Zander v. Schackel, 24116.
| Citation | 201 N.W. 308,161 Minn. 116 |
| Decision Date | 05 December 1924 |
| Docket Number | No. 24116.,24116. |
| Parties | ZANDER v. SCHACKEL. |
| Court | Supreme Court of Minnesota (US) |
Appeal from District Court, Douglas County; John A. Roeser, Judge.
Action by Herman Zander, receiver of the Four County Farmers' Mill Co-operative Association, against J. W. Schackel. Directed verdict against defendant, and from order denying a new trial, defendant appeals. Affirmed.
Constant Larson, of Alexandria, for appellant.
George S. Grimes, of Minneapolis, for respondent.
This action was brought to enforce an assessment against the stockholders of a co-operative association. By direction of the court the jury returned a verdict against the defendant, and he has appealed from an order denying a new trial.
1. It is urged that the association never became a corporation, and never had any stockholders. The undisputed evidence shows that articles of incorporation were signed on March 26, 1921, by defendant and fifteen other individuals; that defendant was named in the articles as a member of the first board of directors; and that the articles were duly filed and published. The corporation was formed to take over the flour mill, elevator, and other property of Kensington Mills, Incorporated, a corporation in which the defendant was a stockholder, and the stockholders in the old corporation were given the privilege of exchanging their stock for stock in the new, as related in Zander v. Holm (Minn.) 197 N. W. 967. Defendant was present at the organization meeting and at subsequent directors' meetings, and actively participated in the business transacted. The old corporation transferred its property, and the new corporation carried on the business until some time in August, 1921. It was unable to pay its debts, and plaintiff was appointed receiver in November, 1921, and, on his application, an assessment of 100 per cent. was levied on the stock.
In ordering the assessment, the court must have determined that it had before it a corporation whose stockholders were subject to assessment, and it would seem that defendant is concluded from questioning the existence of the corporation. Be this as it may, his activities were such that it ought not to lie in his mouth to say that the corporation is nonexistent.
In Zander v. Holm, supra, it was held that the failure to satify the statutory conditions upon which a co-operative association may commence business deprives it of the power to take or hold property. Here a different question is presented. It is this: May an individual become estopped by his conduct from denying the legality of the organization of a corporation or the validity of the stock it has issued? The question is answered in the affirmative upon the authority of Minn. Gaslight Co. v. Denslow, 46 Minn. 171, 48 N. W. 771; Hause v. Mannheimer, 67 Minn. 194, 69 N. W. 810; Gardner v. M. & St. L. Ry. Co., 73 Minn. 517, 76 N. W. 282. See, also, 2 Fletcher, Corporations, p. 1617; Jones v. Dodge, 97 Ark. 248, 133 S. W. 828, L. R. A. 1915A, 472.
Even though the corporation began to do business before it complied with the statute, defendant cannot escape liability, for, as Judge Mitchell said in Olson v. State Bank, 67 Minn. 267, 69 N. W. 904, it would never do to hold that, after a corporation had gone into business and dealt with the public in violation of a statutory provision, its stock is void and the stockholders not liable to creditors.
2. The sufficiency of the proof that defendant became a stockholder is questioned. The law requires a director of a corporation to be a stockholder. Section 6171, G. S. 1913. Defendant was a director, and, in the absence of evidence to the contrary, it will be presumed that he was a stockholder. Caldwell Milling Co. v. L. L. May Co., 141 Minn. 255, 169 N. W. 797.
It is suggested that this presumption does not arise unless the directors are elected by the stockholders. We do not stop to consider the suggestion. There was proof that stock certificates were issued to other stockholders, and that on May 18, 1921, a stock certificate in the name of the defendant was filled out and signed by the proper officers. The certificate remained in the possession of Zander, the president of the corporation. The defendant's name appeared on the stub of the certificate. Any one examining the corporate records after May 18th would have been justified in the belief that defendant was a stockholder. He cannot now be heard to deny that he was one.
3. At the opening of the defense plaintiff objected to the introduction of any evidence on the ground that the answer did not state facts constituting a defense. The objection was sustained, and this ruling brings us to a consideration of the principal question in the case. In brief, these were the facts pleaded as a defense: W. T. Coe was president, and G. A. Melges was secretary of the old corporation. On March 26, 1921, Coe, Melges, and Zander represented to the defendant that the old corporation was practically free from debt; that its property was unincumbered; that it would be transferred to the new corporation free from incumbrances; and that the new corporation would begin its existence free from debt. Relying on these representations, defendant became one of the incorporators, and subsequently delivered his certificates of stock in the old corporation to Zander, who had become president of the new corporation, to have them exchanged for shares of equal par value in the new corporation, on the express condition that a co-operative association would be organized according to the...
To continue reading
Request your trial