Williams v. Erie Mountain Consol. Min. Co.

• Decision Date: 19 October 1907
• Citation: 91 P. 1091,47 Wash. 360
• Parties: WILLIAMS et al. v. ERIE MOUNTAIN CONSOL. MINING CO. et al.
• Court: Washington Supreme Court

91 P. 1091

47 Wash. 360

WILLIAMS et al. v. ERIE MOUNTAIN CONSOL. MINING CO. et al.

Supreme Court of Washington

October 19, 1907

Appeal from Superior Court, Spokane County; Henry L. Kennan, Judge.

Action by S. M. Williams and others against the Erie Mountain Consolidated Mining Company, George Ilse, and others. From the judgment, defendant Ilse appeals. Affirmed.

Peacock & Ludden, for appellant.

Willis H. Merriam and Swanson & Ripley, for respondents.

DUNBAR J.

This action was brought by the plaintiffs, alleging: That they at one time were stockholders in the Erie Mountain Consolidated Mining Company; that afterwards they had their stock transferred into the Erie Consolidated Gold Mining Company in consideration of a certain agreement between the two companies by which the property of the first company was to be transfered to the second company; that the complete transfer was not consummated by reason of a fraudulent conspiracy between the officers of said company, to wit, G S. Allison, Rufus Merriam, Willis Merriam, and the defendant George Ilse, to cheat and defraud the second company, the Erie Consolidated Gold Mining Company, in pursuance of which fraudulent conspiracy the property of the corporation was deeded by the first company, the Erie Mountain Consolidated Mining Company, to the defendant Ilse. And other allegations were made in regard to peculations of the defendants. The complaint prays for an appointment of a receiver, the judgment declaring the deed to the property null and void, and that the defendant Ilse be compelled to reconvey to the second company, and for an accounting by Rufus Merriam and Willis Merriam. A demurrer was interposed to this complaint. The important proposition raised in the demurrer, and the only one which merits discussion here, is that the plaintiffs have no legal capacity to sue. The demurrer was overruled by the court, the defendants Merriam and Allison interposed a cross-complaint, and judgment was obtained against Ilse, to the effect that upon the return of the money that he advanced for the benefit of the property he should redeed the same to the Erie Consolidated Gold Mining Company. The cross-complaint, in substance, alleged that the property was deeded to Ilse with the intention that it should be held in trust for the benefit of the corporation for certain reasons alleged in the complaint which it is not necessary to set forth here, and that it was made without other consideration, and because the companies had confidence in him as trustee of the Erie Consolidated Gold Mining Company. The prayer in that complaint is that said Ilse be required to make a deed of transfer of said properties back to the defendant companies.

It is contended by learned counsel for the appellant that the demurrer of the defendant Ilse to the complaint should have been sustained for the reason that there was no allegation showing the matter had been presented to the corporation for it to act upon, and that there was no demand upon the corporation or its officers to bring suit. It may be admitted that as a general rule, before a stockholder can be permitted to sue or defend on behalf of a corporation, he must show that he has exhausted all means within his reach to obtain within the corporation itself the redress of his grievances, or action in conformity to his wishes, and that the managing body of the corporation has refused to sue or defend, as the case may be. This is the rule announced in 26 Am. & Eng. Enc. of Law (2d Ed.) p. 976 (F), and notes. Ninneman v. Fox, 86 P. 213, a case decided by this court, is also cited by appellant in support of his contention. In that case the general rule was...