Ulmer v. Maine Real-Estate Co.

• Decision Date: 08 December 1899
• Citation: 93 Me. 324,45 A. 40
• Parties: ULMER v. MAINE REAL-ESTATE CO.
• Court: Maine Supreme Court

45 A. 40

93 Me. 324

ULMER

v. MAINE REAL-ESTATE CO.

Supreme Judicial Court of Maine.

Dec. 8, 1899.

(Official.)

Appeal from superior court, Cumberland county.

Bill by W. Edwin Ulmer against the Maine Real-Estate Company. Decree for defendant, and plaintiff appeals. Bill dismissed.

Argued before HASKELL, WHITE-HOUSE, WISWELL, SAVAGE, and FOGLER, JJ.

W. Edwin Ulmer, for appellant

Geo. Libby, for appellee.

SAVAGE, J. Bill in equity by the complainant, as a stockholder, alleging upon information and belief that the directors of the defendant company, without authority, disregarding the rights of complainant and all other stockholders, and in violation of law, have loaned the funds of the corporation upon mortgages of real estate, whereby the interest of the complainant in said funds, as a stockholder, has become jeopardized, and he is liable to be subjected to great loss; also, that the members of the present board of directors caused the annual meeting for 1898 to be held without due notice to stockholders, and, without knowledge of the stockholders other than themselves, caused themselves to be elected as directors for the year then ensuing; also, that the board so elected "has caused to be issued shares of the capital stock, without any authority therefor, and with intent to use the proceeds thereof otherwise than for the purposes for which the corporation was organized, and that the proceeds of said shares have been so used."

The defendant demurred, and the plaintiff has appealed from the decree sustaining the demurrer and dismissing the bill.

The allegations in the bill are vague, Indefinite, and uncertain. They give the defendant no certain notice of the specific charges which they are called upon to answer. For this reason, if for no other, the bill was properly dismissed. But there are other reasons. Two classes of wrongs are charged in the bill: One, that certain acts of the board of directors already done are ultra vires; second, that the election of the directors for the year 1898 was illegal.

It may be said as to the latter complaint that, if the election was illegal, certainly a bill for an injunction and receiver is not the proper remedy. If, however, the election was legal, the complainant has no ground of complaint.

The other acts of which the complainant complains are said to be ultra vires, unlawful, not within the power of the corporation or the scope of its charter. Such wrongs are against the corporation itself, and, strictly speaking, not against the stockholders. In law, the injury was done to the corporation, not to the stockholders. 1 Mor. Priv. Corp. (2d Ed.) § 237. No stockholder can assume the right to seek redress for wrongs to the corporation until the latter is shown to be unwilling or incapable of seeking the remedy for itself. Hersey v. Veazie, 24 Me. 9. This is the general rule. Shareholders aggrieved must seek their remedy through corporate channels. They must exhaust all remedies within their reach in the corporation itself. They must apply to the officers in charge. Failing with the officers, they must apply to the corporation itself, or they must show why application would be ineffectual in either case. If they fail with both, then the courts are open for redress. 1 Mor. Priv. Corp. (2d Ed.) § 241; 4 Thomp. Corp. § 4499; Memphis City v. Dean, 8 Wall. 73, 19 L. Ed. 326; Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827; Dimpfel v. Railway Co., 110 U. S. 209, 28 L. Ed. 121; Dunphy v. Association, 146 Mass. 495, 16 N. E. 426.

Even when the officers themselves are at fault, and under such circumstances as will excuse a complainant from applying to them, it does not follow necessarily that the stockholders cannot find and...