Thorman v. Dome Producing & Developing Co.

SHINN, J.

This appeal from an order refusing a stockholder the right to intervene to defend an action against a corporation, has been submitted under a stipulation waiving oral argument and the filing of a brief by respondents.

[202]

A sufficient statement of the sole question involved is found in appellant’s brief, reading as follows: “Should a stockholder be permitted to intervene as party defendant in an action against a corporation upon a promissory note payable to plaintiff, executed by plaintiff as president, and her father as secretary, of the corporation which they control, where the complaint in intervention denies that the corporation is indebted to plaintiff upon said note, and alleges that said corporation has other good and legal defenses thereto, but that its board of directors is controlled by plaintiff and her father, that it will not, in good faith, defend said action, but will commit the corporation to a judgment therein, and that it is necessary for said stockholder to intervene and make a defense on behalf of said corporation, which he desires to do ? ” The answer is in the affirmative.

The action against the corporation is upon a promissory note executed by the corporation in favor of plaintiff. The proposed complaint in intervention alleged that intervener was a stockholder of the defendant corporation; that the note in question had been signed for the corporation by plaintiff as president and by her father as secretary, who, with a brother of plaintiff, constituted the entire board of directors and the owners of all of the authorized capital stock of the corporation; that shortly after the note was given, intervener made a purchase of stock of the corporation, was elected and continued to be a director and president, the other directors being plaintiff’s father and brother. It was alleged that the note was given without consideration and in pursuance of a scheme to sell privately owned stock to the corporation, for resale and for the purpose of financing the corporation, in evasion and violation of the Corporate Securities Act and in violation of law, in that the scheme contemplated the illegal purchase by the corporation of portions of its own stock; that the transaction in which the note was given was never submitted to or ratified by the stockholders of the corporation and that the corporation was not indebted to plaintiff upon any account; that intervener purchased his stock without knowledge of the existence of the note and without knowledge of the facts which led to its execution. It was further alleged that the corporation had valid defenses to the action; that plaintiff held the note for the use and benefit of her father, who dominated and controlled the action of a majority of the board, namely, himself and his son; that intervener had de