Leslie C. Hardy, of Phoenix, for appellant.
Harold R. Scoville, Charles A. Stanecker, of Phoenix, for appellee.
Phelps, Justice. Udall, C. J., and Stanford, De Concini, and La Prade, JJ., concurring.
[74 Ariz. 221] This is an appeal from a judgment in favor of appellee Spalding and against appellant Funk in the sum of $ 4,496.50.
The cause of action arose out of the operation of the Phoenix Softball Park. This sports enterprise was begun in 1935 or 1936 and operated as a partnership until June 1937 when the business was incorporated as Phoenix Softball Park, Inc. 35 shares of stock were issued to Spalding; 34 shares to Funk and one share to Jacob Morgan, attorney, which was immediately endorsed over to Funk. Spalding claimed in his complaint that the business continued to be operated as a partnership until he left for service in the Navy in April 1943. The facts are, however, that although no stockholders' or directors' meetings were ever held, the business was conducted under the name of Phoenix Softball Park, Inc. The bank account was carried in that name; all checks were signed by the corporation and both the state and federal income tax returns were made out in the corporate name. Registration fees were paid to the Arizona Corporation Commission up to and including 1940 but no report required by law to be returned therewith was ever made. The charter of the corporation was revoked by the Corporation Commission in 1948 for failure to comply with the law above mentioned.
[74 Ariz. 222] Apparently interest in softball as a sport fluctuated considerably between 1935 and 1945, and receipts varied according to such fluctuations. In April 1943 Spalding was called into the U. S. Naval services and remained there until November 6, 1945. He testified that when he received his orders to report for service he talked with Funk and the latter stated to him "Well I will try to keep it running. If there is anything to it we will divide it up."
In 1943 the state income tax report showed a loss of over $ 300. In 1944 and 1945 these returns showed a profit. In fact, according to Funk 1945 was the most successful year in the history of the Softball Park operations. Spalding received $ 200 from the business while in the service. When Spalding returned home in November, 1946 Funk informed him that he had plans for enlarging the operations at the Park to include a dog racing track and that the cost of improvement as planned would be $ 35,000 to $ 50,000 and offered him a
one-fourth interest for $ 10,000. This plan would involve razing the buildings and improvements then in use in the Softball Park. Spalding vacillated for some time as to whether he would or would not participate in the new project, a part of which included the reincorporation of the business under the name of Western Amusements, Inc. He finally decided against participating in it. The project was carried out however; a new corporation organized; the old improvements were removed and salvaged; new improvements constructed and the Park greatly enlarged. The salvage value was fixed by the contractor who constructed the new improvements at around $ 1,730, half of which was paid to Funk and the other half offered to Spalding which he declined to accept and thereupon brought this action for an accounting and for judgment for the amount shown to be due him.
Appellant Funk has contended throughout that Spalding may not maintain this action for the reason that if any wrong has been committed by Funk it amounts to a tort and specifically to a conversion of corporation funds and assets and for such wrong only the corporation may complain; that only after its refusal to act at his request to do so may Spalding as a stockholder maintain such an action; that said action in such event could be brought only on ...