Case ID: la_135/html/0560-01.html
Source: Caselaw Access Project
Author: {"author": "BREAUX, C. J. MONROE, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(65 South. 741)
    No. 20338.
    WESTERN ELECTRIC CO. v. NATIONAL AUTOMATIC ELECTRICAL SUPPLY CO.
    (March 16, 1914.
    On the Merits, May 25, 1914.)
    
      (Syllabus by the Court.)
    
    On Motion to Dismiss Appeal.
    1. Appeal and Error (§ 801*) — Motion to Dismiss — Determination.
    On a motion to dismiss the appeal on the ground of acquiescence in the judgment, based on a telegram sent by the appellant, which the latter avers was sent under a misapprehension of the facts, the court will not pass on the motion without being fully advised as to all the facts connected with the case, but will refer the motion to dismiss to the merits.
    [Ed. Note. — For other cases, see Appeal and Error, Cent. Dig. §§ 3161-3164; Dec. Dig. § 801.*]
    On the Merits.
    2. Corporations (§§ 556, 557*) — Receivers— Appointment.
    The matter of the appointment of receivers for corporations is governed by act No. 159 of 1898, and there is nothing in that act which confers upon a board of directors the authority to provoke, or upon a court to make such appointment at the instance of a board of directors. The only authority which such a board possesses in that connection is to declare, “by resolution, that the corporation is unable to meet its obligations as they mature, and that a _ receiver is xxecessax’y to preserve and administer the assets, for the benefit of all,” in which case, “at the instance of a creditor,” whether the resolution be adopted before or after the filing of his petition, a receiver may be appointed. The application for the appointment must, however, be made by petition to the court, verified by the affidavit of the creditor or his attorney, and a copy of the. petition must be served on the corporation, together with the order of court requiring it to show cause, on a day fixed, and the delay allowed must not be less than 10 days, unless, in the judgment of the court,'a shorter delay is required.
    • [Ed. Note. — For other cases, see Corporations,’ Cent. Dig. §§ 2219-2228, 2230-2236; Dec. Dig. §§ 550, 557.*]
    3. Corporations (§ 557*) — Receivers—Appointment.
    The effect of appointing a receiver being to take the property of the corporation out of the hands of those to whom the stockholders have intrusted it, the courts proceed with extreme caution in the exercise of that power, and the statutes under which it is exercised are strictly construed, and the methods prescribed required to be strictly followed.
    [Ed. Note. — For other cases, see Corporations, Cent. Dig. §§ 2227, 222S, 2230-2236; Dec. Dig. § 557.*]
    Appeal from Civil District Court, Parish of Orleans; Fred D. King, Judge.
    Action by the Western Electric Company against the National Automatic Electrical Supply Company. From a judgment appointing a receiver for defendant company, the Rome Wire Company appeals.
    Reversed.
    Johnson & Fernandez and Edgar M. Cahn, all of New Orleans, for appellant Rome Wire Co. l'eter Stiff and Meyer S. Dreifus, both of New Orleans, for appellee receiver.
   BREAUX, C. J.

Appellee, George F. Schminke, receiver of the National Automatic Electrical Supply Company (for brevity hereafter the National Company) moved to dismiss the appeal on the ground that appellants have acquiesced in the judgment of the lower court, appointing appellee receiver, lie alleged that lie has a telegram from the Rome Wire Company, the only appellant acquiescing in the judgment and consenting to the appointment of a receiver, that it waived and abandoned the appeal as made to appear by the dispatch, as shown by “annexed affidavits.”

The appellant, the Rome Wire Company, does not admit that it acquiesced in the judgment, but that, on the contrary, it avers that it most positively opposes the appointment as illegal and unnecessary. It alleged, through counsel, that when Schminke found that his appointment was opposed by the Western Electric Company, the plaintiff in the suit wherein his appointment was 'made, and also by an intervener and a-member of the board of directors and a creditor for a large amount — the ground of intervener was the unfitness of Schminke to act as a receiver — he, Schminke, sent telegrams to foreign creditors; among them was the appellant, who were ignorant of the state of affairs, leading them to think he was indorsed by all local creditors, and that he had been regularly appointed; that its dispatch, owing to misrepresentations, was sent in error without advice of its counsel.

Immediately after they were informed of the right facts, they recalled their dispatch.

A copy of the dispatch is annexed to the answer.

Counsel for the Rome Wire Company, appellant, wrote to counsel for the receiver, tiie appellee, that they had been directed by their client, the Rome Wire Company, to proceed with the appeal. Counsel for the receiver then notified appellant’s counsel that they would seek to hold the appellant bound by the first dispatch, by which they aver that the appellant is bound despite its endeavor to avoid its effect.' Counsel for appellant insists that the appointment of the receiver was illegal and null; that, even if this first telegram could be construed as an acquiescence in the appointment, it could not be an acquiescence in an appointment absolutely illegal; that the appointment was neither asked for nor solicited by any creditor as required by paragraph 8, Act 159 of 1898.

It follows from the foregoing, if true, that a serious question is presented for decision, but we do not think on this motion for the dismissal of the appeal that we should be concerned with the truthfulness or untruthfulness of the allegation referred to above. It can be properly considered when the case will be before us for decision on the merits.

Without further evidence, we do not choose to dismiss appellant’s appeal, nor to overrule appellee’s motion to dismiss.

There is a right here upon which there should be further light before deciding for or against the point before us for decision.

We cannot pass now upon questions of incompetency, illegality, and irregularity in the proceedings. They will have to abide their time. If 'upon further examination we find that we can decide the questions presented, the decision will be rendered. If not, and we arrive at the conclusion that further evidence is needed, the case may be remanded.

For reasons stated, it is ordered, adjudged, and decreed that the motion to dismiss the appeal be, and the same is hereby referred to the merits to be acted upon upon reaching the merits.

On the Merits.

MONROE, C. J.

On December 8, 1913, plaintiff brought suit against defendant for $150.97, as the price of goods sold and delivered. On December 9, defendant, appearing through George F. Schminke, its president, filed an answer, reading in part, as follows:

“That the petition and citation herein have been submitted to the board of directors; * * * that they have passed a resolution admitting said claim to be correct and past due. They aver that the defendant corporation is solvent and able to settle its just, true, and undisputed claims, if given the time and opportunity to do so; that, owing to suits already filed * * * its credit has been temporarily impaired, and it is temporarily unable to meet its_ * * * obligations as they mature, and that it is necessary, in order to preserve and administer the assets of the corporation, for the appointment of a receiver to conduct the said business * * * and the said hoard of directors has accordingly consented to the appointment of a receiver, all of which will more fully appear from a certified copy of the resolution, * * * annexed and made part hereof. * * * Wherefore respondent submits the entire matter to the judgment of this court, and asks that a receiver be appointed to preserve and administer defendant’s assets and to continue the conduct of the business of the National * * * Company, as a going concern, for the benefit of all concerned,” etc.

The resolution referred to in the foregoing pleading contains a preamble to the effect that the Hunter Ean & Motor Company has sued defendant, and that defendant has answered “disclaiming” liability; that the filing of the suit has injured its credit, and has resulted in the filing of another suit, for $150.97, which has been followed by still other suits; that, beyond the claim of the Hunter Ean & Motor Company, defendant is solvent, and able to meet its just obligations, if granted time and opportunity to do so, and to that end a receiver is necessary.

And the board then “resolves” that the president be directed to file an answer in this suit, and “to admit the correctness of the claim sued upon, and that, if granted time and opportunity, this company will satisfy all its creditors, and, further, that, in the opinion of the board, a receiver is necessary,” etc.

The answer was sworn to by the president of the company, and, upon the representations therein made, with the resolution annexed, and upon the day of the filing of the same, the judge a quo made an order appointing George F. Schminke receiver of the company, with power to administer its business, as a going concern, and to continue such administration until a further order shall be made, directing that he furnish bond in the sum of $2,500; that an inventory be made of the assets of the company, etc. The appointee filed his bond and received his letters upon the same day, and two days later, was authorized to employ attorneys. On the following day (December 12th) C. C. Socola intervened, alleging that he is a stockholder, vice president, and creditor of the company, further alleging that the proceedings leading to the appointment of Schminke were in furtherance of a concocted scheme to give him the control of the company; that the action of the board of directors took intervener by surprise and was protested against; that the order appointing the receiver was unauthorized and void; that, even if a-receiver be necessary, “Schminke is absolutely incapable and not a fit or proper person to be so appointed” (for reasons which are stated), and that he should be restrained from acting until the further order of court. Wherefore he prayed that said Schminke be ordered to show cause why the order appointing him should not be vacated and the administration of the affairs of the company restored to the board of directors, or, in the alternative, why said Schminke should not be removed, and intervener, or some other responsible person, appointed in his stead. Plaintiff (the Western Electric Company) also appeared and moved the court (for reasons stated) to vacate the appointment of the receiver and permit it to proceed with its suit, or, in the alternative, appoint some other person to the position, and thereafter, on December 16th, the Rome Wire Company, alleging itself to be a creditor of the defendant company, took the appeal, which we are now considering, from the order appointing the receiver.

We have no further information upon the subject of appellant’s alleged acquiescence in the appointment of the receiver than that furnished in connection with the motion to dismiss the appeal, and our conclusion is that appellant’s consent to such appointment was given through a misapprehension, and that it was entitled to withdraw the consent and take the appeal as it has done. Upon the merits of the case, we find no authority for the appointment of a receiver under the circumstances which are here disclosed. The matter is governed by Act 159 of 1898, and there is nothing in that act which confers upon the board of directors of a corporation thé authority, to provoke or upon the courts to make such appointment, at the instance of the board of directors. The only authority which-a board of directors possesses in such matters is to declare, “by resolution, that the corporation is unable to meet its obligations, -as they mature, and, that a receiver is necessary to preserve and administer its assets for the benefit of all,” in which case, “at the instance of a creditor,” whether the resolution be adopted before or after the filing of his petition, a receiver may be appointed. The application for the appointment must however be made by petition, verified by the affidavit of the creditor, or his attorney, and a copy of the petition must be served on the corporation, together with the order of court requiring it to show cause, on a day fixéd, and the delay shall not be less than 10 days from the date of the order, unless circumstances, shown in the judgment of the court, require a shorter delay. Act 159 of 1898, §§ 1, 8, 2; Saxon v. S. W. Brick & Tile Co., 113 La. 640, 37 South. 540; Vasquez v. Building Co., 134 La. 907, 64 South. 827.

In Bartlett v. Fourton, 115 La. 34, 38 South. 882, this court quoted, with approval, from High on Receivers (3d Ed.) § 289, as follows:

“When the jurisdiction of courts of equity has been extended by legislation to the appointment of receivers over incorporated companies, the power thus conferred is treated by the courts as delegated authority,’ the exercise of which requires the most careful consideration. The effect of appointing a receiver being to take the property of the corporation out of the control of its own officers, to whom it has been intrusted by its stockholders, the courts proceed with extreme caution in the exercise of so summary a power, and, in construing such statutes, they are inclined to give them a strict construction, and require the prescribed method of obtaining jurisdiction of the person and subject-matter to be strictly followed.”

In the instant case, there has been a. wide departure from the requirements of the statute, and the appointment of the receiver must be set aside.

It is therefore adjudged and decreed that the order and judgment appealed from be set aside, that the letters of receivership issued to George F. Schminke be canceled, and that the stockholders and board of directors of the defendant corporation be reinstated in the control and management of its affairs. It is further decreed that said George F. Schminke- pay the costs of this proceeding.