FARWELL, OZMUN, KIRK & COMPANY v. GOODHUE COUNTY CO-OPERATIVE COMPANY

Minnesota Supreme Court1924-06-20No. No. 24,038

160 Minn. 64

Summary · law.co

Holding. The order making the assessment was affirmed. The assessment order conclusively determines the stock's constitutional assessability and the proper assessment amount, but it does not conclude questions of individual defenses, stockholder status, or the validity of additional stock issuance.

Stockholders of a cooperative company appealed a district court order imposing a 100 percent assessment on their stock. The trial court's role in an assessment proceeding is to determine whether the corporation's stock is constitutionally assessable and, if so, to calculate the appropriate levy amount based on available facts. The court may adjust the assessment later if circumstances change during administration. The appellants argued various defenses, including that additional stock was issued illegally under state securities law and that they should not be liable due to corporate mismanagement. The appellate court held that while the assessment order conclusively establishes the stock's assessability and the assessment amount, it does not resolve individual defenses or determine whether parties are actually stockholders or whether the additional stock was validly issued. Such defenses must be raised in subsequent collection suits.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether an assessment order in a cooperative company proceeding conclusively determines stockholders' liability
Proper scope of trial court determination in assessment proceedings
Whether individual defenses are preserved for later litigation
Effect of allegedly illegal stock issuance under securities law on assessment liability

Procedural posture

Stockholders appealed a district court order assessing 100 percent on their cooperative company stock, raising defenses regarding the legality of stock issuance and corporate mismanagement.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Dibell, J.

This is an appeal by a number of stockholders of the Goodhue County Co-operative Company from an order of the district court making an assessment of 100 per cent on their stock.

In the assessment proceeding under G. S. 1913, § 6617, the trial court determines whether the character of the corporation is such that its stock is assessable under the Constitution; that is, whether it is one of the corporations whose stockholders are excepted from liability by Const, art. 10, § 3. Its determination is binding in subsequent actions by the receiver to collect the assessments. Phelps v. Consolidated V. & Ext. Co. 157 Minn. 209, 195 N. W. 923, and cases cited; Hoidale v. Vogtel, 158 Minn. 106, 196 N. W. 939.

In the assessment proceeding the necessity and amount of the assessment is determined. In determining the amount the court deals to some extent with probabilities. From the facts before it it determines, so nearly as it can, what the levy should be. If in the course of administration it is found that so large a levy is unnecessary a proper adjustment is made. Finch, Van Slyck & McConville v. Vanasek, 132 Minn. 9, 155 N. W. 754; Hosford v. Cuyuna M. I. Co. 153 Minn. 186, 189 N. W. 1025, and cases cited.

The original stock was $30,000. Additional stock was issued. It is claimed by the different defendants that the additional stock was not legally issued; that certain of it was sold in contravention of Laws of 1917, p. 635, v. 429, commonly called the Blue Sky Law; that there is no liability upon such stock nor upon the additional stock illegally issued; and that the stockholders are not liable because of the mismanagement by a. committee of the creditors selected after the corporation got in financial straits.

The order of assessment concludes to the extent before stated; but individual defenses it does not conclude. Harrison v. Carman, 149 Minn. 365, 183 N. W. 826; Greenfield v. Hill City L. L. & L. Co. 141 Minn. 393; Finch, Van Slyck & McConville v. Vanasek, 132 Minn. 9, 155 N. W. 754; Straw & Ellsworth Mnfg. Co. v. Kilbourne, 80 Minn. 125, 170 N. W. 343. It should not assume to save defenses. See Phelps v. Consolidated V. & Ext. Co. 157 Minn. 209, 195 N. W. 923. In State v. Mortgage Security Co. 154 Minn. 453, 192 N. W. 348, the effect of a limitation of debtedness in the charter was determined. The same is true of In re Owatonna Co-op. Merc. Co. 157 Minn. 482, 196 N. W. 654. The determination was made because it bore upon the amount of assessment proper to be made.

The parties would welcome a present decision upon the defenses proposed. They must be interposed when suit is brought upon the assessments. Counsel, if so disposed, can have the defenses common to all or to groups tried together with a saving of time and expense. The suggestion of a possibility of several hundred suits does not startle. Neither party will find so many either necessary or profitable or tolerable.

That there may be no misunderstanding it should be understood that the order under review and which we affrm concludes the parties upon the question of the assessability under the Constitution of the stock of the co-operative company, and the propriety of the assessment made. It is not a holding that the defendants are stockholders, nor that the additional stock was legally issued, nor that there is liability on it, nor does it conclude the stockholders in any personal defense.

No statutory attorney’s fee will be taxed against the appellants.

Order affirmed.