188 CLARK v. GROGER.
Statement of Case. 102 Wash.
[No. 14538. Department Two. May 7, 1918.]
JAMES CLARK, Respondent, v. FRANK GROGER et al.,
Appellants. «1»
CORPORATIONS - DISSOLUTION - POWERS OF TRUSTEES. A corporation
with defined powers limited to the manufacture and sale of beer
and the operation of a brewery, is not dissolved by the state-wide
prohibition law; and its stockholders are not thereby made tenants
in common of its property, but as between stockholders, it may
engage in any lawful business, and the trustees have power to
assemble its assets and liquidate its indebtedness and, pending a
formal dissolution, conduct its affairs.
SAME - RIGHTS OF STOCKHOLDERS. A stockholder of such a
corporation dispossessed by stockholders in control of the stock,
has no right to assert possession over other stockholders, by
reason of his former control of the majority of the stock.
TROVER AND CONVERSION - WHAT CONSTITUTES - CLAIM OF TITLE -
TRUSTEES OF CORPORATION. Corporation trustees are not guilty of a
conversion in taking possession of the property of a stockholder,
where, by resolution, they disclaimed any intention of claiming
the same as owners, admitted the adverse title, and demanded its
removal from the plant.
SAME - TRUSTEES OF CORPORATION - LIABILITY. One refusing to
remove his property on demand of trustees of a corporation, cannot
hold the trustees liable for the value of the property used, as
for a conversion by them, his remedy being against the corporation
for an accounting for the property used by it.
CORPORATIONS - RIGHTS OF STOCKHOLDER. Where a stockholder's
operation of a corporation plant was by sufferance only, without
any right of possession, upon dispossession he cannot recover for
lost profits anticipated in continuing the business.
Appeal from a judgment of the superior court for
Kittitas county, Davidson, J., entered May 16, 1917,
upon the verdict of a jury rendered in favor of the
plaintiff, in an action for conversion. Reversed.
Eugene E. Wager and Bogle, Graves, Merritt &
Bogle, for appellants.
Ralph Kauffman, for respondent.
«1» Reported in 172 Pac. 1164.
CLARK v. GROGER 189
May 1918 Opinion Per CHADWICK, J.
CHADWICK, J. - For fifteen or twenty years prior to
January 1, 1916, the Ellensburg Brewing & Malting
Company, a corporation, had engaged in the manufacture
of beer and conducted a brewery business at
Ellensburg. With the dawn of that day its occupation
was gone. At the time the earth slipped out from under
it, James Clark, the plaintiff, was the owner of
stock of the par value of $13,500. Frank Groger owned
stock of the par value of $11,500. Clark conceived the
idea of operating the plant as a place for the manufacture
of soft drinks, etc., and accordingly leased the
stock of Frank Groger. Clark, with one August Sold,
former brewmaster, who owned ten shares of the
stock, at once began to manufacture near beer, eider
and other products upon a profit-sharing basis. The
annual meeting of the stockholders occurred on May 10,
1916. Clark voted his own and Groger's stock. He
was thereafter elected president by the trustees of his
own choosing. He had already taken possession of
the plant and all of the personal property and stock on
hand of the brewing company and put it to the uses of
the new business.
In the summer of 1916, Groger, who after the lease
of his stock had gone to California for his health,
returned and began buying other outstanding stock, including
Sold's stock, so that, at the time the lease expired
on January 1, 1917, he was the owner of
shares, being a clear majority of the whole. A part
of this stock was taken over in the name of his wife,
Emma Groger, and a part in the name of his son,
Casper Groger.
On January 6, 1917, at a special meeting of the
stockholders, Casper Groger, son of Frank Groger, and
Emma Groger, wife of Frank Groger, were elected
trustees in place of Sold and one Brown, whose stock
had been bought by Groger. It is said that the mother
190 CLARK v. GROGER.
Opinion Per CHADWICK, J. 102 Wash.
and son never qualified as trustees, but they assumed
to act as such, for, at a meeting of the trustees held on
January 19, 1917, the following proceedings were had:
"Upon motion of Emma Groger, duly made and seconded
and carried by a vote of all trustees present, it
was ordered that as the brewing building was idle, and
that the occupancy of the Ellensburg Bottling Works
had terminated, that the same be at once operated by
the company for the making and manufacturing and
selling of soft drinks and substitutes for beer; and that
as the vats in said building were being injured and
destroyed by being filled with vinegar and other materials,
that they be cleaned and the vinegar and so
forth be removed therefrom, and work on the cleaning
and operating of said plant commence at once, and the
trustees proceed at once to take the necessary steps to
operate said plant, and notify Clark to remove the
vinegar and so forth therefrom."
Clark was not present at this meeting, although he
had called the meeting and given notice of the time and
place where it was to be held.
On January 26, 1917, Mrs. Groger and August Sold
went to the brewery and notified plaintiff that it was
the intention of the corporation to take possession, and
called upon him to remove his property. When he returned
after his dinner hour he found the doors barred
and locked and a guard in charge, who informed him
that he would not be permitted to enter. He did enter
the building later in the afternoon, after securing
permission from Groger and a pass from his attorney.
Plaintiff did not remove any of his property at that
time, nor did he attempt then or thereafter to do so.
Being convinced, however, that the defendants, as
trustees for the corporation, were about to engage in
the business of manufacturing soft drinks, and conceiving
that such an undertaking was ultra vires of the
corporation as its powers had been defined in its
CLARK v. GROGER. 191
May 1918 Opinion Per CHADWICK, J.
articles: "the manufacture and sale of beer, and to
establish, conduct and operate a brewery," he brought
an action to restrain the further prosecution of the
business. Such proceedings were thereafter had in that
case that a receiver was appointed and he took possession
of all of the property then on hand, that owned by
plaintiff, as well as that which was admittedly the
property of the Ellensburg Brewing & Malting Company
Before passing to the pertinent issues, let it be
known that plaintiff never made any demand upon the
receiver for the property he now claims, nor has he
ever accounted to the receiver or to the corporation
for the use of its property in the prosecution of his
individual business.
Contrariwise, he brought this action on the 6th day
of February, 1917, against these defendants, as individuals,
to recover damages as for conversion of the
property owned by him individually at the time he was
ousted of his possession. He fixes his damages as the
value of the property at the time of the alleged conversion,
and anticipated profits upon the sale of stock
on hand and goods to be manufactured out of unmanufactured
stock.
Although combated vigorously at all stages of the
proceeding and at the trial, the trial judge followed the
theory advanced by plaintiff and has rendered a judgment
against the defendants Groger upon the verdict of
a jury in the sum of $5,000. A verdict was returned in
favor of Sold, who was made a party defendant.
Plaintiff's whole case is predicated upon the
assumption that the Ellensburg Brewing & Malting Company,
having corporate power limited to "the manufacture
and sale of beer, and to establish, conduct and
operate a brewery," had no legal existence after the
first day of January, 1916, (a) because its corporate
192 CLARK v. GROGER.
Opinion Per CHADWICK, J. 102 Wash.
powers were impliedly repealed by the spirit, if not the
terms, of the prohibition law and (b) under the general
rules of law as they pertain to defunct corporations,
the trustees having no power to engage in the
brewing business or to do anything other than to wind
up the affairs of the corporation and to distribute its
assets, it follows that they are liable as individuals.
Counsel says:
"Our contention is that the shareholders of the corporation
become at once tenants in common of this
property, subject, however, to the lien of the dead
corporation's debts. See Cook on Corporations, SS 641.
Now, the law unquestionably is that co-tenants have
equal rights to the possession and occupancy of the
property of which they are co-tenants. 7 Ruling Case
Law, Co-Tenancy, paragraphs 14 and 15.
"And so when the corporation died on January 1,
1916, Clark had a perfect right to enter into the
occupancy of the tangible property of the defunct
organization, and could maintain that occupancy against his
fellow-shareholders. Indeed, if anything, he had the
best right to enter into such occupancy because he was
by long odds at that time the largest shareholder as
owner and lessee. So that, so far from being a trespasser
when he went into the occupancy of the property,
he was only exercising what were his unquestionable
and undoubted rights. It may be true that he
might be called to account by his co-tenants for the
reasonable rental or value of the occupancy in question,
but that is very far from saying that he was not
rightfully there, and that he might be rightfully dispossessed."
We cannot follow counsel in his contention that defendants
were without power to act as trustees. Trustees
of a corporation have a general power to wind up
a defunct corporation; that is, assemble its assets,
liquidate its indebtedness and, pending a formal dissolution,
conduct its affairs. And as between stockholders,
it may engage in any lawful business, whether
CLARK v. GROGER. 193
May 1918 Opinion Per CHADWICK, J.
within or without the powers as defined by its
franchise, and continue to do so until restrained at
the suit of a stockholder - which was done in this case
at the suit of plaintiff - or by the state ex rel. under a
writ of quo warranto. 7 R. C. L., Corporations, SS 516.
If this view is sound, it follows that the stockholders
of the Ellensburg Brewing & Malting Company were
not tenants in common. But, if it were held otherwise,
plaintiff is in no position to assert a right of
possession over his fellow stockholders. His dispossession
and their possession would put them in the same position
he was in when in possession. If plaintiff had a
right of possession by reason of stock control,
defendants would have the same right when in control. We
are not committing ourselves to this doctrine, but advance
it only to show that, if there be merit in the theory
of plaintiff, he is hoist by his own petard.
Plaintiff had certain property, apples, malt, etc., and
some manufactured products on hand at the time he
was ousted and the brewing company started in the
business of manufacturing soft drinks on its own account.
The receiver would, no doubt, be liable to account
for the value of these goods, subject, of course,
to an accounting on the part of plaintiff for such goods
as were on hand and used by him at the time he began
to manufacture on his own account.
But it is insisted that, even though it be held that
the act of taking possession of the brewery plant was
the act of the corporation, the taking being in the
nature of a trespass, the officers of the corporation who
participated in the act are personally liable to answer
in a suit for conversion. 7 R. C. L., Corporations,
SS 493. We have heretofore affirmed this principle.
Lytle Logging & Mercantile Co. v. Humptulips Driving
Co., 60 Wash. 559, 111 Pac. 774.
194 CLARK v. GROGER.
Opinion Per CHADWICK, J. 102 Wash.
But it cannot be held arbitrarily that the mere taking
of goods is sufficient to sustain an action for conversion.
A wilful, or even an unlawful taking, will not
always amount to conversion. There must be some assertion
of right or title that is hostile to the true owner.
In the instant case, the trustees, by resolution, disclaimed
any intention of claiming as owners. They not
only admitted the title of the plaintiff, but made a
demand that he remove his property. His answer to
this demand was not made with a moving van, but by
filing an action in damages for conversion.
This phase of the case is learnedly treated in Lee
Tung v. Burkhart, 59 Ore. 194, 116 Pac. 1066, where it
is said:
"In an action of trover it is not sufficient that the
facts show a mere trespass, without showing a conversion
. . . There may be an actual, wrongful
exercise of dominion over chattels without constituting
a conversion, if such dominion is not a denial or
repudiation of the owner's right or title."
And this we understand to be the doctrine of Browder
v. Phinney, 37 Wash. 70, 79 Pac. 598.
In answer to this it may be urged that the use of the
malt, apples and manufactured stock was the assertion
of a right in derogation of the title of the plaintiff.
This would be so ordinarily, but the personal liability
of the defendants could not be extended over a
time beyond which plaintiff should have removed his
property in obedience to the demand of the trustees.
He had his choice of remedies. He could comply with
the request of the trustees and remove his property, or
he could undertake to sell it to the corporation or to
the trustees as individuals by resort to a claim for
damages as for a conversion. He chose to hold the
trustees as individuals and must fail, for it is shown
CLARK v. GROGER. 195
May 1918 Opinion Per CHADWICK, J.
that his loss, if any, is due to his own omission. He
cannot recover upon a personal liability the value of
that which he might have had for the taking. His
remedy, if any, is against the corporation.
While it is not necessary to a decision in this case,
it may not be out of place to observe that, in the adjustment
of the rights of plaintiff and of the corporation,
plaintiff could not recover as for lost profits. His
occupation of the brewery plant was at sufferance only.
The trustees had a right to repossess themselves of the
plant for the benefit of the corporation. His right to
recover lost profits would depend upon his right to
manufacture at the brewing plant. This he did not
have, and it follows that his loss on unmanufactured
products, if any, must be measured by the value of his
goods at the time of the taking.
Reversed, and remanded with instructions to entertain
appellants' motion for judgment.
ELLIS, C.J., FULLERTON, and MOUNT, JJ., concur.