Wortman v. Luna Park Amusement Co. , 61 Mont. 89 ( 1921 )

MR. COMMISSIONER SPENCER

prepared the opinion for the court.

Action in ejectment. The complaint herein contains the usual allegations of ownership in the plaintiff of certain real property, particularly described as “certain portions of sections 29 and 32, township 3, north of range 7 west, as follows: Lake Avoka situated in the northeast quarter of section 29, township 3, north of range 7 west,” together with certain improvements situated thereon — possession thereof by defendant, demand and refusal to deliver possession, and claim for damages. The answer tenders the general issue. At the close of plaintiff’s case, motion for nonsuit was granted, and judgment entered accordingly. Motion for a new trial was denied, and appeal is from the order denying the 'motion and from the judgment.

The evidence discloses that on May 22,' 1911, Tidewater Investment Company, a corporation (hereinafter referred to as Tidewater Company) made and entered into an agreement with Clearmont Amusement Company, a corporation (hereinafter referred to as Clearmont Company) by the terms of which the Tidewater Company leased and let unto the Olearmont Company certain real property situated in Silver Bow county, Montana, a short distance south of the city of Butte, for a period of fifteen years, ending March 31, 1926, and commonly known as Lake Avoka, together with certain privileges to be exercised and enjoyed in connection with the use thereof. On April 16, 1912, the Tidewater Company assigned by indorsement thereon all its right, title and interest in the lease to the defendant, and on the same date deeded to defendant certain lands, which included the lands embraced within the terms of the lease. The lease, among other things, provided in substance that the Clearmont Company should have the right to erect a “dancing pavilion or other improvements designed for public amusement” upon the leased premises, but that such right should be exercised on or before April 1, 1912, and the work to make such improvements diligently prosecuted and completed within a reasonable time thereafter, and that if not so done and prosecuted such right could be declared forfeited by the Tidewater Company, lessor. It was further provided in the lease that if the Clearmont Company did not exercise its right to so construct other and additional improvements the Tidewater Company then had the option for a period of one year from and after April 1, 1913, to purchase “the improvements, equipment, fixtures, and all property of the party of the second part [Clearmont Company] had or enjoyed in connection with the premises aforesaid, excluding therefrom only the stock of merchandise of the party of the second part then on hand, for the sum of $10,000 cash.” The evidence further discloses that on November 19, 1913, the defendant notified the Clearmont Company that as assignee of the Tidewater Company it elected to exercise its option to purchase, and tendered $10,000 cash, and that on November 15, 1913, at a special meeting of the board of directors of the Clearmont Company, the cash tender by the defendant was accepted, and the president and secretary authorized to execute the necessary instruments to consummate the sale. Pursuant to such authority a bill of sale was thereupon made, executed and delivered to the defendant company, which then went into possession. On May 4, 1914, at the annual meeting of the stockholders of the Clearmont Company, all the acts of the directors, stockholders, and officers of the company from the earliest time to that date were ratified, confirmed and approved in every particular. On May 4, 1916, appellants herein obtained a verdict in an action wherein they were plaintiffs and Clearmont Amusement Company was defendant, and judgment was subsequently made and entered thereon. On June 23, 1916, execution was issued, and thereafter the sheriff of Silver Bow county, under authority thereof, pretended to sell to appellants the leasehold interest of the Clearmont Company, as evidenced by the lease hereinabove mentioned, together with all improvements situated thereon, for the sum of $7,500, and on July 22, 1916, executed certificate of sale thereof to these appellants. On July 26, 1917, the then sheriff of Silver Bow county made, executed and delivered to the appellants a deed for the property mentioned in his return of sale under the execution. It is further shown that the reasonable rental value of the property involved herein is $1,500 per annum.

Appellants have specified, thirteen assignments of error, but all are comprehended in the solution of two questions: First, did the Ciearmont Company have title to the property levied upon and sold under execution in June, 1916, at the time of such levy and sale? and, second, was it error to permit defendant to cross-examine plaintiffs’ witness for the purpose of showing, not only that plaintiffs had no title to the property in question when this action was commenced, but affirmatively showing that title to the property reposed in defendant?

Discussing these questions in inverse order, it is sufficient to [1,2] say of the latter that appellants must prevail, if at all, upon the integrity of their own title, and not the infirmity of their adversary’s (McKinstry v. Clark & Cameron, 4 Mont. 370, 1 Pac. 759; City of Helena v. Albertose, 8 Mont. 499, 20 Pac. 817), and hence, at the time of the levy of the writ of execution and the pretended sale by the sheriff of Silver Bow county under the writ, if the Ciearmont Company had no title to the property levied upon, the sale was an empty proceeding, the appellants obtained no title, and a nonsuit was inevitable. We think that the appellants in direct examination of their own witness opened the door sufficiently to justify the cross-examination complained of, but, if not, it cannot be said the error was more than a technical violation of the rule of cross-examination upon a vital issue in the case, and therefore not reversible error. (Hanson Sheep Co. v. Farmers & Traders’ State Bank, 53 Mont. 324, 163 Pac. 1151.)

The remaining question worthy of consideration in the [3] determination of these appeals involves the applicability of section 3897, Bevised Codes, invoked by appellants in opposition to the validity of the sale of the property involved herein by the Ciearmont Company to the respondent. In the absence of other objection, if the provisions of section 3897, Bevised Codes, do not sustain the contention of appellants in this regard, clearly they were without title upon which to base their action. Prior to the enactment of section 3897, supra, this court had occasion to construe the various statutes pertaining to the sale of all or a portion of its property by corporations generally (Forrester v. Boston & Mont. etc. Min. Co., 21 Mont. 544, 55 Pac. 229, 353), and in an elaborate and exhaustive opinion by Mr. Justice Pigott laid down both the statutory and common-law rules governing the powers of directors upon such sales. Section 3897, supra, was thereafter enacted as a curative measure to obviate what appeared to be patent incongruities in the then existing law, and to prevent small minority stockholders from thwarting the will of the majority in making a sale otherwise valid under common law and for the best interest of the corporation. To summarize some of the rules of common law so far as applicable to the instant ease, a solvent and prosperous corporation could sell all of its assets only by unanimous consent of its stockholders; if insolvent and unable to execute the purposes of its creation, by the dix-eetors if the best ixxterests of the stockholders demanded; in the proper pursuit of its business, and within the purposes of its creation, sell any or all assets even against the dissent of a minority or perhaps a majority of its stockholders. (Forrester v. Boston & M. etc. Min. Co., supra.) In this case, it is not suggested in the record that the sale in question was of all the assets of the corporation, nor that the corporation was insolvent, but the record affirmatively shows that subsequent to the sale a new board of directors was elected, and the Clearmont Company continued to live as a corporate entity. The proceedings leading up to and the consummation of the sale of the property to respondent were not in harmony with the general scope and meaning of section 3897, supra, which comprehends a sale of all rather than a part of the corporate property, but rather in consonance with the proviso contained therein, reserving to the corporation and the board of directors the powers granted to them by the common law, and enunciated in a general way in sections 3833 and 3889 of the Eevised Codes. Nor can it be said that section 3897, Revised Codes, intended to limit or restrict those powers, for the title of the Act itself declares its purpose to be “to enlarge the powers of corporations as to disposing of, or selling their property,” etc., so that its general intent was to grant the corporation more power rather than to limit or restrict, and as further emphasis of this general intent reserved the common-law powers by a special proviso contained therein. Sections 3889 and 3833, Revised Codes, in substance, and so far as applicable here, declare that corporations have power to purchase, hold and convey real and personal property, and that they shall conduct the affairs of the corporation through a board of directors. By failing, either specifically or by fair implication, to alter the common-law rules the common law must still remain the rule of decision (Forrester v. Boston & M. etc. Min. Co., supra, and citations), and in the instant case the board of directors of the Clearmont Company, acting under power granted by both the common law and statute, were clearly within their rights, and hence' it is of no importance whether respondent assumed to acquire its title by virtue of an option reserved in the lease or otherwise, for the undisputed record is that an offer of $10,000, accompanied by tender, was made by respondent, accepted by the Clearmont Company, and the property delivered, which is all the law required to make a valid sale. We conclude, therefore, that the Clearmont Company made a valid sale of the property in question to the respondent prior to the levy of execution upon the same property, on behalf of appellants, and that appellants were therefore without title upon which to base their action.

Rehearing denied November 7? 1921.

We find no error in the record, and therefore recommend that the judgment and order appealed from be affirmed.

Per Curiam : For the reasons given in the foregoing opinion, the judgment and order appealed from are affirmed.

Affirmed,