19 S.D. 559 | S.D. | 1905
This is an appeal by the defendants from the order overruling defendants’ demurrer to the complaint. The complaint is quite lengthy, and we shall only give the substance of the same. The plaintiff, for himself and all others similarly situated who may choose to unite with him, alleges that the Manila Gold Mining & Milling Company is a corporation duly incorporated and organized under the laws of this state, transacting business in the county of Lawrence; that said defendants C. M. and F. H. Woodbridge and I. A. Webb are directors in said mining company, the said C. M. Wood-
To this complaint the defendant C. M. Woodbridge interposed a separate demurrer upon the following grounds: (1) That there is a defect of parties, both plaintiff and defendant; (2) that several causes of action have been improperly united; (3) that plaintiff’s amended complaint does not state facts sufficient to constitute a cause of action. As before stated, the demurrer was overruled, and the defendant given leave to answer over if he elected so to do.
It is contended by the appellant in support of his demurer that there were several causes of action improperly united in the complaint; that three of the defendants are charged in the complaint with having fraudulently conspired and colluded together to so manipulate the affairs of the defendant compay as to depreciate and render the plaintiff’s stock worthless; that the complaint contains nothing but conclusions of law, and does not state or .purport to state a single act constituting conspiracy, collusion, or fraud of any kind, and that an allegation,
We are of the opinion that the appellant’s contention that different causes of action have been improperly united is not tenable. In our view, the complaint contains but one cause of action, namely, that the defendants conspired together to unlawfully and fraudulently depreciate the value of the Manila Company’s stock in order to render the plaintiff’s stock and the stock of other parties similarly situated practically worthless, and that in order to accomplish this object the three directors named proceeded to do certain acts specifically set out in the complaint, which would necessarily produce results intended by the conspiracy. The plaintiff, in his complaint, proceeds to state the fraudulent acts of the defendants which tended to depreciate and which did depreciate the value of the company’s stock, and that, by reason of such fraudulent acts on the part of the three defendants named, the Manilia Company veas damaged in the sum of $50,000, in which it appears that the plaintiff had a one-eighth interest; and it is alleged that in carrying out that fraudulent purpose they have refused to dispose of the treasury stock, embracing one-half of the capital stock of the company, have systematically depreciated its value, have refused to receive money for the treasury stock, have refused to do. the necessary assessment work upon the property in order to comply with the laws of the United States and this state, have removed the books of the corporation out of the state, have refused the plaintiff any information in regard to the affairs of the company, and in short have proceeded to so conduct the business of the corpor
The contention of the appellant that the plaintiff claims personally a judgment for $50,000 is untenable, as it will be observed that the plaintiff alleges that the $50,000 of damages have accrued to the defendant corporation, and not to himself personally. The action is in effect an action by the corporation, brought for the purpose of protecting the property of the corporation against the fraudulent and unlawful acts - of its board of directors, and which could not be brought by the corporation for the reason that the directors, who were managing the affairs of th'e corporation, and whose duties it would ordinarily be to bring such an action to protect the interests of the corporation, are the parties who have conspired together to so
The right of stockholders to bring such an action is clearly sustained by the decision of this court in the case of Loftus v. Farmers’ Shipping Ass’n, 8 S. D. 201, 65 N. W. 1076, in which this court held that stockholders of a corporation may bring an action on behalf of the corporation against its directors, who by their fraudulent management and conduct of the business of the corporation are fraudulently and intentionally so conducting the business of the same as to depreciate the value of the stockholders’ interest therein, and in effect deprive them of their property.
The contention of the appellant that the acts constituting fraud on the part of the three directors named as defendants are not specifically set out in the complaint is also untenable. It will be observed that the complaint has stated very fully the varions acts done and being done by the said defendants in carrying out their conspiracy, and, if true as alleged, clearly show that these defendants are violating their trust as officers of the corporations, and that their mismanagement of the affiairs of the corporation would necessarily result in destroying the value of the property of the corportation, and, as before stated, practically deprive the plaintiff of his property therein.
Our conclusion, therefore, is that the corporation was entitled , through the plaintiff to relief as against the directors named, for an accounting, and an injunction restraining them from the commission of further acts in the pursuance of their unlawful
We are of the opinion that the court was right in overruling the demurrer, and the order overruling the same is affirmed.