Court Opinion

ID: 5498068
Source: CourtListenerOpinion
Date Created: 2022-01-10 02:55:18.041585+00
Date Added: 2024-06-11T08:33:51.892288
License: Public Domain

Barrett, J.
The question is here presented whether the people can maintain an action, under sections 1781 and 1782 of the Code, to redress a strictly private wrong. There is not a suggestion of public right or interest in the case. The corporation is not a public one, nor is it a private corporation witii public duties. The people of the state have no special interest to be sub-served by the proper and effective administration of the franchise, nor have the people of any locality in the state, nor has any class of citizens. It is, in fact, an ordinary business corporation, organized, under the general act of 1848, for the purpose of mining in California; and it is therefore essentially what is known as a “private corporation. ” The attorney general has brought this action in the name of the people alone. There is no relator. It does not seem to have been brought for the benefit of creditors; for it nowhere appears that any creditor has invoked the attorney general’.s authority, and, indeed, the creditors were apparently provided for by the arrangement which the action questions. It is quite clear, upon the face of the complaint, that the action is solely in the interest of certain stockholders who are dissatisfied with the action of the trustees. The entire dispute, both upon the pleadings and the proofs, is between the trustees and a small minority of stockholders. For the action complained of the trustees have the authority of a large majority of the stockholders. By that action they undoubtedly saved the property of the company for the ultimate benefit of both stockholders and creditors. They were, however, guilty of a technical wrong to the minority in transferring, without their consent, the company’s property to the new California corporation ; and, although this action was necessary to save the property, and was in truth a substantial benefit to all concerned, yet the non-assenting stockholders have a right to refuse the benefit, and to insist that they shall not be saved, against their will, by an act in excess of the trustees' authority. This is precisely what this case comes to; and, while no court should deny to the minority their full legal rights under the circumstances, it seems to me that they might well have been left to secure those legal rights by action in their own name, and at their own risk and expense.
The question of the people’s right, as quasi statutory guardian for these stockholders, to maintain this action, was very fully and thoroughly considered by Mr. J ustice Ingraham at special term, and his conclusion was adverse to the right. The same question was discussed by Judge Earl in the late case of People v. Lowe, 22 N. E. Rep. 1016, and that learned judge also denied the right. Unfortunately,the decision in that case was placed upon another ground, and the question was not determined by the court of appeals. Judge Earl’s opinion, therefore, is only his individual judgment;, but, as such, it is entitled to the consideration always due to the reasoning of this distinguished jurist. My own judgment, upon a careful examination of the statute in the light of these opinions, and after due consideration of the history of the law on the subject down to the passage of the Code of Civil Procedure, is that the legislature never intended to afford this as a concurrent remedy in ordinary disputes between stockholders and trustees of private corporations. It may be going too far to saj' that the actions provided for in subdivisions 1, 2, 5, and 6 of section 1781 of the Code must relate—when brought by the attorney general, in behalf of the people, without a relator—to public corporations, or corporations clothed with public duties. The wording of the revisor’s notes to that provision of the revised statutes from which this section of the Code was *920in part drawn gives color to this view, but the language used by,the revisors in the act seems broader than the intent expressed in the note. That language may, without affecting the result in the present case, be deemed broad enough to cover cases where the public is in any wise interested in the management and disposition of the funds and property of a corporation, public or private, or in the faithful administration of the duties imposed upon its trustees. But, to maintain such an action, there must be some sort of public interest. That seems to be contemplated by the language used in section 1808, where the attorney general is authorized to bring the action if, in his opinion, “the public interests” require it. His judgment on that head, however, does not conclude the inquiry as to whether there is an enforceable public interest involved. A public right may be involved, and the attorney general may or may not deem it in the public interest to enforce that right by action. 1-Ils judgment is conclusive as to the propriety and wisdom of bringing the action, —not, of course, of the right to maintain it. The reference in the section, however, to public interests, is significant; and I cannot but think that it is illustrative of what was contemplated by sections 1781 and 1782. The history of the law on the subject, also, favors this construction, and is opposed to a literal reading of either the Bevised Statutes or the Code. The public interest which authorizes the maintenance of the action may doubtless be ultimately associated with private right; but I cannot believe that the door was opened as widely as the appellant claims, or that it was intended to permit the attorney general, upon behalf of the people, to interfere in strictly private disputes, entirely dissociated from public interests, merely because such disputes happen to occur within corporate lines. Mr. Justice Daniels evidently appreciates the difficulties which must follow his conclusion; for he acknowledges that, owing to the estoppel operating upon the assenting stockholders, the liabilities of the trustees must necessarily be limited to the measure of redress due to the non-assenting stockholders. The statute, however, authorizes no such limitation, nor does it make any provision for the settlement of the equities as between the assenting and non-assenting stockholders. How would it be possible, in an action to which these stockholders are not parties, to go into such questions? To take proof, and adjudicate that some were es-topped, and others not? To bind the people thereby, and to shape the judgment with relation thereto ? The statute contemplates nothing of the sort. On the contrary, it distinctly provides for a judgment compelling the derelict trustees to pay to the corporation, or to its creditors, the value of any property which they have transferred tq others by a violation of their duties; and that, indeed, is the judgment which the people here demand. They do not, and they could not, ask for a judgment compelling the trustees to pay to the stockholders the proportionate value of the property transferred; that is, proportionate to the amount of the non-assenting stock. Hor could the court compel the trustees to pay such proportionate sum to the corporation for the use and benefit of the non-assenting stockholders. It follows that the people were not entitled, upon the pleadings and proofs, to such a judgment as the statute authorizes, and that the complaint was properly dismissed. If the non-assenting stockholders had brought their action against the trustees, they would have been met with proof, in mitigation of damages, of the almost hopeless condition from which the property was rescued by the united action of the trustees and the majority of the stockholders. By this action, brought, no doubt, in perfect good faith by the attorney general upon their representatives, the non-assenting stockholders are enabled to evade this situation; and, if they were successful, the statute would have been utilized, in the name of equity, to work real injustice. The judgment should be affirmed, with costs.