68 Neb. 107 | Neb. | 1903
Lead Opinion
Haskell, the plaintiff, had. a ranch in McPherson county, and certain horses, cattle and farming implements thereon. Read, one of the defendants, had a certain amount of capital which he desired to make use of in the business of conducting a ranch. Accordingly, they entered into a written contract for the purpose of forming a corporation, in which they agreed to incorporate with a capital stock of $32,000, divided into 320 shares of $100 each, of which each of the parties was to subscribe for one-half. They further agreed that the plaintiff should pay for Ms stock by conveying his ranch property, horses, cattle and farming implements to the corporation while the defendant Read should pay for the stock by Mm subscribed for in cattle. Pursuant to this contract a corporation was formed, and the plaintiff and the defendant Read each subscribed for $16,000 of the capital stock. The latter became president, secretary and treasurer, while the plaintiff was vice-president, and manager of the ranch. After the company was incorporated, Read advanced some $700 to the plaintiff, secured by mortgages, under an agreement whereby the plaintiff was to “redeem” with shares of stock when issued. Afterwards two shares of stock which had been issued to plaintiff were transferred by Mm to Read in lieu of the mortgage. When Read turned over the cattle to the corporation in payment of his stock subscription, as provided for in the contract, he claimed to have turned over and delivered more cattle than were necessary for that purpose, and, in the belief and under the representation that he had done so, the plaintiff agreed and consented that additional stock in the amount of $2,000 should be issued in payment therefor. This was done and the shares were duly registered in the name of Read on the books of the corporation. Afterwards a dispute arose with reference to this claim
Assuming, therefore, that the two shares of stock were merely pledged, and were held by Read as pledgee and not as owner, the question arises, who was entitled to vote
With respect to the twenty shares issued for the alleged additional cattle turned over by Read,' we think the decree is right. The court has found that no such cattle were in fact turned over, and that the shares were issued without consideration, and upon a misrepresentation as to the number of cattle contributed. The full amount of the capital stock provided for in the articles of incorporation had been subscribed for already, and it is apparent that it was not intended that twenty of the shares subscribed by Haskell were to be issued to Read, but that there were to be twenty shares in addition to the 320 fixed by the articles of incorporation. We are unable to see hoAV these twenty shares can be vieAved in any other light than as an overissue procured without consideration and upon false representations. A stockholder may maintain a suit to enjoin the holder of shares issued in excess of the amount authorized by the articles of incorporation, and without consideration, from voting such shares in prejudice of his rights, and to procure cancelation thereof. 2 Thompson, Corporations, sec. 1497; 2 Morawetz, Private Corpora
We think, however, the court erred with respect to the validity of the election held by Haskell and his attorney; and in our opinion the decree should be modified so as to grant the appellant relief against such election, as prayed in his cross-petition. It is held generally that a court of equity is without jurisdiction to pass upon the validity of an election of officers and directors of a private corporation, or determine whether persons claiming to be such are entitled to act in that capacity. Kearney v. Andrews, 10 N. J. Eq. 70; Owen v. Whitaker, 20 N. J. Eq. 122; Hullman v. Honcomp, 5 Ohio St. 237; Hartt v. Harvey, 32 Barb. (N. Y.) 55. But in this state, suits in equity seem to be maintainable for such purposes. Humboldt Driving Park Ass’n v. Stevens, 34 Neb. 528, 33 Am. St. Rep. 654; Reynolds v. Bridenthal, 57 Neb. 280. In any event, the court may inquire into the validity of the election and pass upon the title to corporate offices, when necessary to do complete justice in a suit of which it has jurisdiction on other grounds. Mechanics' Nat. Bank of Newark v. H. C. Burnet Mfg. Co., 32 N. J. Eq. 236; Elliott
We therefore recommend that the decree be modified by striking out the sixteenth finding of fact, to the effect that the election held by Haskell and Hoagland, his attorney, —to whom he had assigned a part of his stock — was regular and valid, substituting a finding that such election was invalid and of no force, and by adding to said decree an adjudication in accordance with such substituted finding, and that, so modified, the decree be affirmed.
By the Court: For the reasons stated in the foregoing opinion, it is ordered that the judgment of the district •court he modified by striking out the sixteenth finding of fact of the trial court, substituting therefor a finding to the effect that the pretended election held by the plaintiff and his attorney, Hoagland, was invalid and of no force, and adding to said judgment' an adjudication in conformity with such substituted finding, and that as so modified the judgment he
Affirmed.
Rehearing
The following opinion on motions for rehearing was filed October 7, 1903. Rehearing denied:
It sometimes happens that a proposition, true enough in respect of the case in hand, is put in a general form which
The circumstances out of which the controversy as to the election arises are'these: After the district court had issued a temporary injunction, restraining Read from voting the twenty-two shares of stock in controversy, the annual meeting for election of officers came on. Upon production of the order of injunction, it became substantially impossible to hold an election, as the shares which could be voted were evenly divided between the contending factions, assuming that Haskell could vote the two shares he had pledged. Under these circumstances, all the stock being present, Read, as president, adjourned the meeting until the injunction proceedings could be determined. We are inclined to think that this was within his powers as presiding officer, in view of the impossibility of doing any business at the meeting. However this may be, the only proper course, for those who objected was to appeal from the ruling and put the matter to a vote. Procter Goal Co. v. Finley; 98 Ky. 405, 33 S. W. 188. It did not authorize the plaintiff and his faction, after lapse of some time, to convene what was in effect a new meeting and hold a valid election. Whatever may be the rule in case of stated meetings, or thos.e regularly called or convened, a minority of the shares, after failure of the stated meeting for the election of officers, can not call a new meeting on their own
We therefore recommend that the motions for a rehear-. ing be denied.
By the Court: For the reasons stated in the foregoing opinion, it is ordered that the motions for a rehearing be denied.
Rehearing denied.