Young v. Blandin

• Decision Date: 30 April 1943
• Docket Number: No. 33335.,33335.
• Citation: 215 Minn. 111,9 N.W.2d 313
• Parties: YOUNG v. BLANDIN et al.
• Court: Minnesota Supreme Court

9 N.W.2d 313

215 Minn. 111

YOUNG v. BLANDIN et al.

No. 33335.

Supreme Court of Minnesota.

April 30, 1943.

Appeal from District Court, Ramsey County; Gustavus Loevinger, Judge.

Action by Sarah A. Young against Charles K. Blandin and others for an accounting. The trial court made findings of fact and conclusions of law for plaintiff and ordered judgment in her favor. From an order denying defendants' motion for amended findings and conclusions or for a new trial, defendants appeal.

Affirmed.

Oppenheimer, Hodgson, Brown, Donnelly & Baer, of St. Paul, for appellants.

Patrick J. Ryan, of St. Paul, for respondent.

HENRY M. GALLAGHER, Chief Justice.

This suit is in the nature of an accounting. A former trial between the same parties involved many of the same facts. See Young v. St. Paul Publishers, Inc., 210 Minn. 346, 298 N.W. 251, where we held that the correspondence upon which plaintiff relied to sustain an action for breach of contract was insufficient for that purpose. The present cause is based upon the theory that defendant Blandin, a majority stockholder in St. Paul Publishers, Inc. and liquidator of that corporation, made unauthorized investments with part of the proceeds of the sale of the corporate assets, to the loss and damage of plaintiff, a minority stockholder. The trial court made findings of fact and conclusions of law for plaintiff and ordered judgment in her favor for $62,203.07. Defendants moved for amended findings and conclusions or for a new trial and appeal from an order denying that motion.

The events leading up to the sale by defendant St. Paul Publishers, Inc., of the newspapers known as the St. Paul Dispatch and the St. Paul Pioneer Press to Ridder Bros. and Leo Owens in October, 1927, appear in 210 Minn. 346, 298 N.W. 251, and need not be here repeated. At the time of the sale there were outstanding 30,000 shares of corporate stock, of which Charles K. Blandin and the Blandin Development Company owned 28,600 and plaintiff, Sarah A. Young, 900. The remaining 500 shares were owned by various parties and later acquired by Blandin. After making certain adjustments not here important, the net worth of the company upon completion of the sale was $5,373,221.63, of which $500,000 represented preferred stock in the purchasing corporation and the balance, cash or the equivalent. This sum was subject to the payment of federal income taxes for 1927 assessed by the federal government in 1928 in the amount of $535,000 and settled in 1932 for $151,884.46, and to certain contingent liability of St. Paul Publishers, Inc., as guarantor of payment of bonds issued by Itasca Paper Company, whose stock was owned and controlled by Blandin and the Blandin Development Company, in the approximate amount of $1,500,000. Some of the bonds were retired during each of the years following the sale until 1939, when St. Paul Publishers, Inc., was released in full without any liability having accrued to it.

After the sale Blandin took possession of all the assets of the corporation for the purpose of liquidation. The plan was for him to pay the obligations of the company and distribute the remainder of the assets to the stockholders, less the reasonable and necessary expenses of administration. The corporate structure was left intact for that purpose. Then began the course of activities here involved. The trial court found:

"During the entire time from October 1, 1927 to September 27, 1939, Blandin, as liquidator of the Company, was constantly and actively engaged in buying and selling bonds and stocks with the cash assets of the Company available from time to time for the purpose of making a profit on the rise in the market value of any bond or stock or to minimize or recoup a loss from a fall in the market value of any bond or stock. Many of the bonds purchased were bought at prices substantially below face value. Subsequent to January 1, 1928 Blandin entered upon a policy of investing more and more of the liquidating funds in his hands in corporate stocks. Such investments were not authorized by the articles of incorporation, nor by Miss Young, and were beyond his powers and in violation of his duties as liquidator. All such investments were non-interest bearing and speculative."

The court detailed in its findings the kinds and amounts of bonds, stocks, and other securities held by Blandin at each of various periods between October 1, 1927, and September 27, 1939, and found that during the time Blandin was in charge of the affairs of the company as liquidator, "he increased the aggregate amount of its investments, including accrued interest on bonds, but excluding cash," in the total sum of $1,529, 455.06 and that "there were decreases in the aggregate amount of its investments, including accrued interest, but excluding cash," in the total sum of $3,934,477.53. The net result reflected by the investments was that the decreases exceeded the increases by the sum of $2,405,022.47.

Plaintiff claims that Blandin's investment of the corporate funds was not authorized under the articles of incorporation; that as liquidator he owed a fiduciary duty to plaintiff to distribute the assets of the corporation with reasonable dispatch or to keep them safely until such time as final distribution could properly be made; and that she is entitled to her proportionate share of the net liquidating fund as of October, 1927.

Defendant Blandin contends that he was not able to make final distribution until after the federal income tax matter had been settled and until after the corporation's contingent liability as guarantor on the bonds of the Itasca Paper Company had been fully released; that his investment of the corporate funds was authorized and to the best interests of the stockholders; that he exercised due care and caution in choosing and diversifying his investments; that plaintiff was given notice of annual stockholders meetings, and, although she did not attend any of the meetings, she knew or should have known of the investments; that, having accepted dividends representing profits from such investments, she cannot now be heard to say that she did not consent thereto; and that she is barred from asserting this action because of laches.

The trial judge found that Blandin as liquidator made unauthorized investments with the funds of the corporation during the course of liquidation to plaintiff's damage in the sum of $62,203.07 and that plaintiff was not guilty of laches. He ordered judgment in her favor for the amount of her damage. The only questions presented on the appeal are (1) Were the investments in question authorized; (2) if unauthorized, is plaintiff barred by laches or estoppel from asserting her claim; and (3) if not, what amount is she entitled to recover? The issue with reference to the legality of the investments is largely one of law. The other issues involve both law and fact.

The articles of incorporation of St. Paul Publishers, Inc., provide: "The general nature of its business shall be the printing and publishing of a newspaper or newspapers at the City of St. Paul, Minnesota, and at such other place or places as the corporation may deem advisable, and the purchasing, owning and controlling of such rights, franchises and property as may be considered useful and convenient in the business of printing and publication of newspapers, and to this end shall have the right to own and acquire stock in other corporations, or shares of beneficial interest in associations, trusts or joint stock companies. As to any shares so acquired or owned and as to which voting privileges attach, the voting of such shares shall, unless otherwise directed by the Board of Directors of this corporation, be exercised by the president of the corporation."

The quoted article limits the business of the corporation to "the printing and publishing of a newspaper or newspapers" and to "the purchasing, owning and controlling of such rights, franchises and property as may be considered useful and convenient in the business of printing and publication of newspapers." The right to own and acquire stock in other corporations or shares of beneficial interest in associations, trusts, or joint stock companies is restricted to the accomplishment of those purposes.

1. A corporation has only such powers as are expressly granted in its charter or by statute and such implied powers as are necessary and proper for the purpose of carrying out its express powers. 13 Am.Jur., Corporations, p. 770, § 739; 2 Dunnell, Dig. & Supp. § 1998. This general rule as applied to the power of a corporation to invest in securities is embodied in the Minnesota business corporation act, Minn.St.1941, § 301.10, Mason St.1940 Supp. § 7492-9, which permits the acquisition of "shares, bonds, securities, and other evidences of indebtedness of any domestic or foreign corporation when reasonably necessary or incidental to accomplish the purposes stated in its articles." Clearly, the charter of St. Paul Publishers, Inc. does not authorize or permit it to engage in the business of "buying and selling bonds and stocks with the cash assets of the Company available from time to time for the purpose of making a profit on the rise in the market value of any bond or stock or to minimize or to recoup a loss from a fall in the market value of any bond or stock" as found by the trial court, nor may such authority be implied as "reasonably necessary or incidental" to the accomplishment of its named purposes, within the corporation act provision above quoted.

Mr. Blandin, as president, liquidator, and sole director and officer in charge of the corporation's affairs, stood in the position of a fiduciary toward the corporation and the other stockholders. Green v. National A. & A. Co., 137 Minn. 65, 162 N.W. 1056, L.R.A.1917E, 784; Janney v. Minneapolis Industrial Exposition, 79 Minn. 488, 82 N.W. 984, 50 L.R.A. 273; Taylor v. Mitchell, 80 Minn. 492, 493, 83 N.W. 418; 13...