Parrott v. Byers

40 Cal. 614

• Court: California Supreme Court
• Decided: January 15, 1871
• Docket: No. 2,499
• Status: Published

Opinion

Crockett, J.,

delivered the opinion qf the Court, Temple, J., Wallaoe, J., and Rhodes, C. J., concurring:

The plaintiffs claim that the Washington Quartz Mining Company is a corporation organized under the laws of this State for mining purposes, and is the owner of a certain lode or vein of gold-bearing quartz, which is described in the complaint; that the capital stock of said corporation is divided into one hundred and eighty-one shares, of which the plaintiffs own one hundred and fifty-seven shares and the defendants twenty-four shares; that the defendants “are the duly elected Trustees of said company,” and accepted the trust and entered upon the discharge of their duties as such Trustees, and, in their capacity of Trustees, took possession of said mine; but that recently the defendants have repudiated the trust and claim to be the owners, in their own right, of said mine, and assert title thereto, adversely to said corporation, and are working said mine for their own profit and advantage, and in hostility to the rights of said company; that they have taken from said mine a large amount of gold, for which they refuse to account; that they have neglected to keep any books of account, or any record of their proceedings, and are unable to respond to any judgment at law which might be recovered against them for these injuries. The prayer is for an accounting, and for a perpetual injunction restraining the further committing of these wrongs. The answer denies the existence of the corporation, or that it owns any lode or vein of quartz, or that the defendants are, or ever were, the Trustees of such corporation, or that, as such, they took possession of the mine described in the complaint; and they aver, affirmatively, that for more than five years last past they have been and are the owners in possession of a certain mine in that vicinity, claiming and holding the same adversely to all persons whomsoever. The answer also sets up the Statute of Limitations of two years, and avers that if the corporation ever owned the mine it had abandoned it before the commencement of the action. Judgment was rendered for the plaintiffs, and the defendants have appealed.

The first point made by the defendants is that the complaint is fatally defective in a matter of substance, and does not support the judgment in this, to-wit: That it is not averred in. the complaint that the defendants constitute the whole, or even a majority of the Trustees of the corporation, and it is not alleged that the Trustees were requested to institute an action in the name of the corporation for the redress of the grievances complained of. It is claimed, on the authority of Coggswell v. Buell et al. (decided at the April Term, 1870,) that without these averments this action will not lie in the name of the stockholders. The answer to this objection is: First — That the complaint avers that the defendants are “the duly elected Trustees of said company;” which, upon every rule of grammatical construction, is precisely equivalent to an averment that they are the only Trustees. If the word “the” had been omitted from the sentence, the criticism of the complaint in this respect would have been well founded. But as it stands, the sense would have been precisely the same if the averment had been that they were “the Trustees of said company, duty elected,” which necessarily imports that they were the only Trustees. The only office of the word “the” in this con'nection is thus to qualify the meaning; for, otherwise, the sense would be the same whether this word be omitted or included. Second — The complaint avers that the defendants have repudiated the trust and converted the trust-fund to their own use, whilst the answer not only denies the trust but also the existence of the corporation itself. It is a familiar rule that where the relations between the parties are such that a demand and refusal is a condition precedent to the right of the plaintiff to .maintain the action, a denial in the answer of the relation on which the action is founded will dispense with the necessity of an averment in the complaint of a previous demand and refusal. In an action by a landlord against his tenant, or by a vendor against his vendee fox the possession, or by a cestui que trust against the Trustees to enforce the trust, if a demand and refusal were otherwise necessary, a denial in the answer that the alleged relation exists between the parties will dispense with the necessity of averring or proving a prior demand and refusal. The law does not require a useless act to be performed; and when it is plain from the answer that if a demand had been made it would have been refused, it does not lie in the month of the defendant to object that no demand was made. In this case, a demand made upon the defendants as Trustees to institute an action against themselves, in the name of the corporation for the spoliation of the corporate property, could have subserved no useful purpose. It is obvious from the answer that such a demand would have been refused, inasmuch as the existence of the corporation itself is denied. It would have been an idle farce to have made such a demand upon these defendants, in view of the defence which is set up in the answer. But it is claimed that the proofs show that there were two other Trustees in addition to the defendant, and that three would have formed a quorum, of which two would have been a majority, and that it is not impossible, but that in this method the plaintiffs might have procured an action to be brought in the name of the corporation if they had requested it. But, if by chance such an action had been commenced under these circumstances, it would have been under the control and management of these defendants, who constituted a majority of the Trustees, and who might at anytime have caused it to be dismissed. If allowed to pro-, ceed, the rights of the stockholders would have but little protection in an action in the name of the corporation against the majority of the Trustees, who repudiate the trust, deny the existence-of the corporation, and are charged with a gross abuse of the trust property.

The next point is that the plaintiffs • might, at any time, have elected a new Board of Trustees, and in this way have caused an appropriate action to be brought in the name of the corporation. But this suggestion is entitled to no consideration, coming, as it does, from defendants who deny the existence of the corporation, and who are holding adversely to it. The question before us relates to the rights of the plaintiffs as they stood at the time of the commencement of the action; and it is no defence for the defendants that it was in the power of the plaintiffs, if they had chosen to do so, to-elect a new Board of Trustees.

In tbe original complaint, tbe “Washington Gold Quartz Mining Company” was named as a party defendant, and tbe summons was issued against tbe corporation by tbat name, and was returned as served. But at the trial tbe Court permitted tbe complaint to be amended by striking out tbe word “Gold" from tbe name of tbe corporation; and, thereupon, tbe defendants objected to proceeding further in tbe trial, on tbe ground tbat service on tbe “Washington Gold Quartz Mining Company” was not service on tbe Washington Quartz Mining Company, and tbat tbe action could not proceed until tbe last named company either appeared or was brought in by proper service. But tbe Court ordered tbe trial to proceed, and tbe defendants excepted. We might presume, in support of tbe judgment, tbat tbe Court was satisfied tbat tbe interpolation of tbe word “Gold" into tbe corporate name was only a clerical error or tbe result of inadvertence, and tbat service was, in fact, duly made upon tbe proper corporation, though by a wrong name. But it is unnecessary to express a decided opinion on this point, inasmuch as tbe corporation was a necessary party in respect only to tbat branch of tbe case relating to tbe accounting; and as tbe relief granted was limited to an injunction restraining further waste or tbe assertion of a hostile title by tbe defendants, if tbe Court erred in ordering tbe trial to proceed without due service on tbe corporation, it was an error which did tbe defendants no barm. If an accounting bad been ordered, tbe corporation would have been a necessary party, inasmuch as tbe sum found to be due could be paid only to tbe corporation and not to tbe stockholders. But when tbe purpose of tbe action is only to stay waste and to preserve tbe corporate property, no useful end could be subserved by making tbe corporation a party, and tbe defendants could not have been prejudiced by a failure to do so.

Tbe defendants also assail tbe judgment on tbe ground tbat tbe certificate of incorporation is void because it fails to specify tbe town or county in which tbe principal business of tbe corporation is to be carried on. But if tbe certificate be liable to tbis objection, tbe defendants are es-topped from urging it. They not only signed tbe certificate, but accepted tbe office of Trustees, and in tbat capacity acquired tbe possession of tbe corporate property. Es-toppels in pais would be of little value if tbe unfaithful Trustees of a corporation, wbo are fraudulently wasting tbe corporate property and appropriating it to tbeir own use could shield themselves behind a technical defect in tbe act of incorporation. On tbis point see Rockville and W. Turnpike Company v. Van Ness, (2 Cranch. C. C. R.) .

Tbe next error assigned is, tbat there was no competent evidence tbat either of tbe plaintiffs, at the time of tbe commencement of tbe action, was a stockholder of tbe corporation. It was proved tbat one Card was tbe bolder of a certificate issued to him for two shares of tbe capital stock, and tbat be assigned tbis certificate to tb.e plaintiff, Parrott, but there was no proof tbat tbe transfer bad been entered on tbe books of tbe corporation; and it is claimed that under tbe Corporation Act of 1850, Parrott could not become a stockholder until tbe transfer is entered on tbe books. The case of Weston v. Bear River & A. W. & M. Company, (5 Cal. 185), is cited in support of tbis proposition. Tbe point decided in tbat ease was, tbat a transfer of tbe certificate of stock, without an entry on tbe books, was void as against a subsequent attaching creditor of tbe assignor. In tbe case between tbe same parties (6 Cal. 425), it was held tbat tbe transfer was valid as against a subsequent as-signee, wbo took with notice of tbe prior assignment.

Tbe principle decided in these cases was affirmed in Naglee v. Pacific Wharf Company, (20 Cal. 529;) and Mead v. Elmore, decided at tbe July Term, 1868, but not reported. In tbe latter case, in commenting on those before cited, we said: “ It was held in those cases tbat transfers of stock which have not been entered on tbe books of tbe company, as provided in tbe statute, are, nevertheless, valid as against all tbe world, except subsequent purchasers in good faith without notice.”

In tbe case at bar the question as to the validity of the assignment, and its effect, does not arise as between a subsequent and a prior assignee, nor as between the assignee and the corporation, but as between the assignee and unfaithful Trustees, who have no equities to be protected. It is unnecessary for us to decide what would be the effect of the assignment if the contest were between Parrott and the corporation as to the rights which he acquired by the transfer, as against the corporation. But it is clear that in requiring transfers of stock to be entered upon the books it was not the purpose of the statute to declare such transfers void at law and in equity, as against fraudulent Trustees • who axe wasting the corporate property and converting it to their own use.

I am, therefore, of opinion that the transfer to Parrott invested him with such rights as entitles him to maintain this action. This view of the case renders it unnecessary to inquire whether the proof shows the other plaintiffs to have been stockholders, as it is sufficient to maintain the action if either one of them was a stockholder

But Exhibit “ B ” certainly tended to show that the other, plaintiffs were also stockholders, and, though this document was objected to when produced by the witness, Eng-glish, and the objection noted in the deposition, I fail to discover anything in the record to show that the objection was renewed at the trial, or that the Court requested to decide or did decide upon the competency of the proof. Objections of this kind cannot be raised for the first time in this Court.

There was evidence tending to show that the defendants, Byers and Nave, were and are Trustees of the corporation, and the judgment cannot be disturbed on the ground of a failure of proof on this point.

The last error assigned is that the Court erred in finding the issues of title in favor of the plaintiffs. On this point it is sufficient to say that there was evidence tending to show a prior possession by the corporation of the mining ground in contest, and that the defendants entered into tbe occupation of it as Trustees of tbe corporation. Tbis was clearly sufficient proof of title to support tbe judgment.

Judgment affirmed.