State v. Iowa Southern Utilities Co. , 231 Iowa 784 ( 1942 )

I find myself unable to agree with the majority and respectfully dissent.

In the majority opinion, they state:

"The appellee contends that the provisions of Chapter 387 are void and their attempted enforcement against it are unlawful, and that the courts of this state have no power or jurisdiction to grant any of the relief prayed for because to do so would be the exercise of visitorial power over the appellee, and interference with its internal affairs.

"There was a time when courts would have given weight to such a statement, but we may now say it is uniformly conceded that the question is not one of jurisdiction or power in the court of a state which is not the legal domicile of a foreign corporation, but it is a question rather of discretion in the court as to whether it will exercise jurisdiction. It is a question of the balance of convenience, of whether considerations of public policy, efficiency, expedience and justice to all parties interested demand that jurisdiction be retained in the foreign court, or that it be declined under the rule of forum non conveniens. The rule is thus stated by the Supreme Court of the United States in the majority opinion in Rogers v. Guaranty Trust Co., 288 U.S. 123, 131, 53 S. Ct. 295, 298, 77 L. Ed. 652, 657, 89 A.L.R. 720: `Obviously no definite rule of general application can be formulated by which it may be determined under what circumstances a court will assume jurisdiction of stockholders' suits relating to the conduct of internal affairs of foreign corporations. But it safely may be said that jurisdiction will be declined whenever considerations of convenience, efficiency and justice point to the courts of the State of the domicile as appropriate tribunals for the determination of the particular case.'"

With the above-cited rule from the United States Supreme Court opinion, I have no fault to find, but it seems to me, taking into consideration the convenience, the efficiency and the justice in the case at bar, which are the three things that the Supreme Court of the United States says should be taken into consideration, would justify this court in holding that the appropriate tribunal for the determination of the questions involved in this case would be the courts of the domicile of the appellee company. The circumstances and the facts in the case of Rogers v. Guaranty Trust Co., 288 U.S. 123, 53 S. Ct. 295,77 L. Ed. 652, 89 A.L.R. 720, relied upon by the majority, are entirely different than in the case at bar. In the Rogers case, it was an action brought by a stockholder against the officials of the corporation. Certainly the justice of that case demanded that the high officials of the tobacco company should not be permitted to secure for themselves and others stock at a price which was then about one fourth of the market value. But in the case at bar, it is not a stockholder that has brought this action; it is not a public official or the state of Iowa, but it is some individual who is not trying to save the stockholders of the corporation money. In the Rogers case the parties were in court. In this case not all of the interested parties are in court. Under the majority opinion, as I read it, the appellee corporation, which it is conceded is solvent, and in which there are no stockholders complaining, will be forced into a receivership just to satisfy the desires of some individual who has no interest financially in the corporation which he is seeking to throw into receivership. The majority call attention to the sole dissent by Justice Stone in the Rogers case and I have no fault to find with the dissent but I quote from Justice Stone's dissent:

"We are presented with no problem of administration. The only relief which the petitioner merits on the record before us or which he asks here is a decree that certain directors, now before the Court, restore to the treasury of the corporation, also before the Court, certain shares of stock alleged to have been illegally issued to them, and that certificates for the stock now in possession of the trustees, who are likewise before the Court, be surrendered. There are no more obstacles to the rendition of an effective decree than in any other case in which a stockholder seeks reparation for depredations upon the corporate property committed by directors, some of whom only are before the Court." (Citing cases.) 288 U.S., at page 145.

And so Justice Stone points out that all that is asked in the Rogers case is that certain directors who were before the court restore to the treasury of the corporation, also before the court, certain shares of stock illegally taken, and then he says:

"* * * that jurisdiction will be declined whenever considerations of convenience, efficiency and justice point to the courts of the state of the corporate domicile as appropriate tribunals for the determination of the particular case."288 U.S., at page 145.

How anyone can say that justice demands that the Iowa court take jurisdiction in this case is more than I can figure out. And as I read the majority opinion, the result of the opinion will be that innocent men and women who purchased the stock of this corporation, who purchased the bonds of this corporation, who were not parties to the claimed fraud, and who are not parties to this cause of action, will suffer material financial losses.

The majority calls attention to the case of Foresters v. Scott, reported in 223 Iowa 105, 272 N.W. 68. The only question with which the court was there confronted was whether certain books and papers should be produced. The sole question decided was whether the lower court had jurisdiction to enter the order directing the production of books and papers. The defendant company was a party to that action and was in court.

In a recent opinion in this court, Graeser v. Phoenix Finance Co., reported in 218 Iowa 1112, 1130, 254 N.W. 859, 868, this court said:

"Even if the plaintiff and her assignor of the stock in question were not guilty of laches, we think that the question as to appellant's rights, if any, to be paid the cash value of her stock should not be determined by the courts of this state. The only assets owned by the Des Moines and St. Louis companies, after the sales and transfers, were the cash, bonds, and stocks of the Phoenix Finance Corporation which had been obtained as consideration for such transfers. If appellant were to be paid the cash value of her stocks as of the date of the sales and transfer, it is quite possible, and perhaps even probable, that the other stockholders in the Des Moines and St. Louis companies will not receive an equal share of the assets of these corporations on distribution. It seems to us that the determination of any right of appellant to receive cash for her stocks may necessarily affect the rights of other stockholders upon distribution of the assets of these corporations, and such other stockholders are not before the court in these actions. The law seems well settled that the courts of one state will not exercise jurisdiction in the internal affairs of a foreign corporation. 14a C.J. 1327, and cases cited. Boyette v. Preston Motors Corporation, 206 Ala. 240, 89 So. 746, 18 A.L.R. 1376; Hogue v. American Steel Foundries, 247 Pa. 12, 92 A. 1073, 1074; Wallace v. Motor Products Corp. (D.C.) 15 F.2d 211, 213; Id. (C.C.A.) 25 F.2d 655; Rogers v. Guaranty Trust Co.,288 U.S. 123, 129, 53 S. Ct. 295, 77 L. Ed. 652, 656."

Although we said in the above-quoted case that the courts of one state will not exercise jurisdiction in the internal affairs of a foreign corporation, yet, as I read the majority opinion, we are exercising jurisdiction in the internal affairs of this corporation. In other words, we are reversing, without stating so, the opinion in the Phoenix case.

In Mr. Justice Cardozo's dissent in the case of Rogers v. Guaranty Trust Co., supra, 288 U.S. 123, 150, 53 S. Ct. 295, 305,77 L. Ed. 652, 666, 89 A.L.R. 720, he said, I quote:

"Here the organic structure of the corporation, if affected by the decree at all, will not be changed in such a way as to work substantial detriment to any stranger to the suit, but the fruits of an unjust enrichment will be put back into the treasury. I think we are at liberty to do so much, if nothing more, without waiting upon the judgment of any other court."

In the case at bar, the majority opinion will work substantial harm to strangers not parties to this suit. It will not put into the treasury of the appellee corporation a single cent but instead it will bring about the appointment of a receiver for a corporation that is admittedly solvent and will cause damage to all stockholders and bondholders, innocent people who have not been parties to this action.

I would affirm the lower court.