Zinc Carbonate Co. v. First Nat. Bank of Shullsburg

• Decision Date: 25 April 1899
• Citation: 79 N.W. 229,103 Wis. 125
• Parties: ZINC CARBONATE CO. v. FIRST NAT. BANK OF SHULLSBURG ET AL.
• Court: Wisconsin Supreme Court

103 Wis. 125

79 N.W. 229

ZINC CARBONATE CO.

v.FIRST NAT. BANK OF SHULLSBURG ET AL.

Supreme Court of Wisconsin.

April 25, 1899.

Syllabus by the Judge.

1. A corporation may be held liable as a party to a conspiracy to defraud in a transaction outside the scope of its charter, and a complaint against it and its co-conspirators to enforce such liability, charging that the corporation and its co-defendants made and consummated the fraudulent agreement, is not defective on demurrer for want of allegations as to who acted for the corporation in making such agreement and as to special authority having been given by its governing body in regard to the subject.

2. If a corporation obtain a wrongful advantage of another in respect to a transaction outside its corporate powers, it cannot shield itself from liability to remedy the wrong by the doctrine of ultra vires.

3. Ordinarily, as to executed matters, the doctrine of ultra vires is an instrument to be used only by the state to punish a corporation for violating its charter, not by the corporation itself, or an individual, to aid in perpetrating or perpetuating a wrong.

4. The doctrine that relief from the inequitable use of a judgment must be sought by a motion in the action wherein the judgment was rendered, applies only where the time limited by statute for opening the judgment has not expired or the court had no jurisdiction to enter it, or the time limited by statute for opening the judgment has expired and there is no fault in the judgment itself, the complaint being solely as to its inequitable use.

5. A judgment free from jurisdictional defects cannot be relieved against on the ground of fraud or mistake going to the judgment itself after the term when rendered and the time prescribed by sections 2832, 2879, Rev. St., except by an independent action in equity brought in the same court.

6. If several persons unite to promote the organization of a corporation and thereafter defraud it out of its assets for their benefit, part of the scheme being that some of the promoters shall be the active parties and take stock in and become officers and obtain control of the corporation and thereafter while ostensibly acting in its interests carry out the fraud, and the scheme be fully consummated, one of the conspirators being a corporation, all are equally liable to make good to the defrauded corporation the loss caused to it, without reference to how the fruits of the fraud may have been divided, and an action will lie in the name of the injured corporation against the wrongdoers to compel an accounting of their ill-gotten gains and restitution thereof.

7. The test of whether there is more than one cause of action stated in a complaint in an equitable action is whether there is more than one primary right sought to be enforced or one subject of controversy presented for adjudication.

Appeal from circuit court, Lafayette county; George Clementson, Judge.

Bill by the Zinc Carbonate Company against the First National Bank of Shullsburg and others. From a judgment sustaining a demurrer to the complaint, plaintiff appeals. Reversed.

Action to charge defendants as trustees of plaintiff corporation on account of money and property obtained by them from it without consideration, pursuant to a fraudulent conspiracy to create plaintiff and then absorb its assets for their private benefit. An accounting was asked on facts alleged as to all the wrongdoings of defendants, and relief by way of damages, and otherwise, to indemnify plaintiff for such wrongs and protect it against further injury, including nullification of a judgment hereafter referred to, was also prayed for.

For the cause of action it was stated, in effect, in addition to formal allegations, as follows: In 1890 the defendant bank, being the owner of a mill plant located on leased ground, designed for treating metallic ores, recently obtained by it by the foreclosure of a chattel mortgage, from an insolvent corporation called the “Shullsburg, Benton & New Diggings Milling Company,” of which defendants Hayden and Savage were stockholders, the original cost of which did not exceed $5,000, and which was worth, when it came to the bank, not more than $3,000, and defendants being owners of an option to purchase for $5,000 a mine then in operation, yielding such ores as the mill plant was designed to treat, such mine not exceeding in value $5,000, the defendants made an agreement each with the other to organize a corporation with a capital stock of $25,000, cause the stock to be mostly subscribed by outside parties, obtain control of the organization and its books, induce it to purchase the mill plant at $13,000 in the belief, as to all stockholders not in the fraudulent scheme, that it was worth such sum and could not be bought for less, and belonged to the old milling company; and to purchase the mine for $7,000 in the belief, as to outside stockholders, that it was worth that sum and could not be bought of the proprietors for less, and to thereby make a secret and fraudulent profit to themselves of $12,000, and, while ostensibly managing the corporation in the interest of the stockholders, to obtain and convert to their own use its money and property and cause the books of the corporation to be so kept as to conceal the facts from stockholders generally. The scope of the fraudulent agreement, as alleged in great detail, was sufficiently broad to cover all the acts alleged to have been done, by means of which the money and property of plaintiff, while being handled by defendants Savage and Hayden ostensibly in its interest, was converted to the use of defendants without consideration and without knowledge of the directors or stockholders aside from Hayden and Savage. The complaint further stated, in effect, that pursuant to the aforesaid agreement the plaintiff corporation was formed, the stock being subscribed in good faith by outside parties, except $2,000 each by Hayden and Savage who made their subscriptions to give their conduct the semblance of good faith, and to delude, and which did delude, the other subscribers into signing for stock, when the promoters did not intend, and it was a part of the fraudulent agreement that they should not, and they never did, part with anything of value upon their subscriptions; that Savage and Hayden obtained control of the organization of the corporation, the former being elected president and the latter secretary, and that, while permitted to manage and handle its affairs, acting on behalf of defendants they fully consummated the scheme of turning the mill plant and the mine over to it for $20,000, pretending, and all not in such fraudulent scheme believing from such pretense, that the vendor of the mill plant was the old mill company and the price to the owner $13,000, and that the vendors of the mine were the proprietors who had given the aforesaid option and that the price to such proprietors was $7,000, thereby gaining to defendants the sum of $12,000, and that thereafter, during a period of some three years, they from time to time, in further consummation of the alleged fraudulent plan, took large sums of money from the corporation, including money paid in for stock, aggregating in all the sum of $10,000, besides other sums believed to have been taken but not yet discovered. There were also allegations to the effect that in further consummation of the alleged fraudulent scheme, Hayden and Savage, the former acting as secretary of plaintiff and the latter as cashier of defendant bank, both being, as before stated, directors of plaintiff, contrived to have a judgment in form of law entered in the office of the clerk of the circuit court for Lafayette county for $3,712.23 in favor of the bank and against plaintiff, upon numerous claims of indebtedness, none of which had any foundation in fact, as both Hayden and Savage knew; that they caused an execution to be issued on the judgment against the plaintiff's property and a levy to be made thereon; that thereafter, in semblance of necessity created by such levy, and without authority except that which they assumed to possess as directors and officers of plaintiff, they gave to the bank for the benefit of defendants a chattel mortgage for $4,125.42 on all of plaintiff's property, assuming that such sum was due the bank on the judgment, when in fact the whole claim of indebtedness was fictitious and did not, on its face, amount to the sum mentioned in the mortgage into over $400; that as soon, practically, as the mortgage was made, defendants caused the bank to go through the form of taking the property, which was worth $20,000, and selling the same to itself, ostensibly, but for the benefit of defendants in fact, for $2,850, and the sheriff to indorse that sum as collected on the execution, though he collected no sum whatever but his fees; that thereafter, in further consummation of the alleged scheme, the bank held possession, and pretended to be the owner, of such property and to operate it for its own benefit, but operated it in fact for the benefit of defendants. There were further allegations to the effect that plaintiff, its stockholders, agents and attorneys, were all, except Savage and Hayden, ignorant of each and all of the wrongful acts mentioned, till shortly before the commencement of this action.

Defendant bank demurred to the complaint generally for insufficiency, for want of jurisdiction of the court of the defendant bank or the subject of the action, because of the pendency of another action for the same cause, for defect of parties defendant in that the bank should not have been joined, and for improper joinder of causes of action. The demurrer also treated that part of the complaint relating to relief against the alleged fraudulent judgment as the subject of an independent cause of action, and demurred to such cause of action upon all the grounds before stated. The demurrer was sustained.Van...