Jones v. Pearl Mining Co.

Chief Jhstioe Hayt delivered the opinion of the court. The right of stockholders under certain conditions to maintain a suit in equity against the company and its board of directors is now universally recognized. The conditions have been stated in various forms by the courts, but we think they are all comprehended in the simple statement that such a suit may be maintained whenever it appears that otherwise there will be a failure of justice. Hawes v. Oakland, 104 U. S. 450; Miller et al. v. Murray, 17 Colo. 408; Pomeroy’s Equity Jurisprudence, vol. 3, secs. 1094, 1095. Tested by this rule, the allégations of the complaint are sufficient. Facts are alleged, which, if true, brand the- defendants as unworthy of The trust and confidence imposed upon them by their trust relationship to the corporate property* and, for the purposes of this demurrer, these allegations are admitted. By the record it appears that the guilty directors own a majority of the capital stock of the company, and therefore have the corporate management and the corporation itself completely within their power, and that they have conspired together for the purpose of using their trusteeship, not for the benefit of the cestui que trust, but for their own individual profit, to the manifest injury of plaintiff and those similarly [422] situated. It is apparent from the pleading that a demand upon either the managing body of the corporation, or the stockholders themselves, would be unavailing. Under such circumstances, an action may be maintained by stockholders “ without alleging or proving any notice, request, demand, or express refusal.” Pomeroy’s Eq. Jur., sec. 1095; Miller et al. v. Murray, supra. The directors are shown to have been guilty of negligence in the management of the corporate business, of frauds upon the company, and of acts ultra vires. Without any statutory authority therefor, and in direct violation of the law, they, have attempted to change the situs of the corporation from the state of Colorado to the state of Pennsylvania. Meetings of the stockholders have been called and held in the city of Philadelphia, in the state of Pennsylvania. The holding of such meetings beyond the limits of the state of Colorado was unauthorized, and the proceedings thereat were voidable, if not absolutely void. Spelling on Private Corporations, sec. 383; Miller et al. v. Ewer, 27 Me. 509; Smith v. Silver Valley Min. Co. et al., 64 Md. 85; Reichwald v. Commercial Hotel Co. et al., 106 Ill. 439; Camp v. Byrne et al., 41 Mo. 525. The statute provides (Mills’ An. Stats., sec. 481) that notice of the annual meeting of stockholders for the election of directors shall be published not less than ten days previous thereto, “ in the newspaper printed nearest to the place where the operations of said company shall be carried on.” This plain provision of law has been violated, and directors have been elected, including the present defendants, without notice, and at a place at which' a stockholders’ meeting cannot be legally held. A stockholder, although in the minority, at least has the right to the statutory notice, and to insist that meetings shall be held within the state, in order that he may attend and present his views in regard to the corporate management, although such views may not be shared by a majority of the stockholders. Perchance, by protest [423] and argument, lie may persuade the majority to change their course of conduct. Among other violations of the laws of this state charged against this company is that it has failed to keep its principal, or any office, at the town of Aspen, or elsewhere in this state, as provided in its articles of incorporation ; that it has kept no stockholders’ or other books in the state of Colorado. It is further shown that the directors have appropriated to their own use one hundred thousand shares of stock of the company, these being the property of the corporation set aside as its working capital, to raise funds to develop its mines, and that the directors absolutely refuse to account for this stock, or the proceeds thereof. Other acts of negligence and fraud in the corporate management are alleged against the defendants, but the foregoing are sufficient to show a right of action in the plaintiff, suing, as he does, for himself and on behalf of all other stockholders similarly situated. Several specific objections urged in argument to the sufficiency of the pleading will, however, be noticed. Plaintiff has designated five of the seven defendants in his complaint by fictitious names, alleging as a reason for so doing that the real names of the parties are unknown to plaintiff. Plaintiff' further alleges that the true names of said parties could not be obtained at the time, for the reason that all books and papers of said company were in Philadelphia, Pennsylvania, and not accessible to plaintiff, and offers to substitute the true names of the directors so designated as soon as he obtains the necessary information to enable him to do so. This manner of designating defendants whose true names are not known to the plaintiff is expressly authorized by sec. 76 of the Civil Code of 1887. Certain allegations of the complaint are made upon information and belief, and defendants claim that, for this reason, the demurrer was properly sustained. This objection is not a ground of demurrer. It can be raised by motion only. Pomeroy’s Rem, & Rem. Rights, sec. 548, Moreover, as the [424] facts alleged upon information and belief are not presumptively within the knowledge of the plaintiff, he is at liberty to plead them in the form adopted. Carpenter et al. v. Smith et al., ante, p. 89; Thackara et al. v. Reid et al., 1 Utah, 238. It is claimed that the capacity in which the plaintiff sues is not sufficiently alleged in the complaint. We do not think this objection is well taken, it being averred that Sarah F. Cooper was the duly appointed and acting administratrix, and it appearing from the record that James A. Jones was afterwards duly substituted by an order of court for said Sarah F. Cooper. In the absence of a showing to the contrary, we must assume that this order of substitution was properly made. Another objection is that it is nowhere positively alleged that any of the stock belonged to the estate of Isaac Cooper. This claim is not borne out by the record, it being expressly alleged that plaintiff is a stockholder in the company. The prayer is for an injunction and appointment of a receiver, and for general relief. Under this prayer the court may award the plaintiff any relief to which the facts may show that he is entitled, and it is unnecessary to consider at this time the particular relief that should be granted in oase plaintiff succeeds in finally maintaining the action. The judgment of the district court is reversed aud the cause remanded, Reversed,