Appeal from Wayne; O'Hara (Chester P.), J. (Calendar No. 48,492.)
1. CORPORATIONS -- OFFICERS -- DIRECTORS -- IMPROPER CONDUCT -- LIMITATION OF ACTIONS.
Cause of action by corporation against defendants for accounting, cancellation of stock, and damages, based upon alleged improper action of its former directors and officers in that they enriched themselves by fraudulently diverting to themselves the corporation's business opportunities and using its plant, equipment, facilities, funds, and personnel, was barred by failure to commence suit within 6 years of time the directors are cl1imed to have acted contrary to the corporation act or within 2 years from the date of its discovery (CL 1948, § 450.47).
2. CORPORATIONS -- DIRECTOR -- BREACH OF FIDUCIARY DUTY -- LIMITATION OF ACTIONS.
A corporation that is defrauded or otherwise injured by a director who owes fiduciary duties to his corporate victim must sue within 2 years of its discovery of the wrong or at least within 6 years of its occurrence or forever bear the loss (CL 1948, § 450.47).
3. LIMITATION OF ACTIONS -- CORPORATIONS -- DIRECTORS -- STATUTES.
The limitation of the general corporation act upon an action by a corporation against its director for conduct below the statutory standard in requiring that it must be commenced within 2 years from time of discovery or 6 years from date of the delinquency, whichever is sooner, alters the periods of limitations which would otherwise apply to actions against directors either for negligent conduct or fraud (CL 1948, § 450.47; CLS 1956, §§ 609.13, 609.20).
4. CORPORATIONS -- CORPORATIONS -- ACTION AGAINST OFFICERS.
Action based on alleged improper conduct of officers and directors whereby they enriched themselves by fraudulently diverting to themselves the corporation's business opportunities and using its plant, equipment, facilities, funds, and personnel, was barred, where action was commenced more than 6 years after the alleged improper action took place (CL 1948, § 450.47). REFERENCES FOR POINTS IN
[1-4] 13 Am Jur, Corporations §§ 1020, 1021.
Statute of limitations in stockholder's derivative suit against directors or officers. 123 ALR 346.
The opinion of the court was delivered by: Kelly
Bill by Detroit Gray Iron & Steel Foundries, Inc., a Michigan corporation, against Hugh Martin, subsequently deceased, and continued on appeal against Hugh Martin, Jr., executor of estate, Hugh Martin, Jr., individually and with the Detroit Bank & Trust Company as co-trustees under the will of Louis W. Schimmel, deceased, Howard Colby, Bernard P. Costello, and others for accounting, cancellation of stock holdings and damages, as result of misuse of corporate assets. Bill dismissed on motion. Plaintiff appeals. Affirmed.
KELLY, J. Plaintiff was engaged in the manufacturing of gray iron castings for the automotive industry, and on February 6, 1929, certain of plaintiff's officers and directors formed the Detroit Alloy Steel Company to manufacture steel castings. The Detroit Alloy Steel Company leased a portion of plaintiff's premises at a monthly rental of $500.
In 1942 plaintiff sought a loan from the Reconstruction Finance Corporation and was informed, as a condition to obtaining the loan, plaintiff would have to acquire the assets of the Detroit Alloy Steel Company. Plaintiff complied by acquiring all of the issued and outstanding shares of capital stock of Detroit Alloy Steel Company on December 31, 1942.
Approximately 16 years later (September, 1958) plaintiff filed its bill of complaint in the circuit court of Wayne county seeking an accounting, cancellation of certain shares of stock, and damages.
Defendants and appellees filed motions to dismiss, and, after oral argument, plaintiff, on December 1, 1958, was given the right to file an amended bill of complaint. Plaintiff filed such amended bill of complaint on December 31, 1958, and, also, an amendment to this amended bill was filed on July 2, 1959.
Plaintiff in its final argument and brief abandoned the so-called directors' statute (CL 1948, § 450.47 [Stat Ann 1959 Cum Supp § 21.47]) and based its action upon common-law fraud and conspiracy.
The bill of complaint was dismissed by a decree entered by Hon. Chester P. O'Hara, circuit Judge, on October 12, 1959. Claim of appeal was duly filed by plaintiff.
Section 47 of the Michigan general corporation act (CL 1948, § 450.47 [Stat Ann 1959 Cum Supp § 21.47]) reads:
"The directors of every corporation, and each of them, in the management of the business, affairs, and property of the corporation, and in the selection, supervision and control of its committees and of the officers and agents of the corporation, shall give the attention and exercise the vigilance, ...