People ex rel. Schindler v. Flint

Myrick, J. This is a proceeding by the people to have it determined that the defendants have usurped, intruded into, and wrongfully hold and exercise a corporate franchise, and that they be restrained from exercising the same. The articles of incorporation stated the capital stock to be one hundred thousand dollars, of which the amount actually subscribed was five thousand dollars. The certificate was filed [52] May 22, 1874. As section 419 of the Civil Code then read, no corporation could be formed for insurance, except on live stock, Avithout a subscribed capital equal to one hundred thousand dollars. Section 290 as it then read required the articles to state the amount actually subscribed. We think these sections should have been read together, to the extent of stating, (1) the amount actually subscribed; and (2) that it equalled one hundred thousand dollars. This being so, the persons signing the articles did not form a corporation. But the alleged corporation is not a party, and has not been heard; therefore its right of existence, or its right to transact business, cannot be adjudged or determined in this proceeding. It may be that individuals, perhaps the relator, have had such transactions Avith the alleged corporation as not to be in condition to dispute its existence. The people are interested to the extent that no further insurance business shall be transacted by the defendants (that is, no policies issued); and to that extent the defendants might, perhaps, be enjoined; but to prevent the corporation from collecting its dues, or maintaining any action, Avithout being heard as to its right so to do, is beyond the scope of the .present proceeding. The complaint Avas demurred to upon the ground, among others, of defect of parties defendant, in that the corporation AA'as not made a party. We think the demurrer Avell taken. The corporation Avas a necessary party. It certainly should be heard before any decree should be made affecting its rights; and possibly the very right of defendants, as individuals, to transact business, or do any act, might involve the right of the corporation to have the business done. The rights of the corporation may be, and probably are, involved in the very acts sought to be enjoined. It has the right to take issue on the allegation that the individuals enjoined are its trustees or directors. It is Avell to say, to prevent any misconception, that if on a neAV trial, after the alleged corporation has been made a party, it should be adjudged that it never had been legally a corporation, that in that case appropriate proceedings should be had by Avhich the affairs of such de fado corporation should be Avound up and settled by the trustees, Avhatever due to it collected, and Avhatever due by it paid, the balance, if any, to be divided among the stockholders. [53] The judgment is reversed and the cause is remanded, with instructions to sustain the demurrer upon the ground above indicated, and for further proceedings not inconsistent with this opinion. Thornton, J., Ross, J., and McKee, J., concurred. Rehearing denied.