Dinsmore v. Barker

CHERRY, J. Montello Salt Company is a Utah corporation. Defendant J. H. Knauss is one of its stockholders, and holds the offices of director and secretary and treasurer. The corporation having disposed of its property and ceased conducting the business for which it was incorporated, on July 31, 1922, after proper proceedings by the stockholders, the defendant J. H. Knauss and others, as directors, filed a petition in the district court of Weber county for the voluntary dissolution of the corporation under Comp. Laws Utah 1917, §§ 7418-7424. Responding to notice, the plaintiffs.herein appeared in the dissolution proceedings and filed objections to the petition, in which they alleged misconduct and maladministration against the directors, and prayed for the appointment of a receiver and an accounting by the directors. The petitioners filed an answer to the objections, generally denying the accusations against the directors, and praying that, if a receiver was to be appointed, that J. H. Knauss be appointed as such. The district court .heard and considered the matters in dispute, and concluded to make an order dissolving the corporation and to appoint a receiver to take possession of its property and wind up its business. The parties having failed to agree upon a person to be appointed receiver, the court announced its intention to appoint the defendant J. H. [334] Knauss, notwithstanding the objections of plaintiffs. To prevent the appointment, the plaintiffs applied to this court for a writ of prohibition. The matter is submitted upon the petition or affidavit of the plaintiffs and the answer of defendants, and on the briefs and oral arguments of counsel. It is proper to state that the power of the district court, in the proceedings pending before it, to determine issues or make orders, other than, or in addition to, dissolving or refusing to dissolve the corporation, has not been questioned in this case, and is not here considered or decided. The pleadings and briefs contain considerable matter relating to alleged misconduct and maladministration on the part of the directors, and to particular personal reasons why the defendant Knauss should or should not be appointed as receiver. We are not concerned with the merits of these controversies, except so far as they indicate a conflict of interest between the parties. It is admitted that the defendant J. H. Knauss is a stockholder and a director and secretary and treasurer of the corporation, and that its principal property is a large sum of money in the custody of its treasurer. The question presented is whether the district court has the jurisdiction to appoint the defendant Knauss as receiver of the dissolved corporation, in view of his relationship to the dissolution proceedings. Comp. Laws Utah 1917, Sec. 6766, provides as follows: “No party or attorney, or person interested in the action, can be appointed receiver therein, without the written consent of the parties, filed with the clerk. * * *” Comp. Laws Utah 1917, §§ 7418-7424, provide for the dissolution by the district court of a corporation upon its voluntary application. Section 7419 requires the application to be in writing and to set forth that the dissolution was regularly resolved upon by a two-thirds vote of all the stockholders. Section 7420 requires the application to be made by or in behalf of the board of directors, or, if they decline, by any stockholders, and that it be verified. Section 7421 requires certain notice of the application to be given by pub [335] lication. Section 7422 authorizes any person to file objections to the application, within the time limited in the notice. Section 7423 provides that the court, alter five days’ notice to persons who filed objections, shall proceed to hear and determine the application, etc. Section 7424 provides that the application, notices, proof of publication, objections, if any, and declaration of dissolution, constitute the judgment roll, and from the judgment an appeal may be taken as from judgments in other civil actions. It is argued in behalf of the plaintiffs that the statutory proceeding for the voluntary dissolution of a corporation is an “action” within the meaning of section 6766, supra, and that the proposed receiver is a party to and interested therein, and that the proposed appointment is therefore prohibited, while defendants’ counsel contend that the proceedings cannot properly be denominated an “action” within the meaning of the statutory prohibition, and that the proposed appointment is within the lawful power of the district court. Thus we are brought immediately to a consideration of the meaning and interpretation of the term “action” as used in the statute. The law reports abound in eases where the word “action” has been judicially defined, and many of them have been called to our attention. With.out attempting elaboration, we refer to the definitions given in 1 C. J. 926, in support of which the authorities are in general agreement, viz.: “It is a generic term, and, in the absence of any restrictive words, has a broad and comprehensive application; and is said to mean any legal proceeding in a court for the enforcement of a right; any proceeding for the purpose of obtaining such a remedy as the law allows; any judicial proceeding, which, if conducted to a termination, will result in a judgment.” When the term is used in statutes regulating judicial procedure, it should be given a general and comprehensive meaning. Mulcahy v. Mulcahy, 84 Conn. 659, 81 Atl. 242. Accordingly it has been held that a judicial settlement of an executor’s account in the probate court (Mulcahy v. Mulcahy, supra), a proceeding to disbar an attorney (In re Wilcox, [336] 90 Kan. 646, 135 Pac. 995), a proceeding for tbe appointment of an administrator .(Gwinn v. Melvin, 9 Idaho, 202, 72 Pac. 961, 108 Am. St. Rep. 119, 2 Ann. Cas. 770), are all “actions.” The word “action” means the pursuit of a right in a court of justice without regard to the form of legal proceedings (City of Boston v. Turner, 201 Mass. 190, 87 N. E. 634). The purpose of section 6766, supra, is obvious and useful. It is intended to mate judicial proceedings deserving of trust and confidence by prohibiting interested partisans from assuming functions essentially nonpartisan. There is no reason in principle or authority why it should be given general application. The terms of the statute interpreted according to the established legal rules, above referred to, lead clearly and directly to the conclusion that a proceeding under the statute (Comp. Laws Utah 1917, §§ 7418-7424) for the voluntary dissolution of a corporation is an “action” within the meaning of Comp. Laws Utah 1917, § 6766. It is contended further in behalf of the defendants that Knauss is not a party to the action because he made the application in his representative capacity as a director and in behalf of the corporation, and that he is not interested because his ownership of stock is small, and his interest is not adverse to, but in common with, other stockholders. These points are both untenable. It is hard to see why Knauss should not be considered a party to the proceeding, since the application .was made in his name with others. A guardian ad litem, though acting in a representative capacity, is held to be a party to the action. Thomas v. Safe-Deposit Co., 73 Md. 451, 21 Atl. 367, 23 Atl. 3. But even if he is technically not a party, he is still prohibited from being appointed receiver, because he is a “person interested in the action.” That his ownership of stock is limited to a few shares of small value is of no consequence. The statute requires no particular degree or extent or quality of interest. But aside from his interest as a stockholder, he is interested in the accounting which must be made by [337] him as an officer of tbe corporation,, and this interest is adverse to the plaintiffs, as is clearly shown by the pleadings in the dissolution proceedings. Courts have a large discretion in the appointment of receivers, and, in the absence of statutory prohibitions, have, in some cases appointed interested persons. In this jurisdiction, however, the statute must prevail, and the district court may not legally appoint Mr. Knauss • receiver in the action pending before it on account of his relationship to and interest in the proceedings. It is suggested in the defendants’ brief that the plaintiffs are .seeking to impose upon the court their own nominee for receiver. That is not the alternative. The court may appoint any proper person not prohibited by law. The prermptory writ is granted. Costs to be taxed against defendants other than the judge. WEBER, C. J., and GIDEON, THURMAN, and FRICK, JJ., concur.