Case Name: William J. Wasmer v. Massillon Iron & Steel Co. et al.
Court: Ohio Court of Appeals
Jurisdiction: Ohio
Decision Date: 1916-03-24
Citations: 30 Ohio C.C. Dec. 575
Docket Number: 
Parties: William J. Wasmer v. Massillon Iron & Steel Co. et al.
Judges: Shields and Houck, JJ., concur.
Reporter: Ohio Circuit Court Decisions
Volume: 30
Pages: 575–577

Head Matter:
ACTION — CORPORATIONS—NEGLIGENCE.
[Stark (5th) Court of Appeals,
March 24, 1916.]
Powell, Shields and Houck, JJ.
William J. Wasmer v. Massillon Iron & Steel Co. et al.
1. Corporation Has Primary Right to Maintain Action for Negligence of Directors.
The right to maintain an action for the recovery of a loss resulting from the negligence of directors of a corporation is primarily in the corporation itself, either upon its own initiative, or on the demand of a creditor, when a creditor is interested, or of a stockholder.
2. Stockholder Has Secondary Right to Prosecute Action for Negligence of Directors.
A secondary right to maintain the action accrues to a stockholder after demand made upon the corporation to institute such suit and a failure on its part to comply with such demand or to prosecute the action in good faith to a final termination.
3. Action for Negligence of Directors Prosecuted Originally by Stockholder.
Such suit can also be maintained originally by the stockholder where the facts alleged and proved show that the suit would not be prosecuted in good faith for the benefit of the corporation and its shareholders.
4. Suit Brought in Good Faith at Request of Stockholder Binding as Election of Remedies.
A suit brought in good faith, upon demand made by a stockholder, is in the nature of an election of remedies and such stockholder is bound by it.
Ebror.
Ammerman & Mills and J. Buchanan, for plaintiff in error.
Lynch, Day, Fimple & Lynch; J. Ralph Dangler, Jr.; M. B. & H. H. Johnson and Henry, Fauver, McGraw & Thomsen, for defendants in error.

Opinion:
POWELL, J.
The judgment of the court of common pleas in this case is affirmed on the ground that the plaintiff, William J. Wasmer, is without any legal right to maintain the action.
If recovery can be bad upon the facts stated in the petition, it would be a recovery not in favor of the plaintiff directly but in favor of the defendant, Massillon Iron & Steel Co., for the benefit, of its creditors and stockholders. Plaintiff's interest in such recovery is as a stockholder of the Massillon Iron & Steel Co. The ground of recovery is the alleged negligence of the defendants as directors of said Massillon Iron & Steel Co., whereby the loss of a large sum of money accrued to said defendant Iron & Steel Co. and its stockholders. Such action can be maintained, and recovery had, in a proper case. Primarily the right to maintain, it is in the corporation itself; either upon its own initiative, or on the demand of a creditor, when a creditor is interested, or of a stockholder. A secondary right to maintain the action accrues to a stockholder after demand made upon the corporation to institute such suit and a failure on its part to comply with such demand or to prosecute the action in good faith to a final termination. Such suit can also be maintained originally by the stockholder where the facts alleged and proved show that the suit would not be prosecuted in good faith for the benefit of the corporation and its shareholders. In the present case plaintiff, who was a shareholder, made demand upon the corporation to institute suit against its alleged delinquent directors to recover from them the losses claimed to have been sustained by the corporation by reason of their negligence. This demand was made August 26, 1912, and suit was brought pursuant to such demand in October, 1912, which suit is still pending. This action was commenced December 3, 1912.
We hold that in such eases a suit brought in good faith, upon demand made by stockholder, is in the nature of an election of remedies and that such stockholder is bound by it. Plaintiff's amended petition states several reasons why he should be allowed to maintain this action. These reasons if sufficient for that purpose would also have been sufficient to have allowed him to maintain an original action, without first making demand on the corporation. His remedy, if one were necessary by1 reason of bad faith or fraud in the prosecution of the original suit, was to have intervened in that suit by answer and cross-petition. By analogy to the doctrine of election of remedies, be is bound by bis own act in making demand upon the corporation to bring the suit it did bring.
Judgment affirmed.
Shields and Houck, JJ., concur.