Case ID: la_109/html/0657-01.html
Source: Caselaw Access Project
Author: {"author": "NICHOLLS, C. J. BREAUX, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

(33 South. 641.)
    No. 14,637.
    POSNER v. SOUTHERN EXHAUST & BLOW PIPE CO., Limited, et al.
    (Dec. 1, 1902.)
    RECEIVER — APPOINTMENT—APPEAL—DISMISSAL — CORPORATIONS.
    1. By Act No. 159 of 1898 a party aggrieved by a judgment of court either granting or rejecting an application for the appointment of a receiver may appeal therefrom, provided the appeal 'be taken and perfected within 10 days from the entry of the order. The statute declares that such, appeal is made returnable in 10 days from the date of such order, and shall he tried by- preference in the appellate court. When such appeal has been taken and perfected, it will be sufficient for the appellant to file the record within three judicial days at the first session of the supreme court after the return day, should that court he not in session on the day fixed by the statute for the return day. Section 4, Act No. 45 of 18T0, Bx. Sess.; State v. Hampton, 33 La. Ann. 1257; State y. Butler, 35 La. Ann. 392; State v. Corcoran, 38 La. Ann. 950; State v. Joseph, 3 South. 405, 40 La. Ann. 5.
    2. When such would, in a particular case, have been the situation of the appeal, it will not be dismissed because in the order of appeal the district court has designated as the return day for the appeal the first day of the next session of the Supreme Court, instead of “ten days from the date of the order.” Appellee would not be misled nor injured by that fact.
    On the Merits.
    3. In reference to the application for the appointment of a receiver:
    A receiver may be appointed at the instance of a majority of the stockholders.
    Plaintiff does not represent a majority of the stockholders.
    A receiver may be appointed when the officers and directors are grossly mismanaging the affairs of the company.
    To the date suit was filed the officers and directors were not grossly mismanaging the affairs of the corporation.
    The firm is a successful firm. The charge of misapplication of funds is not sustained, an investment having been made in bonds, in which plaintiff acquiesced.
    4. In reference to the application made in the alternative to have surplus funds of the corporation distributed:
    The volume of the business annually renders some surplus necessary. Besides, to the date suit was instituted, plaintiff had not objected to the management in such a way as to enable him (as relates to prior act of management) to obtain a distribution of the funds.
    5. Courts are slow to interfere with the domestic affairs of a corporation, and will interfere only in case of downright wrong, injustice, and injury in the management of the business.
    (Syllabus by the Court.)
    Appeal from civil district court, parish of Orleans; Bred D. King, Judge.
    Action by A. C. Posner against the Southern Exhaust & Blow Pipe Company and others. Judgment for defendants, and plaintiff appeals.
    Affirmed.
    Andrew Michael Buchmann and Boatner, Dodds & Boatner, for appellant. E. Howard McCaleb and E. Howard McCaleb, Jr., for appellees.
   On Motion to Dismiss.

NICHOLLS, C. J.

Defendants have filed a motion to dismiss the appeal herein, on the grounds:

(1) That plaintiff and appellant has abandoned his appeal.

(2) That plaintiff and appellant has failed to comply with the statute authorizing appeals in cases of this kind.

(3) That this being a case arising under article No. 159 of 1898, entitled “An act to authorize and regulate the practice in, the appointment of receivers,” and the court having refused to appoint a receiver of defendant corporation, and having dissolved the writ of injunction obtained by plaintiff, the-appeal should have been made returnable to this court “in ten days from the date of such order,” as required by section 4 of said act.

(4) That, plaintiff having failed to make his: appeal returnable in 10 days from the date of the order refusing to appoint a receiver and dissolving the preliminary writ of Injunction as required by said statute, and having-failed to return and file the transcript of the-record in this court within the time fixed by said statute, be has thereby abandoned hi® appeal, and it should be dismissed.

After the present motion had been made, one of plaintiff’s counsel filed an affidavit, in which he deposed that as such he moved for the appeal; that he prepared and wrote the motion of appeal which was filed in the court a qua; and that neither in said motion, nor orally, nor in any other manner, did he, theaffiant, or any of the other attorneys for the-plaintiff, suggest a return day for the said appeal; that blank spaces were left in the order-appended to the said motion for the insertion therein by the judge a quo or the clerk of his court of the said return day and -the-amount of the axspeal bond. And on information and belief affiant swore that the-word “first” in the fourth line from the bottom of the order and the word “November”' in the third line were written’by G-. P. Malloy, minute clerk of the court a qua, and the-words “one hundred” in the second line from the bottom thereof were written by the judge-himself, and affiant swore “that the determination of the appeal herein in the said order of appeal cannot and ought not to be imputed to him or to the plaintiff or any of his attorneys.”

The motion prepared for the action of the-court was as follows: “On motion of Boatner, Dodds and Boatner and Andrew WBuehman, attorneys for the plaintiff, and on suggesting that there is error to the prejudice of plaintiff in the judgment herein rendered on the 25th of September and signed on the 1st day of October, that he is aggrieved thereby, and. desires to appeal suspensively and devolutively therefrom:

“It is ordered that the plaintiff be, and he is hereby, granted suspensive, and devolutive appeals therefrom, returnable in the honorable Supreme Court of Louisiana on the - Monday of the month of -, 1Ü02, upon his furnishing security according to law in the sum of - dollars for the suspensive appeal and in a like sum for the devolutive appeal.”

The ruling appealed from was signed on the 1st of October, 1902, the order of appeal was granted on the same day, and the bond of appeal filed on the 2d of October. The transcript was filed on the 4th of November. This court met for the first time in open session after the order of appeal was granted on the 3d of November.

Appellees’ counsel, in support of their motion to dismiss, refer the court to section 4 of Act No. 159 of 1898; State ex rel. Garig v. Judge, 104 La. 472, 29 South. 18; Crichton v. Webb Press Co., 107 La. 86, 31 South. 648; Davies et al. v. Water Co., 107 La. 145, 31 South. 694; State v. Moore, 52 La. Ann. 605, 26 South. 1001; State v. Barranger, 106 La. 352, 31 South. 13; Encyda. of Law & Procedure, vol. 3, 122; Code Prac. arts. 574, 883, 884; Act No. 45 Ex. Sess. 1870, § 4; and Act No. 92 of 1900.

By the eleventh section of Act No. 45 of the Extra Session of 1870 it is provided that “no appeal shall be dismissed on account of any defect, error or irregularity of the petition, citation or order of appeal, or in the citation of appeal or service thereof, or because the appeal was not made returnable at the next term of the Supreme Court, or on a proper day, whenever it shall not appear that such defect, error, or irregularity may be imputed to the appellant, but in all cases the court shall grant a reasonable time to correct such defects, errors or irregularities, in case they are not waived by the appellee and may impose on the appellant such terms and conditions as in its discretion it may deem necessary for the attainment of justice.”

By the fourth section of the same act it is declared that “if the Supreme Court shall not be in session on the day fixed for the return day of any case it shall be sufficient for the appellant to file the record within three judicial days at the first session of the Supreme Court thereafter.”

It will be seen that the objection urged in this motion is not that the motion for the appeal, the order of appeal, and the bond of appeal were not timely, but that the “return day” mentioned in the order of the court was not that fixed by the law; that by law “the appeal was returnable in ten days from the order.” There was unquestionably error in the order of the court in this respect. But should this court make that error carry with it the dismissal of the appeal under the circumstances of this particular case?

The record shows that the case was tried with all parties in court. The judgment and the date of the judgment were known to all, as was also the fact that an application for an appeal had been made and granted. Appellees knew that the proceeding was one in which the return day was fixed by the law, and not by the judge, and that, if it was fixed otherwise, it was error. When the return day mentioned by the judge was reached, appellees had a right to object to making an appearance in the court upon a day other than that which the law itself had designated; but was it not their duty, under the special facts of this ease, to be in this court on the 3d of November, 1902, and for three days thereafter, the time to which the return day was postponed by the law itself? State v. Hampton, 33 La. Ann. 1252; State v. Butler, 35 La. Ann. 392; State v. Corcoran, 38 La. Ann. 950; State v. Joseph, 40 La. Ann. 6, 3 South. 405. Did the error of the judge in giving a wrong day in his order of appeal cause them to occupy a position other than that which they would have held had the return day been correctly stated?

Had the error not occurred, the return day of the appeal would have found this court in vacation, and this particular case not triable on appeal at chambers, but by preference in open court. Under such circumstances the appellant would have been authorized by the fourth section of Act No. 45 of the Extra Session of 1870 to have withheld filing the transcript in the case, until after the opening of this court in November, by force of the law itself. The appellees therefore suffered no injury by the error. They would be precisely where they would have been had the return day been correct.

(Jan. 19, 1902.)

If the district judge, in granting an appeal to the party applying for it, should fix for the return day when this court is in session a date later than that at which it was returnable by the law itself, the appellee unless there were some exceptional facts in the case, could ignore the date fixed by the judge, and obtain from this court the certificate as authorized by article 589 of the Code of Practice. If the transcript of appeal should not have been filed here within the legal delays, appellant would be bound to know that he could not rely upon an unauthorized return day, but an appellee could not obtain this certificate under circumstances such as are shown in the present case. Appellant could not be presumed to have abandoned his appeal. We are very reluctant to dismiss appeals, even if there be error or irregularity, where there is no injury; and under the law we should not do so where the fault is not imputable to the appellant. We do not think the present appellees could possibly have been misled in this ease by the wrong date given in the order of appeal. They have made no showing that they were in fact misled to their injury.

We think the appeal should be maintained. The dismissal of the appeal is refused.

On the Merits.

BREAUX, J.

Plaintiff, by this suit, seeks to have a receiver appointed to take charge of the defendant, company’s assets, and liquidate its business. In the alternative he seeks to compel by mandamus the distribution of investments made by the company of its surplus fund.

• The corporation was organized in the year 1895 for 10 years, under the limited liability law, which authorizes three or more persons to form a corporation. The capital was $10,000 ($2,500 to be paid cash, divided into 200 shares of $50 each), for the purpose of manufacturing piping for woodwork factories; also general jobbing and sheet-iron work.

The complaints, in the main, are that the investments made in outside securities were unauthorized; that, instead of these investments, dividends should have been declared.

There are three directors constituting the board of this company. Plaintiff is the vice president; the defendant’s father and himself are, respectively, president and secretary and treasurer of the company. Plaintiff, with one vote on the board, owns one-half of the stock, and the defendant, with two votes, represents the other half.

The company, as authorized by its charter, commenced with the cash capital before mentioned. Plaintiff is a mechanical draftsman and designer. The secretary and treasurer, as his office indicates, had charge of the finances of the firm.

By dint of industry and good management up to the date difficulties arose between them last August, their profits had been, as compared with the capital originally invested, quite large.

In the course of a few years the business shows an increase of assets over liabilities of $57,406.38. Of these assets, $29,450 are invested in Louisiana state bonds and premium bonds of the city of New Orleans. The personal account of the vice president amounted to $2,379.77, and the secretary and treasurer to $4,010.42, subject to reduction for salaries and traveling expenses in connection with the business of the company. The following is the statement of the bookkeeper appointed as an expert by the court: “Respectively and figuring in the assets for these amounts are subject to a reduction for salaries and traveling expenses, which amount, I regret to state, I was unable to ascertain, they not being of record in the books.”

It devolves upon us to determine, in the first place, whether or not a receiver should be appointed to take charge of the affairs and assets of the corporation. We are convinced that the grounds urged would not justify the decree appointing a receiver.

The case does not fall within the conditions which authorize the court to appoint a receiver. The appointment of a receiver is to be made when requested by a majority of the stockholders. We have seen that plaintiff, as relates to this application, is in hopeless minority.

It is also to be made when the officers and directors are mismanaging the affairs of the company.

The foregoing set forth the conditions under which a receiver may be appointed, as detailed in the first three sections of the Statute No. 159 of 1898.

The other sections of that statute have no application to the case here, particularly as it does not appear from the evidence that the interest of plaintiff is in danger, and that he is threatened with loss against which a minority stockholder cannot protect himself by other steps than the appointment of a receiver.

The testimony does not show that there was mismanagement of the affairs of the company. The profits were large. Two of the officers before referred to attended to the business and work of the company — one to the mechanical department; the other had charge of the books of the office and other parts of the business.

The least proof of mismanagement should certainly lead to a different conclusion under the statute. The fact that one of the active managers may have drawn, in a legitimate manner, without objection, a few more dollars than the other, gives rise to no good ground for the appointment of a receiver. We have nothing to do in this litigation with the personal difficulties that have arisen after many years of friendly relations between plaintiff and the secretary of the company. Difficulties and enmities such as those that have arisen between these parties are not grounds for appointing a receiver under the statute cited — which is the measure of the court’s authority to appoint such an officer. As it is not of such a nature as to justify the appointment of a receiver, we pass to the demand made in the alternative for declaring a dividend upon the outstanding stock of the corporation equal to the entire assets of the company less the capital stock.

It does not occur to us that plaintiff has presented a case sufficiently strong to justify the court to interfere and distribute the surplus. The surplus (retained in the business, .not invested), in view of the company’s business, does not appear excessive. Part of it, with the consent of the parties concerned, has been invested in a manner which binds the parties among themselves. They, in view of this consent, are not in a position to urge successfully that the act of investing part of the fund was ultra vires.

The remainder of the fund is not more than necessary to safe and conservative management of the company’s affairs.

We infer that it is the desire of the board to protect the interests of all concerned, including those of the plaintiff. The purpose, we take it, is to use the company’s earnings in good faith for the successful management and improvement of business of which they have the direction.

We must decline to interfere. The decisions are not favorable to such interference, although there may arise cases of which the court should assume jurisdiction. “The courts very rarely compel directors to declare a dividend.” Cook on Corporations, volume 1 (3d Ed.) p. 545.

“The power of the court may be invoked for the protection of stockholders against bad faith on the part of directors.” New York, L. E. & W. R. Co. v. Nickals, 119 U. S. 296, 7 Sup. Ct. 209, 30 L. Ed. 363.

“A very strong- ease should, indeed, be made to justify a court in any interference on the ground that the board retains too large a sum as a surplus to meet accident and contingencies.” State of Louisiana v. Bank of Louisiana, 6 La. 746.

If the directors, without reasonable cause, should refuse to divide what was actually profit, thereby committing a wrong and an injustice, the stockholders are not without remedy.

Minorities have rights. A corporation owes and does not own the stock. It is owned by the stockholders, and is to be- managed in the interest of all concerned. “A corporation is as fully liable to suits in equity as a natural Iverson.” English & American Enc. of Law, volume 7, p. 952.

But a stockholder has no right, because of a personal difficulty, to a decree setting aside all acts previous to the difficulty, to which he has given his consent, or in which he has acquiesced.

No question but that one director, after the issue has been made, is entitled to the same credit as his associate directors, to the extent of their respective interests, and to an economical management of the company’s affairs, and to a consulting voice in the permanency of investment made.

He has the right to examine the books, and the right to every facility and assistance needful in following the movement of the funds and the management of the corporation. He has also the right to the advice and presence of counsel, when necessary, at meetings of the board and elsewhere, in matters concerning the corporation. In the Xiresent situation of affairs, these rights, and the course they suggest as proper, are not before us in such a manner as to justify interference.

Other questions were raised. We do not think that it is necessary to decide them, as the views we have expressed sustain our decree.

For the reasons assigned, it is ordered, adjudged, and decreed that the judgment appealed from in this case is affirmed.