Weber v. Della Mountain Mining Co.

• Decision Date: 29 February 1908
• Citation: 14 Idaho 404,94 P. 441
• Parties: PETER WEBER, Guardian ad Litem of W. H. WATT, an Incompetent Person, Respondent, v. DELLA MOUNTAIN MINING COMPANY, a Corporation, and IRVIN E. ROCKWELL, Appellants
• Court: Idaho Supreme Court

94 P. 441

14 Idaho 404

PETER WEBER, Guardian ad Litem of W. H. WATT, an Incompetent Person, Respondent, v. DELLA MOUNTAIN MINING COMPANY, a Corporation, and IRVIN E. ROCKWELL, Appellants

Supreme Court of Idaho

February 29, 1908

COMPLAINT AGAINST CORPORATION-SUFFICIENCY OF COMPLAINT-LEVYING AND COLLECTING ASSESSMENT BY BOARD OF DIRECTORS-NECESSITY FOR ASSESSMENT-RIGHT OF STOCKHOLDERS TO COMBINE STOCK FOR ELECTION OF OFFICERS-WRONGFUL ACTION OF BOARD OF TRUSTEES-COMPETENCY OF NONEXPERT WITNESS ON QUESTION OF SANITY OF CONTRACTING PARTY-RIGHT OF ADVERSE PARTY TO EXPLAIN AFFIDAVITS INTRODUCED AGAINST HIM.

1. In an action commenced against a corporation and a third party as codefendants, alleging that the latter purchased stock in the defendant corporation from plaintiff at a time when he was of unsound mind and incompetent to transact business, and that the sale was void, and praying an injunction against the mining company restraining it from collecting an assessment levied by its board of directors subsequent to the void transfer of stock, it is essential that the plaintiff should plead and prove some facts from which it would appear that but for the sale and transfer of such stock the assessment would not have been made, and that the purchaser of the stock wrongfully, fraudulently or unlawfully procured control of the company and its board of trustees, or wrongfully or unlawfully secured the election of a new board of trustees and that the assessment would not have been made had it not been for such transfer of stock, in order to state a cause of action against the mining company and to entitle the plaintiff to an injunction against the company restraining the collection of such assessment. A complaint which does not state such facts is obnoxious to a demurrer.

2. It is lawful and legitimate for a stockholder in a corporation to combine his holdings with the holdings of one or more other stockholders for the purpose of the election of directors and officers and controlling the management of the corporation.

3. The necessity for making and levying an assessment on the capital stock of a corporation within itself, and separately and independently of any wrongful or unlawful acts on the part of the board of directors, cannot be questioned by a stockholder.

4. The evidence of a layman or nonexpert witness is equally as competent and admissible as the evidence of an expert witness on the question of the sanity of a person or his incompetency to transact business at any given time or in any given manner.

5. A layman or nonexpert witness may be as able and competent as an expert to make clear mental comparisons between the acts and conduct of a man who was at one time sane, sound and competent, and at another time incompetent or laboring under mental disability or partial or total insanity.

6. In a case where the gist of the action is the sanity or competency of a person to transact business at a given time, it is error to exclude the evidence, opinions and statements of witnesses who were acquainted with the alleged insane person for many years, and who were familiar with his actions and conduct and who saw him at the time of the transaction in question.

7. In the trial of an action where one party introduces an affidavit made by his adversary upon a prior date and occasion, it is error on the part of the court to refuse to allow the party litigant who made the affidavit to explain what he meant by statements contained therein and the circumstances and conditions under which it was made, or any other facts or circumstances which would tend to explain or elucidate the contents of the affidavit or the conditions and circumstances under which it was made.

(Syllabus by the court.)

APPEAL from the District Court of the Fourth Judicial District for the County of Blaine. Hon. Lyttleton Price, Judge.

Action by the plaintiff as guardian ad litem of W. H. Watt, an incompetent person, to obtain a decree declaring a certain sale and transfer of stock void and to procure an injunction against the corporation restraining it from collecting an assessment on such stock until after the return of the stock. Judgment for the plaintiff and defendants appeal. Reversed.

Reversed and remanded with direction. Costs awarded in favor of appellant.

Sullivan & Sullivan, for Appellants.

Plaintiff had no standing in court whatever, under the complaint filed as courts never interfere with the internal management of corporations unless there is fraud, gross negligence or acts ultra vires. (Cook on Stock & Stockh., sec. 643.)

The discretion of the directors or majority of the stockholders, as to acts intra vires, cannot be questioned by the courts, unless fraud is involved. (Cook on Stock & Stockh., secs. 676, 677; 26 Enc. Law, 963; High on Injunctions, sec. 1186.)

Equity will not interfere on mere questions of corporate management or policy. (10 Cyc. 969; High on Injunctions, sec. 1210; Clark & Marshall Corp., secs. 627, 628.)

Courts will not interfere with the business policy of a corporation. (26 Am. & Eng. Enc. 959, n. 5.) Stockholders cannot control directors in the exercise of their judgment. (Clark & Marshall Corp., sec. 694.)

Majority entitled to control against minority. (26 Am. & Eng. Enc. Law, 960; Clark & Marshall Corp., sec. 628; Gamble v. Queen Co. Water Co., 123 N.Y. 91, 25 N.E. 201, 9 L. R. A. 530.)

Stockholders cannot question the necessity of making an assessment. (10 Cyc. 487; Budd v. Multnomah St. Ry. Co., 15 Ore. 413, 15 P. 659; Oglesby v. Attrill, 105 U.S. 605, 26 L.Ed. 1186; Chouteau Ins. Co. v. Floyd, 74 Mo. 286; Cook on Stock & Stockh. & Corp. Law, par. 113.)

The court erred in granting an injunction against the defendant company and restraining it from collecting the assessment, as the board of directors may proceed to collect by assessment the legally incurred debts as prescribed by Title 4, Civil Code. (Sparks v. Lower Payette Ditch Co., 3 Idaho 306, 29 P. 134; Santa Cruz R. R. Co. v. Spreckles, 65 Cal. 193, 3 P. 661, 802; Chandler v. Sheep Rock etc. Min. & Mill Co., 15 Utah 434, 49 P. 535.)

"Stockholders owning a majority of the stock have a right to combine and secure the election of the board of directors." (Cook on Stock & Stockh. and Corp. Law, 3d ed., par. 622; Faulds v. Yates, 57 Ill. 416, 11 Am. Rep. 24; Havemeyer v. Havemeyer, 86 N.Y. 618.)

Mere mental weakness will not authorize a court of equity to set aside an executed contract, if such weakness does not amount to inability to comprehend the contract, and is unaccompanied by evidence of imposition or undue influence. (Pickerell v. Morss, 97 Ill. 220; Lindsey v. Lindsey, 50 Ill. 79, 99 Am. Dec. 489; Willemin v. Dunn, 93 Ill. 516; Ratliff v. Baltzer's Admr., 13 Idaho 152, 89 P. 71; 16 Enc. Law, 624.)

A grantor who has mental capacity sufficient to understand ordinary business transactions at the time of the factum, and understands the motive and effect of the deed which he makes, knows what property he is conveying and to whom it is being conveyed, is competent to make such deed. (Kelly v. Perrault, 5 Idaho 221, 48 P. 45; Curtis v. Kirkpatrick, 9 Idaho 629, 75 P. 760.)

"The mental capacity to be considered is that which exists at the time of the execution of the deed." (Francis v. Wilkinson, 147 Ill. 370, 35 N.E. 150; Heirs of Clark v. Ellis, 9 Ore. 128.)

The court erred in not permitting Rockwell to explain certain statements in his affidavit. Such admissions are open to rebuttal or explanation, or they may be controlled by higher evidence. This is true even though they are made under oath. (1 Jones' Law of Ev., sec. 298; 1 Enc. of Ev., 476.)

The court erred in refusing to allow witnesses who were present at the execution of contracts to testify as to Watt's competency. (Heirs of Clark v. Ellis, 9 Ore. 128; In re Christensen's Estate, 17 Utah 42, 70 Am. St. Rep. 794, 53 P. 1003, 41 L. R. A. 504; People v. Wreden, 59 Cal. 394.)

"Upon the question whether a disease had reached such a stage at a given time that the subject of it was incapable of making a will or contract, or was irresponsible for his acts, the opinion of his neighbors, men of good, common sense, is of more value than that of medical experts." (Rutherford v. Morris, 77 Ill. 397.)

N. M. Ruick, and McFadden & Brodhead, for Respondent, cite no authorities on points decided.

AILSHIE, C. J. Stewart, J., concurs. Sullivan, J., sat at the hearing, but took no part in the decision.

OPINION

AILSHIE, C. J.

This action was commenced by the plaintiff, Peter Weber, as guardian ad litem of W. H. Watt, an incompetent against the Della Mountain Mining Company, a corporation, and Irvin E. Rockwell as defendants. The complaint alleged plaintiff's appointment as guardian ad litem and that prior to the commencement of the action the probate court of Blaine county had duly and regularly adjudged Watt incapable of taking care of himself and managing his estate, and the appointment of one Vivian F. Watt as guardian of his person and estate. It is then alleged that on or about the 9th day of November, 1903, Watt was the owner of the controlling interest in the Della Mountain Mining Company, a corporation, owning and controlling 58,990 shares of the capital stock of that corporation. That "on said date he entered into an agreement in writing with Rockwell whereby the said Watt agreed to sell and deliver to the said Rockwell all of said shares of mining stock, together with 1,000 shares belonging to one Samuel Allen, in consideration of the payment to him, said Watt, of the sum of $ 54,000 therefor." That it was stipulated by the terms of said agreement that upon the payment of $ 9,000 at the date of the agreement, 10,000 shares of stock should be transferred and delivered to...