Gere v. Dorr

Lewis, J.

A demurrer to the complaint, on the ground that it did not state facts sufficient to constitute a cause of action, was overruled by the court below. The action is in equity, brought by certain stockholders,, on behalf of all stockholders, against the Columbia River Orchard Company, Russell R. Dorr, its president and treasurer, B. R. Dorr,, its secretary, and W. E. Bramhall, all of whom constituted the board of directors, for the purpose of procuring judgment that fifty thousand shares of stock of the company, which had been issued to R. R. Dorr, and one thousand shares issued to B. R. Dorr, were fraudulently issued, and to restrain the officers from voting the stock, and that it be canceled and surrendered to the company.

The corporation was organized under the laws of Arizona, and at the time of the commencement of the action was not transacting any business in this state, and had no office therein. Attempted service-was made on the company, but it was set aside, and demurrers to the complaint by defendants B. R. Dorr and W. E. Bramhall were sustained. The demurrer by R. R. Dorr was overruled. The objection urged by him against the complaint is that the relief sought, conceding the facts stated to be true, will necessarily constitute an interference with the internal affairs of the corporation, and that the state is powerless to confer jurisdiction upon the courts of this state with reference to the subject-matter.

In the case of Guilford v. Western Union Tel. Co., 59 Minn. 332, 61 N. W. 324, 50 Am. St. 407, the rule was recognized that courts will not exercise visitorial powers over foreign corporations, or interfere with the management of their internal affairs, and two important cases were reviewed and distinguished. The principle was-also considered in State v. De Groat, 109 Minn. 168, 123 N. W. 417, 134 Am. St. 764, and the leading case of Madden v. Electric Light Co., 181 Pa. St. 617, 37 Atl. 817, 38 L.R.A. 638, was referred to. The supreme court of Pennsylvania held that the leasing by a foreign corporation of its property and franchises for an inadequate rental, with respect to the consequent depreciation of it, constituted the management of its internal affairs, and that the local court could not entertain jurisdiction to compel the taking of bids. The cases are collected under section 6742, Thompson, Corporation (2d Ed.).

We are not prepared, to state whether all of those cases would altogether meet with the approval of this court; but we believe they are distinguishable in principle from the case before us. At least, we^do not find that a similar state of facts was ever before presented.;' So far as developed, the rule seems, to be that where no question is involved as to the object and good faith of the incorporators, and residents of one state in good faith become stockholders of a foreign corporation, they cannot question in a local court the acts of a corporation which involve their relation as stockholders in the corporation, while acting through its board of directors or stockholders. The validity of such acts must be tested by the laws of the incorporating state, and the interpretation of those laws and the validity of the corporate powers attempted to be exercised thereunder, unless otherwise provided, are limited to the courts thereof.

It is charged that appellant, a resident of this state, for the purpose of obtaining money from the plaintiffs, entered into a conspiracy with other persons to organize the corporation for the fraudulent purpose of securing fifty thousand shares of the stock without consideration; that it never was the intention to purchase lands and cultivate them in good faith for the benefit of the plaintiffs, although that was represented by him to be the purpose when they subscribed for stock. If the plaintiffs parted with their money on account of such representations, and if by such means appellant secured control of the corporation to the detriment of the plaintiffs, they and the other stockholders are entitled to some relief. The purpose of this action, in part,' is to prevent appellant from parting with the stock' The courts of this state have jurisdiction as against him for that purpose, even if no jurisdiction .'exists as to the corporation or the nonresident defendants. It is a personal matter between the appellant and the plaintiffs, and this proceeding is not an interference with the management of the internal áffairs- of the corporation.

Affirmed,