Court Opinion

ID: 8184042
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:06:15.544791+00
Date Added: 2024-06-11T16:40:20.982420
License: Public Domain

Pinney, J.
While, as held in Doud v. W., P. & S. R. Co. 65 Wis. 108, when the sufficiency of a complaint is raised by an objection to any evidence under it, a greater latitude of presumption will be indulged in to support it than upon a formal demurrer, we are obliged to hold that the complaints in this action as consolidated are so defective that no relief can be granted on either or both of them. The complaint of Hinckley prays relief in very many respects and on various grounds, but the difficulty is that on nearly all important matters affecting Hinckley’s claim to relief his title or grounds for relief are so imperfectly and vaguely stated that it would be found impossible from the complaints to frame a judgment that could be sustained consistent with the law.
1. Although the bonds issued to Pfister to the amount of $250,000 are void, as having been issued in violation of the *79statute (see. 1753, R. S.), without value given therefor equal to seventy-five per cent, of the par value thereof, yet neither the appellant the electric railway company, nor Hinckley as stockholder in right of the company, if we are to assume that he owns any valid stock, can maintain any action for the surrender or cancellation of these bonds, they having been pledged to Pfister as security for the loan of $125,000 to the corporation, for want of tender of the principal sum loaned and interest. Seeking equity, the corporation or any one suing in its right, would be required to do equity, and make tender, as a condition of relief, of the debt for which they were pledged. 1 Pom. Eq. Jur. § 391; Mumford v. Am. L. Ins. & T. Co. 4 N. Y. 463; Jones, Corp. Bonds, § 219. Besides, both the corporation and Hinckley, as its president, participated in the unlawful issue of them, and occupy no position to ask the intervention of a court of equity, for they could neither of them make out a title to relief except by showing a plain and positive violation of the statute. They are in equal wrong with Pfister, the party to whom the bonds were issued. Clarke v. Lincoln L. Co. 59 Wis. 655, and cases there cited. The law will leave the parties as they are, affording a remedy to neither.
2. It is difficult to say that the complaint shows with reasonable clearness and certainty that Hinckley ever acquired any valid stock of the electric railway company. He was the president of the company, and was a party to the issue and pledging of all the stock alleged to have been issued in violation of the statute. R. S. sec. 1753. Hinckley asserts several times in his complaint, in substance, that for the two fifths of the stock of the company issued to Hinsey he paid no money, property, or anything of value, but the same was issued to him gratuitously, contrary to law; and he admits that of the other three fifths issued to himself for part he paid no money or (value, and for the greater part thereof he paid property and services, but he *80specifies no part so that it can be identified or described, and proffers no allegation as to the value of the services or property paid for the rest. lie states that none of the parties to whom stock was issued, but himself, paid anything of value for it. He had already stated that he was the only person who had any actual interest in the cable railway company, the franchises and property of which were transferred to the electric railway company; that all this property, and all the' property of the electric railway company, except such as was acquired from the proceeds of the loan from Pfister, and such as it remains indebted for, had been “furnished by him (Hinckley), and no other of the stockholders of the company paid or furnished any portion thereof; ” that this was done under an agreement that he should be and remain a creditor of the electric railway company to the amount thereof, and be repaid from the proceeds of the sale of its said bonds, or, in lieu, that he should receive such bonds at seventy-five cents on the dollar; and he claims that for such advances (which include the cost of the cable railway company) he is a creditor of the electric railway company in a sum exceeding $100,000. How much of this was for the transfer of his sole beneficial ownership in the property and assets of the cable company, and how much was for subsequent advances, we are not informed. Failing to make any statement in this and other respects, it cannot be said with reasonable certainty that he is the owner of any full-paid stock in the company. He seems also to be making his interest in the cable company do double service: First, as a payment for stock in the electric railway company; and, second, as the basis of a still subsisting indebtedness against it. These allegations are so uncertain, indefinite, and contradictory that they cannot serve, we think, to show that the plaintiff is a stockholder and entitled to a standing in court in that capacity. He ought to have stated the facts so as to have enabled *81the court to determine whether the payment he made in money or services and property was applied in part payment of his entire block of stock, and, if in payment of a particular part, he should have identified it. The allegations of the complaint justify an unfavorable inference in this respect, and do not warrant the conclusion that he was the owner of any bona fide full-paid stock. On the contrary, the allegations of the complaint are much more clear and satisfactory to show that he has the position and rights of a creditor of the corporation for all he had furnished or done for it, and for his beneficial interest in the cable company. In this view of the case, the plaintiff’s stock, as well as that issued to Hinsey and others, falls under the condemnation of sec. 1753, R. S., and is void as not having been fully paid for “ to the amount of its par value,” so that neither of them can make any claim by means of or through it to the aid or protection of a court of equity as against the other, based upon the rights of a stockholder. Clarke v. Lincoln L. Co. 59 Wis. 655.
Hinckley's rights in relation to the pledge of his stock under the agreement with Pfister stand upon entirely different grounds, and the agreement not to resort to his stock until after the sale or disposition of the remainder of its bonds may well be enforced, as in such case the illegality alleged would be collateral to the agreement, and he would not be compelled to trace his right to relief through the illegality of issue of the stock. Regarding the case, in respect to the rights of Hinckley under this agreement, in the light of the allegations of the complaint, that the sale of the stock by Pfister was in violation of its express terms, and in excess of his power as pledgee, and therefore void; that its sale and purchase by Vogel was merely col-orable, and was made for the use and benefit of Pfister, and that it is now held in trust for him,— we are unable to understand upon what ground he can invoke the aid of a court *82of equity when it is plain from these allegations that such colorable sale and purchase and holding of the stock in trust for Pfister have not extinguished Hinckley's rights as pledgor, and, if they had, for such wrongful sale he has a plain and adequate remedy at law for a wrongful sale and conversion of the stock. The precise terms of the pledge of stock in this case do not appear, but it is conceded by the parties that they were such as to transfer to Pfister, and to take from Hinckley, the right of voting upon it. He cannot ask a court of equity to restore to him the stock, or the right to vote upon it, of -which he voluntarily deprived himself, until the purpose for which it was pledged has been satisfied.
3. If Hinckley is a creditor of the electric railway, as claimed by him, he cannot, on that ground merely, have any standing in a court of equity, for his debt has not been established at law, and he is merely a creditor at large. His remedy is at law, and it does not appear to have been exhausted. Hinckley had himself, by the pledge of the 1,501 shares of stock given to Pfister, in connection with the stock Hinsey had pledged to him, control of the corporation through a preponderance of its capital stock, and the charge of collusion between Pfister and Hinsey to obtain control through or by means of its capital stock loses all significance and force, and there is nothing to show any attempt to create any false or spurious debts against the corporation, or any improper lien upon its property. Indeed, the complaint lacks a statement of any sufficient title to relief or ground justifying the appointment of a receiver or the granting of an injunction.
4. It is claimed that Hinckley’s complaint ought to be sustained as a suit in equity by a surety of the corporation through the pledge of his stock to Pfister for its debt, to compel the principal debtor to pay the debt, or to require Pfister to proceed against the property of the company *83and the bonds pledged to him to obtain payment of his debt. It is, we think, a sufficient- answer to this contention that the complaint does not seem framed for any such purpose, and no such specific relief is prayed. It does not appear from the complaint, by clear and direct allegation, that the debt for which the plaintiffs stock was pledged was due when this action was commenced. There is at best a mere inference from the facts stated that such may be the case. A surety cannot go into equity for relief against either the creditor or the debtor until after the debt is due. 1 Brandt, Suretyship, §§ 223, 229. The complaint, as against Pfister, proceeds on grounds hostile to his rights, and asserts the invalidity of the bonds pledged to him as security for his debt, as well as the stock; and this puts his entire debt and security in danger. How can he expect to ask that Pfister shall be put, for the satisfaction of his debt, first to his security, namely, the pledged bonds, which the surety maintains in the same breath is wholly void, and when he alleges that all the stock pledged to Hinsey for the same purpose is void also ? He must come in, when asking such relief as surety, in subordination to the creditor’s right to obtain payment in full without risk or cost; and the allegations of the complaint fail to show that the creditor can obtain speedy, direct, and certain satisfaction by resort to the security, but the plaintiff puts that in doubt, not only as to the property pledged, but in respect to the other property and assets of the company, for he alleges that the Iona fide debts of the corporation, including the amount due to himself, exceed $250,000, and that the company is without means or property sufficient to pay its debts. The corporation, in its complaint, however, claims that it has a large amount of property over and above the amount required to pay its just debts. The complaint of the corporation cannot aid Hinckley’s, of which it is really no part. The authorities cited by the respond*84ent’s counsel abundantly show that, under the circumstances alleged, and for the reasons above stated, the complaint of the appellant Hinckley, in this aspect of it, cannot be maintained.
5. The complaint of Hinckley, as well as that of the electric railway company, seems to have been framed upon the theory of obtaining a decree substantially winding up the corporation, taking an account of its debts and assets, and the adjustment of its liabilities, and the application of its property to their payment, and a division of the surplus, if any, between the stockholders. It is scarcely necessary to cite authorities to show that a stockholder, as such, cannot maintain a complaint for such purposes. Strong v. McCagg, 55 Wis. 624. And no case has been cited to show that such a suit can be maintained in eqdity by the corporation.
6. The foregoing observations dispose of the claim of the corporation to the relief prayed by its complaint, except that portion praying that an interpleader be awarded between Hinckley, Burke, and Vogel to determine the ownership of the valid portion of the stock of the company. It is claimed that the suit of the electric railway company is one in the nature of an interpleader. The only ground for an inter-pleader is in relation to the disputed rights of stockholders, and it does not appear from the complaint that any necessity existed for the commencement of the action. It does not appear .that different parties claim the same debt or duty from or against the corporation, or any duty whatever in relation to the disputed stock, or that the plaintiff is ignorant of their rights or in doubt in respect to them, or that any action is asked of the corporation which will place it in danger of loss or injury from the alleged doubtful claims and conflicting rights of the defendants as between themselves. There is no allegation to show whether evidence of title to the stock of either party has been entered on the stock registry, which is. the test of the right of a *85stockholder to vote; nor that any application has been made to it to enter on the registry any such stock, or whether any claim has been made against it, or that it has been subjected to any suit or threatened with any in this respect; nor does it charge that any dispute has arisen in respect to dividends, or that any have been earned. The defendants were actually engaged in litigating their respective claims when this suit was commenced. Actions of interpleader are not to be encouraged, and ought not to be brought except when there is no other way for the plaintiff to protect himself from a litigation in which he has no interest; and, in order to maintain the action, it is necessary to show that the plaintiff has not acted in a partisan manner as between the different claimants. Cook, Stock, §§ 387, 407, 540, 544; McDonald v. Allen, 37 Wis. 108; Mohawk & H. R. Co. v. Clute, 4 Paige, 392; Bedell v. Hoffman, 2 Paige, 200, 201; Buffalo G. S. Co. v. Alberger, 22 Hun, 349, 353. It is plain that the complaint of the electric railway company does not state any case for an interpleader.
There are no facts stated" in either of the complaints to show that the property and business of the corporation is being mismanaged, or that its property is in danger of being lost through misconduct of its officers or directors. The apprehensions and fears of the plaintiff Hinckley of what may occur are not justified by the facts alleged in his complaint, and, as the complaints are both insufficient, there was, as before stated, no ground for granting an injunction or the appointment of a receiver.
The judgment of the superior court dismissing the complaints is correct, and must be affirmed.
By the Court.— The judgment of the superior court of Milwaukee county is affirmed.