22 S.D. 598 | S.D. | 1909
This is an action by two minority stockholders of the defendant corporation against the corporation and the president, secretary, and board of directors of the same. Findings and judgment being partly in favor of the defendant and partly in favor of the plaintiffs, the plaintiffs have appealed from that part of the judgment denying the plaintiffs the 'full relief prayed for.
The court finds, in substance, the following facts: That the defendant the People’s Telephone Company is a corporation duly organized and existing under the laws of the state of South Dakota, having been organized about the month of October, '1895. That the defendant C. D. Jensen was one of the incorporators of said company, and since its organization has been at all times the president, general manager, stockholder, and one of the directors thereof. That the defendant Lfillie M. Jensen, wife of C. D. Jensen, has been one of the directors and treasurer of said company since about the month of December, 1895. That the defendant Parks 'has been one of the directors of said company since the month of August, 1896. That said Parks became a stockholder and director at the request of C. L. Jensen, who purchased one share of the stock of said corporation and caused the same to be issued to the said Parks. That said Parks has no active interest in said company and has participated at the meetings of directors since his appointment only at the request and in the interest of said defendant C. L. Jensen. That at all times since the month of August, 1896, the board of directors of the defendant company has consisted of said C. D. Jensen, Ifillie M. Jensen, and said Parks. That the
From these findings the court concludes: That the plaintiffs are entitled to have the defendant C. L. Jensen return to the ’company the sum of $10 per month, being the difference between $50, which he agreed to take for his services, and the $60 per month which he charged as salary -prior to June 12, 1897, amounting to $183.33, together with any sum charged by said Jensen for fuel, rent, and lights prior to June 12, 1897; that by the resolution of June 12, 1897, the compensation of Jensen as president, director, and general manager of the defendant company was properly fixed at $75 per month; that the complaint should be dismissed except as to the relief above granted; that there is no equitable showing for the appointment of a receiver, nor further relief against the defendants. Upon these findings judgment was entered adjudging that said Jensen pay to the defendant People’s Telephone Company the sum of $183.33 for the use and benefit of s,aid company; that the plaintiffs’ complaint be dismissed except as to sai'd C. L. Jensen on the part of the plaintiffs; and it was further ordered that each party should pay one-half of the coasts of the action. The appeal was taken from said judgment, except the portion thereof whereby it is adjudged that the defendant Jensen pay to the defendant the People’s Telephone & Telegraph Company
It is contended by the appellants that the trial court erred in failing to find as conclusions of law the full claim or relief to which they were entitled from the findings of fact. It is further contended that the pretended resolution of June 12, 1897, passed by C. I* Jensen and his wife, with the concurrence of Parks, was voidable, if not void, and should have been vacated and annulled by the court, and said C. L. Jensen required to return the money ¡received by him as salary and for fuel, rent, and lights after June 12, 1897, in excess of $50 per month, ¡amounting to the sum of $2,022 in addition to the $183.33 which was allowed for such excess prior to that date. Appellants further contend that the complaint was improperly dismissed for the reason that the relief asked for was granted in part and should have been granted in full, and the costs of the action should have been taxed against the defendant C. L. Jensen, against whom the action was directed, and who was found by the court to be guilty of a breach of trust and misappropriation of the 'funds of the corporation, and under the facts found that plaintiffs were entitled to the appointment of a receiver to fake charge of said property.
We are 'inclined to take the view that the plaintiffs are right in their contention. It will be observed from the findings of fact: That the plaintiffs •were induced to purchase the 73 shares of stock of the corporation upon the representations of the defendant C. L. Jensen that he would have charge of the company, and that the expenses of the same would not exceed $50 per month; that the business of the corporation was managed entirely by the said C. L. Jensen and his wife; that no proper accounts were kept; ■that all of the moneys collected were received by the said C. L,. Jensen and mingled with his individual moneys belonging to the livery corporation; that, in addition to the $50 per month, he had received for a portion of the 'time $60 per month, and for the larger part of the time $75 per month; that he charged and received a large sum for rent, fuel, and light individually; that the whole
It is contended by the appellants that C. L,. Jensen was disqualified to act as a director and vote for either resolution in his own interest, and that his wife was equally disqualified by reason of her relationship to him as his wife, and that the court in its conclusions of .law, in. holding that the resolutions were legally adopted, was clearly in error. This contention of the appellants is sustained by the authorities. 10 Cyc. 590; 3 Thompson on Corporations, § 4389; First National Bank v. Keenan, 12 S. D. 240, 80 N. W. 1135; Same v. McGuire, 12 S. D. 226, 80 N. W. 1074, 47 T. R. A. 413; Sellers v. Phoenix Iron Co., 13 Fed. 20; Butts v. Wood, 38 Barb. (N. Y.) 181; McNaughton v. Osgood, 3 N. Y. St. Rep. 795, 41 Hun. 109; Loftus v. Farmers’ Shipping Ass'n, 8 S. D 201 65 N. W. 1076; Graves v. Mono, etc., Mining Company, 81 Cal. 303, 22 Pac. 665; Smith v. Los Angeles, etc., Ass’n, 78 Cal. 289, 20 Pac. 677; Chamberlain v. Pacific Wool-Growing Co., 54 Cal. 103; Mallory v. Mallory Wheeler Company, 61 Conn. 131, 23 Atl. 708; Ward v. Davidson, 89 Mo. 445, 1 S. W. 846; Troy Mining Company v. White, 10 S. D. 475, 74 N. W. 236, 42 L. R. A. 549. In 10 Cyc., supra, the law applicable to this class of cases is thus stated: “A director cannot with propriety vote in the board of directors, upon a matter affecting his own private interest, any more than a judge can sit in his own case; and any resolution passed at a meeting of 'the board of directors, at which a director having a personal interest in the matter voted will be voidable at the instance of the corporation or shareholders, without regard to its fairness, provided the vote of such director was necessary to the result.” In Koehler v. Black River Falls Iron Co., 2
Section 1619 of our Revised Civil Code provides: “Neither a trustee nor any of his agents may take part in any transaction concerning the trust in which he or any one for whom he acts as agent has an interest, present or contingent, adverse to that of his beneficiary” — with certain exceptions that are not applicable to this case. And section 1623 provides: “Every.violation of the provisions of the preceding section of this article is a fraud against the beneficiary of the trust.” This question was very fully considered by this court in the case of Loftus v. Farmers’ Shipping Ass’n, supra, in which this court said: “While the courts have -not always been in strict accord as to the legal effect of a contract so made, it seems to be pretty well established that such a contract is 'at least voidable at the instance of those, like stockholders, whose interests are affected.” And this court, after citing a number of authorities bearing upon the point, further says: “Although a contract so attempted to be made may not be necessarily unjust to the stockholders generally, or show upon its face that it is one that could not have been made in their interest, still it lacks the essential element of assent by both parties, for á majority of those whose duty it was to represent and act only as the agents of the corporation and in its interest really acted for themselves in apparent and probably real hostility ’to that of the Corporation.” And in that case this court held that, by reason of the fact that two of the directors who acted as members of the- board were interested in the lease claimed to have been granted- by the corporation to them, the proceedings were'void as against the complaining stockholders. It is quite clear therefore that under the authorities the resolutions adopted by the board consisting of Jensen and his wife and Parks were void as against the plaintiffs in this action:
The contention of the appellants that the court under its findings should have appointed a receiver to take charge of the corporation and manage the same in the interests of its stockholders is also clearly correct. Courts of chancery having long exercised the power of appointing receivers, where the officers of a corporation have shown incapacity or are guilty of gross fraud or wrong or abuse of office, as trustees or directors, by the misappropriation of funds until such funds have been returned to the company. 23 Am. & Eng. Ency. of Law, 1023; State v. Second Judicial District Court, 15 Mont. 324, 39 Pac. 316, 27 L. R. A. 292; Sternberg v. Wolff, 56 N. J. Eq. 389, 39 Atl. 397, 39 L. R. A. 762; Miner v. Belle Isle Ice Company, supra. In the latter case the Supreme Court of Michigan,, in discussing this subject, uses the following language: “This corporation has utterly failed of its purpose, not because of matters beyond its control, but because of fraudulent mismanagement and misappropriation of its funds. Complainant has a right to insist that it shall not continue as a cloak for a fraud upon him, and. shall not longer retain his capital to be used for the sole advantage of the owner of the majority of the stock, and a court of equity will not so far tolerate such a manifest vio - lation of the rules of natural justice as to deny him the relief to which this situation entitles him. * * * lA receiver will be appointed.” In State v. Second Judicial District Court, supra, the Court of appeals cites with approval the Michigan case and holds that, under similar circumstances as those in the case at bar, a receiver will be appointed to manage the property, and in the following case the court quotes with approval from Waterman on the Law of Corporations, vol. 2, § 356, as follows: “The power to appoint a receiver is necessarily inherent in a court which possesses equitable jurisdiction. * * * The property is thus placed in the hands of an officer of the law in order that it may be under the protecting care and control of the court and be delivered unimpaired to the persons to whom it is legally ascertained to belong.” Ranger v. Champion Cotton Press Company (C. C.) 52 Fed. 611.
The court therefore should have concluded as a matter of law that there-was due from-Christian L. Jensen the sum of $2,305.33 besides the $570 which it was admitted the corporation had on hand, and Jensen should be required to repay to said corporation the said $2,305.33, with interest thereon at 7 per cent per annum from April 17, 1902, provided ¡that, in case the said Jensen produces for cancellation the note for $600, he shall receive credit upon the $2,-305.33 for the said sum of $600 as of the date of April 17, 1902. There should be appointed a receiver for the property of said corporation, who should take over the property and manage the business of said corporation until such time a-s the lower court otherwise directs. The said receiver should be directed to collect the said $2,305.33, as well as the said $570, and further be directed to recover from the said Christian L. Jensen any sum or sums which the said Jensen may have retained from the moneys of said corporation for and on account of salary, rents, ¡or fuel in excess of $50 per month since the 17th day of April, 1902. The said receiver should he directed to pay such dividends as the assets of the company will authorize, retaining dividends which would otherwise belong to said Jensen and wife until said parties have repaid to said 'corporation all moneys due the same.