Kennebec & Portland R. R. v. Portland & Kennebec R. R. , 54 Me. 173 ( 1866 )

DaNFOrth, J.

This case is before us on a general demurrer to the complainants’ bill. At the argument, several objections were raised; the first of which is, a misjoinder of plaintiffs. In this respect a corporation and a portion of its members are joined.

The bill shows, whatever it may be in other respects, that all its allegations charge the defendants with injuries to corporate property. To the property thus injured, the stockholders had no title or interest whatever; no right to in-termeddle with it more than a stranger. " The corporation itself is regarded as a distinct person; and its property is legally vested in itself, and not in its stockholders. As individuals, they cannot, even by joining together unanimously, couvey a title to it, or maintain an action at law for its possession, or for damages done to it. The artificial person, called the corporation, must manage its affairs in its own name, as exclusively as a natural person manages his property and business. The officers, though chosen by a vote of the stockholders, are not their agents, but the agents of the corporation, and they are accountable to it alone.” Peabody & al. v. Flint & als., 6 Allen, 55, 56.

Stockholders undoubtedly have an interest in the property and business of the corporation, which will be protected in equity when invaded. They have equitable rights which, when violated, may be enforced by equitable remedies. " The corporation itself holds its property as trustee for the stockholders, who have a joint interest in all its property and effects, and each of whom is related to it as cestui que trust.”

So long as the corporation is faithful to its trust, the stockholders, as individuals, have no occasion and no right to resort to or enforce any remedies, legal or equitable, to vindicate any injury to the corporate property. When it is guilty of a breach of trust, then, and only then, the relationship of the stockholders, arising from that trust, gives them a right to pursue the proper remedy to vindicate their rights. But, in such a case, it necessarily follows that the corporation must, or at least may be, a party defendant; for it is only the violation of the trust existing between the corporation and its stockholders, that gives the latter any occasion for a remedy. These principles appear to have been well settled. Peabody & al. v. Flint & als., 6 Allen, 52; Smith v. Hurd, 12 Met., 371; Smith v. Poor, 40 Maine, 413; Hersey v. Veazie, 24 Maine, 9.

In the bill now before us, there is no allegation that the corporation, of which the plaintiffs are members, has been guilty of any violation of its trust, or in auy way combined with the defendants to the injury of the plaintiffs, or refused to pursue such remedies as are open to them to protect their property. On the other hand, they, are co-plaintiffs in this bill, and, so far as appears, assisting in its prosecution. No decree can be ordered in favor of these stockholders, either for an account or for redemption; for they have no right to the funds of the corporation, nor have they such an interest in the road as would give them a right to redeem. None can redeem except those who have some interest, however small, in the property to be redeemed. 2 Hoffman’s Chancery Practice, 156 and note.

To be entitled to redeem property mortgaged, the person must show a title to the equity. 1 Yern., 182. It follows that there is a misjoinder of plaintiffs, for which a demurrer lies. Story’s Equity Plead., §§ 232, 544.

Another objection raised to the bill, is, that it is multifarious as respects its subject matter, or a misjoinder of claims therein set out. "There appears to be no positive or inflexible rule as to what, in the sense of courts of equity, shall constitute multifariousness in a bill, but each case must in a great measure be governed by its own circumstances,” and much must be left to the discretion of the Court. 1 Dan-iell’s Ch. Pr., 343 and note. Nevertheless, when it clearly exists, a demurrer will be sustained. Story’s Equity Plead., § 271.

To support this objection, two things must concur; "first, the different grounds of suit must be wholly distinct; secondly, each ground must be sufficient, as stated, to sustain a bill; if the grounds be not entirely distinct and unconnected ; if they arise out of one and the same transaction, or series of transactions, forming one course of dealing, all tending to one end; if one connected story can be told of the whole, the objection does not apply.” Story’s Eq. Plead., § 2716 and cases cited in note.

From the bill, we learn that the plaintiff corporation was the builder and original owner of the road therein described; that, becoming embarrassed for want of funds, among other means to relieve themselves, they executed and delivered to three of the defendants, as trustees, two mortgages of the road to secure the payment of certain bonds issued by the corporation, known as first and second mortgage bonds; that, in process of time, the interest on said bonds not having been paid, the trustees and mortgagees took possession of the road for breach of the condition of said mortgages. Then follows a history of the management of the road and the income thereof received by the mortgagees, and the other individual defendants, alleged to have wrongfully and fraudulently combined with them, until they became absorbed in and compose a new corporation; which new corporation is now, as stated in the bill, in possession of the road. Here is a series of transactions, not separate and entirely distinct, but forming one course of dealing, all tending to one end, that of, as alleged, absorbing the road and all its incidents, and all the defendants are combined together to accomplish that end. The statement of all these transactions was proper and necessary, in order to lay the foundation for the prayers for account and redemption. The transactions themselves are so mixed up and intimately connected that, if true, it is difficult to see how justice can be done between the parties without a knowledge of them. Therefore the demurrer, for this cause, cannot be sustained.

Another objection made to the bill is the improper joinder of defendants. If the bill can be sustained against any of the defendants, those only can demur who are improperly joined. Story’s Eq. Plead., § 544. In this case it is alleged that all the individuals named as defendants fraudulently combined together, in all the transactions set out in the bill of which the plaintiffs complain. They are all alleged to have been partakers of the income of the road which should equitably go in payment of the debts secured by the mortgages, therefore all should be held to account. The defendant corporation is now in possession of the road, and, if they took it under the mortgages, they took it subject to all payments which may previously have been made ; therefore it becomes important ihat all who have been connected with the mortgage, in such a way as to render them liable for income under it, should. be made parties. Story’s Eq. Plead., § 190; McCabe v. Bellows & al., 1 Allen, 269.

There is, however, another ground on which these individual defendants are properly made parties. They are all members of the defendant corporation, and this is a bill of discovery as well as relief.. They have information important to the plaintiffs, and to which the plaintiffs have a right as the facts now appear.' It is not necessary that each of the parties should be interested in the whole case. If they have information as to a part, and so connected with the real defendant as to entitle the plaintiffs to their disclosure under oath, without calling them as witnesses, they are properly made parties, even though no decree could be made against them. Such is the case with members of corporations. Story says, in his treatise on Equity Pleading, § 235, not only that officers, but "the members of corporations may also be made parties to a bill, either for discoveiy alone, or for discovery and relief, although they have no other interest, than as corporators, in the subject matter of the suit.” See, also, 1 Daniell's Chancery Prac., 134; Wright v. Dame & als., 1 Met., 237.

It is further contended that the bill, as a bill of redemption, is defective in several particulars. It is said that the bill can only be maintained on " payment, or on an adequate and sufficient tender of the amount of the over due bonds and coupons.” This appeal’s to be a necessary averment to sustain the bill under the 55th section of chapter 51, B. S. But it will be noticed that this section refers to the redemption of mortgages of railroads after the commencement of pi’oceedings for the purpose of foreclosure. There is nothing in the bill which shows the commencement of any such proceedings; hence, if the bill comes within any of the provisions of that chapter, it is rather under the fifty-fourth section, which provides that the trustees may take possession for the purpose of securing the appropriation of the earnings, or a portion of them, to the payment of such claims as are secured by the mortgage; and, when paid, the road to be surrendered. Accordingly, wo find in the bill an averment that all such claims have been paid, or have been so purchased that they should in equity be considered as paid, which seems to be a sufficient averment as the facts now appear.

It is further objected that the bill does not aver that the defendant corporation holds the mortgages, or either of them; but denies all title in them; " nor is there any averment of information or belief, that they hold the mortgage title, or any portion of it.” The bill is certainly defective in this respect. If it should appear upon answer and proof that they hold, as suggested in the bill, without title, then the plaintiffs would have an adequate remedy at law, and in such a case, as the bill now stands, if at all, the plaintiffs would not be entitled to a discovery even. It is upon this point that a discovery is asked, and, before it will be ordered, the proper averment must be made, to show that plaintiffs are entitled to it. It would not be according to the principles of equity, to proceed with the case until we have the requisite assurance that the plaintiffs are entitled to a hearing. They may be entitled to a discovery, but it can only be upon the ground of the necessary information, or belief, that the title, when discovered, would be such as to authorize the plaintiffs to proceed in equity.

It is also objected that the bill does not aver an offer to pay such an amount as may be found due. This is also a defect. This offer must be a formal one. The statement of the demand for an account, on the trustees, " in order that they might pay,” or the prayer to be let in to redeem on payment, &c., is not sufficient. R. S., c. 90, § 13 ; Story’s Equity Plead., § 187, a.

The result is, that the bill is defective in the misjoinder of plaintiffs; in the omission to make the proper statement in regard to the title of the defendant corporation, they being the party in possession, and the want of the proper offer to pay the amount due. The first and last defects are amendable, as is also the other, if it can be done consistent with the truth, and will be allowed upon such terms as the Court at nisi jorius may think proper.

The demurrer sustained, and, unless the hill is amended, it must he dismissed.

Appleton, C. J., Kent, Walton, Dickerson and Barrows, JJ., concurred.