| N.H. | Mar 13, 1875
Lead Opinion
Equity — Multifariousness.
1. It appears, at least inferentially, from the bill that there are stockholders in the Hooksett Manufacturing Company who are not made parties, either plaintiff or defendant. The bill therefore seems to be defective in this particular: either the other stockholders should be joined, or it should be alleged that the proceeding is brought by the plaintiffs on behalf of themselves and others having a like interest. March v. Eastern Railroad Company,
2. The bill alleges that the plaintiffs are owners of stock, and sets out specifically the amount owned by each. It is contended for the defendants that the bill is defective in not showing that they were owners of stock at the time of the alleged wrongful payment to some or all of the defendants. No authority is referred to in support of this position, and I see no sound reason upon which it can be sustained. To hold so, would seem to involve the singular consequence that the transfer of stock in a corporation extinguishes the right to inquire into the previous fraudulent conduct of its officers, whereby its funds have been misappropriated.
3. I am of opinion that the first ground of multifariousness specified in the demurrer cannot be allowed. The right of the plaintiffs and the liability of each and all the defendants rest upon the same single fact, namely, the illegal vote of the directors, June 3, 1871, and the payments made in pursuance of that vote. When, according to the allegations of the bill, the plaintiffs establish their right, as against one of the defendants, to have the money thus paid restored to the corporation, they have established the same right as against all the defendants. Their case is the same against all the defendants, and there is nothing to show that either defendant has grounds of defence distinct or separate from that of the others. The subject of multifariousness is quite elaborately discussed by PERLEY, C. J., in Abbot v. Johnson,
The second ground of multifariousness alleged seems to me well taken. The bill sets out (1) an illegal vote of the directors, and an illegal and fraudulent payment of money of the corporation to part only of the stockholders by way of dividend, praying that the defendants may be decreed to return the money thus received; (2) gross misconduct and maladministration on the part of the treasurer, Bailey, praying for an injunction to restrain him from further acting in that office. These two allegations and prayers appear to be entirely independent and distinct, and I think the demurrer must for that reason be sustained.
The plaintiffs may amend upon terms to be settled by the circuit court, if they desire to do so, by striking out of their bill one of these separate causes.
4. The fourth cause of demurrer is, in effect, that the bill calls for an answer to charges of fraud, etc., which amount to crime. I think this cannot be sustained. By our practice the answer need not be under oath, and when not sworn to is a mere pleading. The defendant may easily draw his answer in such way as to put the plaintiff to proof of such charges, without making admissions that may subject him to a criminal prosecution. *222
Concurrence Opinion
I concur.
Dissenting Opinion
1. The plaintiffs should allege that the bill is brought in behalf of themselves, and all others interested who may come in and join in the suit. March v. Eastern R. R.,
2. The plaintiffs allege that they are stockholders in the Hooksett Manufacturing Company, and specify the number of shares owned by each, but do not allege that they were stockholders at the time the dividend was paid the defendants. But that is not necessary, and it is immaterial whether they were or not. The transfer of the stock conveyed to them not only the ownership of the shares and the right to the future dividends thereon, but also placed them on an equal footing with the other stockholders in respect to the right to call the officers and agents of the corporation to an account for their fraudulent conduct.
3. The bill is not multifarious in that it joins the seven stockholders as defendants to whom the dividend is alleged to have been wrongfully paid. The plaintiffs are not seeking to recover the amount of the dividends so wrongfully paid, for their own use, but for the use of the Hooksett Manufacturing Company. The plaintiffs cannot maintain a suit at law or in equity to recover back said dividends for their own use. It is alleged (and the demurrer admits the fact) that a majority of the directors refuse to allow the same to be recovered in a suit in the name of the company. The plaintiffs then have no remedy for the protection of their interests except by bill in equity, and the defendants are properly joined for this purpose. Their defence must be a common one, and a multiplicity of suits is thus avoided.
4. But the bill is open to the objection of being multifarious in other respects. Four of the defendants have no interest in the purpose of the bill, which seeks an injunction against the treasurer and his removal from office. The plaintiffs seek to recover from six of the eight defendants the money alleged to have been paid to them illegally as dividends, and ask for the removal of the treasurer, and an injunction against him, and the appointment of a receiver. They also charge the treasurer with fraud and embezzlement. These matters are clearly distinct and independent. Several matters, distinct and unconnected, cannot be joined in a bill against one defendant, nor with still stronger reason against several defendants when the various matters do not apply to some of them. Story's Eq. Pl., sec. 275. The bill can however be amended in the circuit court upon leave obtained.
5. If the bill alleges that which if confessed by answer would subject the defendant to a criminal prosecution or to a penalty, the defendant may, if required to answer under oath, demur, and protect himself from discovery; and this in so, not only if his answer would, but if it may, subject him to such prosecution. 1 Daniell's Ch. Prac. 626*, 627*. The bill charges several offences punishable by fine or imprisonment, such as violation of the law regulating voting in corporations; *223 embezzlement of the funds of a corporation by an officer; perhaps forgery in making false entries in the books of the corporation with intent to defraud the corporation; and conspiracy to cheat and defraud the plaintiffs; and if the defendants were called upon to answer under oath, the defendants might demur, and protect themselves from discovery. But under our practice, the defendants not being called upon to answer under oath, their answer will be considered as a mere pleading, and accordingly, without admitting the truth of the allegations, may be so drawn as to require the plaintiffs to go to proofs.
Demurrer sustained.