and took title thereto in an individual, title holder was held a constructive trustee for the corporation. p. 18.

5. TRUSTS---Constructive Trust---In Real Estate---Effect of Statutes Prohibiting Parol Trusts.---Although an express trust can not be created in lands by parol, the law will raise a constructive trust to prevent fraud and to do justice when the facts justify it. p. 18.

6. TRUSTS---Resulting Trust---Subsequent to Taking Title---Statute.---A resulting trust, under 13449, Burns 1926, 14741, Baldwin's 1934, must arise when the trustee takes title, and cannot be created by subsequent agreement or by a subsequent use of the funds of the cestui que trust. p 18.

7. TRUSTS---Constructive Trust---Arising Subsequent to Trustee's Title.---Equity will create a constructive trust on the basis of use of funds after the trustee has acquired title to the property. p. 18.

8. TRUSTS---Constructive Trust---Accounting of Trustee---Property Included.---The trustee of real property impressed with a constructive trust in favor of a corporation is liable to account for assets of the corporation diverted, or money received from third parties on the assumption the trustee was the owner. p. 19.

9. CORPORATIONS---Officers---Judicial Supervision---Power to Remove.---A court will not remove corporate officers of a solvent corporation. p. 20.

10. CORPORATIONS---Officers---Judicial Supervision---Power to Suspend Activities.---Courts have power to appoint a receiver to temporarily suspend the activities of corporate officers when such action is required to protect the corporation and minority stockholders from conduct which threatens ruinous consequences. p. 20.

11. CORPORATIONS---Dissolution---Of Solvent Corporation---Appointment of Receiver.---In a suit by a minority stockholder for an accounting where there were but two stockholders, a finding that the majority stockholder was the only one capable of conducting the corporate business and that he was fraudulently diverting corporate assets to his own use, held to justify appointment of a receiver to effect a dissolution of the corporation through sale of its assets and distribution of the proceeds, provided the stockholders could not settle their own difficulties within a reasonable time. p. 21.

12. JUDGMENT---Amendment of Correction---Authority of Court---During Term.---All courts of record have the inherent power to modify or to vacate their judgments or orders during the term at which they are rendered, and this power is not qualified by statutory procedure whereby parties litigant may procure a judgment to be set aside. p. 22.

13. TRIAL---Conclusions of Law---Power to Vacate.---A trial court, having vacated a part of the judgment, has full power to set aside the supporting conclusions of law. p. 22.

14. TRIAL---Special Findings and Conclusions of Law---Power to Amend.---In all cases trial judge may amend his special findings and conclusions of law at any time before final judgment, and during the period within which a bill of exceptions containing the evidence may be filed. p. 23.

15. JUDGMENT---Amendment or Correction---To Conform to Substituted Conclusion of Law.---Trial court held action within its power when it vacated a part of a judgment during the term at which it was rendered, set aside the supporting conclusions of law, substituted new conclusions of law therefor, and modified the judgment to conform to the new conclusions of law. p. 24.

16. APPEAL---Review---Harmless Error---Amendment of Special Findings.---Error, if any, in amending special findings held harmless where the amendment did not affect the conclusions of law or judgment based thereon. p 24.

17. TRIAL---Special Findings and Conclusions of Law---Amendment---Withdrawal of Original Findings Not Essential.---Withdrawal of original findings and conclusions of law is not required as a condition precedent to the court's power to amend the original findings. p. 24.

Action by Almira Jarvis and another against Tri-City Electric Service Company and others. From a judgment for plaintiffs, defendants appealed. Transferred from Appellate Court under 1351, Burns 1926. Affirmed in part; reversed in part.

William J. Whinery, Otto J. Bruce, J. B. Walters, M. Clyde Brown and Bertram C. Jenkines, for appellants. Frederick C. Crumpacker, Edwin H. Friedrick, J. E. Darlington, Bernard A. Petrie, and Tinkham & Galvin, for appellees.

TREANOR, C. J. ---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.

Appellant's 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 finding 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 2nd, 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 18 assignments which, in appellants' brief, are grouped under 5 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 5th conclusion of law after judgment had been entered and restating its 5th 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 cor- poration 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" (p. 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 $10,000.00 divided into 100 shares of $100.00 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...