*1
214, 50
Morse, 20 Mont.
v.
rights making
them. Bradshaw
575,
The
en
judge
be treated
by
trial
“will
approved
adopted
’’
them.
evidence to sustain
if there is
substantial
unassailable
McCue, 80
127; In
re
Lunke,
In
56 Mont.
Pac.
re
Fly
Rainbow
also, Stephenson v.
537,
All among them. can be found amined but no reversible error allowed the court are reason- fees The costs referees’ able. parties both are judge, and counsel for trial the referees thoroughness diligent with effort
to be commended for the performed. their were duties judgment decree and of the district reasons stated the For the affirmed. court is ADAIR and ASSOCIATE JUS-
MR. JUSTICE CHIEF BOTTOMLY, concur. ANGSTMAN, METCALF and TICES May 2, 1950. Rehearing denied NOBLE, Appellant, FARMERS UNION TRADING CO. Respondents. al., et No. February 10, April 6, 1950. Decided
Submitted (2d) 925 216 Pac. *3 appellant. Mr. Collins Burns, Dillon, for Messrs. Collins and argued orally. the case McCaffery, Jr., Virginia City, Mr. J. Blair, J.
Mr. Frank E. Mr. Blair respondents. Roe, Butte, Butte, Mr. Frank J. orally. argued the case ADAIR: CHIEF JUSTICE
MR. 20, 1947, plaintiff Noble, R. F. owner o£ one On March voting Trading Company, stock Farmers Union share of the of еquity, in in commenced this suit the district quiet county, seeking to court Madison title the south Montana, Sheridan, of which he avers feet of two town lots exclusive owner in fee corporation “is the sole and naming corporation and one simple title,” and Charles plain- In the court Wiggins as therein. district defendants difficulty ultimate pleading experienced tiff no little prose- right in to institute and facts to show a himself sufficient by equity justify a court of and interference cute the action workings busi- conduct, internal and management with the and vested, by law, in corporation prima its officers ness of the facie amended Upon to his second and directors. demurrer allowed pleadings his supplemental complaint, plaintiff and stood .on against him. judgment of dismissal to be entered suffered appeal judgment. is an This from that question presented appeal is: Do the averments plaintiff’s pleading maintain show a in him to this suit
in his own ? name and as a stockholder complaint
The second amended alleges: here involved That Trading Company defendant Farmers Union is “a farmers cooperative association, duly incorporated existing under Montana;” virtue of the laws of the that its state number 75 F. persons; plaintiff stockholders or more that R. Noble is one of owning corporate such stock par $500; value of plaintiff that never been a has director of the corporation; by-laws that the provide for the of the holding regular meeting annual of the stockholders for Monday election of directors December of on the first year each time; at no has fre other quently permitted year a full pass calling holding without stockholders; meeting plaintiff has no informa when, ever, tion as if another stockholders meeting will be held; January that since 1937 the “has been and still is sole and simple exclusive owner fee title” of the 5 and 11 in south 51 feet of lots block 36 of the town of Sheri dan, county, only Montana, Madison which is the land owned ‘‘ corporation; Wiggins that the defendant Charles claims *4 title, right, in, some interest or estate or lien or encumbrance upon property real described; above but every that such ’’ ‘' alleged claim is without void; foundation and that on infor mation and belief” the Wiggins defendant has demanded
received from corporation $70 the defendant per month as alleged rental occupancy part for the nse o'f such real property; “upon that information and belief” since the com- mencement of this suit Wiggins the defendant has demanded payments that month; such per $100 be increased to that “un- less the sum regularly paid him, [Wig- last mentioned is he gins] will commence an compel payment action court to thereof, possession or to obtain damages;” of said lands with that commencing plaintiff before this action demand made corporation the directors and officers of the “that take the * * * necessary proceedings quiet against in court to the title claims, all alleged pretentions” claims of the defendant Wiggins; that the “board of directors have failed and refused any and still purpose, fail and institute action for that refuse to ’’ steps quiet corporation to take establish or the title properties any part thereof; question quieting corporation title to the lands of the is one of common general stockholders; impractical is interest to the that “it join” bring “as parties the stockholders to this action or to time; them within a for which this to court reasonable reason brought plaintiff action is his own and also benefit for similarly interested,, elect all others who benefit of expenses (Em- in and this action.” to come contribute to the prayer for relief is that the defendant phasis supplied.) The required appear and set forth the nature of all Wiggins be adversely described by him asserted lands to the claims end that such ownership of the to the claims be can- naught; property that title to the estab- celled and held for be quieted corporation; in the defendant lished and forever privity persons in with him Wiggins defendant and all be for- against asserting claim the lands ad- ever foreclosed from versely plaintiff and that recover his costs. 204 Minn. Will, In person.
A is not a re Clarke’s merely legal W. 876. It fiction created 574, 284 N. conducting Whipрle business. v. Industrial for convenience (2d) 876, It can Commission, 59 Ariz. 121 Pac.
523 Cyc., authority. 1 Fletcher legislative only by under or created Being 36, 37, note 15, pp. (Perm. Ed.), sec. Corporations purposes a cor special for law established a mere creature of People creating it. Act from the powers all its receives poration 651, 655. It acts 71 Ill. Dupuyt, & L. R. Co. v. St. ex rel. Cairo 1947, see. (R. M.C. and officers directors through its board of subject to the not 15-401) property is and its 14-206 and sec. Sellers stockholders. or disposition of its members control or L. R. A. 589. Com 248, 40 246, E. Greer, 549, 172 Ill. 50 N. v. 19 401, N. L. May, 48 J. County v. pare : R. Co. North Hudson Bank, 133 Savings City Trust & 276; 5 A. v. 401, Vroom Judd Co., Trust v. Continental 81, (2d) 288; 12 N. E. Stokes Ohio St. 969, 9 A., S.,N. 1090, 1093, 12 L. R. 285, E. 186 N. Y. 78 N. Prankard, App. 204 v. 738; Paper Frank Gilbert Co. Ann. Cas. 25, 27. 83, Div. 198 N. Y. S. joint “corporation” all associations
The term includes any exercising powers or companies having or stock part privileges corporations possessed individuals 18; R. Montana, XV, Art. sec. C. M. nerships. Constitution 1947, 14-201 14-222. secs. individuality, Will, In
A
has a real
re Clarke’s
entity entirely separate
is in
an
and dis
supra, and
law
Rural
stockholders. McCarroll v. Ozarks
Electric
tinct from its
329,
(2d) 693, 695;
201 Ark.
146 W.
Co-op. Corp.,
S.
Matthews
Co.,
369, 10
(2d)
232,
215
230,
Minnesota Tribune
Minn.
N. W.
v.
147, 150;
Employment
rel. Oklahoma
147 A. L. R.
State ex
Se
293,
Exchange, 192
curity
v. Tulsa Flower
Okl.
Commission
46, 48;
Treasury
(2d)
Department
135
of Indiana v.
Pac.
Dairy
252,
(2d) 89, 91; Rapides
E.
Crowder, 214 Ind.
15 N.
App.,
247, 249;
158
Mathews, La.
So.
Co-op. Ass’n v.
Dealers’
Co.,
58, 59;
Realty
App.,
La.
145 So.
Wild v. Standard General
929,
301;
Shirley Planting
135 La.
66 So.
Common
Co.
Levert
194, 196;
Ky.
W.
Ulmer v. Lime
Muir,
435;
170
186 S.
wealth v.
;
1006, 1007, L. R. A.
1001,
57
66
387
Co.,
579,
R.
98 Me.
A.
Rock
593,
568, 571,
75 A.
27 L.
592,
Hooper,
Eq.
76 N.
Jackson v.
J.
82,
134,
Nev.
100 Paс.
Rickey, 31
A.,
658;
parte
R.
N.
Ex
S.,
140, 135 Am.
Rep. 651;
St.
People’s
Park
Pleasure
Co. v. Roh
leder, 109 Va. 61 E.
S.
981;
S. E.
State ex rel.
City of
Ry.
Tacoma
Co.,
v. Tacoma
&
Power
Wash.
506, 508,
Pac.
32 L. A.,
S., 720;
R.
N.
Crampton, Cir.,
Aiello v.
R. M. 14, Chapter 2, Title sections 14-201 to 14-222 set special forth the statutes of this state governing the incor- poration management cooperative associations purpose of trade prosecuting industry, branch of or the *6 purchase and distribution of consumption, commodities for borrowing the money or lending among members for indus- purposes. trial
R. 1947, C. M. provides: 14-202 person per- see. “No shall be mitted to subscribe for or control or own more or less than one ’’ share of the common stock of such association.
R. C. M. 14-205 provides sec. that associations formed Chapter under such corporate politic “shall be bodies and for period they for organized, exceeding forty are not * * * years; may sued; may own, sue and be possess, enjoy and so much personal real and necessary as shall be for the property business, may transaction their and dispose sell and may may They money same. pledge borrow and property, their personal, payment thereof, both real and to secure the and powers*necessary requisite shall have and exercise all to carry objects they may formed, into effect the for which be usually by co-operative associations, and such as exercised are duties, subject all to restrictions liabilities set forth in the general corporations, in relation similar except laws to so far as may enlarged by be limited or act.” the same this (Emphasis supplied.) provides: C. M. 14-206
R. sec. “The officers of the asso- of directors, shall consist a board ciation who shall exercise * * * corporate powers in such association a presi- invested secretary, dent, vice-president, treasurer, to be elected provided by by-laws. by-laws All shall (Emphasis the association.” adopted the stockholders of be supplied.) earn- net provides: profits M. 14-214
R. C. sec. “The those entitled shall distributed to ings of such associations be by-laws which shall thereto, prescribe, shall at such times as months. such associations be as often as once in twelve for If upon the years declare a dividend shall consecutive fail five majority of capital, paid-up shares of holders its stock, by outstanding petition, capital par value of the issued may court setting fact, apply forth to the district such place principal its of business this county, wherein is situated If, hearing, allegations of state, dissolxition. its true, may adjudge court a dissolu- petition are found be (Emphasis supplied.) tion of the association.” “* * * provides: R. sec. 14-215 No association C. M. or- perform any- ganized required this do or under act shall corpora- thing specially required not herein in order to become a tion, (Emphasis supplied.) or to continue its business as such.” provides: secretary 14-221
R. C. M.
sec.
“The
of state
incorporation
any corpora-
shall
issue
certificate of
’’
except
compliance
with this act.
tion or association
property
persons
A
from third
for the
lease
*7
corporation
prima
its
were
use
the
and
directors
of
facie
designated
empowered
place
lease an office at the
in its char
to
incorporation
principal
of the
ter or articles of
for the
office
Co.,
Min. &
corporation. McConnell v. Combination
Mill.
31
may
563, 573, 79
248. Likewise
directors
lease
Mont.
Pac.
the
a
obtaining the
corporate property without first
con
part of the
Slater,
v.
161
Seal Gold Min. Co.
of
stockholders.
of
sent
the
“Corporate authority
of
621,
to take
lease
organized carry necessarily trading to on a business have power property necessary leаse of take when to the conduct Cyc., (Perm. 7 Corporations Ed.), of such business.” Fletcher 2977, Compare 22. p. Club, sec. Polacheck v. Michiwaukee Golf 233; 223 N. Gaebler, Wis. W. v. Thauer Wis. 232 N. W. 563. exceedingly functions Every of stockholders are limited. impliedly agrees, becoming
stockholder on a member of powers all to the execution of conferred corporation. law on the He management consents that the and control of corporate business and interests shall be vested in agrees the board of directors and that such board shall exercise corporate powers corporation. in vested He knows that ordinarily, a stockholder, as he must abide the decision aggregate or the capacity, their as the directors may be, upon case all matters which the law commits to their charged knowledge control and determination. He is with the generally, statutory authority, absence of stock holders cannot act for individually either collectively; being reason of a stockholder he has no agency corporation; for the that he bind it and cannot that di management rect participation corporate in the affairs a right stockholders, such, which the S., as can claim. 18 J.C. Corporations, 1171, 1172, sec. pages and E. M. 1947, C. sec. 14-206. has money “He no direct control over property corporation, the,right manage corporate control and being property through vested exercisable officers, agents.” the directors, S., J. Corporations, C. 512, page 1191, sec. However, note 45. a stockholder dissatisfied with the management internal of a has call his he, fellow stockholders’ attention to conditions which good faith, regards prejudicial the best cor interests of the poration Jarratt, its Grayburg stockholders. Oil Co. v. Tex. App., Civ. (2d) 16 W. Compare: S. Nat. Bank First Fireproof Waterloo Storage Co., v. Bldg. Iowa N. 14, 17; W. Mt. Vernon Bank Employment & Trust Co. Iowa *8 “The 402, (2d)W. 403. Comm., 1165, 11 N. Security 233 Iowa by law, and prescribed acting manner directors, the board of controls the corporation, conducts not of a the stockholders 5933, (Sec. Rev. Codes property corporation the of business Co., Canal ; Raish v. Orchard M. sec. C. 15-401] [R. is 655); approved payment of claims Mont. 218 Pac. the the the conducting of business but an incident to -the Corp. v. Larabie engaged.” is Pioneer Minerals (2d) 884, Bankers, 886. See also: 99 Mont. 43 Pac. Bros. 218, 231, (2d) 90 Pac. Anderson, 108 Hanrahan v. Mont. (3rd 390- Corporations Ed.), pp. Thompson on sec.
In minority not dictate the it is said: “The stockholders can only with its man- policy corporation, the interfere of can agement majority beyond or when act of the is fraudulent the minority corporation. The powers powers their or the of have, course, present their at to views stockholders of corporate meetings, questions pоlicy, stockholders’ to on of vote and to be informed of the condition of the but the really right possessed by compel majority them is valuable to honestly to within the laid the corporate act bounds down words, minority In and the laws. other charter stockhold- only question majority ers can the acts the directors or stock- of vires, illegal such acts are ultra or fraudulent. holders where generally manage- Courts decline to interfere with internal minority stockholders, at the of ment of a instance majority acting strong ultra or a unless the stockholders are vires mismanagement minority fraud or is shown. stock- case of acquires impliedly agrees at the he his stock holder time majority govern coming will shall in all matters within incorporation. the charter or the act There no limits of can be minority acts within the interference with stockholders, discretionary powers directors * * * enough allow this interfer- pursuant It is not law. successfully operated is being that the ence minority contrary operated way in a the interests arraign di- stockholder. To allow dissatisfied ‘ *9 country rectors before tbe of courts whenever in opinion of such a or policy pur- wiser better could have been sued, practically would put an end to the claimed benefits capital’.” result from associated Wiggins The averment that defendant “has demanded and cooperative received from said per $70.00 association the sum of alleged part month as rental occupancy for the use and of property” real corporation alleged of which the is to be “the sole and simple exclusive owner fee title” not itself does of alleged leasing vires, show that the of illegal act either ultra or may fraudulent. One be the sole owner of the fee to the real building thereon, estate and own the store situate nor have right or possession building. may use such of One be yet owner of the fee and not be entitled to “the occu- use and pancy part property.” may of the real An owner of the fee a property one, years enter into lease his or 40 thereby occupancy” surrender his to “the use and property in part or in whole. The owner of the hotel fee a property required which he has leased another still be pay a rental entitle him occupancy” to “the use and room of a space or office therein.
“Ordinarily, where of action cause exists favor of a cor poration, brought by suit must be itself in the name, corporate brought by and cannot be a stockholder on his * * *” behalf, own or on behalf of himself and others. Cyc., Fletcher Corporations, (Perm. Ed.) sec. p. 301. R. M. 93-2801, requires C. sec. every action must be prosecuted in property the name of the real in interest. object defendant, оf this against statute “is to save whom judgment may obtained, from further harassment vexa tion at the demand, hands of other claimants to the same and to prevent making transfer, a claimant from a simulated thus any just defeating counter-claim set-off which defendant pressed by would have to the demand if the real owner.” Bancroft’s Code Pleading, see. p.
By alleging Trading that the defendant Farmers Union Com- pany "is simple the sole and exclusive owner in fee title of the ** * lands plaintiff’s pleading affirmatively described” shows the defendant real party interest, is the E. M. 1947, 93-2801, supra, C. sec. and as such authorized to bring prosecute quiet to final an decree action to title to the real estate here involved. E. M.C. sec. 93-6203.
A sue, stockholder representative cannot as a of by bringing law, notwithstanding an action at corporation could have in an recovered action at law. Thus always stockholder’s equity suit is a suit unless pro otherwise vided statute. 13 Cyc., Corporations (Perm. Fletcher Ed.), sec. pp. 299-301.
"A stockholders’ derivative suit is an invention of courts of
equity recognizable and only equity in and cannot be maintained at law.” Shaffer, C., Liken v. Supp. D. F. What then must complaining stockholder show to warrant by interference a equity court of with management the internal corporation? a early English case of Harbottle, Foss v. Hare English Eeports 189, brought decided in by was Eoss and Turton, two shareholders of Victoria Park Company, corpora- a tion, on behalf of themselves and all other (except defendant) one named as against directors, the named corporation’s shareholder and the solicitor and There, architect. here, a demurrer was sustained the pleading plaintiff shareholders,- suit was plaintiffs dismissed and appealed. —-the plaintiffs There charged defendants with concerting and effect- ing fraudulent illegal transactions, whereby and property corporation was misapplied, wasted; aliened and that there had ceased to be a qualified sufficient number of directors to board; corporation constitute a that the had no clerk or office sought appointment and of a receiver and a against decree good defendants to appellate make the loss. Thé court, in af- firming trial in allowing court’s action the demurrer
dismissing suit, speaking through Vice-Chancellor Sir James Wigram, recognized right that the of action inwas the defendant corporation and said: not, successfully be, argued
“It nor could it that it was a any matter corporation of course for individual members of suing thus to assume to themselves the the name of corporation. corporation aggregate In law and the mem- bers of thing purposes are not the like same this; only question alleged can be whether the facts justify this departure which, primа facie, case from the rule require would that the should sue its own name corporate character, its or in the name of someone whom appointed representative. the law has to be its “* * * injury If a case should arise to a of members, adequate remedy remained, some its for which no except corporators private that'of a suit individual in their characters,' asking protection in such character the of those rights corporate entitled, to which in their character I were forcibly think principle cannot but so laid down (4 Myl. 635; Lord Cottenham in & Wallworth v. Holt Cr. see Eldon) per also Ves. Lord and other cases apply, would justice and the superior claims of would be found diffi- arising respecting culties out of technical rules the mode in required corporations are sue. “But, hand, on the other it must not be without reasons of a very urgent character that practice established rules of law and *11 departed from, technical, which, though are to be rules in a sense general principles justice are founded on convenience; of and question entitling and the is whether a case stated in this bill is private (His the Plaintiffs to sue in their characters. Honor Act, 1, 38, 39, 43, stated the substance of 46, 47, 48, sections ” 49, 67, [supra, p. 464, seq.].) and n. et plaintiff’s The pleading fatally vice-chancellor held to be de- allege because it fective failed- to the absence of at least an act- ing or empowered de board of directors to authorize the facto bringing duty plain- of tbe two of tbe suit and because it wás tbe been complaining tiff of what has done to have meeting have attended at some called a stockholders or to regular meeting annual of the stockholders and there obtained majority saying the action of the on the matters issue majority approved such of the stockholders have ratified action of board directors in which event body thereby. whole of shareholders would have been bound Mozley Alston, English Chancery 790, In 1 Phil. v. Eng. L. Reprint, 833, English ap- R. Full decided pellate expressly approved principle practice court adopted Harbottle, announced and in the earlier case of Foss v. supra. English Gray Lewis, Reports, App. case of v. Law 8 Ch. brought by decided in one shareholder of Charles Co., Ltd.,
Laffitte & all a on behalf of himself and except defendants, seeking other shareholders those named as to compel the directors of and a bank to restore £230,000 alleged illegally improperly to have been taken corporation’s 1051) James, from the (p. funds. Therein Sir J., L. said: opinion only person you
“Now in this case I am of that the —if may call person having complain it a incor- was the — porated society corporate called Laffitte & Co. In its Charles sue; sued, character it was liable to be and was entitled if company corporate character, sued its the Defendant might allege compromise by company in its release or corporate in a open character —a which would defense plaintiff suit where a suing and other on behalf of himself importance shareholders. I think maintain it is of the utmost Harbottle, Mozley rule laid down in Alston and Foss v. which, corporate I understand, only exception is where the body got has majority, into the hands directors and of the pur- using power directors and their for the are pose minority, doing something who against fraudulent Merryweather, them, are overwhelmed as in where Atwool v. *12 Wood, circumstances, Vice-Chancellor under those sustained a bill a others, shareholder on behalf himself and of there attempt it was after an proper had been made to obtain a au- thority corporate body public meeting from the itself as- sembled.” English MacDougall Gardiner, Reports,
In the case of v. Law Chancery Division, 13, James, p. J., at Sir W. M. L. said: “I opinion am ought of that this I demurrer to be allowed. think importance it is companies of the utmost in all these that Mozley is rule which well known in this court as the rule in v. Copper Alston and Company Lord v. Miners’ v. Har- Foss always to; bottle say, nothing should be adhered that is to that disputes connected with internal between the shareholders is subject to made be оf a bill some one shareholder be-- on half others, of himself and unless something illegal, op- there be pressive, something fraudulent —unless there ultra vires on part company, of company qua part or on the of the ma- jority company, persons so that not fit are to deter- it; every litigation mine but that must be in the name of com- pany, company really may if the desire it. Because a there be great many wrongs company may committed a —there against directors, may against officers, claims be claims there may against debtors; they variety there may be claims be a things company of, which a well complain be entitled to but which, good sense, they as a matter do not think it subject litigation; make the and it company, is the as a com- pany, which anything has to determine whether it will make that is wrong company subject-matter litigation, whether it steps prevent will take itself to wrong being from ’’ done. leading Oakland, case of Hawes U. S. L. Ed. January decided 16,°1882, English reviews the above cited cases and announces the in the United what rule States as to must be shown stockholder in' a him to enable sustain in equity name, court of in his own a suit founded on a right of action existing corporation itself, and in listing plaintiff. After appropriate itself is the grievances an a number of will sustain such action the "But, grievances court said: in addition the existence of relief, equally important which cаll this kind of it is *13 permitted name, before in his the shareholder is own to institute usually a litigation which belongs corpora- conduct tion, show, court, he should to the satisfaction of the has that he obtain, exhausted all the within reach the means his within corporation itself, grievances, the in con- redress his action formity earnest, to his wishes. He must make an not a simulated effort, managing body with the to induce remedial part, action on their apparent and this must be made permits, permitted, show, to the court. If time or has he must directors, if he fails an with that he has made honest effort to obtain body, action as a the matter of complains. case, which he And he must show a if this is not done, it could it done, where not be was not re- reasonable to quire it. complainant
"The efforts to such induce action as on desires part directors, of the and of the when is shareholders that neceskary, and the efforts, these cause failure should be ’’ * * * stated particularity with important
So did the court the principle deem announced 16,1882, on January case, it v. that supra, Hawes Oakland later, namely January 23, one week 1882, incorporated on it principle adopted in and Equity requires Rule 94 that may before the stockholder sue must he first make se efforts to cure managing and, relief "from the directors or trustees if necessary from the shareholders” unless such effort useless. 23(b) See Rule Procedurе, of the Federal of Civil U. Rules S. Long A. Stites, Cir., (2d) 554, denied, C. 88 F. certiorari 706, 939, U. S. L. 1360, dismissing S. Ct. 81 Ed. a bill allegations insufficient reviewing prior federal decisions. Eubanks, The annotation 185, to Cadwell v. 326 Mo. 30 W. S. (2d) page R., general in 72 A. L. at states the rule thus: "The are holding cases uniform in that there must a request be directors, or an body sue the action
that the stockholders as benefit, an individual stockholder brought for their before be interest bring an action —unless words, unavailing. In useless and other request such a would be all redress must exhaust means of an individual stockholder bringing an in the interest corporation before action within the ’’ supporting above rule see corporation. For the eases pages 72 A. L. R. at 628-638. 227 Pac. Refining Co., 71 Mont.
In Allen v. Montana 582, 587, said: decided in this court showing that a any event,
“In in the absence of a by persons refused their aid to voting stock was held who alleged wrong complaint is now obtain redress for the of which made, any showing that the case will not in the absence of stockholders, it delay necessary action admit of to obtain they plaintiffs appeal to the stock- Avas incumbent they institute denied relief before could holders and that *14 action; words, in a court will not do for this other * * * they may do for themselves. stockholders what ‘ plaintiffs case is that Our this branch of the conclusion they all available means of redress failed to that exhausted show itself; in court did not err corporation within hence the 943, refusing J., 14 C. 944.” relief. Lee, 328, 337, 722, 724, 260
In v. 80 Mont. Pac. decided Cobb court, 1927, go this stockholders can into in court said: “Before remedy they their within the it must first exhaust may they stock, they If control self. a hold 1921), or, (Section 5937, election R. C. if hold of directors they may objectionable stock, remove an di two-thirds of the rector, having meeting purpose. called a for that caused to be (47 5940, Id.; McIntosh, supra, 70, Mont. 130 Section Brandt v. 413). Pac. they may
“The court will not do which (71 Refining Co., supra, do for themselves. Allen v. Montana 105, 582). minority A Mont. 227 Pac. stockholder must mak°ean body managing earnest effort with the to in-
535 appear must and this part, their action on remedial cluce show, if he must permitted, he permits or has ‘If time court. an honest effort directors, made that he has fails with body, in the matter of the stockholders obtain action ease, if this is not must show complains. And he which he- re- not reasonable to done, or it was done, it could not be where Ed. 827. 450, 26 L. Oakland, 104 U. S. it.’ v. quire Hawes “ * * * 1916 two of the during show that evidence tends to directors, Cheadle, K. were and E. Alphonso Jackman plaintiffs, meeting year. after that stockholders’ and that there was not a awere directors, Jackman and Cheadle If but three were there meeting called a so, they If could have majority of the board. 5944, 1921) R. and have taken (section C. of the board requisite action.” case, supra, and in the this court in the Allen Cobb
While Oakland, v. case, supra, quoted aрproval with from Hawes announced, yet supra, applied and followed and the rule therein Sullivan v. Moun suggested it has been that in the later case of tain, 224, (2d) 477, 1945, de 117 Mont. Pac. decided we ap parted from that rule. The record filed this court on the judicial notice, peal case, take the latter we Co., App. (2d) Hartford Accident & Indem. Cal. Corum v. 710, 891, (2d) construing identical with Pac. statute 93-501-1; Grove, Mesa Irr. R. M. sec. La Lemon etc. C. 999, 1000; Lem Halley, 235 Pac. Cal. District Casualty (2d) 169 W. Co., 350 Mo. S. mon v. Continental plain 920; S., Evidence, 50, page sec. discloses that C. J. showing that Dr. complaint pleads tiff’s therein ultimate facts Sullivan, therein, exhausted all means of plaintiff J. B. had and it brought within he his suit redress before had him the appear pleader would must before have complaint cases, supra, drafting Allen and Cobb when *15 capital alleges: I) That the complaint (Paragraph that such Shelby of the 250 shares of the First State Bank of stock B. each; (par. II) plaintiff that J. Sullivan par $100 value of 55 shares of such stock duly was a director and owned elected 536 brought
and that he behalf of all the action on stockholders Ill) corporation; (par. plaintiff the benefit of the that had orally writing expressly and in directed the attention of members of the of directors to the conduct of the defendant board they R. D. Mountain and had demanded that institute action against money Mountain to recover the of the use; IV) wrоngfully appropriated (par. he had to his own during complained the times of the directors of the Mountain, Johnson, Drake, were R. D. M. the defendant J. O. E. McIntyre Sullivan; Cheadle, plaintiff E. K. Ed B. J. the directors were the owners of shares of stock cor- poration as follows:
Mountain shares Drake shares Johnson shares McIntyre 55 shares Sullivan shares 5 shares Cheadle Total shares Paragraph alleges IV complaint then that “the said R. D. Mountain and J. *W. and O. E. E. K. Johnson Drake and Cheadle, at corpora- all of the times were directors of said tion, by were and now are intimate friends and that reason of friendship persons ownership by between said the close R. D. said Mountain of the aforesaid shares of stock of said cor- whereby poration largest had and maintained he individual meetings, vote of shares of stock at stockholders all Johnson, of the fact that the said Messrs. reason Drake and voting elected directors of the Cheadle were R. D. Mountain in of his stock said their favor at the annual meetings said for other Mountain, Johnson, causes and known to said Messrs. reasons Cheadle, plaintiff, Drake and and unknown to the said R. D. persons in Mountain dominated and controlled said their actions
537 per- directors acting as said persons in and said as directors R. D. said and controlled be dominated themselves to mitted and to bis demands times were servient and at all Mountain corporаtion regardless said concerning affairs of directions ’’ corporation. of said of the best interests X said IX and that complaint alleges paragraphs The also Clearly from corporation. president R. D. Mountain was of said directors, al- fact, influence over the this ultimate Mountain’s strong, and since the leged friends, would be to be his intimate of the total complaint alleges that shares owned its that it shares, plaintiff complaint Sullivan’s shows on face meeting stock- would been called have useless to have large bringing a when the owners of a holders to authorize suit already prosecute suit of the stock had refused to such by their the record shows that action directors. While appearing separately interposed general defendant Mountain complaint, demurrer that demurrer it fails to show such argued passed upon court, was ever trial defendant’s apparently considering allegations complaint counsel of the plaintiff sufficient to show a to sue as stockholder. separate
The defendants filed answers ad- answers. These capital shares; mitted that the stock of the bank was that plaintiff prose- owned shares and that and he commenced cuted the action on behalf of all of the cor- other stockholders poration similarly situated for the benefit of the allegations complaint but denied ease the other and the presented. was tried on the issues so profit
The trial court
that:
made
found
“Whatever
was
Mr.
an
grew
Mountain
with the Bank as
out of his connection
thereby.
officer
It
permitted
profit
and
should not be
he
my opinion further,
brought
that
information was
sufficient
justify
home to
that
the directors of
bank
the inference
Mr.
Sullivan exhausted
within the
his remedies
(Emphasis
plain-
supplied.)
finding
that
The
such
effect of
Judg-
complaint.
tiff
proved
allegations
Sullivan had
of his
against
plaintiff
ment was
entered
favor
Sullivan
$3,600
$528
the defendant Mountain
for the use
bene-
from
adjudged
plaintiff
fit
the bank and
that
also
recover
attorney
paid
his
out of the
$600
bank
reasonable
fees of
to be
collected,
plaintiff
amounts when
also recover
above
from
$66.11.
Mountain his costs taxed at
appealed.
specification
defendant Mountain alone
One
urged
error
“that suffi-
finding
court
trial
erred
*17
cient
brought
was
of the bank
information
home to the directors
justify
to
the inference that Dr. Sullivan exhausted his remedies
with the corporation.”
In his
said
appellant
brief
Mountain
“Respondent
permitted
only
is
act
and if
plaintiff
to
as a
when
has,
he
minority
as a
stockholder,
at
dis-
exhausted all means
his
posal, within
corporation,
the
to
Bank
induce the directors of the
to
upon
commence a suit
support
that cause of action.”
In
of
his
appellant
case,
contention
supra,
Mountain
thе Allen
cited
case,
Cobb
supra,
McIntosh,
70,
the
v.
Brandt
Mont.
Pac.
413, and Deschamps Loiselle,
v.
Mont.
As complaint Mountain, above the v. supra, Sullivan alleges plaintiff only that not that demanded the directors com- pel Mountain to account corporation, but also demanded they against Upon institute an action him. of the refusal the against Mountain, corporation’s directors to start such action the president, it plaintiff was useless for the Sullivan ask to them to a meeting call when, complaint of the stockholders as the shows, the a holding directors of all stock cor- the poration opposed starting were to such an action. Under such pleaded proved holding circumstances so court in Sulli- van could start modify and maintain his action did not over- Brandt, Cobb, rule the Deschamps Allen cases. Mont,
In the case, page 228, (2d) Sullivan at 160 Pac. at page 479, uniformly this said: court “This court has held that the above requirement met, reasonably either where it appears is that it would be aid useless to seek from the stockholders or where as by tbe such being pursued a conduct course of application relief fruitless.” would render an allege plaintiff complaint In does instant case meeting requested special directors to a call meetings or by-laws governing special provisions or the plain- majority of stock or that the directors controlled a stockholders, had con- a list or that he procured tiff had of the been attempted them, or that he had denied tacted or contact names right books obtain the inspect corporation’s plaintiff allege stockholders, nor did and addresses of the part corporation’s act, fraud or faith on the of the ultra vires bad part Wiggins. Such com- directors, of the defendant or on clearly de- plaint repeated under and is insufficient ease, court, including supra. Mountain cisions this may That in favor a cause of action exist the action and that the directors decline commence prose to institute and empower does not stockholder Para said Hornstein v. cute suit in his own name. As was (2d) pages Pictures, Sup. 1942, mount 37 N. Y. S. at “* * * things company may variety ‘there of, which, but a matter of complain well be entitled to subject good sense, do not think it to make the litigation’ (MacDougall Gardiner, [1875] 1 Ch. Div. *18 City 104 26 quoted Oakland, 450, 457, v. U. L. in Hawes of S. 179 Marcus, 257, 263, 264, Ed. v. 258 N. Y. 827, and in Isaac 487), corporation N. E. en and whether not a shall seek to or existing is, force a in favor like in the courts of action its cause other questions, management business a matter of internal to be representatives decided directors of the as the executive body corporation [Citing stockholders, Whether the as a cases]. vоte, a mat majority instruct in such could the directors ter, Copper as seems to be in United Securities Co. v. intimated Amalgamated Copper 261, 509, 61 Co., 263, 244 U. S. 37 S. Ct. L. 1119, Ed. or whether in matter directors are such a representatives corporation, exclusive in as seems to be 559, 313, timated in E. Curtis, 323, Manson v. 223 N. Y. 119 N. 540 1918E, presented
Ann. not in this case and Cas. is need overwhelming not be is not decided. of acquiesce apparently Paramount af- stockholders of here They firm not what directors done. have undertaken have to instruct to do otherwise.” directors Castleton, (2d) 748,
In 144 (2d) Goodwin v. 19 Wash. Pac. 725, 731-733, 150 L. R. 859; A. court said:
“Ordinarily, an at a suit in equity, action law or to enforce corporate rights wrongs or to redress done ato can- not aby group be maintained or a of stockholder stockholders. The reason for this that of is cause action accrues to the cor- poration itself, rights merely stockholders’ therein are ¿s- of a derivative character and can therefore be enforced or only through corporation. serted Corpora- Am. Jur. tions, 461; S., Corporations, page J. sec. C. sec. 1272.
“However, it where is shown the stockholder has ex hausted all his obtain available means to within the grievances itself redress of his or institution of an action conformity wishes, appears to his and it thé is incapable enforcing accruing action it to or that fraudulently collusively its or acting officers dirеctors are or among with themselves or others in such as will manner result injury serious or the interests of its stock holders, then, prevent justice, order to equity failure will permit brought by a suit to stockholder or stockholders * * a right belonging corporation. enforce of action
‘‘ ‘The
bring
stockholder does not
such a suit because Ms rights
directly violated,
been
Ms,
have
because the cause
action is
sought;'he
permitted
because he is entitled to the relief
simply
judicial
sue in this manner
in order to set in motion the
machinery
Accord,
Puget
the court.’
Sound Wood
Elliott
Co.,
228;
101 Pac.
Missionary
Products
Wash.
Tribble v.
Heart,
Sisters of Sacred
Wash.
Pac.
connection,
from
“It does
follow
what has been said in this
however,
that a stockholder or a
group of
*19
may impose their
npon
unbridled wills
the officers or directors
of a corporation
launching
litigation
into
purpose
obtaining
of
for it certain benefits which
com-
plaining parties
belong
corporation.
deem to
or be due to the
policy may
that,
circumstances,
Business
dictate
under certain
it
unprofitable
would be unwise
npon
rights,
to insist
one’s
accordingly
directors
of a
or the
of its
bring
to
decline
or maintain
suit which a
single
minority
stockholder or a
believes should be insti-
group
tuted.
“
‘The mere fact that a
has
cause of action for
injury
an
always
does not
it
sue,
make
incumbent
it to
more than in
If,
the case
an
opinion
individual.
of the
directors or majority
stockholders,
of the
the best interests of
company
require
do
sue,
it
it
need not do so. The
ordinarily
matter
is within their discretion,
and if
act in
good faith, their
refusal to sue violates no
dissenting
stockholders, so as to entitle them maintain
a suit in their own
behalf. The
exercise of such discretion
the directors will not
lightly
set
court,
aside
and where a stockholder com-
plains of snch action of the directors the court will consider the
circumstances, and, if
shown,
no bad faith is
will decline
sub-
judgment
stitute the
of the stockholder for that
managing
directors,
Fletcher,
Cyclopedia Corporations (Perm. Ed., 1943
Vol.), 147,
Rev.
sec. 5822.
‘‘This court has itself enunciated
principle
Opportun-
ity Christian
Washington
Church v.
Water
Co.,
Power
136 Wash.
116, 238
641;
Pac.
as has the United
Supreme
States
Court in
Corbus v. Alaska
Mining Co.,
Gold
Treadwell.
U. S.
* ° *
S. Ct.
“We point, expressed above, par that the ticular privilege which, under certain circumstances, is accorded a single stockholder or to a group stockholders, simply setting judicial motion machinery, and its purpose sole prevent is to what would otherwise amount to a justice. failure
‘‘ stockholder, group that a lone or circumstances mere al- action, a derivative and has individuals, of such has initiated entitling him them to maintain the leged existence facts establish place suit in of the do not of themselves necessity for its continued propriety of the aсtion or the by corporation, its maintenance, otherwise, device the this would at officers, directors, and conclusively powers management their once be shorn of in affairs which are of vital con- discretion the conduct of those The lone stock- cern to the and all its stockholders. only have bringing such action not holder or the stockholders charges entitling the cor- proving the burden of the material they poration recover, itself to but must also establish .
grounds corporation. entitling place them to sue in of the corporation or
“Since those who conduct the affairs of the right, in power who have over it have the the ultimate of control instance, brought the first whether a suit shall be to determine controversy existing or whether an shall compromised suit, right inquire, without also have the to so already consider, brought and determine whether a suit well-founded, dissentient stockholder is what its chances for suc- may be, any cess in its continued maintenance whether event may injuriously prosperity of the present affect the or future corporation. completely Their in is not fore- such matters group stalled or a single the mere fact that a stockholder by instituting a derivative stockholders has taken the initiative ’’ action. or more of 75 plaintiff, but one years elapsed since Three have this .corporation, commenced holding stock in the persons other interestéd, who “similarly inviting all other stockholders suit action” expense of this in and contribute elect to come equity aid a court of seeking join in him his action to with right directors board of he or the determine whether to in interest right Wiggins has sufficient landlord whether Sheridan, used and lots town 51 feet of the two south business, conducting its occupied by the tenant such, per month or other $70 to entitle landlord to collect stockholder has sum as rental therefor. No other elected in.” No other stockholder has elected “contribute to “come years expense” litigation. court, plain- After three repeated attempts tiff still stands alone his to override the judgment business and decision of the board of directors not litigate Seventy portions the title to these fractional of the lots. per pro-rated among figure dollars month 75 shareholders would an expense plaintiff ninety-four month, per of less than cents years $34 —less than pending. for the three this suit has been By declining any part trifling controversy to take in this have plaintiff’s stockholding neighbors apparently 74 or more placed stamp approval their policy on the “hands off” determined *21 upon corporation acquiesced in, the officers of the and rati- fied and affirmed what their board directors of has done. quiet
Suits precipitate long, title hard-fought legal often fraught battles uncertainties, with expense. hazards and much experience This Co-operative Supply Farmers Oil & Company resulting of Conrad separate at least four suits in the district court county, (Cases of Pondera Montana Nos.
5533, 5607 5637 therein) and appeals,to and at least two this (Cases eourt herein). Nos. 8448 and 8743 Pritchard Petroleum Cooperative Co. v. Supply Farmers & al., Oil Co. et 117 Mont. Id., (2d) 526, Pac. Mont., (2d) and 190 Pac. No decision has been cited nor has our exhaustive research of year
the authorities from present revealed any case a equity permitted where court of has dissatisfied lone single holder of but a voting corporation share of stock maintain a suit in quiet his own name property to real title affirmatively which he pleads corporation “is the sole and ’’ owner in simple exclusive fee title. That such lone stockholder is without to maintain such an action is fundamental Applying principles hornbook law. elemental stated above bar the case at it is clear that the trial rulings court’s judgment were correct. judgment
The of dismissal affirmed. is ASSOCIATE JUSTICES FREEBOURN and BOTTOMLY concur.
MR. JUSTICE : (dissenting) ANGSTMAN many I agree principles with course of the fundamental majority opinion. hornbook law contained agree I that courts will not interfere with the internal man- agement corporation of a at the instance of management discretionary when such involves matters within scope powers corporation. go I will further and say that courts will not interfere such matters even at the instance of a of the stockholders. management
But we are not here concerned with the internal corporation by of a acting discretionary its directors within their powers. alleged it corporation Here is that the is the sole property only exclusive owner of the and that it ‘' land Wiggins right, owned and that claims some title, in, interest or estate or lien or encumbrance the real property” “every alleged involved but that with- such claim is out foundation and void.”
Notwithstanding property his lack of interest in the it is alleged demanding that he has been been has paying per him alleged $70 month as rental and this demand has $100 since the commencement of this action been increased to per month. property of business is held in trust
corporation members, clearly beyond and “it power for its is the corporation, against least their such business at creditors members, gift property and a donation or of their for a to make way tending in their purpose no to further business.” Am. 820; Jur., 806, p. “Corporations,” see. see McConnell v. Co., Min. & Mill. 30 Mont. 76 Pac. Combination Rep. Am. St. allegations complaint if clear to me that of the
It seems the they true, demurrer, must be purposes are and for of the the and amount true, complained of are ultra vires taken as the acts upon to a fraud stockholders. the I point disagree opinion.
On that I with the vital majority opinion grounded upon palpably the also think the is only what is erroneous notion here concerned with that we are management corporation. a therein denominated the internal management legion internal Cases are that when that amounts ultra vires practice to the of fraud the stockholders or is illegal, equity will intercede on behalf of courts of protect stockholders. ordinarily
I a of action at law concede that where cause exists corporation, brought by corpora- in suit favor of must be corporate may brought in tion itself and its name and a stockholder. equity, however, inflexible,
“In as it is law. the rule is not at case, beyond corporate In a proper equity a court of will look body entity legal members, and, disregard- as a distinct from its ing fiction, recognize that a in will the fact is reality purpose private an association individuals gain, ordinary that, partnership, like an while have not legal corporation, they title to the assets of are neverthe- injury equitable less the beneficial or owners. And if an is com- against mitted or threatened will consti- equitable rights stockholders, and for tute violation of the dissenting stockholder cannot obtain redress or re- reason equity grant through appro- lief a court of will brought by behalf, priate relief in a suit him his own may himself аnd other stockholders who behalf of come according parties, circumstances. Such a suit be made generally brought is under and sustained because committed, persons have or threatened to who control commit, wrongs complained of. equity although corpora-
“A suit be maintained at might maintained an action law on the same cause. tion have *23 Equity power wrongs lias independently to redress such Cyc., Corporations, statute.” Fletcher 5945, 302, Vol. sec. p. seq. et Supreme Court, speaking United States question of this early
in the Dodge Woolsey, case of v. 18 How. 15 L. Ed. say: had longer this to “It is doubted, Eng- now no either in land or States, the United equity both, courts of have a jurisdiction corporations, over at the instance of one or more members; their apply preventive by injunction, remedies restrain those doing who administer them from acts which would amount charters, prevent any to violation of or to mis- application capitals of their profits, might or result in lessening stockholders, the dividends of or the value of their shares, protected by either of a franchises cor- poration, if the acts intended to be done create what inis ’’ law denominated a breach trust. Oakland,
In Hawes 104 U. 26 Ed. S. L. court grounds enumerated the on which a stockholder an equitable has remedy as follows: that, understand that “We doctrine to be enable a in a stockholder to sustain in а court of equity in name, his own suit founded on a of action exist- ing in the itself, and in which the itself appropriate is the plaintiff, must there exist as the foundation of the suit: managing
“Some action or threatened action of the Board of corporation, beyond Directors or Trustees of the which is authority conferred on them their charter or other source of organization;
“Or transaction, completed contemplated such a fraudulent acting managers, party, in connection with some other among themselves, or with other shareholders as will result injury serious or to the interests of the other shareholders; majority them, Directors,
“Or where the Board of or a are acting interest, cor- their own in a manner destructive itself, shareholders; poration rights of other or of the op- “Or of shareholders themselves are where the pressively illegally pursuing in the name of the cor- a course rights poration, in violation of the of the other share- which is holders, only aid of a court of and which can be restrained ’’ *24 equity. is, plaintiff a precise point
The before us has stockholder performed precedent right his maintain all the conditions to to the action. generally agreed prece- conditions
Courts are that one the right dent a to maintain an action for the bene- to stockholder’s fit is that first make demand the of the he and their refusal do so. That condition has directors to act tо been met here. minority through
As to whether a stockholder must seek relief body an the of stockholders before he maintain action question behalf the is which the are on courts agreement. apply not in Some courts held that he must have precedent bring a condition his to stockholders as to contrary view. the action and others take the Some of the cases require him which to resort to the stockholders are cases which sought by he minority the relief stockholder was such that might through have been able to obtain necessity anyone going without the to court. Those cases application question sought would have no here because here having quieted corpora- is that of the title to real estate powerless grant tion. The stockholders were such relief only question themselves. so far as this case is The concerned plaintiff corporate bring is whether suit officers must quiet title. following expressly This court in the cases has either held may proceed that a stockholder an with action after he applied has to the directors and met with their refusal or after application he has shown that to the directors would be futile suggestion and no was made that resort must also be made to Gerry Bank, the stockholders. v. Bismarck 19 Mont. The 810; Cop- Pac. Forrester & v. Boston Montana Consolidated Co., 353; &per Silver Min. 21 Mont. 55 Pac. McConnell Co., supra; McIntosh, v. Combination Min. & Mill. Brandt v. Mining Co., Mont. 130 Pac. Kleinschmidt American v. 413; Ltd., Deschamps Loiselle, 50 Mont. 785; Mont. Pac. v. Pac. 565, 148 uncertainty procedure language reason has arisen
used in what the courts Hawes treat as bellwether case of Oakland, supra. enumerating grounds In that case after equity by minority stockholder, which would entertain a suit “But, grievances the court said: in addition to the existence of relief, equally important which call for this kind of it permitted name, before shareholder is in his own to institute litigation usually belongs corpora- conduct a tion, show, court, he should to the satisfaction of the that he has obtain, all exhausted the means within his reach within corporation itself, grievances, redress of his or action con- formity earnest, to his wishes. He must make an simulated effort, managing body with to induce *25 part, remedial action on their apparent and this must be made to the court. If permits, permitted, time has must show he directors, if he fails with the an that he has made honest effort by body, to obtain action the stockholders as a in the matter of complains. case, which he And if he must show a this is not done, done, re- it could not be or it was reasonable to where not quire it.” every language, opinion,
That like court should be considered in all that light the of the court. In that ease the facts before plaintiff sought in he prevent was to the city minority furnishing of was stockholder from water to the a matter that could have been charge. Oakland free of That was - stopped by could not the stockholders. Here the stockholders quiet question. in Likewise in the Oakland case title to the land allegation pointed “There is no of fraud or the court out that: property, or of irreme- vires, of acts or of destruction ultra injury any kind.” diable question involved in that pointed out that the
The court also minority o£ case one discretion and that stockholder could not interfere with the discretion of board of trustees. The “ point highest court on that said: It be the exercise of the wisdom, City complained to let the use the water in the manner understandingly of. The directors are better able to act on this subject body residing great than a stockholder York. New residing places the stockholders in Oakland other Cali fornia, may by take this view of it and be content to abide action of their directors.
“If so, litigation City this be is a bitter with the to be con- by Corporation ducted one stockholder for and all other stockholders, ? because the amount of his dividends is diminished question
“This itself, answers considering and without point by other demurrer, raised opinion we are of that it was properly sustained, dismissed, and the bill appellant, because the bill, standing shows equity no a court right —no ” prosecute himself to apparent this suit. It is that the court would have reached same had application result unsuccessful been made body stockholder to the of stock- holders instituting before action.
That the ease application has no to the facts here involved is readily apparent. Here we must assume on demurrer that the alleged facts are true. There is not involved here matter of discretion. If alleged the facts true, are pay- ing rental for property use of already which it owns. Such here, clearly acts are ultra vires. Furthermore sought relief that of quieting land, title to the is one that the stockholders could grant without equity. resort to a court of Whether plaintiff resorts directly, thereto or induces action the stock- holders, affects no substantial Wiggins. defendant
On authority of the Oakland case this court in Allen v. Montana Refining Co., 71 Mont. Pac. a made *26 statement upon which the trial court based its conclusion. In “ that case this court appears said: It allegations from the of the complaint plaintiffs that own some of the common stock of the Montana Refining Company, they, if that in connection with friendly them, a
other holders of common stock to own or control majority stock, and if be a fact that the directors were it contrary acting corporation, mani- to the best interests of the festly duty their recalcitrant and elect was to oust the directors company’s promote protect members will interests. who any event, showing In a that a of the the absеnce of by voting persons their aid obtain stock was held who refused alleged wrong complaint made, redress for the of which is now and in showing absence of that the case will not admit of delay necessary stockholders, it in- to obtain action plaintiffs they appeal cumbent to the stockholders they and that relief this be denied before could institute action; words-, in other a court will not do for stock- ’’ they may holders what themselves. do for power grant
If the
had it
stockholders
in their
the relief
justified.
plaintiff,
asked for
then the statement was
far, however,
suggests
So
as the Allen case
that recalcitrant
ousted,
given
directors should
the court seems to have
little
question.
opinion implies
consideration to
ma-
that a
jority
directors,
recalcitrant
the stockholders
oust
where-
requires
as under the statute it
of two-thirds
stock-
vote
holders. R. M.
"When
president
C.
sec. 15-408.
act,
requires
the board of directors refuse to
it
hold-
ing at least
one-half of the votes
order to even call a stock-
meeting
purpose
removing
holders’
for the
director.
Id.
quotes
apparent approval
The Allen case
with
from the case of
Belmont,
Continental
206 N.
Securities Co.
Y.
N. E.
51 L. R. A.,
S., 112,
1914A, 777,
N.
Ann. Cas.
but the court in
language
quoted
the Belmont case used further
the Allen
‘‘
case,
applies
body
facts here
If the
follows:
adequate power
authority
stockholders has
remedy
no
wrong
stockholders,
asserted
the individual
it is unreasonable
unnecessary
require
application
aud
an
to it to redress the
wrong
representative
bringing
before
action”
N.
7, Y.
[206
551 Allen case again the rule of the This court made to reference 1, County, 72 Mont. in Bank of Outlook v. Sheridan State 722. Lee, and in 80 Mont. Pac. Pac. Cobb subject Sulli by case this is that of The latest this court on (2d) Mountain, 224, 160 477, 479, wherein van v. 117 Mont. Pac. this foundation was laid for action court held that sufficient application been had stockholder when unsuccessful in said: to the board directors. This court that case made of found, complaint appear, and court “From the it is made to the Shelby against that the bank defendant had a valid claim the money pay failure to to bank received as a commission the the brought from Haeh. constituting The facts this claim had been to the attention of the several Boards of Directors of the bank plaintiff, duty the and it of Board had then become the necessary steps to Directors take the to obtain redress. Since in the instant sitting case the last Board of Directors took no action, gave refusing so, no reason for do we believe the fully justified trial court was finding showing in that the made lay sufficient to foundation bringing for the of this action ’’ Sullivan, Doctor aas suggestion stockholder. There nowas in that ease that resort must had be or a showing made that it would Lawyers have been futile so to do. litigants rely have the upon given the reasons in opinion law applicable and to me it seems novel doctrine say that this court can now that there were other rea sons opinion mentioned which would compelled have result, same but “merely lurk in the record.” Valier State, Co. v. (2d) Mont. Pac.
The opinion in this case justify undertakes to Sullivan ground case it appears allega- from the complaint tions in that case that resort to the stockholders would have been useless. I think it is too to rewrite the late opinion in the Sullivan ease. But if permitted we were do so we would go have to further attempted by than has been majority in this ease. allegations made in the Sullivan case to the effect that R. D. Mountain dominated three of the flatly filed in that
other directors were denied in the answers Appellant questioned the suffi- ease. his brief this court ciency right maintain the plaintiff’s show the evidence to opinion we would permitted action. Were we to rewrite that merely allega- obliged and not to consider the evidence findings the lower court complaint tions of the and the thereon. interpretation to the give if we same liberal
Furthermore attempted that is now allegations complaint this case *28 obliged in would be to sustain applied to be the Sullivan case we amended complaint complaint us. The the second before pending has thаt the action been complaint. The record shows stockholders, of complaint all March 1947. The invited since join more, in action. alleged which there were to be joined single has stockholder far as we are advised not So unlikely plaintiff that me it seems plaintiff in the action. To for applying in them accomplish anything would be able to record to show. appears from the so sufficient redress in case overrules opinion Sullivan legal In effect the effect import like to the and others of holding in the Allen case di- attempt to oust the must first minority stockholder that a benefit action for may bring equitable an he rectors before corpora- equity his protect thus corporation and makes no reference case opinion in the Sullivan tion. While the Mr. as did the same conclusion thereto, is it reached fact subject in the Mon- this treatment of in his excellent Schmidt Review, 1942, p. 105. tana Law courts. in the federal the rule should be made to
Reference on the resorting the federal courts Because of abuses placed added work diversity citizenship and the ground of in a stock- adopted a rule that upon courts, there was those used to the efforts complaint must set forth action the holders’ stock- the directors action from secure the desired however, apply to state courts. not, holders. rule does This Co., supra. Min. & Montana etc. Forrester v. Boston always necessary to courts it is not And in the federal even Cincinnati, Berg Port, New etc. R. resort to the stockholders. Co., C., Supp. D. 56 F. dispensing with the rule
And the federal courts are lenient discovering or in facts under which it can held the rule does Albany Co., & apply. Delaware Hudson Co. v. etc. R. U. S. S. L. Ed. 862. Ct. I applies The rule which think here is in 3 stated Cook on * “* *
Corporations, Ed., 740, p. 2700, 7th sec. as follows: fact, however, meeting that the stockholders assembled can- not control the in bringing discretion of the directors such a suit; remedy refusing delay, that the to re-elect them involves assumption and involves the that a of the stockholders suit; irreparable injury can the election control such a vesting great may or the financial interests occur in mean- time; and that laches arise as a bar to the stockholder’s suit—has request settled the rule that the stockholder’s corporate directors to institute suit is sufficient. He need * * meeting apply not also to a stockholders’ Mr. Corporations, p. on Vol. Fletcher see. after ' ‘ referring case, supra, to the Hawes said: There is considerable authority, however, necessity denying demand body, the stockholders as a at least where retain no control corporate except business means of an annual election *29 of officers. One line of cases makes a distinction between causes оf which action can be ratified corporation the as a body and those which ratified, cannot be so holding that an appeal to necessary the stockholders is not where the breach of duty the stockholders cannot be ratified the stockholders as a body, subject but that if the matter of the stockholders’ complaint any is for reason within control, the immediate direc tion, power body confirmation of of stockholders, it must brought be to the attention stockholders, of such action, brought, before suit is application unless such clearly would be ’’ useless. The statement made in in 72 the note A. L. E. 628, quoted majority’ opinion in the to the effect that the cases are uniform holding
in may bring that a stockholder not an in action court in the corporation interest of the until a re- he has first made quest directors, that the stockholders sue the that an action brought benefit, justified by be for their is too broad and not the facts. purpose
No useful examining would be subserved here in all cursory the cases in A support cited of that statement. exam- representative ination of a group will of those cases disclose at least respect support some of them do not in that text. In the County Co., 210, case of Difani v. Oil 201 Cal. Riverside 210, 213, Pac. which is the first one cited from the state of California, only question decided was that stockholder standing had no in court because he had not “exhausted all the means within managing his reach to obtain redress from the body corporation.” suggestion no There was opinion apply of the court that stockholder must also body of stockholders. Fleming Copper Co.,
In v. Black Warrior Ariz. 136 Pac. R., S., A. L. N. it that demand was held on the man agement by minority need not made managers complete stockholder before he sue where had corporation. sugges control of affairs of the There was no body any necessity appeal to the of stockholders. tion of I all the cases there cited but most of those have examined involving.merely I examined are cases which have the internal resting as to matters dis- management of the They directors. do not of the board of involve cretion ultra acts, upon work a fraud and acts which such vires alleged here. as those do with desired relief that here have to unlike
Others power grant. of the stockholders to within the it Castleton, (2d) 19 Wash. Pac. of Goodwin The case strongly L. R. so relied ma- 725, 150 A. (2d) seeking wherein the stockholder was opinion was one jority management internal with interfere *30 clearly effecting agreement settlement discre- tionary for the board of directors. matter my sustaining
It conclusion that the court erred de- complaint. murrer to the second amended I judgment think should reversed and the cause re- manded with directions to overrule the demurrer and allow demurring a reasonable time in defendants which to file answer. serve an
MR. JUSTICE I dissenting METCALF: concur opinion Angstman. of Mr. Justice
REICKHOFF, CO., v. CONSOLIDATED GAS Respondent,
Appellant. No. 8929 February April
Submitted 1950. Decided (2d) 217 Pac.