63 W. Va. 650 | W. Va. | 1908
At the June Rules, 1903, of the circuit court of Marion county Thomas A. Deveny, John McCool, John W. Irvin, John R. Bennett, John J. McCool, Robert Talbot, S, C.
That on the 14th clay of May, 1902, the said Cook, Brooks, and Hart, again acting as the directors and officers and as. such trustees of said corporation and the other stockholders thereof, purchased from Owen Meehan a property known as the Franklin Coal Mines and its equipments for the price of $100,000; that said purchase was made by said Cook, Brooks and Hart through one James F. Anderson, who was then an attorney and agent for the said Owen Meehan; that Cook, Brooks and Hart conspired and confederated together to cheat and defraud the corporation and the other stockholders and jn pursuance of said conspiracy caused and procured said Meehan to convey said property to his said attorney, Anderson, for the consideration of '$100,000, paid and satisfied as thereinafter set forth, and caused and procured said Anderson immediately and as one act to convey said property to the said Hart Coal Company — a copy of said deeds from Meehan to Anderson and from Anderson to the company were filed as exhibits with the bill. That said Cook, Brooks and Hart paid to Meehan for said property, with the money of said corporation, the sum of $55,000 cash and caused said Anderson (with the promise to said Anderson and Mee-han that said corporation would assume the payment thereof) to' execute to said Meehan two notes calling for $22,500 each due in six and twelve months respectively from the 15th day of May, 1902; and further caused said Anderson to secure the payment of said notes by executing a mortgage on said property on the day the deeds were executed as a part of the same act and transaction. That said Cook, Brooks and Hart, in pursuance of said conspiracy to cheat and defraud the corporation and the stockholders, caused and procured Anderson to execute said deed to said corporation and to have it recited and written in said deed falsely and fraudulently that said “corporation” (meaning the deed, I presume) was made “for the consideration of one hundred and forty thousand dollars ($140,000.00,) received to our full satisfaction of the Hart Coal Company;” and on behalf of said corporation
A demurrer was entered to said bill, and on the 1st day of August, 1903, the demurrer was overruled and leave given defendants to file their answers in the clerk’s office within sixty . days, and leave to plaintiffs to reply thereto within ten days after the same were filed. On the 10th day of December, 1903, the joint and several answer of Herbert C. Brooks and Frances J. Brooks, administrators of the personal estate of W. B. Brooks, deceased, and the answers of defendants James F. Cook and John P. Hart were filed and general replications made thereto. Depositions were taken and filed and the cause finally heard on June 27, 1905, when the court decreed in favor of the Hart Coal Company against defendants Hart and Cook for the $40,000 and interest aggregating $47,480 to be refunded to said company, from which decree the defendants James F. Cook and John P. Hart appealed and say the court erred in overruling their demurrer to the bill and also in decreeing against them the said sum of $47,480, interest and costs.
The first assignment is in overruling the demurrer to the bill. Appellants insist that the bill is not sufficient in its allegations to authorize a stockholder or stockholders to bring suit to recover in favor of the corporation. First that their proper action was at law, that an action of assumpsit would give ample relief and therefore equity has not jurisdiction. Equity always has jurisdiction when fraud is well charged. In Maurice v. Devol, 23 W. Va. 247, it is held: “Equity always has jurisdiction of causes involving the fraud of one
The bill no where alleges that a demand or request was made on the part of the plaintiffs or any of them upon the directors to bring suit in the name of the corporation. In Rathbone v. Gas Co., 31 W. Va. 198, (Syl. pt. 1), it is held: “In order to entitle a stockholder to institute and maintain a suit in equity to redress a corporate injury committed infra vires against a solvent corporation in the full exercise of its franchises and carrying on its corporate business, it must appear not only that the directors are either disabled by their misconduct to sue, or that they have wrongfully refused to do so upon a proper demand; but where the matter will admit of the necessary delay, and it is practicable to call upon the stockholders to act, this must also be done. Until it is shown, that every reasonable effort to obtain redress through the regularly constituted agents and controlling power of the corporation has proved unavailing, a stockholder cannot sue in his own name alone nor on behalf of himself and other stockholders.”
In case at bar while it is alleged that the corporation was under the control of the defendants Cook, Hart and Brooks during the lifetime of Brooks, and of Cook and Hart after the death of Brooks, it is not made to appear that a majority of the directors were wrongdoers, or that if a demand had been made, it would not have been granted. Pomeroy in his Equity Jurisprudence, 3 vol. section 1095, says that a stockholder may sue whenever the corporation, either actually or virtually, refuses to permit a proceeding by itself; and says: “These are two distinct conditions of fact; and the circumstances must determine whether any particular case belongs to one or the other of the two conditions. In general, a case should come within the first condition; and it should appear that the board of directors or other managing body has actually refused to bring or permit an action in its own name. To this end the plaintiff should allege an application to the directors or managing body, a reasonable notice, request, or demand, that they would institute proceedings on the part of the corporation against the wrongdoers, and their refusal to do so after such reasonable request or demand. These allegations are material and issuable; if controverted by the
In the case of Rathbone v. Gas Co., cited, in the opinion of the Court at page 806 it is said: “In order to entitle a shareholder to sue he must show, either, that the managing agents are themselves the authors of the wrong, or, that their refusal to bring suit in the name of the corporation is an act of bad faith, or an abuse of the discretionery power vested in them. Even this rule is subject to this qualification: The directors and agents of the corporation are inferior to and under the control of a majority of the shareholders. Consequently, when the directors refuse to discharge their duty, they may be removed or controlled by a majority of the .shareholders. Thus, in order to confer upon a shareholder the right to sue, in a case in which the primary right is in the corporation, he must not only show, that the directors are in default or wrongfully refuse to sue, but he must show, that a majority of the stockholders have been appealed to, and, that they are also guilty of misconduct, or willfully and wrongfully refuse to act in the matter. 1 Mor. Priv. Corp. sections 242-246; Foss v. Harbottle, 2 Hare 493; Hodges v. Screw Co., 53 Amer. Dec. 624, note 637; Cook Stocks, sections 677, 678. In Stevens v. Davison, 18 Grat. 819, the act complained of was done ultra vires, and bad been repudiated by the stockholders in regular meeting, and the question of the right to institute that suit was not raised or- considered by the court.”
In plaintiffs allegation concerning the alleged illegal meeting of the stockholders held December 13, 1902, when it appears that a majority of the stock was represented, 1052 shares, it is not alleged that the greater part of the stock
The allegation that the “corporation was at the time of the institution of this suit and still is under the control of said defendants James F. Cook and John P. Hart, and plaintiffs a.ver that said Cook and Hart will not institute a suit by the directors of said corporation in the name of the corporation and will not permit such suit to be brought, ” is too general and does not specify in what manner or how two directors are enabled to control a body of five. The demurrer should have been sustained. We therefore reverse the decree, sustain the demurrer to the bill and remand the cause to the circuit court of Marion county with leave to plaintiffs to amend their bill, if they shall be so advised, and for further proceedings there to be had therein according to the rules governing courts of equity.
Reversed. Remanded.