77 P. 753 | Utah | 1904
(after stating the facts). — The decisive question presented in this case is whether the--court erred in overruling the demurrer to the special and separate defense set up in the answer, and in denying the motion to strike out that portion of the answer.
The appellants contend that the judgment in the case of Rogers v. Ferry et al., wherein the Putnam Mining Company was made a defendant, constitutes no bar to this suit, and that their demurrer should have been sustained and their motion granted.
The respondents insist that not only this action is-barred- by the judgment in the Rogers Case, hut also that these plaintiffs must fail because they have brought and are attempting to maintain this suit in their own-right, and not in the right of the Putnam Mining Company, although they claim only as stockholders of the corporation. The position of the respondents seems to he sound. And first as to the suit having been brought
In Weyeth H. & M. Co. v. James-Spencer-Bateman Co., 15 Utah 110, 121, 122, 47 Pac. 604, it was said: “The natural person has such powers and rights as are conferred upon him by nature, except as' restricted by human laws for the good of society. The artificial person or corporation has such powers and rights as are conferred upon it by the law of its creation, and such as áre incidental and necessary to its corporate existence. Both the natural and artificial personages act in an individual capacity. Among the most important attributes of a natural person are his absolute dominion over his property and his right of disposition, and the same may be said of a corporation aggregate as to its corporate property. It has the right to contract and be contracted with, to sue and be sued, to implead and be im-pleaded, the same as a natural person; and it has the right to do all other acts in regard to its property that a natural person may do in regard, to his. ’ ’
Since, then, the corporation was capable of owning, and in fact did own, the property in controversy, absolutely, as a distinct entity, how could that property be held to be property in trust for the benefit of persons
If a right of action exists, because of the alleged fraudulent acts and dealings in relation to the property in controversy, it exists in favor of the corporation, and of necessity the action must be brought in1 the right of the corporation, and for its benefit. If the defendants must account to any one for the property in litigation, the accounting must be to the corporation, and not to the plaintiffs or any other stockholders. The prayer of this complaint, in effect, asks the court to adjudge that the defendants have obtained for themselves, through fraudulent acts and dealings, the property of the corporation, and, instead of asking that the property so ■obtained, or its proceeds, be returned to the rightful owner, demands that the plaintiffs, for their own bene
In Gorham v. Gilson, 28 Cal. 479—a case much like the one at bar — where a mining company was induced by the fraudulent representations of a part of its stockholders to make a conveyance of its property, and the plaintiffs, stockholders, brought suit in their own right to have conveyed back to themselves such part of the property as was proportional to their stock, Mr. Chief Justice Sanderson, speaking for the court, and holding that the innocent stockholders could not maintain an action in equity to' compel a conveyance to them of such portion of the corporate property, said: “This action proceeds upon the theory (and it could be maintained upon no other) that, in equity, the defendants, by reason of their fraudulent acts, have become the trustees of the plaintiffs to the extent of an undivided half interest in the property in question. But we think
So, in Abbott v. Merriam, 8 Cush. 588, Mr. Chief Justice Shaw, speaking of the rights of stockholders, said: “As stockholders, they have rights undoubtedly and interests in the affairs and management of the concerns of the corporation; but these are derivative and indirect, and are limited and regulated by law. They have no right by any direct suit, legal or equitable, to call the directors or other' officers of the corporation to account for mismanagement. Nor, if all the stockholders were to unite in a suit in equity, could they have any better ground to recover. The directors and other officers and agents are amenable only to the corporation,
In Forbes v. Memphis, etc. R. R. Co., 2 Woods, 323, Fed. Cas. No. 4926, Bradley, Circuit Judge, said: “A commercial or other business corporation is constituted for the specific purpose of suing and being sued, granting and receiving, buying and selling, and doing other business in a corporate name and capacity, totally distinct from that of any or all of its members, considered as individuals. They have only an indirect interest therein. . . . All remedies for injuries to the property must be prosecuted in the name of the company, and all demands against the company must be prosecuted against the company, by name, unless its officers or agents, by fraud and misrepresentation, have rendered themselves personally liable. A stockholder, in his character of stockholder, cannot sue, nor, unless specially made liable by the charter, can he be sued for any of the company’s transactions.” 4 Thomp. Corp., sections 4443, 4445; 1 Thomp. Corp., section 1071; Smith v. Hurd, 12 Metc. (Mass.) 371, 46 Am. Dec. 690; Smith v. Maine Boys Tunnel Co., 18 Cal. 112; Davenport v. Dows, 18 Wall. 626, 21 L. Ed. 938; Church v. Citizens’ Street Ry. Co. (C. C.), 78 Fed. 526; Big Creek G. C. & I. Co. v. American L. & T. Co. (C. C. A.), 127 Fed. 625; Mickle v. Rochester Bank, 11 Paige 118, 42 Am. Dec. 103; Spurlock v. Missouri Pac. R. Co., 90 Mo. 200, 2 S. W. 219; Verplanck v. Mercantile Ins. Co., 1 Edw. Ch. (N. Y.) 84; Hawes v. Oakland, 104 U. S. 450, 26 L. Ed. 827.
There are instances, however, where a stockholder may apply to a court of equity for a preventive remedy by injunction to restrain those who are administering the affairs of the corporation from doing acts which are ultra vires, or to prevent a misapplication of the corporate funds which might result injuriously to the stockholders, where the acts intended to be performed would amount to a breach of trust. In such and like cases a preventive remedy may be applied at the instance of a
Mr. Thompson, in his Commentaries on the Law of Corporations, vol. 4, section 4491, states the distinction .thus: “Where an action is brought by one or more stockholders to enjoin the performance of ultra vires, fraudulent, or oppressive acts on the part of the directors, the remedy is preventive; consisting of an'injunction against the performance of such acts, to which may be superadded, in appropriate cases, other forms of equitable relief. Where, on the other hand, the action is brought to undo frauds and breaches of trust already committed, and to restore to the corporation assets thereby wasted, the action does not, as in the former case, proceed in right of the stockholder, but it proceeds in the right of the corporation, and consequently whatever is restored accrues to the- corporation.”
But suppose this suit were regarded and treated as brought, not in the right of the plaintiffs nor for their -own benefit, but in right of all the stockholders, and
In Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739, 33 L. Ed. 184, where the plaintiff in error, who was a stockholder, claimed that a certain order or decree which was binding upon the corporation was void, as against him, because he was not a party to the suit in which the order was made, the Supreme Court of the United States held that, “in the absence of fraud, stockholders are bound by a decree against the corporation in respect to corporate matters, and such a decree is not open to collateral attack.” Mr. Chief Justice Fuller, delivering the opinion of the court said: “Sued after such an order of court, the defendant does not deny the existence of any one of the facts upon which the order was made, but contends that there has been no call, as to him, because he was not a party to the cause between creditor and corporation. We understand the rule to be otherwise, and that the stockholder is bound by a decree of a court of equity against the corporation in enforcement of a corporate duty, although not a party as an individual, but only through representation by the company. A stockholder is so far an integral part of the corporation that, in the view of the law, he is privy to the proceedings touching the body of which he is a member.” Freeman on Judgments, sections 176, 178; Glenn v. Williams, 60 Md. 93; Kessler v. Ensley Co. (C. C.), 123 Fed. 546.
Prom the foregoing considerations, and from the authorities, the conclusion is inevitable that the court did not err in overruling the demurrer or denying the motion directed at the special plea, nor in rendering' judgment in favor of the defendants on the merits.
We find no reversible error in the record. The judgment is affirmed, with costs.