Opinion
No. 5793.
December 17, 1932.
APPEAL from the District Court of the First Judicial District, for Shoshone County. Hon. Charles F. Koelsch, Judge Presiding.
Action by minority stockholder for benefit of corporation. Plaintiff appeals from judgment of nonsuit. Reversed, with directions.
Gray McNaughton and James A. Wayne, for Appellant.
If the defendant Kingsbury was not entitled to the stock which the directors illegally tried to convey to him, it is well settled that upon the officers refusing and failing to recover the stock or institute an action for that purpose, a minority stockholder has the right in his own name to bring the proper action for such relief on behalf of and for the use of the corporation and to make the corporation itself a party to such action. ( Just v. Idaho Canal etc. Co., 16 Idaho 639, 102 Pac. 381, 133 Am. St. 140; Ryan v. Old Veteran M. Co., 37 Idaho 625, 218 P. 381; Hawes v. Contra Costa Water Co., 104 U.S. 450, 26 L. ed. 827.)
After the refusal of the officers to take action for the company, the plaintiff, having expended a large sum in paying fees for retaining attorneys to bring an action on behalf of and for the benefit of the company, which action was successful and benefited the company in a much greater sum than the expenditures, was entitled to recover from the company the reasonable fees and costs thereof. ( Hutchinson Box Board Paper Co. v. Van Horn, 299 Fed. 424; Colley v. Wolcott, 109 C. C. A. 425, 187 Fed. 595; Trustees of Internal Improv. Fund v. Greenough, 105 U.S. 527, 26 L. ed. 1157.)
Walter H. Hanson and F.C. Keane, for Respondents.
The business of every corporation shall be managed by a board of directors and the qualifications, powers and duties of the directors may, subject to the provisions of law, be prescribed by the articles or by-laws, and the corporation, either by its articles or by-laws, may delegate to the directors any powers reserved to them, unless prohibited by statute. (Sec. 27, subd. 2, of Business Corporation Act, Sess. Laws 1929, pp. 568, 569; sec. 10, subds. F, I and K of Business Corporation Act of 1929, p. 553; Rives v. Montgomery South Plank-Road Co., 30 Ala. 92, 95; Sharp v. Mayor etc. of New York, 40 Barb. (N.Y.) 256-273; 7 R. C. L., pp. 142, 143.)
Action by minority stockholder, for the benefit of the corporation and all similarly situated stockholders, to require the return to the corporation of 681,708 shares of its capital stock alleged to have been sold by the board of directors to one of its members without authority. No fraud is involved. After suit brought, but before trial, the stock was returned to the corporation, leaving only the one question to be determined, whether appellant is entitled to attorney's fees, there being no proof of any expense incurred other than taxable costs which follow the judgment. At the close of plaintiff's case a judgment of nonsuit was granted from which plaintiff appeals.
The right to maintain such an action has been recognized by this court. ( Riley v. Callahan Min. Co., 28 Idaho 525, 155 Pac. 665; Smith v. Rader, 31 Idaho 423, 173 P. 970; Ryan v. Old Veteran Min. Co., 37 Idaho 625, 218 P. 381.) Where the suit is successful and the corporation is thereby enriched, the plaintiff stockholder is entitled to reimbursement from the corporation for his reasonable costs, expenses and attorney's fees. (14 C. J., sec. 1473, p. 948; note in 49 A.L.R. 1190, where many cases are reviewed.)
In the case at bar, the stock having been returned to the corporation, the only inquiry is, Was its restitution due to the initiation and maintenance of the present suit? If the stock was so returned, appellant is entitled to recover his reasonable expenses, including attorney's fees, and it is immaterial, since the principal object of the suit has been obtained, i. e., the return of the stock, whether the act of the board of directors in selling Mr. Kingsbury the stock was authorized or not, or whether the action of the board of directors was subsequently ratified at one or more stockholders' meetings. ( Baker v. Seattle-Tacoma Power Co., 61 Wn. 578, 112 P. 647, 651, Ann. Cas. 1912C, 859.) The trial court should have heard the evidence on this point and determined whether the return of the 681,708 shares of stock was induced by the institution or pendency of this suit. If he so found, then appellant was entitled to judgment for his expenses and attorney's fees as fixed by the court, otherwise not.
Since the disposition made of the principal case renders passing on the application for a writ of supersedeas unnecessary, we refrain from doing so. Judgment reversed, with directions to grant a new trial for the purpose of determining the questions above stated. Costs to appellant.
Lee, C.J., and Budge and Givens, JJ., concur.
Mr. Justice Leeper did not participate.
Petition for rehearing denied.