Case ID: la-ann_34/html/0754-01.html
Source: Caselaw Access Project
Author: {"author": "Fenner, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

No. 8428.
    Page M. Baker et al. vs. The Louisiana Portable Railroad Co.
    As a general principle, courts have no jurisdiction to appoiutreceivers for corporations in the absence of express statutory authority.
    This Court has recognized no exceptions to this rale, unless when the corporate property is abandoned, or when there are no persons authorized to take charge of or conduct its affairs.
    Such power has never been claimed in case of an existing corporation, whose charter has neither expired nor been declared forfeited, and which is equipped with competent officers.
    APPEAL from the Civil District Court for the Parish of Orleans. Jifonroe, J.
    
      A. Goldtlmcdte, for Plaintiffs and Appellants:
    Corporations may be equitably liquidated in a court without a forfeiture of charter or dissolution.
    
      "When a majority of the shareholders refuse to administer a corporation and hold nó election for officers and abandon its affairs, a court, under Article 21, C. C., will interfere in behalf of a minority, and liquidate the affairs of said corporation.
    Shareholders who have paid up their shares have a right to recover the excess they have paid over what the ordinary shareholders have paid, from the corporation. 3 Rob. 510.
    
      Nicholls & Garroll, for Defendant and Appellee :
    Proceedings brought as tutrix of parties who were really majors when suit was brought, are radically null ab initio, and must be commenced anew.
    The majors interested in the subject matter of the suit cannot adopt and ratify the proceedings so as to authorize the further prosecution of the suit, under the original petition and citation.
    That which lias no legal existence, cannot he ratified. Tutorship is limited to minors. It is legally impossible that majors should appear in court through a tutor.
    It is of the essence of valid legal proceedings that the initial proceeding, when brought by a party claiming to hold a trust derived from the law aud nob from contract, should he instituted in a capacity possible under the law.
    Parties with proper capacity from first to last, are essential to the validity of legal proceedings. Dugas vs. Truxillo, 15 A. 116 ; 3 La. 300.
    “Trusteeship,” as conferring legal capacity under such designation to institute suits for another person, is unknown in Louisiana.
    After exception taken to plaintiff’s capacity, facts which are necessary to be proved to sustain the capacity must be shown by evidence regularly taken, and not by mere recital in act sous seing prive.
    
    Rights of parties on exception must be tested by state of affairs existing when exception was taken.
    On the Exception — Ho Cause of Action.
    The holder of “fully paid up” stock, in an “insolvent” corporation, “owing debts it is wholly unable to pay,” is without interest to ask that the corporation assets and affairs should be placed in the hands of a receiver. Under Section 690, of the R. S., he has nothing to fear from the continued possession of assets by the corporation officers, and on the other hand, he has nothing to hope or gaiu from winding up tho corporation. If creditors or the State are interested in bringing this about, it is for them to act. 3 Rob. 325.
    The whole body of express law, on the subject matter of this litigation, is found under the heading of Sequestration in the O. P., and in Sections 688 and 731 of the R. S. Plaintiffs do not pretend to fall under the provision of such laws or to he acting under them in this proceeding.
    The plaintiffs claim that the courts of Louisiana are auth >rized, not by Statute, but under general equitable powers, to take, without bond or security, at tho instance of a stockholder, the property of an existing corporation, out of the possession, control and administration of officers legally in office under the charter, and transfer them to the possession, control and administration of a receiver appointed by tho court.
    Tho defendant denies.the existence of any such right or power on the part of our courts High on Receivers, Secs. 287, 288, 298 and 749; Drench vs. Gifford, 30 Iowa, 148; 3* Oregon, 77. ,
    If such «power existed, it could only exist as incidental and ancillary to a suit for the dissolution of the corporation or forfeiture of its charter, and then only after judgment. High on Receivers, Sec. 307.
    Dissolution or winding up of a corporation can bo accomplished only in two ways by stockholders:
    1. In the manner provided for in the charter, if the charter determines the method.
    2. In the mode prescribed by the general law, (Sec. 687, R. S.,) if the charter be silent on the point. Brice, p. 636, note; Ibid, p. 7$2; 1 Cal. 56. Courts are powerless to break up the contract of the parties, or to stretch their authority to frame remedies not given by law. 10 Md. 500; Uhl vs. Dillon, 32 An. 1225.
    Omission on part of managers of a corporation to do some act or wrong on their part, either accomplished or about to be accomplished, does not authorize an attaok against the body corporate, (3 Oregon, 77) or the placing of its affairs in the hands of a receiver.
    The remedy is either by mandamus to enforce the duty, or by injunction to restrain the wrong, or displacement of the board, either through an election or through a general meeting of stockholders. High on Receivers, §740; Brice, Ultra Vires, p. 670 (Note); Angelí & Ames, Corp. § 700; Samuel vs. Halladay, Wool, 400; 3 Oregon, 77; 6 Barb. 397; 10 Nev. 167.
    The board must have been called upon, apd refused to perform the aot, the omission to do which is complained of, and these faots must be alleged.
    The failure to do the act must have resulted in injury: had the act been done and-matters would still be as they are, the complaint is groundless, as where it is affirmatively shown that acts of omission or of commission by a managing board would be approved and confirmed, if submitted to a general meeting of stockholders.
    So, a failure to order an election for directors amounts to nothing, when the complaining party affirmatively shows that had an election taken place, the same board would have been re-elected.
    It is no part of the duty of a board of directors to inaugurate proceedings to dissolve and wind up the corporation.
    .The courts of Louisiana have carefully refrained from the appointment of receivers. They have confined themselves to consent cases, in which the receiver is really the agent of the parties and not strictly an officer of the court, and to cases of property abandoned, or not in the control and possession of any particular person, and which property, being subject to claims of various parties, had to he taken possession of and administered for common benefit. Counter authorities are either mero obtiter dicta or decisions failing to undo accomplished facts where objections have been either collaterally raised or raised too late. 4 R. 517; 11 R. 418 ; 16 A. 238 ; 24 A. 349 ; 30 A. 162; 31 A. 64, 825.
    A party claiming the exercise of equitable powers, must have shown diligence and not acquiesced in the state of facts on which he bases his application. Laches bar the relief asked. High on Receivers, Section 314.
    More differences of opinion between a minority of stockholders and the managing body of a corporation, on subjects of internal management and economy, involving questions of judgment and policy, are not adjustable in the courts, and cannot be made the basis for a sequestration of corporation assets and the appointment of a receiver. The will of the majority is supreme, with the limitation that that will must not he violative of law, and must not involve breach of trust or fraud. See the leading case of Foss vs. Harbottle, Biice’s Ultra Vires, pp. 664, 665 and 668; Gregory vs. Patohett, 33 Beav. 595; Gray vs. Lewis; L. R. 8 Eq. 526; MoMurdo vs. Northern Railway Company; Hedgos vs. Paquet, 3 Oregon, 77.
   The opinion of the Court was delivered by

Fenner, J.

The plaintiffs allege, in substance, that they are holders of full paid stock in the defendant corporation; that other stockholders have paid up only fifty per cent, of their shares; that the corporation has ceased active business, and is insolvent; that the existing officers and directors wilfully avoid and refrain from liquidating the affairs of the corporation by calling in the unpaid stock and, after settling the debts, by distributing the surplus in such manner as to make the stockholders equal; that upon such administration and liquidation, plaintiffs would be entitled to receive a large sum, exceeding ten thousand dollars; that the existing directors hold only half-paid stock, and are interested against enforcing such liquidation ; that the majority of the stockholders also hold half-paid stock, and have like interest against such liquidation and, on a new election of directors, would .choose those who would continue the policy of the present board ; that they have, in accordance with law, applied to the attorney-general to take proceedings for forfeiture of the charter of the corporation, which that officer declines to do; wherefore, they pray for the appointment of a receiver to take charge of, administer and liquidate the affairs of said corporation.

To this petition the defendant filed an exception of no cause of action, which was sustained in the lower court, from which judgment plaintiffs prosecute the present appeal.

It affirmatively appears on the face of the petition :

1. That the defendant is an existing corporation, whose charter has neither expired nor been legally forfeited.

2. That it has officers who are lawfully in office, holding over, under the terms of the charter, until their successors are elected, who have not died, or resigned, and who do not refuse to act as such officers, although they take a different view of their duties from that asserted by plaintiffs.

We may remark that the petition contains no allegation that plaintiffs have ever demanded of the officers the performance of the duties charged to have been neglected, and that they have been refused. This should seem, under all circumstances, to be a necessary condition precedent to the maintenance .of this action, and would, perhaps, by itself, furnish sufficient ground to sustain the exception.

But, on general principles, we can discover no judicial power, under the laws and jurisprudence of this State, to grant the relief herein sought, under the circumstances of this case. It is well established that courts have no jurisdiction to appoint receivers for corporations in the absence of express statutory authority. High on Receivers, Secs. 287, 288, 292, 298, 307, 749, and authorities there cited; French vs. Gifferd, 30 Iowa, 148; Hedges vs. Pacquet, 3 Oregon, 77.

To this doctrine, in its broadest statement, there may be some exceptions, confined, however, to .cases of extreme necessity, such as when the corporate property is abandoned, or where there are no persons authorized to take charge or conduct its affairs.

No other exception has ever been hinted at, even in any dictum of this Court. Stark vs. Burke, 5 A. 740; N. O. Gaslight Co. vs. Bennett, 6 A. 456; Brown vs. Union, 3 A. 182.

Such power does not exist, and has never been claimed, in case of an existing corporation equipped with competent officers.

A corporation is a person, whose possession and control of its own property and affairs must be respected like the similar rights of individuals. They cannot be interfered with, in preliminary proceedings and in advance of judgment, except in cases specially provided bylaw and on strict compliance with the requirements thereof.

It is not pretended that there exists any statute of this State authorizing the relief sought herein.

The only statutes referring to the subject are Sections 688 and 781 of the Revised Statutes, neither of which apply to this case.

We are not prepared to admit that petitioners are without other relief under the law. Their petition does not establish that they have resorted to any of the usual and ordinary proceedings under which relief, in such cases, is ordinarily found.

We are not prepared to accept his prognostications of their failure as sufficient basis for judicial action. Even if tried and found wanting, he must avail himself of remedies recognized by law.

Judgment affirmed at appellants’ cost.

Rehearing refused.

Levy, J., absent.