Court Opinion

ID: 3571097
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:23:55.8339+00
Date Added: 2024-06-11T14:07:10.084687
License: Public Domain

It is unnecessary to determine whether the complaint supplemented by the evidence states a cause of action; a question raised by demurrer, both in the district court and in this court; because the findings of the court contradict the court's conclusions and judgment.
The Supreme Court of the United States stated in Hawes v. Contra Costa Water Co., 104 U.S. 450, 460, 14 Otto 450,26 L.Ed. 827: "But, in addition to the existence of grievances which call for this kind of relief, it is equally important that before the shareholder is permitted in his own name, to institute and conduct a litigation which usually belongs to the corporation, he should show, to the satisfaction of the court, that he has exhausted all the means within his reach to obtain, within the corporation itself, the redress of his grievances, or action in conformity to his wishes. He must make an earnest, not a simulated effort, with the managing body of the corporation, to induce remedial action on their part, and this must be made apparent to the court. If time permits, or has permitted, he must show, if he fails with the directors, that he has made an honest effort to obtain action by the stockholders as a body, in the matter of which he complains. And he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it."
The court follows this statement with the requirements regarding pleading and proof of such conclusion, as follows:
"The efforts to induce such action as complainant desires on the part of the directors, and of the shareholders when that it necessary, and the cause of failure in these efforts, should be stated with particularity, and an allegation that complainant was a shareholder at the time of the transactions of which he complains. * * *
"He merely avers that he requested the president and directors to desist from *Page 224 
furnishing water free of expense to the City, except in case of fire or other great necessity, and that they declined to do as he requested. No correspondence on the subject is given. No reason for declining. We have here no allegation of a meeting of the directors, in which the matter was formally laid before them for action. No attempt to consult the other shareholders to ascertain their opinions, or obtain their action."
Finding No. 7, upon which appellees rely, is a substantial copy of the court's conclusion in the Hawes Case. But it was not used there otherwise than a conclusion. The court followed such conclusion with a statement regarding the contents of proper pleading and proof, as is shown by our quotation from that case.
The presumption which this court indulges in favor of the correctness of judgments of the district court would have bound us in this case except for the contradictory findings to the effect that no request had been made upon the corporation or its officers to bring the suit, and the corporation had not refused to do so; and coupled with the fact that appellees were two of the five members of the board of directors and presumptively could bring about a meeting of the board of directors to act upon the matter. When the court made this finding and failed to make findings of fact showing the futility (not merely stating it as a conclusion) of calling upon the directors to bring the suit, his findings not only do not support the judgment, but contradict the conclusion upon which it is grounded.
It should be stated that the dismissal of this case does not preclude the bringing of a stockholders' suit in the future, if authorized under the rules of law governing such cases.
The motion for a rehearing is overruled.
It is so ordered.
HUDSPETH, C.J., and SADLER, BICKLEY, and ZINN, JJ., concur.