to pay to him for his services in that business the sum of $75, and his reasonable and rightful expenses incurred in the conduct of that business. That Mr. Cravens during all this time-that is, during all the times I have mentioned-secured territorial licenses authorizing him to sell and dispose of malt, spirituous, and other liquors under the liquor license law in and through Kay county, Oklahoma Territory, and possibly other counties, and he at all times held these licenses. That Mr. Cravens entered upon his duties as agent in the sale of this beer and ice. That that business was conducted by Mr. Cravens in his own name, using his own letter headsmanaged by Mr. Ruemmeli in no way whatever, except to receive his accounts from him, and his money. That business was conducted by Mr. Cravens up to the 1st day of May, 1900, and he sold quite an amount-I believe, $7,000-of this beer and ice in this county to the retail dealers of the county, and possibly ice to outside parties. That at a settlement had between these parties-one of the setments-I believe about the 1st day of May, 1900, that the books which Mr. Cravens kept, showing his transactions, were submitted to the representative of Mr. Ruemmeli. That he represented to Mr. Ruemmeli, through his agent, that those books contained a true and correct statement of the business which he had done in this county, and that, among other things, he had charged up as claim against Mr. Ruemmeli one of $50 about May 1. 1900, and that originated in the fact that he took $50 of this money that had been collected and invested it in a lot. It may be, the evidence will show that was by consent of Mr. Ruemmeli, but it was to be held by him in trust. And about the 15th day of July he took $50 of this money and paid it on the balance of that lot. That on June 2, 1899, he paid for the building in partpaid for the lumber that went into the building located upon that lot that stood in the name of William Cravens. That he paid $7 on June 5th, or about that time, and he paid $7.50 and $7.85 for some other material which went into that building, and that Mr. Cravens appropriated that lot to himself. sold the lot afterwards, and put the money into his pockets, and has never accounted to Mr. Ruemmeli for it, and refuses to account with us for it. That before March 1, 1900, in the due course of his proceedings, he sold beer and ice to a man running a saloon at Kildare, named Woods, to the amount of $150, and the amount of the claim, together with interest up to March 1, 1900, amounted to $180. That Mr. Woods gave Mr. Cravens a bill of sale, which was in effect a mortgage, securing this claim for this beer and ice sold by Mr. Cravens to Mr. William Woods, and Mr. Cravens accepted the bill of sale as his security, together with a number of other claims which he had also secured. That this claim was paid off by Mr. Woods' estate, he having died. That Mr.

He

Cravens executed a bill of sale back to the estate of William Woods, and released this claim entirely. That Mr. Cravens has failed and refused to account to Mr. Ruemmeli for this $180, and has kept the proceeds ever since. That between May 1, 1896, and May 1, 1900, Mr. Cravens took out of the business and out of the money the sum of about $148.85, and that he has refused to account for this item, and the same is due from him to the plaintiff. That he charged up on these books an unreasonable amount of expense. That the sums so overcharged amounted to $20 per month more than what was reasonable and right. That he deducted the $20 per month out of these sales of beer and ice. That he deducted this $20 per month out of the proceeds of these sales for this material, and refused to account to Mr. Ruemmeli for them, and that it is now due and owing to us. On about May 22, 1900, there was paid to him a claim which was due Mr. Ruemmeli for the sale of beer and ice, in the sum of $20, which was paid by Mr. Lynch, and that was money he obtained in the course of that business, and refused to account to Mr. Ruemmeli for it. And also the sum of $12.50, which was for feed that Mr. Cravens purchased with the money of Mr. Ruemmeli, and, instead of turning it over to the establishment, he took it to his own use. The testimony will further develop the fact that Mr. Braun, here representing Mr. Ruemmeli, had a settlement with Mr. Cravens, or an attempted settlement, some time along about the 1st of May, 1900. That these items which I have mentioned were charged upon the books, not being proper items to be charged. They were charged up to Mr. Ruemmeli, and claimed by Mr. Cravens, except this $180, which appeared as a legal and unpaid account upon the books. That Mr. Cravens represented to Mr. Braun that these books contained a true and correct statement of the accounts between himself and Mr. Ruemmeli, and that the charges made upon that book were a true and correct statement of the charges, and that he was entitled to the same; and in that settlement he was allowed to retain out of the proceeds of those sales the amount of those items I have mentioned to you, and it was found upon a balance of this account there was something like two to four dollars due to Mr. Cravens, and that was paid to Mr. Cravens. That at the time of this settlement Mr. Braun accepted the statement of Mr. Cravens that his book contained a true and correct statement of the account between them, and that he was entitled to the balance shown by the books. That Mr. Braun relied upon that. He did not know of those individual items at the time of the settlement. He did not know that this $100 had been appropriated to the purchase of this lot, and that the lot had been deeded away, and the proceeds turned over to Mr. Cravens, and kept by himself. Neither did Mr. Ruemmeli, nor his agents, know this house had been built

on this place, and paid for by the money of Mr. Ruemmeli, and that Mr. Cravens had also appropriated that to his own use. Mr. Ruemmeli did not know, nor did his agents know, other than Cravens, that this account due from the estate of Mr. Woods had been paid, and that Mr. Cravens owed this account to Mr. Ruemmeli. Neither did he know that this $148.85, or something thereabout, charged to profit and loss, had been money collected by Mr. Cravens, and that he should have accounted for it. And so with his $20 per month expense account. In that settlement it was represented that these items were just and reasonable, and they took the books for it. Having shown you this state of facts, if the testimony develops that condition of affairs, we will expect a verdict at your hands for the sum of $784.55. Now, I will read, if your honor please, this agreed statement of fact in reference to the license. We have agreed to it in writing. In this connection we have made the following agreement: (Counsel here reads paper to the jury as follows:) 'It is agreed by both parties hereto as facts in this case that from May 1, 1896, to May 1, 1900, neither Albert Ruemmeli, the plaintiff, or the Pabst Brewing Company, had any license to sell beer, malt, spirituous, or vinous liquors at wholesale or retail in Kay county, O. T. It is further agreed that from May 1, 1896, to May 1, 1900, William Cravens had a license in his own name to sell beer, malt liquors and cigars at wholesale in Kay county, O. T. That these facts with reference to the license were known by both parties at all times from May 1, 1896, to May 1, 1900. This agreement is not intended to refer to the United States government license under the Revised Statutes.'

"Judge Bierer: Comes now the defendant in this case, and objects to the introduction of any evidence, and moves the court to instruct the jury to return a verdict in favor of the defendant upon the plaintiff's petition and the defendant's answer, taken in connection with the statement of the case made by counsel for plaintiff-that is, upon the facts alleged by plaintiff's counsel, in his opening statement for the reason that, upon the pleadings and this statement, the plaintiff shows that he is not entitled to recover from the defendant, and that the plaintiff is not entitled to maintain his cause of action as set forth in the petition, and that the defendant is entitled to judgment in his favor upon the statement and the pleadings. Which motion is sustained by the court. To which ruling of the court the plaintiff then and there excepts."

Thereupon the court rendered judgment for the defendant, and also dissolved the attachment, and ordered the attached property restored to defendant.

Opinion.

The reversal of this case is asked for on three grounds, but we think it only neces

sary to consider the first, viz., plaintiff in error contends that the court committed material error against him in sustaining the motion of defendant for judgment on the opening statement of counsel for plaintiff, because the license of defendant, Cravens, authorized him to sell the beer mentioned in said statement. Now, the motion of the defendant in error being based entirely upon the opening statement of the counsel for plaintiff in error, it must be considered that everything stated in that opening statement is true, and, if true, if it makes out a case on which the plaintiff could recover, then the judgment of the court was wrong, and should be reversed. The question here presented is, was the wholesale license which it is conceded was granted to the defendant in error, Cravens, a sufficient authority for the sale of the beer, the proceeds of which are sued for in this case? In other words, was it necessary that the plaintiff, Ruemmeli, should have had a wholesale license, before he had the legal right to furnish to his agent the beer in question, to be sold in Kay county, Okl.?

Section 8

"That all

The law of this territory regulating the sale of intoxicating liquors (Rev. St. 1893, p. 653, c. 47, art. 1, § 1) provides, among other things, the manner in which a license for the retail sale of intoxicating liquors shall be obtained, and also provides the qualifications of the applicant, and the price to be paid therefor. That provision provides the number of taxpayers that shall sign the petition, and where they shall reside; also the place where such liquor is to be sold; and also setting forth that the applicant is a man of respectable character and standing, and is a resident of the territory. of the same chapter is as follows: persons selling liquors at wholesale shall be subject to all the provisions of this act, except that they shall be required to pay in each county within the territory where they so wholesale liquors, a license fee of one hundred dollars per annum, or for any part of the year they may so sell, and no more, and shall not be required to pay the license fee hereinbefore mentioned. And no wholesale dealer shall engage in the retailing of liquor without complying with the law appli cable to retail dealers, in addition to the license required by this section. Wholesalers shall not sell in less quantities than four and one-half gallons: provided, that wholesale malt, exclusively, shall pay a license of twenty-five dollars annually." Now, these provisions authorize the person holding a license to sell intoxicating liquors. They do not contain any provision that the person making the sale shall be acting in any particular capacity; neither do they in express terms, or by a reasonable implication, prohibit any person so holding a license from selling such liquors as agent. Now, under the statement of counsel in opening the case in the court below, the statement is made, and is an absolute verity, so far as the pur

poses of the present investigation is concerned: "He [meaning the plaintiff in error] made and entered into an agreement some time in the early part of the year 1896 with the defendant in this case, William Cravens, by which William Cravens was to secure a license in his name (that is, in William Cravens' name) in this (Kay) county, Oklahoma Territory, and possibly some other counties in this territory. That Mr. Ruemmeli was to furnish Mr. Cravens beer and ice, and that Mr. Cravens was to sell the beer and ice to retail dealers in this county, who were lawfully licensed to sell the same. That Mr. Cravens was to have the entire charge, management, and control of that business-was to look after it-and that he was to exercise his discretion in his position according to the laws of the territory of Oklahoma, and in all manner conduct his business subject to the laws of the territory of Oklahoma. That his place of business was established at Ponca City, Oklahoma, and that this beer and ice, and beer particularly, was to be furnished upon orders, either in car-load lots or in certain packages, from the brewery in Milwaukee, Wisconsin." Now, under this statement, by whom was the sale of this beer made? Was it the plaintiff in error, Ruemmeli, or was it the defendant, Cravens? It is contended by counsel for defendant in error that Ruemmeli sold this beer, through his agent, Cravens, to the retail dealers in Kay county, Okl. Now, it is true that Cravens acted as an agent in the conducting of this sale, but the sale was made, not by Ruemmeli personally, but by Cravens as agent. The object of the liquor laws of this territory in regulating the traffic is for the purpose, first, of putting the sale of intoxicating liquors into the hands of respectable and responsible parties; second, to derive a revenue therefrom. Now, when the legally constituted authorities of Kay county granted a license to William Cravens to sell intoxicating liquors in Kay county, the license granted to him contained no prohibition against his selling such liquor as agent of Ruemmeli or any other person; neither did it contain any condition or requirement that he was to be the owner of the liquor so sold. It is immaterial to the people of Kay county as to who was the real owner of the property in the beer sold, but it is a matter of vast importance to them as to who was to conduct the sale. The question of the capacity in which Cravens acted depended upon a private arrangement between himself and his employer, and by that arrangement he was recognized by the employer as an agent; but, so far as the rights of the people of Kay county were concerned, he was a principal in the sale of the liquor. It is apparent from the statement that the business was conduct ed in the name of William Cravens. It is further alleged in the statement of counsel that the plaintiff, Ruemmeli, had no control or management over the business, except to 76 P.-13

furnish the beer and ice and collect his pay therefor. Now, would it be contended that the requirements of the liquor law of this territory demanded that as to the same identical sale there should be more than one license? The opening statement shows that these goods were shipped in to Ponca City by the plaintiff in error, who was a resident of the city of St. Louis, and after such shipment were taken by the defendant, Cravens, and sold. True, they were sold by Cravens as agent, but such a sale was fully covered and fully authorized by the terms of his license. Then can it be said that such a sale was illegal? Can it be said, in the face of the statement of counsel, which is accepted for the purpose of this hearing as a fact, that such sale was to be conducted under a license previously obtained, and to be made in accordance with all the laws regulating this subject in the territory, that such sale was illegal? If it was a legal sale, then it would be no defense on the part of the defendant, Cravens, when the plaintiff seeks to recover from him money which, under the contract between plaintiff and defendant, was actually due, and, in equity and good conscience, ought to have been paid. It may reasonably have been, and no doubt was, the purpose of having the goods shipped by the plaintiff in error to the defendant, as agent, to protect the plaintiff in error in the property in said goods until such time as he would receive his pay therefor, or it may have been as an additional safeguard to secure the collection of the debt in this regard. This is not an uncommon way of taking security by wholesale houses in dealing with beer or any other commodity. It is not an uncommon thing for brewers or distillers to organize agencies in the different counties of this territory and in all the various states in the Union, and it seems to us that all the law requires, when such agencies are opened, is that before the goods are sold the laws regulating the traffic in such articles shall be complied with.

Taking the statement of defendant's counsel in their brief, and following it to its legitimate conclusion, we think it tends to sustain, rather than refute, the views of counsel for plaintiff in error. In defendant's counsel's brief we find this language: "If the position of plaintiff is sound, then William Cravens may take out a license to sell liquor at wholesale, and sell under such license the beer of the Pabst Brewing Company, of the Ferd Heim Brewing Company, of the Lemp Brewing Company, the Schlitz Brewing Company, the Miller Brewing Company, and all of the other brewing establishments which vend their beer at wholesale in this territory, and, under the guise of a license to an agent, who pays the fee of a hundred dollars in each county, the large number of members selling their liquors in the territory may escape the payment of the liquor license to sell at wholesale required

by the statute." Now, with the slight discrepancy in price, which should have been twenty-five dollars, instead of one hundred dollars, as in this case, nothing but malt liquor was sold. Let us analyze for a moment this statement of counsel for defendant in error. Does he intend by this statement to say that a man who has a license to wholesale malt liquors or beer shall be obliged to specify in that license that he will only and exclusively handle Pabst's beer, Schlitz's beer, Miller's beer, Heim's beer, or any other particular brand of beer? I take the reasonable construction of the language of the license for wholesaling beer to be that when a man takes out a license to wholesale beer, complies with the requirements of the law, and pays the price required therefor, he is then at liberty to sell as many different kinds and brands of beer as he may choose, and as his customers may desire, and that he is under no obligation to specify at the time of the sale that he is selling only beer in which he has an unqualified, unconditional, and exclusive title. He may sell as principal, he may sell as agent, he may sell as owner, or he may sell as a person only having the custody and the right to sell. The only restriction that the laws of this territory put upon the business is that it shall be conducted in accordance with the laws of the territory as to the person and by the person authorized by the license to so conduct the business. Does it make the sale illegal because the absolute property in the beer in question did not pass, by their arrangements and agreement, from the plaintiff in error to the defendant in error, at the time the defendant in error, as agent, sold the beer? Let us carry it a step further under the statement of counsel. It is apparent that the plaintiff in error, Ruemmeli, obtained this beer, which was shipped to Ponca City in car-load lots to the defendant, Cravens, from the Pabst Brewing Company, of Milwaukee, Wis. Suppose that, for their protection, the Pabst Brewing Company had exacted from the plaintiff, Ruemmeli, an agreement that he was not to be the owner of this beer, but was to act as the agent of the Pabst Brewing Company, at a stipulated sum per month, and was to handle their beer in this way, and, without divulging that agency, he had entered into a contract with Cravens, such as described in the opening statement of counsel for plaintiff. Now, would the gentlemen who represent the defendant in error contend that it required a license from Cravens, who actually sold the beer, another license from Ruemmeli, who shipped it to him, and still a third license from the Pabst Brewing Company, of Milwaukee, Wis., who owned the beer? This, it seems to us, would be simply ridiculous.

The authorities cited by defendant's counsel in support of their contention have been examined by us, and they are all, without exception, cases where the sale was in itself

illegal; and, for the reasons above expressed, we think the sale as shown and set forth in the statement of counsel in this case was in strict compliance with the law, and a legal sale. For these reasons, they do not apply. Therefore we think that there is no foundation in law or reason in the contention of defendant's counsel, and we think that the action of the district court in sustaining their motion for judgment on the statement of counsel for plaintiff was error.

Suppose we consider, for the sake of the argument, that this beer was sold by the plaintiff in error, Ruemmeli, and that he did not have a license. It was sold through an agent who had a legal right to make the sale. The direct medium through which that sale was made was a medium which was legalized and made legitimate and lawful by the laws of this territory. Now, can it be said that the sale as made is such an illegal sale as would deprive a party from obtaining redress in court, or asserting his legal rights as set forth in the pleadings? We certainly think not. Let us put it in another light. Did the defendant, Cravens, under the license which he held from the commissioners of Kay county, have the legal right to sell beer as an agent? This, we think, cannot reasonably be denied, under the terms of the license. If he did have such a right, and did so sell, then can it be said that such a sale was an illegal sale? If not, then the contention of defendant is certainly erroneous.

Hence, I think the majority opinion of this court does not correctly state the law as applied to this case, as it would seem to, me that to put such a construction on the contract of the parties would be awarding a party an advantage by reason of his own wrongful acts, and allow him to take advantage of his own unlawful conduct, and, by means of his unwarranted and unauthorized conduct, defeat the collections of his just debts.

(30 Mont. 239)

MCCONNELL et al. v. COMBINATION MIN. & MILL. CO. et al.

(Supreme Court of Montana. April 2, 1904.)

CORPORATIONS-ACTION AGAINST OFFICERS AND DIRECTORS CONDITION PRECEDENT-COMPLAINT-POWERS ULTRA VIRES — MINORITY STOCKHOLDERS - ESTOPPEL - LACHES RATIFICATION-BY-LAWS LEGALITY SALARIES OF OFFICERS-POWERS OF DIRECTORS-STATUTES-EVIDENCE--SUFFICIENCY-ADMISSIBIL

ITY-EQUITY.

1. Though a corporation is necessarily made a party to an action against its officers for fraudulently diverting and misappropriating its funds, and though the action is brought in the name of the plaintiffs, who are minority stockholders, it is in reality on behalf of the corporation.

2. Demand on the officials of a corporation to bring suit for fraud of officers and directors in misappropriating its funds is not a condition

2. See Corporations, vol. 12, Cent. Dig. §§ 792, 1427, 14291, 1430.

precedent to action by the minority stockhold

ers.

3. Though the allegations of the complaint in an action against the officers and directors of a corporation for fraudulently diverting and misappropriating its funds are not sufficient to entitle the action to be considered as brought on behalf of others than plaintiffs, who are minority stockholders, its sufficiency as an action in plaintiffs' own behalf is not impaired by averments that they bring it for others as well as themselves.

4. A court of equity, having obtained jurisdiction of an action for one purpose, may retain that jurisdiction for all purposes necessary to the complete protection of the plaintiff's rights.

5. In an action by minority stockholders against the officers and directors of a corporation for fraudulently diverting and misappropriating its funds, evidence examined, and held sufficient to charge the president and secretary with knowledge of all expenditures made, to whom they were made, and for what purpose.

6. Where a statute authorizes the organization of corporations thereunder for general mining purposes, but does not specify as one of the objects donations for political purposes, such donations are ultra vires.

7. Though the majority stockholders of a corporation sanction the acts of its directors and officials in illegally making expenditures of the corporate funds, so as to bind themselves by estoppel, yet such acts are not binding on stockholders who neither took part in the proceedings, nor sanctioned, by act or acquiescence, the making of the expenditures.

8. In the absence of power emanating from the stockholders, from statute, or from by-laws legally adopted, directors of a corporation have no authority to vote a salary to any of their number.

9. A resolution of four directors of a corporation voting three of their number salaries, and giving them back pay, predicated on by-laws previously passed by five directors, including the first mentioned four, is void, under Civ. Čode, §§ 2970-2976, providing that in all matters connected with his trust a trustee is bound to act in the highest good faith toward his beneficiary, and declaring that every violation of the provisions of the article is a fraud against the beneficiary.

10. Comp. St. 1887, div. 5, § 449, provides that, if a company is organized under that chapter for the purpose of carrying on any part of its business outside the state, the certificate shall so state, and shall also name the locality in the state where its principal place of busines is located. Held, that the removal of the entire official business of a domestic corporation beyond the state, and acts of the directors in attempting to hold regular monthly meetings and to sit as the board of directors in another state, are ultra vires.

11. In an action against the officers and directors of a corporation for fraudulently diverting and misappropriating its funds, it appeared that, during a period of time in which the offcial business of the company had been removed from the state without authority of law, stockholders' meetings were held annually in the state for the purpose only of electing directors, at which a majority of the stock was represented. At each of those meetings a resolution was passed approving all acts of the directors and officers for the past year. None of the acts of which plaintiffs complain were presented at those meetings. The board of directors, after the suit was brought, at a regular meeting held in the state, passed a resolution ratifying the acts done without the state; some of the defendants voting for and causing its adoption. Held insufficient to show a ratification of the ultra vires acts.

12. Where a series of illegal acts by a corporation's officers and directors, continuing over a period of several years, is pursued till the com

mencement of an action against the officers and directors therefor by minority stockholders, laches cannot be predicated of the plaintiffs' delay in bringing suit.

13. Minutes of a stockholders' meeting, consisting of separate sheets of paper pinned to the leaves of a record book, are insufficiently identified to make them admissible.

14. Under Code Civ. Proc. § 3130, providing that, when part of a writing is given in evidence by one party, the whole on the same subject may be inquired into by the other, the act of plaintiffs, in an action against the officers and directors of a corporation for fraudulently diverting and misappropriating the corporate funds, in first introducing some insufficiently identified by-laws, though denying the legality of their adoption, renders the others admissible on behalf of the defendants.

15. Where the secretary of a corporation, who is unlawfully paid a salary by the directors, is not a director, and is connected in no way with the fraudulent transactions of the directors in misappropriating and diverting the corporate funds, he cannot be held liable in an action by' minority stockholders against the officers and directors for relief against the fraudulent acts, but the officials who caused the money to be paid to him must account therefor.

Commissioners' Opinion. Appeal from District Court, Silver Bow County; Wm. Clancy, Judge.

Action by O. J. McConnell, administrator of the estate of William Thompson, deceased, and others, against the Combination Mining & Milling Company and others. From a judgment for defendants, and an order denying a motion for a new trial, plaintiffs appeal. Reversed.

E. N. Harwood, for appellants. Forbis & Evans, for respondents.

Pleadings.

POORMAN, C. The original complaint in this cause was filed September 8, 1898. Subsequently several supplemental complaints and amendments were filed to meet new conditions arising, or to put in issue facts alleged to have been discovered after the commencement of the action. It is alleged that the individuals named as defendants, pretending to act as trustees (directors) of the defendant corporation, wrongfully abandoned the principal office of the company, at Butte, Mont., and moved the books, records, stock register, and papers to St. Louis, Mo.; that they were proceeding to sell the stock of plaintiffs to satisfy assessments wrongfully made; and that they had misappropriated funds and other property of the company, and had been guilty of fraud in connection therewith. The court was asked to enjoin the defendants from selling the stock, to require the return of the records to Butte, and that defendants be required to render an accounting. An injunction was Issued, restraining the selling of the stock, and forbidding the defendants to detain longer away from Butte the records of the company. The material allegations of the complaint were put in issue by the defendants.

Appointment of Referee.

A referee was appointed by the court to hear the evidence, to make findings of fact