The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-02-13

pointment of a receiver against the wishes
OF the large majority?
Mr.. Winter-Wherein, In the determine
ton OF this cause, does IL matter how the
insolvency was brought about? We viii
admit that the company is insolvent
FRAUD JUSTIFIES RECEIvERSHIP.
Judge Baker-The creation OF a receiver
ship is often determined by the conditions
which brought about the insolvency. II the
management has been prudent and honest,
but by some mistake or accident the corpo-
ration became insolvent. the court would
hesitate to appoint receiver. But on the
other hand. if the insolvency was brought
about by the dishonest and fraudulent con-
duct OF the managers, the court would be
willing to say that the property should be
taken out of the hands of such persons.
MIR. Winter thought that the single stock
holder should have complained to the direc-
tors and failing get relief there should
have called meeting of all the stockhold-
ers 10 GUST the directors or to enjoin them
from further misdeeds. Mr.. Wallace in
sisted that any action of the stockholders
as a body, honestly made. would have had
the same result as the action OF the single
stakeholder. the plaintiff in this case They
would have filed suit similar 10 this.
Mr.. Wallace then went on TO argue the
point as to the right of minority OF stock
holders TO ask Tor the appointment OF q
receiver, Mr.. Miller having in the mean
time made the assertion that when the
plaintiffs bought the stock they hold they
tacitly agreed TO submit 10 the will of the
majority He cited several decisions. In
one case the corporation itself went into
court and asked for the appointment of a
receiver, showing that it was insolvent and
that II was important that the property
be kept together In the case of the Wa
bash Railroad he showed that the receiver
was appointed as an original proposition
and not as an incident 10 another suit
Coming directly to the point in question,
he referred to the case of the United States
Electric Securities Company. of Boston,
In oh
Pany. or New Orleans. The plaintiff asked
for the appointment of a receiver on two
SroundS-that II was a creditor and that IL
was a stakeholder. The United States
Court of Appeals, in reviewing the case, de-
clared that the company had no status in
court as creditor, but as a stakeholder
II had the right to sue and ask for the
appointment of a receiver. 1t was shown
that it held stock which had been issued to
Fort Wayne electric company without
consideration, the issuing OF which was
questionable; and yet the court appointed
q receiver on the complaint or the United
states Electric Securities Company a
stakeholder. The company held less than
one-half of the stock and was therefore a
minority stakeholder.
Il take 1t that stakeholder has stand
ing In a court or equity" said Mr.. Wallace.
whether he be majority or a minority
holder. When the corporation became. in
solvent 1t was in the hands OF directors
who must remain in control for some time
and NAY accomplish further wrongs. They
Rave withdrawn all its assets through the
sale OF bonds, and it is proper that the
property be brought into The possession of
the court, the same as that or a dead per-
son. We are stockholders suing the corpo-
ration for an accounting. II there are
minor irregularities in the bill or complaint
l think II would not have been out of the
way for the defendants to waive them an
sWer the Dill and let the case come before
the court on it's merits at once. We ask
to be permitted to sue as the holders of
$1,000 of bona fide stock without being con-
taminated with the vaporized stock We
ask the court TO decide which is valid and
which Is invalid stock. and then to take
charge or corporation whose manage
ment has been so corrupt as TO admit of
such condition of affairs"
In answer to Mr. Winters argument that
the bill was multifarious aud should there
Iore nave no standing in court Mr.. Wal
lace cited case which went up from Mis-
souri,, i'll which an heir to part of an es-
tate sought to have the administrator
settlement or the estate set aside and also
10 sue the Sureties on the administrator S
bond on account of his maladmini 81 alton
OF the estate. Mr.. Wallace claimed that
this was an analogous case His client
seeks to have invalid stock in the Citizens
Street-railroad Company Cancelled or set
aside, and seeks to Dust the men who per
mitted invalid stock to be issued.
The argument Will be concluded this
morning. Mr.. Winter says he will have
nothing further to offer in the case He
during the afternoon. Mr.. Wallace referred
TO MIN as representing the corrupt directors
or the company and he took exceptions to
this statement. He declared that he did not
represent any particular set OF directors
but represented the company as he had
or several sets of directors. 81 maintain"
Re declared, further. that L represent the
stockholders. Mr.. Wallace merely repre-
sents one and represent several hundred"