Dean v. Kellogg

Julia Dean and other shareholders (the shareholders) (plaintiffs) owned shares in Warren-Teed Seed Company (Warren-Teed) (defendant), a Nevada corporation. Seedtown Products, Inc. (Seedtown) (defendant) was a Delaware corporation that had qualified its stock for sale in Illinois. In 1930, Warren-Teed entered into an agreement with Seedtown in which Seedtown agreed to exchange its stock for Warren-Teed’s assets. The agreement gave each Warren-Teed shareholder the right to exchange his or her shares in Warren-Teed for shares of the same class in Seedtown. However, according to the shareholders, the shareholders did not receive shares owed in Seedtown because of the actions of John L. Kellogg (defendant), an Illinois resident, who had been Warren-Teed’s majority shareholder since 1928. In 1931, Kellogg obtained a default judgment in Illinois against Seedtown in the amount of $220,006.90. Thereafter, the shareholders filed a derivative suit on behalf of themselves and any other shareholders or creditors of Seedtown and Warren-Teed who wanted to join and contribute to the litigation expenses. The lawsuit alleged that Kellogg engaged in a scheme to strip Warren-Teed and Seedtown of their assets and obtain the default judgment against Seedtown by fraud. The shareholders did not personally serve process on Kellogg, and Kellogg did not submit to the trial court’s jurisdiction. Moreover, although the shareholders attempted to constructively serve Warren-Teed and Seedtown by publication, the shareholders did not personally serve process on an agent of Warren-Teed or Seedtown doing business in Michigan. The trial dismissed the lawsuit for lack of jurisdiction upon finding that the parties were not properly served and that Warren-Teed and Seedtown were indispensable parties. The shareholders appealed.