Court Opinion

ID: 8188897
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:11:45.488931+00
Date Added: 2024-06-11T16:40:31.917742
License: Public Domain

Dodge, J.
Before considering whether the counterclaim is pleadable as such, it is necessary to ascertain what is the plaintiff’s cause of action. The obvious primary complaint is that the defendants have obtained from the corporation and hold stock to which they have no right and which, therefore, ought to be canceled. This is clearly a right of action belonging to the corporation. It is the person primarily injured by the ostensible existence of full-paid stock, at once constituting an apparent liability and subjecting its management and policy to unwarranted control, or at least influence, by the holders of this fictitious evidence of ownership. Such right of action may, of course, be enforced by plaintiff, a stockholder, in behalf of the corporation, when, as alleged, the conduct of the latter is controlled by the defendants. Land, *678L. & L. Co. v. McIntyre, 100 Wis. 245, 75 N. W. 964; Jenkins v. Bradley, 104 Wis. 540, 551, 80 N. W. 1025. All tbe other allegations of the complaint, though disclosing misconduct of officers which might suggest -an action under sec. 3237, Stats. (1898), to remove them, are at least equally consistent with a purpose to declare the manner and degree in which the possession of the fictitious stock is injurious or threatening. Such purpose would, we are sure, be naturally inferred but for the prayer for a receiver to sequestrate and distribute the property' of the corporation. Can we, from that alone, reasonably deduce an intention to state an additional and separate cause of action either, under sec. 3237, Stats. (1898), to remove misbehaving officers or to reclaim property by such officers misappropriated, or, apart from such section, to wind up the corporation ? In the first place the complaint nowhere declares any separation of causes of action, as required by sec. 2647, Stats. (1898). This omission is at least significant of absence of intention to plead any additional cause. Luther v. C. J. Luther Co. 118 Wis. 112, 126, 94 N. W. 69; Earley v. Winn, 129 Wis. 291, 308, 109 N. W. 633. When to the considerations above stated is added the entire absence of prayer for any of the relief authorized by sec. 3237, Stats. (1898), we are convinced that not even the utmost liberality of construction discloses any cause of action for such relief, although some facts are stated which might support it. On the other hand, while the prayer of the complaint does ask that the corporation be wound up and its property sequestrated and distributed, no facts are alleged to support such a cause of action. The corporation is not insolvent, nor plaintiff a creditor, to warrant relief under sec. 3216, Stats. (1898). Neither does plaintiff show any right to sue under sec. 3241, Stats. (1898), to annul the corporation. Save within the field of one or other of those sections a mere stockholder has no. cause of action, in equity, to annul or dissolve a corporation and sell and divide its property. *679Strong v. McCagg, 55 Wis. 624, 13 N. W. 895; Hinckley v. Pfister, 83 Wis. 64, 53 N. W. 21. Hence we conclude that the only cause of action set forth in the complaint is that first above stated, to procure the cancellation .of the illegal stock and prevent its abuse by the unlawful holders. Luther v. C. J. Luther Co., supra.
This conclusion being reached, the nest question is as to the pleadability of the counterclaim thereto, or rather of either counterclaim, for defendant claims it has two: one to declare the corporation’s rights in the real estate, and another to remove plaintiff from office for misconduct substantially within sec. 3237. This force for the pleading would involve disobedience of sec. 2647, and the decisions under it above cited; but we shall not stop to consider it now, for we deem it immaterial. The statute — sec. 2656, Stats. (1898) — requires of a counterclaim either that it arise “out of the contract or transaction set forth in the complaint as the foundation of the plaintiff’s claim,” or that it be “connected with the subject of the action.” That neither of the suggested counterclaims' arises out of the contract or transaction of fraudulently obtaining an original issue of stock, or that of using the voting power of that stock to the injury of the corporation, or of the plaintiff’s right as a stockholder, is too plain to warrant more than statement. There is no identity, save in the parties between whom the distinct transactions occurred. Is there any connection with the subject of the action? The expression “subject of the action”- has evoked many attempts at definition. That which has received latest approval in this court is: “The subj ect of plaintiff’s action is his right and the invasion of that right by the defendant.” Telulah P. Co. v. Patten P. Co., ante, p. 425, 112 N. W. 522, 524, citing Mulberger v. Koenig, 62 Wis. 558, 22 N. W. 745; Grignon v. Black, 76 Wis. 674, 45 N. W. 122, 938. Illustrative cases of claims held not. counterclaims, though having connection either with the physical property or with the relief involved *680in. the plaintiff’s action are Tallman v. Barnes, 54 Wis. 181, 11 N. W. 418; Kuhn v. Sol. Heavenrich Co. 115 Wis. 447, 456, 91 N. W. 994; Stolze v. Torrison, 118 Wis. 315, 95 N. W. 114. Applying the above definition to the present situation, the plaintiff’s right is the right of' the corporation that none of its capital stock should be issued or be outstanding contrary to law, and that no privilege should be enjoyed by holders of such unlawful stock, and the infringement of that right, present and threatened, by the defendants. Obviously no connection with or relevancy to such subject can be discovered in a claim that plaintiff or any one else holds property in trust for the corporation or as mortgagee and denies the corporation’s alleged rights; or that plaintiff or any one else is abusing his position as president or director in some manner not related to the illegal stock or its use. Either such claim depends on an entirely distinct and disconnected right of the corporation and invasion thereof. No such claim, if established, could in any wise affect, modify, or defeat either the right of the corporation that the illegal stock should be canceled or the liability of the holders thereof to surrender it and refrain from exercising any privileges by reason of it. This latter consideration has often been held to exclude counterclaims, which it is declared can be pleaded only when they “will defeat or in some way qualify the judgment to which plaintiff is otherwise entitled.” Dietrich v. Koch, 35 Wis. 618; Kaukauna E. L. Co. v. Kaukauna, 114 Wis. 327, 343, 89 N. W. 542; Stolze v. Torrison, supra.
We conclude that the counterclaim is not pleadable as such against the cause of action stated in the complaint, and that the demurrer thereto on that ground should have been sustained. Such conclusion renders unnecessary consideration of other grounds of demurrer.
By the Court. — Order appealed from reversed, and cause remanded with directions to sustain the demurrer to the counterclaim of defendant M. C. Gehl Company.