Opinion ID: 2136271
Heading Depth: 1
Heading Rank: 1

Heading: Plaintiff raises four distinct arguments in support of its first assigned error.

Text: First, it contends corporate existence may be attacked only by the state in a quo warranto action, unless the action is brought by one of those parties specified in section 496A.6, The Code, or the issue is raised as an emergent issue in fraud or comparable cases. It has been held an action in quo warranto under rule 299, Rules of Civil Procedure, is appropriate to test the legality of the corporate existence of a corporation, provided the public interest requires such action. State ex rel. Maley v. Civic Action Comm., 238 Iowa 851, 28 N.W.2d 467. Plaintiff relies on Sherwood v. Greater Mammoth Vein Coal Co., 193 Iowa 365, 378-379, 185 N.W. 279, 284-285, wherein the plaintiff sought an injunction against a corporation. The trial court held for defendant and this court affirmed, stating as follows:    The instant case is an action in equity and for injunction, in which appellant seeks to test the existence of the coal company as a corporation. The statute in regard to injunctions is section 4354. The action of quo warranto is provided for by section 4313 of the Code. Under this an ordinary action in the name of the state may be brought against a corporation acting as such, or exercising powers not covered by law, and so on. We held in Harvey v. Kirton, 182 Iowa 973, 164 N.W. 888, and Nelson v. School District, 181 Iowa 424, 164 N.W. 874, that in such a case the action of quo warranto is exclusive. In both cases an injunction was asked and denied, because the matter of testing the legality of a corporation or the election of officers therein must be determined by an action in quo warranto by the state. In the Nelson case we said, 181 Iowa, at page 434, 164 N.W. 878: 'We think the rule equally well settled and sound that private citizens cannot raise such question by any form of direct attack. Quo warranto is the proper, and in the absence of statute the exclusive, proceeding to determine the question of the legal existence or validity of the organization of a public corporation.    The essential point is that the right to draw in question the legality of an existent body of the character mentioned is the prerogative of the state, and not of private litigants.    It is an application of the principle that public rights are to be vindicated by public authority.    The private litigant should not be permitted to reach the same result by a change of form of action.' (Emphasis supplied) Sherwood is precedential support for the proposition the legal existence or validity of a corporate organization, whether public or private, must be tested by an action in the nature of quo warranto. Walling v. Iowa Ins. Co., 228 Iowa 503, 513-514, 292 N.W. 157, 162-163. The rationale of Sherwood is well stated by the emphasized portion of the above quotation from the Nelson case. If a party seeks merely to test the legality of the corporation, his exclusive remedy is by quo warranto. Here, however, defendant did not institute an equitable proceeding to redress a public wrong, to test the legality of plaintiff's existence. Rather, it urged as a defense the fact plaintiff lacked corporate existence because of the action by the state pursuant to chapter 496A, The Code, it did not have capacity to enter into the alleged contract and sought a summary judgment in light of that fact. As this court stated in Walling, supra, quo warranto is not the exclusive remedy when the challenge to corporate legality is merely a casual issue in a case involving enforcement solely of private rights which do not relate to questions of a public interest. Id. 228 Iowa at 516, 292 N.W. at 163. Sherwood and Walling both indicate that a question as to corporate existence can be raised by a private litigant in an action involving private rights; an action in the nature of quo warranto is appropriate only when public interests are involved. The applicable rule is stated in State ex rel. Robbins v. Shellsburg Co., 243 Iowa 734, 737, 53 N.W.2d 143, 144, in this manner: Quo warranto or an action in the nature of quo warranto is a special proceeding and strictly statutory in character. It is available only where the act complained of is of a public interest and may not be invoked for the redress of a private right or grievance.    [citing authorities]. The foregoing principle was approved in Berger v. Amana Society, 250 Iowa 1060, 1071, 95 N.W.2d 909, 916. See also State ex rel. Maley v. Civic Action Comm., 238 Iowa at 860, 28 N.W.2d at 471. Plaintiff's lack of capacity to enter into the alleged contract declared on is neither being urged by defendant to conserve or protect the public interest nor in an attempt to have the court terminate plaintiff's corporate existence, but only as a defense in defendant's private interest. Neither our rules of procedure nor other statutory provisions relating to actions in the nature of quo warranto bar defendant from raising plaintiff's lack of capacity to enter into the alleged contract as a defense.