Cyrowski v. Wojcik

On May 18, 1932, an action was instituted in the name of the Polish American Publishing Company of Detroit, Michigan, by August Cyrowski, its shareholder, and August Cyrowski, individually, as plaintiffs, being filed in pursuancef Act No. 327, § 47, Pub. Acts 1931, complaining against the defendants therein named and particularly the actions of Louis F. Wojcik and other individual defendants in the management of said Polish American Publishing Company, charging the payment of exorbitant salaries and bonuses, misappropriation of funds by defendant Wojcik, the execution of a mortgage, and the sale of bonds not properly authorized by the corporation, and other wrongs which it would be of no avail to recite in detail here.

On June 16, 1932, a second bill of complaint was filed by August Cyrowski, individually, against the same defendants, the recitals in said bill of complaint being substantially the same as those contained in the first bill of complaint. The bill originally asked for the appointment of a receiver for the Polish American Publishing Company and the dissolution of the company, but these portions of the bill were dismissed by an order entered by the Honorable Clyde I. Webster, circuit judge, on June 11, 1932.

Mr. Cyrowski, plaintiff, died November 4, 1933, and an order was subsequently made substituting Arthur Cyrowski, administrator of the estate of August Cyrowski, deceased, as party plaintiff in the cause without prejudice. Subsequent to the foregoing proceedings, and on the 27th of July, 1934, one Paul Faust, upon a petition, was granted leave of the court to intervene in the above cause as a party defendant, his petition setting forth that he is the owner of the stock held by plaintiff, August Cyrowski, at the time of the institution of these proceedings. It appears from the record herein that on October 19, 1932, one Julian W. Koss, recovered a judgment against August Cyrowski in the circuit court for the county of Wayne in the sum of $6,519 and $98.15 costs, that subsequently execution was issued and the sheriff levied upon the stock (60 shares) owned by plaintiff, August Cyrowski, at the time he instituted these proceedings, that said stock was sold on execution sale, duly advertised, on July 24, 1933, and that the same was purchased by said Paul Faust, that said Faust paid the sum of $9,500 for the stock, out of which sum was paid the judgment of plaintiff Koss in the law action, and the remainder, amounting to $2,541.40, was paid to August Cyrowski. It further appears that said Faust caused the said 60 shares of stock previously owned by Cyrowski to be transferred to his name upon the books of the Polish American Publishing Company and a new certificate of stock for said 60 shares to be issued to him.

Separate motions were filed on January 15, 1935, by defendants Frank Januszewski, Stefania Januszewski, John J. Przylubski and Paul Faust to dismiss both bills of complaint filed in these causes. The motions were heard and considered together by reason of the similarity of facts by the Honorable Lester S. Moll, circuit judge in and for the county of Wayne.

For the purpose of simplifying the record and to obviate the taking of testimony, statements were made upon the record by counsel for the respective parties at the time of the hearing on said motions as follows:

"Mr. Burns: There were 360 shares of stock in the Polish American Publishing Company, of which August Cyrowski was the owner of 60 shares at the time these suits were commenced; he was the owner of 60 shares of the 360 shares of the corporation at the time he commenced the suits.

"Mr. LaJoie: We will admit that there was a judgment against Cyrowski; that this stock was sold to satisfy that judgment and was bought by a man by the name of Faust. Therefore, at this time Mr. Cyrowski no longer owns the shares of stock.

"Mr. Burns: And Paul Faust is the owner of the stock, of the 60 shares of stock that Cyrowski owned at the time that he commenced the suits. That the stock was purchased for $9,500 at the sheriff's sale by Faust, purchased by Faust at the sale.

"Mr. LaJoie: Yes, we will admit he bought it.

"Mr. Burns: And that the stock has been transferred on the books of the corporation and the certificates of stock surrendered and new stock issued.

"Mr. LaJoie: I assume that is true, I don't know; I don't dispute it.

"The Court: That is the one question that appeals to me. Can Mr. Cyrowski, we will assume that he is alive, could he profit as a judgment creditor in any other capacity than as a stockholder?

"Mr. LaJoie: That is right, as a stockholder.

"The Court: Is he entitled to any personal judgment in his favor?

"Mr. LaJoie: Not at all, only as a stockholder.

"The Court: Maybe you misunderstood my question. Does August Cyrowski or his estate, so far as party in interest is concerned, stand alone, or does it stand simply in the status of a stockholder of the corporation?

"Mr. LaJoie: It stands only in the status of a stockholder in this corporation as of the time that this suit was started — as of the time that this fraud was done."

Upon the conclusion of the arguments and the submission of said motions to the court, the bill of complaint in both cases was dismissed.

Plaintiff appeals from the order dismissing his bill of complaint, contending that a minority stockholder who commenced an action in equity to recover his portion of funds fraudulently and illegally diverted from a corporation by its dominating and controlling majority of shareholders resulting in special injuries to his property rights and in violation of fiduciary relationship to said minority shareholder, may continue his suit where it appears that he lost his stock pending said litigation.

The defendants contend that where it appears pending litigation that a plaintiff has parted with all of his interest in the litigation, that the court on motion should dismiss the action without requiring a trial of all of the issues involved in the case; that where it appears that plaintiff's entire claim is based upon his ownership of the shares in a corporation and does not claim that any dividends have been previously declared by the corporation which were not paid him, and he does not claim to be a creditor at the time of the filing of the motion to dismiss, he is no longer a stockholder of the corporation, has no interest in the carrying on of the litigation, and that the motions to dismiss were properly granted.

Appellant insists that the question should have been brought before the court by supplemental pleadings, and that the issue should have been disposed of at the trial of said cause on the merits, insisting that appellant might have had sufficient reason for setting aside the sale of his stock, insisting that the court had to assume in disposing of said motion not only the sale of said stock but also its validity. In view of the court proceedings hereinbefore quoted had in open court at the time of the hearing on the motions, we are compelled to hold that the present position of appellant is untenable.

There is nothing in the record or in the briefs of the parties to this cause that even tends to indicate that the present owner of the Cyrowski stock, Paul Faust, ever was a party to any plan, scheme or conspiracy to deprive the plaintiff of his stock. The purchase of the stock, as shown by the record, was made at a public sale thereof, in which Mr. Faust was in no way interested, except later as a purchaser, or in which he was in no way involved. He paid $9,500 for the stock, and that portion thereof in excess of the judgment and costs, upwards of $2,500 was paid to plaintiff. Mr. Faust thereby became the undisputed owner of the stock held by the plaintiff at the time of the institution of this suit. We are familiar with the holding of this court that, "Motions to dismiss are a substitute for demurrer, pleas in abatement and pleas to the jurisdiction but cannot be used to try the merits and issues of facts. Haney v. Grand Rapids Trust Co., 221 Mich. 160; Thomson v. Kent Circuit Judge, 230 Mich. 354; BrothertonCo. v. Jackson, 231 Mich. 604," but in view of the admissions of counsel made in the record at the time of the hearing on the motion, we hold that the foregoing cases cited by plaintiff are not applicable to the questions involved in the instant case.

Counsel for plaintiff contend that Court Rule No. 18, § 1, subd. j (1933) "that the plaintiff assigned or disposed of the cause of action before the bringing of suit," is not applicable here because the appellant did not part with his stock for some 13 months after the bringing of suit.

The statute, 3 Comp. Laws, 1929, § 14010, provides:

"Every action shall be prosecuted in the name of the real party in interest, but an executor, administrator, guardian, trustee of an express trust, a party with whom or in whose name a contract has been made for the benefit of another, or a party expressly authorized by statute, may sue in his own name without joining with him the party for whose benefit the action is brought."

In Michigan Employers Casualty Co. v. Doucette, 218 Mich. 363, we said:

"What was formerly permissive is now mandatory. All suits must be prosecuted in the name of the real party in interest."

We call attention to the following cases as bearing upon this question: Niles v. Ransford, 1 Mich. 338 (51 Am. Dec. 95);Webster v. Hitchcock, 11 Mich. 56; Perkins v. Perkins, 16 Mich. 161; Brand v. Smith, 99 Mich. 395; Moore v. Smith, 103 Mich. 387; Waters, for use of Commercial CasualtyIns. Co., v. Schultz, 233 Mich. 143.

The record in this case clearly shows from the pleadings and admissions made in open court that no dividends had ever been declared by the Polish American Publishing Company; that the plaintiff was not a creditor of the corporation; that his stock had been transferred subsequent to the filing of his bill of complaint, and that he was thereby divested of any interest in the corporation or its assets, and that, therefore, the motion for the dismissal of plaintiff's bill of complaint was properly granted.

Order affirmed, with costs to defendants.

FEAD, C.J., and NORTH, WIEST, BUTZEL, BUSHNELL, SHARPE, and POTTER, JJ., concurred.