Fortner v. Cornell

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The material allegations of appellant's amended complaint as amended are in substance: that on or about February 1st to 7th, 1926, the stockholders of respondent corporation, Oakes and Company, adopted a resolution providing for the application of the assets of the company to the payment and retirement of its stock, which was to some extent and for a time carried out; that the number of shares of stock were variously increased and decreased at different corporate meetings until August 26, 1931, when a resolution of the board of directors ordered a reduction to 90 shares, then stated in said resolution to be owned by Eugene Looney, A.G. Campbell and Robert M. Naylor.

That November 30, 1935 the charter of said corporation was forfeited (under 29-605, I.C.A.) by failure to pay its annual license fee (as required by 29-608, I.C.A.), and its then directors, Eugene Looney, now deceased, J.R. Cornell, and J.W. Cunningham, thereby became statutory trustees to wind up its business, (29-611, I.C.A.); that on or about November 27, 1935, Oakes and Company sold by warranty deed two-thirds interest in Lot 16, Block 145, Twin Falls Townsite, Twin Falls County, Idaho, to the respondent Western Loan and Investment Company, a corporation, and one-third interest to Eugene Looney, for $10.00, the property having a reasonable market value of $60,000; that with the exception of R.E. Simpson, the stockholders of the Western Loan and Investment Company and Oakes and Company were the same; that Eugene Looney later transferred his one-third interest to the Western Loan and Investment Company; that December 16, 1940, R.E. Simpson transferred to appellant 112 shares of stock of respondent Oakes and Company then owned by him, par value $11,200; that on or about March 21, 1941, the respondent trustees refused to comply with the resolution of February 7, 1926, providing for the rateable distribution of the assets to the stockholders.

"That the said R.E. Simpson, who was the owner of the certificates of stock herein above described, and this plaintiff, did not discover the fraud of the said officers, directors and managing agents of the said Oakes and Company, in purporting to convey said real property to the said The Western Loan and Investment Company, and Eugene Looney, to evade the payment of the par value of the certificates of stock herein above described pursuant to the resolution of the stockholders of said Oakes and Company, adopted between February 1st, to February 7th, 1926, until on or about March 21, 1941."

That neither appellant nor her predecessor in interest, R.E. Simpson, have received payment on this stock.

Appellant sued March 4, 1941, to set aside the above sale, for an accounting for her share of the rents, interest and profits derived from the use and occupation of the land to the amount of the par value of the stock, $11,200.

Respondents demurred generally on the ground the amended complaint as amended did not state facts sufficient to constitute a cause of action; and specially because the statute of limitations, Sections 5-203, 218, I.C.A., barred the action, that several causes of action were improperly united, appellant had no legal capacity to sue, defect of parties, and that the amended complaint as amended was ambiguous, uncertain and unintelligible on various grounds.

The minutes of the court and the order sustaining the general demurrer refer to a motion to separately state and number intermingled causes of action, but such motion does not appear in the record and the court sustained the demurrer only on the single ground that the amended complaint as amended did not state a cause of action. Upon refusal to plead further, judgment was entered dismissing the action from which the appeal herein was taken.

The sole point now at issue is therefore whether the complaint states a cause of action, the other special grounds of demurrer not having been ruled on are not before us for consideration. (Rosa v. Devingenzo, 53 Idaho 213 at 216-17,24 P.2d 1051.)

Even though the face of a complaint discloses the cause of action may be barred by the statute of limitations, such point must be raised by special demurrer or answer and the pleading does not thereby fail to state a cause of action.

"In this state it (statute of limitation) must be specially pleaded, and cannot be raised by demurrer on the ground that the complaint does not state facts sufficient to constitute a cause of action. (Citing authorities.)

"In fact, a complaint may state a good cause of action and be sufficient to support a judgment, although it shows conclusively upon its face that the cause of action is barred by the statute of limitations. The fact that the cause of action is barred does not deprive it of any of the elements which would otherwise constitute a good cause of action, but merely leaves it open to the exercise of the personal privilege given the defendant by law to plead its limitation which merely cuts off the remedy. Facts which constitute a cause of action do not cease to be facts simply because of the application of the statute of limitations. * * *" (Chemung Min.Co. v. Hanley, 9 Idaho 786 at 794, 77 P. 226.)

"Under the rules of practice in this state, a statute of limitations may be pleaded either by special demurrer or by answer, where it appears on the face of the complaint that the cause of action is barred by such statute, and by answer where it does not appear on the face of the complaint that the cause of action is so barred. The plea of the statute of limitations cannot be invoked by a general demurrer." (Rogers v.Oregon-Washington R. Nav. Co., 28 Idaho 609 at 616,156 P. 98.)

Rosa v. Devingenzo, supra at 217.

If the corporation is in control of the directors or trustees whose acts are questioned and it thus appears it would be unavailing to make application to them to bring the suit, the stockholder may sue. (Just v. Idaho Canal Etc. Co., Ltd.,16 Idaho 639 at 651, 102 P. 381, 133 A.S.R. 140; Ryan v. OldVeteran Mining Co., 37 Idaho 625 at 634, 218 P. 381; Morton v.Morton Realty Co., 41 Idaho 729 at 738, 241 P. 1014.) If it should appear on the trial there are other stockholders who are entitled to share in the assets, their interests must and will be protected and the controversy should be settled on the factual issues. (In re San Joaquin Light Power Corporation (Calif.), 127 P.2d 29; Sully v. Automobile Finance Co. (Del.), 101 A. 908.)

Respondent contends the complaint is defective because it has not sufficiently or properly traced the ownership of appellant's shares of stock. It was, however, unequivocally alleged that R.E. Simpson was the owner of 112 shares on December 16, 1940 and on that day transferred this stock to appellant, who is now the present owner and holder thereof.

Both by general law, Riley v. Callahan Mining Co., 28 Idaho 525,155 P. 665, statute, 29-158, 611 I.C.A., and the terms of the resolution adopted February, 1926, respondent directors, as statutory trustees, were under a fiduciary obligation to wind up the affairs of the corporation, collect its assets, pay the creditors and distribute the balance rateably among the stockholders. (Caxton Printers,Ltd., v. Ulen, 59 Idaho 688, 86 P.2d 468; Heaney v. Riddle,23 A.2d 456 (Pa.); 13 Am. Jur., Section 1352, p. 1197; 19 C.J.S., Section 1767, p. 1553.) The statutory trustees are charged with due and faithful execution of such trust. (Ryan v.Old Veteran Mining Co., supra; Nelson v. Jones, 38 Idaho 664,224 P. 435, 38 A.L.R. 85; Morton v. Morton Realty Co., supra;Coeur d'Alenes Lead Co. v. Kingsbury, 59 Idaho 627,85 P.2d 691.)

The allegations of fraud — aside from the application of the statute of limitations, which is not now before us and we do not consider — were sufficient as against a general demurrer. (Just v. Idaho Canal Etc. Co., Ltd., supra at 649; James v. P.B. Steifer Mining Co. (Calif.), 171 P. 117.)

This court early rejected the contra so-called Federal doctrine (now embodied in Federal Rules of Civil Procedure, Rule 23 (b) (1), Title 28 U.S.C.A., Section 723c, p. 524),McQuillen v. National Cash Register Co., (Fourth C.C.A.),112 F.2d 877, and adopted and has not abandoned the rule that one who acquires stock subsequent to malfeasance of the directors, as trustees of a corporation, may maintain as a minority stockholder a suit for redress. (Just v. Idaho CanalEtc. Co., Ltd., supra at 647; Pollitz v. Gould (N.Y.),94 N.E. 1088, 38 L.R.A. (NS) 988, 1912D Ann. Cases 1098; Roberson v.Draney (Utah), 178 P. 35 at 38; Peterson v. Hopson (Mass.),29 N.E.2d 140 at 149; Scully v. Automobile Finance Co., supra at 911.)

The amended complaint as amended appropriately and sufficiently alleges that in violation of their obligation respondent trustees sold to themselves, in the form of another corporation, for $10.00, property which was allegedly worth $60,000 and that appellant was entitled to her share.

The complaint, therefore, stated a cause of action and the demurrer on the one ground ruled on was improperly sustained. Judgment of dismissal is therefore reversed and the cause remanded for further proceedings in accordance herewith.

Costs to appellant.

Ailshie, C.J., Budge, Holden and Miller, JJ., concur.

ON REHEARING