Moyle v. Landers

PER CURIAM. The complaint contains two counts. The defendants demurred to the whole complaint, and “to the second alleged cause of action set out in the plaintiffs’ complaint,” which we shall consider as a demurrer to the second count of the complaint.

The demurrer was sustained, and plaintiffs declining to amend, final judgment was given and entered in favor of defendants. From this judgment plaintiffs have appealed.

The object of the action is to procure relief from certain alleged fraudulent misappropriations of the funds and property of the corporation defendant the Andes Silver Mining Company by some of its directors. The defendants contend [115]that the complaint is defective in this: That the action should have been brought by the corporation as plaintiff, and not by the present plaintiffs, who are stockholders of the corporation. The general rule undoubtedly is that an action of this character must be brought in the name of the corporation. The recovery, if any, belongs to the corporation, and must go into its coffers. But there are exceptions to this rule. One is where a demand is made on the corporation to bring such action, and it refuses to bring it. This demand must be considered and passed on by the managing authority of the corporation, which is its board of directors. But where such a demand would be useless, as where the peccant directors still control the affairs of the corporation, such a demand would be regarded as useless, and will not be insisted on. We think the averments of the complaint show that the corporation is still under the control of the alleged defaulting directors, or their tools and servants, and that it sufficiently appears that a demand to sue would have been nugatory. In such a case the law dispenses with a demand, and allows a stockholder to bring the action to which the corporation, as is here the case, must be a party.

It is contended, further, that the causes of action set forth in the complaint are barred by the statute of limitations, and that such appears on the face of the complaint to be the case. The action is brought for relief on the ground of fraud, in which case the cause of action is not to be deemed to have accrued until the discovery by the aggrieved party of the facts constituting the fraud. Such is the law of this state fixed by statutory enactment. The action, under such circumstances, is not barred if the discovery of the facts constituting the fraud has been made within three years before the commencement of the action: Code Civ. Proc., sec. 338. Now, it seems to us that the defaults set forth in the second count of the complaint, hereinafter pointed out, were not discovered within three years before action brought.