Court Opinion

ID: 6604701
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:11:07.704712+00
Date Added: 2024-06-11T15:58:08.741943
License: Public Domain

Lyon, J.
1. The action was brought by a stockholder in the defendant corporation to procure the cancellation of certain stock alleged to have been issued by its board of directors without lawful authority, and incidentally to obtain an injunction to restrain the holders of such illegal stock from voting thereon at the meetings of the corporation. Courts of equity constantly take jurisdiction of such actions, and hence the objection that the court has no jurisdiction of the subject matter of the action cannot be sustained.
2. Does the complaint state facts sufficient to constitute a cause of action? That is to say, does it show on its face that the thirty-nine shares of stock were issued without authority of law? Sec. 1YY2, R. S., provides that the original articles of incorporation, or .a true copy thereof, duly verified, “shall be recorded by the register of deeds of the county in which such corporation is located; and no corporation shall, until such articles be so left for record, have legal existence.” Sec. 1YY4 authorizes the amendment of the original articles for any purpose which might have been provided therein, and requires that a certificate of such amendment, executed as specified in that section, shall be recorded in the office where the original articles are recorded. These sections are in pa/ri materia, and must be construed together. So construed, the amendment increasing the capital stock of the defendant corporation is entirely inoperative until such certificate shall be left for record with the register of deeds of Milwaukee county. The averment in the complaint is that the same has not been filed in the office of such register of deeds. It is claimed that this *14is not an averment that the certificate of the amendment has not been recorded in that office. The criticism is merely a verbal one. We regard the averment as equivalent to saying that such certificate has not been left for' record with such register of deeds, and if not so left, of course it could not have been recorded. It follows that the thirty-nine shares of stock were' issued without authority of law.
The complaint further alleges that none of the persons to whom such illegal stock was issued paid any consideration for it, and that the corporation received no consideration therefor. Tor this reason, also, the stock was illegally issued. R. S., sec. 1153.
It was argued by counsel for the defendant that the complaint fails to show that the plaintiff was a stockholder at the time of the alleged illegal transactions. We think that, under a fair construction of the complaint, the point is not well taken. It is alleged therein that the whole original stock of the corporation was subscribed and paid for before the attempted increase of its capital stock; that the plaintiff subscribed and paid for his shares, and is now the lawful owner and holder thereof. This is sufficient.
It is further maintained that the complaint is insufficient because it fails to allege that the plaintiff, before he commenced this action, made any application to the board of directors to procure the cancellation of the illegal stock. This objection goes to the legal capacity of the plaintiff to bring the action, and is waived by the failure of the appellant to take the objection by demurrer. R. S. secs. 2049, 2654.
We conclude that the complaint states an equitable cause of action.
3. The complaint is, in form, in behalf of the plaintiff alone. It states, however, that the original stockholders, or at least some of them, are affected the same as he is by the issue of the illegal stock,— are injured thereby in the *15same manner,— and that such stock ivas issued contrary to their wishes. The relief demanded, if granted, necessarily inures to the benefit of all such other stockholders as well as the plaintiff. "While, therefore, the complaint contains no formal statement that the action is brought for the benefit of the other original stockholders, we are of the opinion that it was brought in their behalf, and that any of them may become parties plaintiff thereto upon due application. This seems to us to be the fair construction of the pleading, and we hold it sufficient in that particular.
Many authorities were cited on behalf of the plaintiff to show that the action may be maintained in his behalf alone, without reference to the interests of the original stockholders ; but the view we have taken of the complaint renders it unnecessary to consider this question. On this subject, however, see Nevil v. Clifford, 55 Wis. 161; Dousman v. W. & L. S. M. & S. Co. 40 Wis. 418.
4. Should the directors have been made parties defendant to the action? The case last above cited (40 "Wis. 418) answers this question in the negative. Probably the directors would be proper parties had the plaintiff elected to make them such, but they are not necessary parties.
"We conclude that the demurrer was properly overruled.
By the Court.— Order affirmed.