Mussina v. Goldthwaite

Texas Supreme Court
Mussina v. Goldthwaite, 34 Tex. 125 (Tex. 1871)
Walker

Mussina v. Goldthwaite

Opinion of the Court

Walker, J.

The Houston City Mills Manufacturing Company - was incorporated in 1864, with a capital stock of $500,000. It *131appears that, in 1868, shares had been taken in the capital stock to the amount of $75,000. On the ninth day of June, 1868, there were issued by the company $100,000 in bonds of different denó'minations, payable to George Goldthwaite or bearer; at the same time the company mortgaged its corporate property to Goldthwaite, as trustee for the holders of the bonds, to secure their payment.

The company failed to pay the interest on the bonds. Goldthwaite filed his petition in this case on the twenty-third of April, 1870, in which he claims that the principal and interest of the bonds have become due, according to their tenor and effect, and he seeks to foreclose the mortgage in favor of certain of the bondholders.

Simon Mussina files a plea of intervention, as the owner and holder of six shares of $500 each in the capital stock of the company. It appears that these shares were originally issued to John E. Owens. There were no parties before the court except Goldthwaite, the trustee, plaintiff, and the company, defendant, which suffered judgment by default.

The plaintiff demurred to the plea of intervention, and the demurrer was overruled by the court.

It is claimed, upon the authority of Canaway v. Morgan, 5 Martin, and Walker v. Dunbar, 7 Martin, (which authorities, we think, are wrongly cited,) that the intervenor cannot change the case as made by the original parties; that he cannot change the character of the suit, and cannot make another party. But we think that an intervenor, claiming an interest in the subject mat-' ter in dispute, may interpose his claim as a defendant to the suit, having been made such by leave of the court, the better to protect his interests; and if there be fraud and collusion between the original parties, whereby his interests are compromised or prejudiced, he may set it up affirmatively and prove it, and thereby defeat any fraudulent design intended to be carried out by the suit. The case *132of Allen v. Curtis and others, 26 Connecticut, 456, cited by ap.- - pillee,- we think supports this doctrine. It is therein decided that-an individual stockholder may maintain a petition in equity against' the directors of a corporation for misconduct in office, where the corporation is unable to bring a suit at law, or where, through' collusion or fraud, it neglects to seek redress, and an application has been made to the directors for the use of the corporate name;to bring "suit, which has been refused.

We see no good reason for insisting upon this latter condition,where the directors, as in this case, are themselves charged with fraud. The case of Shelby v. Dixon, 24 Georgia, 273; Kean v. Johnson, 1 Stockton, 401; Revere v. Boston Copper Company, 15 Pick., 351; Brown v. Vandyke, 4 Halstead, 795; and Brown v. Vandyke, 5 Allen, 230, all cited by' the appellee, have no further- bearing upon the case- at- bar, than the case of Allen v. Curtis.

Where a party states facts in his pleadings-, from which, ii-proven,. the court must infer fraud as a legal sequence, it is not-necessary that he should allege fraud specifically.

' The bill of exceptions shows that on the trial of the cause the intervenor sought, by the evidence of W. R. Baker, Secretary-/ and B. A. Shepherd, President, of the company, to prove fraud- on the part of the directors of the company, in issuing the bonds, and certain'Other matters alleged-in his petition, which-we think it-' perfectly legitimate for him to prove,, and it was error in the court-to exclude -the evidence.

We think the judgment of the district court is objectionable on the ground of uncertainty. (See Spiva v. Williams, 20 Texas, 442; Claiborne and others v. Tanner’s heirs, 18 Texas, 68.)

There should have been a finding of the jury, of -the amount due the plaintiff. (See May v. Taylor’s administrator, 22 Texas, 348.) As to the averment of facts constituting frauds, see McMahan v. Rice, 16 Texas, 335. We deem it-unnecessary in this decision te *133pass upon the right of corporations to issue bonds in a proper case; here it is charged that they were fraudulently issued, that there was no necessity for their issue, that the affairs of the company were in a healthy and prosperous condition, and that the creation of such a debt was a fraud upon the stockholders, and intended to Operate to the private advantage of the directors.

There is nothing appearing in the record to show that the rights of third parties, innocent holders of these bonds, have intervened to prevent any equitable adjustment of all rights between the company and the individual stockholders; and that they may have such ah adjustment, the.judgment of the district court is reversed and the cause remanded.

Reversed and remanded.

Reference

Full Case Name
Simon Mussina v. George Goldthwaite, Trustee, Etc.
Cited By
17 cases
Status
Published
Syllabus
I. An intervene» who claims an interest in the subject matter of the suit may, by leave of the court, interpose his claim as a defendant, for .the protection of his interests ; and if there be fraud or collusion between the original parties to the suit, whereby his interests may be prejudiced., he may allege and prove it, and thereby frustrate any fraudulent purpose designed to be effectuated by the suit. 8. An individual stockholder in a corporation may maintain an equitable action against the directors, for misconduct in offiee, when the corporation itself is unable or, through fraud or collusion, omits to sue; and when the directors are charged with fraud, it is not necessary for the stockholder to apply to them for the use of the corporate name in bringing the suit. 3. If a party states facts in his pleadings, from which, if proved, the court must infer fraud as a legal sequence, it is not necessary that he should specifically charge fraud. 4. In a suit to foreclose a mortgage given by a stock company to secure certain of its bonds, there was a judgment by default taken against the company, an intervention of an individual stockholder, who denied the validity of the bonds, and charged collusion between the plaintiff and the officers of the company, and a jury empanneled to try the issues between the plaintiff and the intervenor, and also as a jury of inquiry upon the default taken against the company. The verdict was that “ we the jury find the material allegations in the petition true;” and the court thereupon decreed foreclosure and sale, directing the proceeds of sale to be first applied to costs, and afterwards to the interest and principal of the bonds, but nowhere adjudging any specific amount in favor of the plaintiff. Held, that the judgment is objectionable on the ground of uncertainty, and that there should have been a finding by the jury of the amount due the plaintiff.