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Mathay vs Consolidated Bank & Trust Company

FACTS:
The complaint in this case, filed on December 24, 1963 as a class suit. It
stemmed when stockholders in the Consolidated Mines, Inc. including the plaintiffs-
appellants, passed a Resolution organizing Consolidated Bank & Trust Co. and that
all stockholders who were legally qualified to become stockholders, would be
entitled to subscribe to the capital stock of the proposed Bank; that the Board of
Directors of the CMI be authorized to declare a "special dividend" in an amount it
would fix, which the subscribing stockholders might authorize to be paid directly to
the treasurer of the proposed Bank in payment of the subscriptions; that the
President and members of the Board of Directors of the CMI, who are the
individuals-defendants-appellees in the instant case, constituted themselves as the
Interim Board of Organizers; that said Board sent out to the CMI stockholders,
including the plaintiffs-appellants, circular letters with "Pre-Incorporation
Agreement to Subscribe" forms that provided that the payment of the subscription
should be made in cash from time to time or by the application of the special
dividend declared by the CMI, and that the subscription must be made within the
specified period, otherwise such subscription right shall be deemed to have been
thereby ipso facto waived and released in favor of the Board of Organizers of the
Defendant Bank and their assignees; that the plaintiffs-appellants accomplished and
filed their respective "Pre-Incorporation Agreement to Subscribe" and paid in full
their subscriptions.

The Board of Organizers caused the execution of the Articles of Incorporation


of the proposed Bank indicating an original subscription of shares and paid only by
six of the individuals-defendants-appellees thereby excluding the plaintiffs-
appellants and the other CMI subscribing stockholders who had already subscribed
that the execution of said Articles of Incorporation was "in violation of law and in
breach of trust and contractual agreement as a means to gain control of Defendant
Bank by Defendant Individuals and persons or entities chosen by them and for their
personal profit or gain in disregard of the rights of Plaintiffs and other CMI
Subscribing Stockholders and that as of the date of the Complaint, the plaintiffs-
appellants and other CMI subscribing stockholders had been denied the right to
subscribe at par value, in proportion to their equities established under their
respective "Pre-Incorporation Agreements to Subscribe" to the capital stock.

On February 7, 1964 defendants-appellees filed a motion to dismiss on the


grounds that (a) plaintiffs-appellants had no legal standing or capacity to institute
the alleged class suit.

In its order, dated March 21, 1964, the trial court granted the motion to
dismiss, holding, among other things, that the class suit could not be maintained
because of the absence of a showing in the complaint that the plaintiffs-appellants
were sufficiently numerous and representative, and that the complaint failed to
state a cause of action.
Hence the petition.
Issue:
Whether the instant action could be maintained as a class suit.

Held:
The necessary elements for the maintenance of a class suit are accordingly:

1) that the subject matter of the controversy be one of common or


general interest to many persons, and
2) that such persons be so numerous as to make it impracticable to bring
them all to the court.

By the phrase "subject matter of the action" is meant "the physical facts,
the things real or personal, the money, lands, chattels, and the like, in
relation to which the suit is prosecuted, and not the delict or wrong
committed by the defendant.

The interest that appellants, plaintiffs and intervenors, and the CMI stockholders had
in the subject matter of this suit — the portion of stocks offering of the Bank left
unsubscribed by CMI stockholders who failed to exercise their right to subscribe on
or before January 15, 1963 — was several , not common or general in the sense
required by the statute. Each one of the appellants and the CMI stockholders had
determinable interest; each one had a right, if any, only to his respective portion of the
stocks. No one of them had any right to, or any interest in, the stock to which another was
entitled