149 N.W. 957 | N.D. | 1914
This is an equitable action brought to determine adverse claims to real estate. This opinion is written after a rehearing had. Substituted service of summons was made upon the five individual defendants and one corporation defendant in 1910, and all of them appeared in due time by their attorneys of record, who served written notice of appearance and demand for a copy of the complaint on behalf of all defendants. The individual defendants have never answered, and are in default of answer, but their attorneys of record appeared for them at all times during the progress of the trial. An original answer and counterclaim was served by the corporation, the Missouri & Kansas Land & Loan Company, which was held to have been served in time, on appeal to this court decided in 22 N. D. 336, 133 N. W. 913. Kemittitur on that appeal left this court in January, 1912. A few days prior thereto, December 26, 1911, the twenty-year period of corporate existence, the lifetime of the corporation under the Kansas statutes, expired, it thereby becoming dissolved with this action undetermined after issue joined. On April 30, 1912, the attorneys for the plaintiffs and the defendant corporation served, respectively, amended complaint, answer, counterclaim, and reply thereto on eve of the trial, and proceeded to a trial upon the merits, all in ignorance of the lapsing of the corporate charter. The amended com- ¡ ,i plaint, and likewise the reply, pleads a forfeiture of the corporate 'charter by nonuser and noncompliance with the Kansas law, but the j 'pleadings do not plead a dissolution of the corporation by lapse of¡‘ , time. A forfeiture is one thing, and dissolution without forfeiture, j by lapse of charter, is a different thing. Motions were subsequently’
Plaintiffs’ original complaint is in the statutory form to determine adverse claims, and recites tax deeds as the basis of title. The original answer of the corporation, interposed in 1910, before its dissolution, denied the title of the plaintiffs, alleged its source of title through , deeds, and asked affirmative relief, that it be decreed to be the owner,/ and entitled to possession. The individual defendants, as stated, interposed no answer. Trial was had on the merits on April 30, 1912, and the parties rested except as to the depositions of officials of the state of Kansas, to be taken later and submitted, on the question of forfeiture of corporate existence by the corporation defendant. This was done in July, and a final hearing was had September 3, 1912, at which time both the purported corporation and the plaintiffs rested after having offered proof by depositions establishing the dissolution of the corporation on December 26, 1911. Before the close of the trial on September 3d, the officials and manager of the corporation dissolved moved that they be substituted as parties defendant in lieu of the corporation, and be permitted to defend and prosecute the action as trustees on behalf of themselves, stockholders, and creditors of the defunct corporation. The depositions establish this to be permissible; under the laws of Kansas; that the parties petitioning are its officials' and stockholders; that it has $2,000 of liabilities unpaid. No return! was made on the motion to substitute, but was reserved, with all others, including the motions to strike. The court attempted to determine these questions in its findings and conclusions and order for judgment issued thereon, in which it was found that the petitioners were entitled to be substituted, and substitution was allowed, although no pleadings were filed other than the application for substitution and supporting affidavits, and the title of the action remained unchanged. On trial on April 30, 1911, counsel for plaintiffs gave notice in open court that the individual defendants served by substituted service, all of whom had appeared and were then appearing by counsel, would be considered as defaulting, and requested “that a default be entered against these
There is no question as to this corporation having become defunct in December, 1911. The proof offered by both parties, as well as the affidavits of the attorneys for both plaintiffs and those who would appear in the corporation’s behalf on the motion to substitute the trustees in lieu of the corporation, state that fact. Hence, regardless of' any subsequent necessity of pleading by answer or otherwise reciting that fact, or the necessity of changing the title of the action, the fact must be conceded that on September 3d the suggestion of and proof of tne death of the corporation was before the court upon a proper motion to substitute, and that petitioners were entitled to substitution, they possessing the power to petition for substitution under the foreign statute, and in this jurisdiction through comity and practice as well. These petitioners and their counsel had moved with reasonable promptness, and were entitled to an order for substitution, and whatever delay occurred after September 3d and before the findings were made is chargeable to the court, and not to the petitioners. Nor were they responsible for the failure of the court to direct by separate order such substitution, with change of title accordingly. The court not only had power to make such an order, but it was its duty to make it. The date of the dissolution of the corporation having been established, the fact was brought to the court’s attention that, during the trial and up to the time of the application for substitution, the corporation defendant was non-existent, dead, and could not appear except by representative, and then not in its behalf as a corporate entity, but, instead, such representative would be empowered to appear only for the purpose defined in the Kansas statute in evidence, viz., as trustees of the stockholders and any creditors of the defunct corporation. As to the corporation itself, during this time it had not appeared, not acted, and was incapable of so doing. To the present time it has formulated no issue
With this condition of affairs, the first question is to determine the position of the parties under the proceedings taken, including the order for a judgment entered, the default judgment prior thereto, and the attempted dismissal in the interval, the attempted amendment of pleadings, and the voluntary appearances of the individual parties plaintiff and defendant, including the proceedings taken by and against them in the trial and the submission of the cause on the merits, as was attempted without objection and in ignorance of -the fact and the effect of the dissolution of this corporation.
The' court had jurisdiction of’ person and subject-matter of all of the defendants, including a qualified jurisdiction to take steps that would bind the successors in interest of the corporation, its stockholders, and creditors. The trial was not one had without jurisdiction, but was a valid trial as to plaintiffs and all individual defendants. Tor the purpose of the case it can be assumed that it was no trial as to the successors in interest of the corporation. The plaintiffs were entitled to no judgment whatever, except one of dismissal, without affirmative proof made of their interest or estate in the specific real property described in the complaint. An action to determine adverse claims may be maintained only by persons possessing such an interest or estate. Sec. 7519, Rev. Codes 1905. In this peculiar statutory action “the court in its decision shall find the nature and extent of the claim asserted by the various parties, and determine the validity, superiority, and priority of the same.” This is the command of § 7528, Rev. Codes 1905. It is true that said section also provides that “any defendant in default for want of an answer, or not appearing at the trial, or a plaintiff not appearing at the trial, shall be adjudged to have no estate or interest in or encumbrance upon the property.” Sec. 7528. Plaintiffs took this default judgment vacated in the findings evidently on the supposition, as here contended and as indicated by the statements of their counsel March 1, 1912, on the trial, that, as the individual defendants had defaulted in answer, judgment by default could be taken
This clears the way to a determination as to what was accomplished by the so-called trial, the default judgment having been properly set aside, and not standing a bar to a consideration of the rights of the plaintiffs and individual defendants. The first question, then, arising at the close of plaintiffs’ proof of title, when they rested their case, was whether they have established prima facie title in them in the face of the motion made challenging it. This involves consideration of their case made as against these individual defendants appearing, as we may omit from present consideration whether any corporate defendant was there. Plaintiffs offered in evidence only some tax deeds. These disclose on their face a sale made under a statute requiring the sale to be on a basis of a reduction of interest accruing after sale, and, instead of being sold upon this basis, the sale was made in the manner prescribed by an earlier and repealed statute, as having been made upon a decrease in the amount of land sold. Such a sale as was made has been twice adjudged void by this court, in Youker v. Hobart, 17 N. D. 296, 115 N. W. 839, and State ex rel. Ebbert v. Fouts, 26 N. D. 599, 50 L.R.A.(N.S.) 316, 145 N. W. 97. The deeds are not voidable, but void. They are the only source of title pleaded, proven, and relied upon, and amount to no title or interest in the real property. At the close of the trial, then, instead of plaintiffs being entitled to a judgment by default or otherwise against these individual defendants named, such defendants were entitled to the only finding and judgment possible, that as to them “the plaintiffs had no title to or interest in the land” (Dever v. Cornwall, 10 N. D. 123, 86 N. W. 227); and having that right then, they have it now, as the situation has not been changed with reference to the individual parties plaintiff and defendant by any act or failure of the corporation to participate or make proof, and the trial as to these individual defendants is over, all steps subsequent to March 1, 1911, having been taken with reference to the rights of others.
We now approach the case from another angle, that of the rights of the respective plaintiffs and trustees ordered substituted instead of
It might also be mentioned in passing that, irrespective of the merits, the proceedings had been regarded as a trial on the merits as to the corporation defendant and the plaintiffs, and not only a suggestion of dissolution of the corporation, but proof thereof had been offered and was before the court, establishing the fact that there was no defendant in existence in whose favor or against whom a judgment could be rendered, and this rendered it imperative that the court, before rendition of a judgment on the testimony, should determine not only who the proper party defendant should be to represent stockholders and creditors of a defunct corporation, but also required the court to determine from the record to what extent any parties had been bound by proceedings had on the .trial. On appeal from the judgment so awarded, the same questions must be here present, even under the assumption that the merits are not otherwise before us on appeal. In any event, then, such matters must now be determined.
The dissolution of the corporate defendant, pending action, under
Plaintiffs also assign error in the court in not dismissing their case on their written dismissal and separate motion therefor, purported to have been made under the provisions of § 6998, Pev. Codes 1905. As above stated, the trustees were entitled to substitution as successors in interest to the rights of the corporation defendant. That corporation had counterclaimed in this suit during its lifetime, and asked affirmative' relief against plaintiffs, under a statute making it plaintiff as to it the plaintiff defendant, and, besides, a purported trial had been had. Had the corporation not dissolved, the plaintiff could not have then dismissed the action. The ground, as for want of an adversary party, is not well taken; the court did not err in denying said motion in effect, as the case, if covered by the statute at all, is within the 7th, instead of the 1st, subdivision of § 6998.
Having reviewed the proceedings had and the trial, so far as the same was valid, it is the decision of this court that the judgment, order,, and findings entered be set aside and anulled, so far as the same purports to be a final adjudication of the rights of the parties hereto. The findings and order made thereon, so far as they relate to and order the substitution of the parties therein named as trustees on behalf of the corporate stockholders, and the creditors thereof, and set aside the default judgment rendered against the individual defendants, will stand as valid orders to that effect, and the trustees named ordered substituted will be and are regarded as such trustee defendants, substitution to relate back to and take effect as of September 3, 1912, the date of their application. As between the plaintiffs and the individual defendants not answering, but appearing at the trial had in March, 1912, as between them and plaintiffs, and which trial has as to them been
As this opinion is written after rehearing had, substantially adhering to the views announced in the former opinion, remittitur will go forward at once. It is so ordered.