Singers-Bigger v. Young

ADAMS, Circuit Judge (after stating the facts as above). Some criticism is made of the practice of rehearing a demurrer to a complaint on a motion for judgment after the answer is filed, but, as counsel for both sides joined in this method of disposing of the case without objection and treated the complaint, bill of particulars, and affirmative allegations of the answer as true, we shall do so likewise. A bill of particulars is not a pleading, and cannot help out one which is otherwise demurrable. When a pleading sets forth facts constituting the essential elements of a cause of action so that it is not obnoxious to a demurrer, but is so general as to afford opportunity for surprise when the proof is taken, a bill of particulars may be resorted to to secure requisite certainty. Rinker v. United States, 151 Fed. 755, 759, 81 C. C. A. 379, and cases cited. We shall therefore treat the bill of particulars filed in this case only as illustrative of the general averments of the complaint. The answer presents little, if anything, beyond what is found in the complaint. It admits all its essential allegations, but states in detail what was there stated in substance only, concerning the relief which was granted by the decree in the former suit. Defendant’s motion for judgment on the pleadings assumed the truth of the averments of the complaint and the affirmative undenied averments of the answer. [85] Their legal sufficiency was cliallenged by defendant’s motion for a judgment. Practically, however, we are called upon to determine whether the complaint stated a cause of action. The substance of the charge made is that defendant Young, who was a director in the amusement company, acting in concert with its other directors wrongfully failed to secure a renewal of some valuable leases owned by their company, and allowed the same to be acquired by another company in which the plaintiff had no interest. We held in McCourt v. Singers-Bigger, supra, that the reasonable expectancy of a renewal of a lease by a tenant is regarded in equity as property, and the charge in this case is that the defendant, co-operating with his associate directors, converted that property to their own use, and that as a result the plaintiff was compelled to assert the rights of the corporation in order to secure her stockholder’s portion of damages which resulted to the corporation by the wrongful act of the directors; that in doing so she expended money and otherwise sustained loss as stated in the complaint. The wrong complained of against the defendant does not arise out of his personal, but solely out of his official, acts. Neither he nor his associate directors as individuals could secure the renewal of the leases. The right to it was in their corporation, and its assertion required the official action of its directors. Defendant’s special employment by plaintiff to protect her rights was necessarily in subordination to his duty as director. If the contract of employment obligated the defendant to assist plaintiff to control the corporate action of the company in the important particular under consideration, regardless of his duty as a director to represent and act for all the stockholders alike, it would have been against the policy of the law of Colorado under which the amusement company was incorporated. This law confides the business management of such corporations to boards of directors (Mills’ Ann. St. § 481), and requires a majority of them to authorize any proposed act (Thomp. on Corp. § 726). A contract of the character just suggested would tend to deprive the stockholders of the benefit of defendant’s independent and impartial judgment, and subordinate the interests of the corporation, which his duty required him to serve, to the individual interests of his employer, and would be contrary to public policy and void. Wardell v. Railroad Company, 103 U. S. 651, 26 L. Ed. 509; West v. Camden, 135 U. S. 501, 520, 10 Sup. Ct. 838, 34 L. Ed. 254. Whatever other obligations defendant owed to plaintiff by reason of the contract of employment, he owed her nothing with respect to his duty as a director. That was conclusively determined by law, and could not be added to or lessened by a personal contract with one of the stockholders. The right to a renewal of the leases was the right of the corporation, and the injur}’ resulting from a wrongful failure to secure that right by the directors was an injury to the corporation. The general rule is that the corporation alone can maintain a suit for damages occasioned to it by the wrongful acts of its directors. Thomp. on Corp. § 4119, 4471, et seq., and cases cited. Chief Justice Shaw, in the. leading case of Smith v. Hurd, 12 Metc. (Mass.) 371, 46 Am. Dec. 690, discussing the correlative rights, powers, and duties of a corporation and its stockholders, said: [86] “The bank Is a corporation and body politic, having a separate existence as a distinct person in law, ⅝ * * to whom all * * * officers and servants are responsible for * ⅜ ■* torts and injuries. * * * The individual members of the corporation, whether they should all join, or each act severally, have no right or power to intermeddle with the property or concerns of the bank, or call any officer, agent, or servant to account, or discharge them from any liability, ⅜ ⅜ ⅜ simply because they are not the legal owners of the property, and damage done to such property is not an injury to them.” The principles just referred to are, in our opinion, decisive of this case. Plaintiff’s ground for recovery rests exclusively in the malfeasance of an officer of the corporation which resulted in loss of corporate assets. Any right of action resulting from that malfeasance belongs to the corporation itself. Plaintiff’s particular claim that she was damaged by not having the use of certain money which she ultimately received in dividends, from the time the income from the theaters was wrongfully cut off by the misconduct of defendant until they were finally paid out of the proceeds of the litigation to the stockholders, clearly falls within the rule just announced. This lost use of the money is in contemplation of layr a loss to the corporation itself, and not to the stockholders. The latter had no legal right to it until the directors of the corporation should distribute it to them. Non constat that any dividend would have been declared if the money had been received earlier. The exigencies of the company might have required its use for other purposes. “A shareholder cannot maintain an action at law against the directors for any loss sustained by him through the waste of the assets of the corporation, the deprivation of dividends or the diminution of the value of his shares in consequence of the mistake, negligence, fraud, or other nonfeasance or malfeasance of the directors in the discharge of the duties of their office.” Thomp. on Corp. § 4478, and cases cited. We are also of opinion that all the other specified items of damage resulting to plaintiff from the malfeasance of defendant Young are damages recoverable only by the corporation. But there is another reason why plaintiff cannot recover them in this action. She paid certain costs and expenses in the litigation which were decreed to be a charge against the fund secured and were awarded and paid to her out of the recovery. Her present complaint is that because she was the owner of one-half of the stock, and because the money: restored to her in payment of the costs and expenses came out of the as-, sets of the company, she was compelled in this indirect way to bear one-half of them. Bor this indirect loss, as well as for some costs and expenses which she claims were not refunded to her, she seeks now to hold the defendant Young. He with his co-directors were defendants in that case, and all other persons were made parties who were necessary to its final and equitable disposition, including the determination of the ultimate liability for all costs and expens'es incurred in its prosecution. The fact that plaintiff had expended money in defraying the costs and expenses and all the facts concerning Young’s infidelity and malfeasance were before- the court for adjudication and in view of all of them the court ordered some to be taxed against the fund, and is alleged to have made no provision with respect to the balance. It might, in the exercise of the jurisdiction vested in it as a [87] court of equity, if the facts had so warranted, have declined to reimburse plaintiff at all, or it might have ordered Young or the other directors to pay plaintiff’s equitable portion of them out of their individual assets. The court had full power and jurisdiction over the subject and parties, and could do what equity and good conscience dictated. Pomeroy in his work on Equity Jurisprudence, vol. 1, §§ 114 and 115, says: “The governing motive of equity in the administration of its remedial system is to grant full relief, and to adjust in the one suit the rights and duties of all the parlies, which really grow out of or are connected with the subject-matter of that suit. * * * The fundamental principle of equity in relation to judgments is that the court shall determine and adjust the rights and liabilities concerning or connected with the subject-matter of all the parties to the suit, and shall grant the pari bailar remedy appropriate in amount and nature to each of those entirled to any relief, and against each of those who are liable, and finally shall so frame its decree as to bar all future claims of any party before it which may arise from the subject-matter and which- are within the scope of the present adjudication.” The parties to this suit were parties to the former one, and the claim now asserted by one of them against another is one which either was or might have been adjudicated then. In such circumstances the decree then rendered is conclusive of the matter now sought to be litigated. Cromwell v. County oí Sac, 94 U. S. 351, 24 L. Ed. 195; Fish Bros. Wagon Co. v. Fish Bros. Wagon. Co.. 95 Fed. 457, 37 C. C. A. 146; Stewart v. Board of Trustees, 156 Fed. 773, 84 C. C. A. 451. Affirmed.