Smith v. Poor , 40 Me. 415 ( 1885 )

Appleton, J.

The Portland Gas Light Company are responsible to the plaintiff on any and all contracts it may have made with him, to the extent of any damage he may have sustained in consequence of any violation of such contract or contracts on its own part.

The directors of a corporation are chosen by the votes of the corporators, are the agents of the corporation, and are responsible tpALfor official misconduct and fraud in the discharge of their duties. The amount which may be recovered by the corporation in a suit for official delinquency, •will in each case constitute a portion of its assets in which each corporator will have an interest in proportion to his share of the whole stock. Franklin Fire Ins. Company v. Jenkins, 8 Wend. 130.

The plaintiff being a member of the corporation, and having made a contract therewith, claims compensation of the defendants, its directors, for certain alleged fraudulent acts and votes, by reason of which he has been damnified in his various relations with the corporation. It was held in Smith v. Hurd, 12 Met. 371, that a stockholder in a bank could not maintain an action against its directors for negligence in so conducting its affairs, that its whole capital was wasted and lost and the shares therein rendered worthless ; nor for the malfeasance of the directors in delegating the whole control of its affairs to the president and cashier, who wasted and lost the whole capital. The decision in that case rests upon well established principles, and has a direct and important bearing adverse to the maintenance of the suit now before us.

The directors, who fraudulently abuse their trust, and-misapply the funds of the corporation, are personally liable as trustees to make good that loss. But the stockholders cannot maintain a bill to compel them to account, unless it first appear, that the directors refuse to prosecute the suit, or the present directors are the parties, who made themselves answerable for the loss. In all cases the corporation is a necessary party either as complainants or defendants. Robinson v. Smith, 3 Paige, 222; Hersey v. Veazie, 24 Maine, 9; Cunningham v. Pitt, 5 Paige, 607.

The plaintiff, so far as he was entitled to his certificates of stock, might vindicate his rights by suit against the corporation, in case of the wrongful refusal of their officers. Gray v. Portland Bank, 3 Mass. 363. If a corporation refuse to permit a transfer of stock upon their books, they are liable in assumpsit. Com. v. Bank of Buffalo, 22 Wend. 348. If dividends are illegally withheld, the remedy of the party aggrieved is by a suit against the corporation, and not against its officers. French v. Foster, 23 Pick. 108.

In case of a fraudulent abuse of trust on the part of the president and directors of an incorporated banking company in the election of directors, it seems that the new directors may be restrained from the exercise of their powers by injunction. Ogden v. Kip, 6 Johns. Ch. 160. In Cone v. Arrison, 15 Serg. & Rawle, 127, it was held, that in this country information may be freely used for trying the right to offices in public as well as in private corporations. A writ of mandamus will be granted to restore directors of a banking corporation, who were refused the exercise of their rights as directors by a majority of the board. Angel & Ames on Corporations, c. 20, § 702. So the writ will be granted where the member of a company was illegally removed. Delacy v. Neuse River Navigation Co., 1 Hawk. 274. In exparte Disdoty & als., 1 Wend. 98, illegal votes were cast at an election of directors, by which votes certain persons were elected, and without them certain other persons were elected, the Court, upon application, say, the election by the illegal votes was void, and that the other election without those votes was legal and binding. The authority to issue a mandamus to corporations and individuals when necessary for the furtherance of justice, is expressly given by R. S., c. 96, § 5. It likewise exists at common law. Smyth v. Titcomb, 31 Maine, 272. Assuming, therefore, the votes complained of to have been cast illegally, as is alleged, the rights of those directors chosen by legal votes, would upon proper process have been fully affirmed.

So far as the plaintiff may have sustained damages as a contractor with the Portland Gas Light Company, in consequence of any breach on its part of its contract with him, he has the ordinary legal remedies against the same, and in a proper suit may recover all to which he may be legally entitled. It seems by the declaration, that he has commenced such suit, and that the parties have referred “ all demands and claims and controversies” between them, and that he has obtained an award upon the same in his favor. By that award it would seem, that “ all demands and- claims and controversies between the parties” have been finally determined. In this writ he claims damages against the defendants, because the corporation have not complied with this award. If it has not been adjusted, the plaintiff is entitled to the ordinary process of law against the corporation, and in case of its insolvency, to the remedy provided by statute against the stockholders of the corporation. As a creditor of the corporation, the plaintiff is entitled to the same remedies as its other creditors. His claims are directly against the corporation and to be enforced against it.

The general propositions already discussed, embrace the various grounds of complaint set forth in the plaintiff’s writ, and sufficiently indicate the reasons why, upon legal principles, this action is not maintainable.

The plaintiff’s contract with the corporation was dated Oct. 29, 1849. The various acts of which complaint is made, are alleged to have been done by the defendants under color of their office, as directors, and cover a period of over three years. Most of the grounds of complaint, such as fraudulently preventing the plaintiff from performing his contract, neglecting to collect the instalments when due, and to pay over the moneys collected, and the fraudulently issuing stock and allowing the same to be voted upon, &c., occurred prior to July, 1851, when the defendant, McCobb, was chosen director. All the illegal acts before that time, done under color of office, were without his participation. The demurrer to the declaration is by all the defendants. The defendant, McCobb, cannot be held responsible for acts, to which it appears by the plaintiff’s own showing he was not a party. If all the allegations in the declaration are omitted as to facts occurring before the election of McCobb, and for which he cannot be held answerable, the declaration would be fatally defective. There is no allegation in the writ so connecting the defendant, McCobb, with the proceedings before his election, as to show - that he should be held justly liable for those occurring subsequent thereto. As to the latter, there is no sufficient declaration. The writ contains but one count, and sets forth no legal cause of action. The declaration must be adjudged bad.

Declaration bad.