Case Name: FRANK J. LANGER and William Langer, Appellants, v. FARGO MERCANTILE COMPANY, a Corporation Dissolved, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors and Trustees of Fargo Mercantile Company, a Corporation Dissolved, Fargo Mercantile Company, a Corporation, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors of Said Fargo Mercantile Company, a Corporation, Respondents
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1919-07-16
Citations: 43 N.D. 237
Docket Number: 
Parties: FRANK J. LANGER and William Langer, Appellants, v. FARGO MERCANTILE COMPANY, a Corporation Dissolved, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors and Trustees of Fargo Mercantile Company, a Corporation Dissolved, Fargo Mercantile Company, a Corporation, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors of Said Fargo Mercantile Company, a Corporation, Respondents.
Judges: Justice Bronson, being disqualified, did not participate, Honorable-J. M. Hanley, of the Twelfth Judicial District, sitting in. his stead.
Reporter: North Dakota Reports
Volume: 43
Pages: 237–247

Head Matter:
FRANK J. LANGER and William Langer, Appellants, v. FARGO MERCANTILE COMPANY, a Corporation Dissolved, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors and Trustees of Fargo Mercantile Company, a Corporation Dissolved, Fargo Mercantile Company, a Corporation, T. A. Quirk, C. O. Follett, and Croil Hunter, Directors of Said Fargo Mercantile Company, a Corporation, Respondents.
(174 N. W. 90.)
Corporations — receivership — grounds for denial of receivership.
In this case the judge is commended for refusing to appoint a receiver, be cause it would have done the plaintiffs no possible good, and it would have done the defendants a great and manifest injury.
Opinion filed July 16, 1919.
Rehearing denied September 8, 1919.
Appeal from an order of the District Court of Cass County, Honorable A. T. Cole, Judge.
Affirmed.
W. 8. Lauder, for appellants.
Under § 4567 the directors of a dissolved corporation become trustees of its assets only in case other persons are not appointed by the court. Besides the subject of trusts is, and always has been, one peculiarly of equitable cognizance. Perry, Trusts, § 240; Patjo v. Swasey (Cal.) 44 Pac. 225.
“Corporations whose charters expire by limitation may continue to act for the purpose of winding up their affairs, but this does not preclude a court of equity from winding up the affairs of such corporation when necessitated by internal dissensions in the corporation.” Stewart v. Pierce (Iowa) 89 N. W. 240.
A court of equity can wind up the affairs of a dissolved corporation only through receivers or trustees appointed by itself. Stewart v.. Pierce (Iowa) 89. N. W. 240; Vila v. Grand Island Electric Co. 94 N. W. 136; Vila v. Grand Island Electric etc. Co. (Neb.) 97 N. W. 613; French Bank Case, 63 Cal. 495; People v. Judge of St. Clair Circuit Ct. 31 Mich. 456; Republican Mountain Silver Mines v. Brown (U. S. Circuit) 24 L.R.A. 776; Dodge v. Woolsey, 15 L. ed. U. S. 401; Robinson v. Smith (N. Y.) 24 Am. Dec. 732; Ellwood v. First Nat.. Bank (Kan.) 21 Pac. 673; Cameron v. Groveland (Wash.) 54 Pac. 1128; Columbus etc. Dredging Co. v. Washed Bar etc. Co. 136 Fed. 710.
Trustees cannot lawfully sell the trust property to themselves nor to. á corporation in which they are interested. Comp. Laws 1913, § 6282.
That a trustee may not lawfully deal with the trust property for-his own advantage, or for the advantage of a company or corporation, in which he had a personal interest, see the following authorities: Clendenning v. Bank (N. D.) 86 N. W. 116; Anderson v. First Nat. Bank (N. D.) 64 N. W. 114; McKay v. Williams (Mich.) 35 N. W. 159;. Kimball v. Ranney (Mich.) 80 N. W. 992; King v. Remington., (Minn.) 29 N. W. 352; Stettnisehe v. Lamb (Neb.) 26 N. W. 374; Veeder v. McKinley, L. Loan & T. Co. (Neb.) 86 N. W. 982; Frazier v. Jeakins (Kan.) 57 L.R.A. 575; Ferguson v. Goocb (Va.) 40 L.R.A. 234; Kindman v. O’Connor (Ark.) 13 L.R.A. 490; Moore v. Mandlebaum (Mich.) 8 Mich. 432; Wormley v. Wormley (U. S.) 5 L. ed. 651; Harding v. Handy (H. S.) 6 L. ed. 429 (Chief Justice Marshall) ; Michaud v. Girod (U. S..) 11 L. ed. 1076. See particularly column 2, p. 1098, one of the three leading cases of this country; Richardson v. Jones (Md.) 22 Am. Dec. 293; Cumberland Coal & I. Co. v. Sherman (N. Y.) 30 Barb. 553; Gardner v. Odgen, 22 N. Y. 327, 78 Am. Dec. 192; Barnes v. Lynch (Okla.) 59 Pac. 995; Bruner v. Finley (Tenn.) 41 Atl. 334; Sage v. Culver (N. Y.) 41 Atl. 513; Wayne Pike Co. v. Hammons (Ind.) 27 N. E. 487; Francis v. Cline (Va.) 31 S. E. 17; Ferguson v. Gooch (Va.) 26 S. E. 397; Loud v. Winchester (Mich.) 17 N. W. 784.
“The good will of a business is property transferable like any other property.” Comp. Laws, § 5466; Mapes v. Metcalf, 10 N. D. 601.
“The good will of a business is an asset and cannot be appropriated by majority stockholders.” 2 Cook, Corp. § 641, p. 1835; Trentman v. Wahrenburg (Ind.) 65 N. E. 1060.
“The good will of a business is the expectation of continued public patronage. It is property transferable like any other property.” Merchant’s Ad. Sign Co. v. Sterling, 57 Pac. 468, 71 Am. St. Rep. 94; Knoedler v. Bossuod, 46 Fed. 465.
Watson, Young, & Gonmy, for respondents.
The old corporation, the Fargo Mercantile Company, ceased to exist as a legal entity upon the expiration of its charter on April 1, 1915. Under our statute it had no further corporate existence. See MacRae v. Kansas City Piano Co. (Kan.) 77 Pac. 94; Kurtz v. Paoli Town Co. 20 Kan. 397; Paoli Town Co. v. Kurtz, 22 Kan. 726; Eagle Chair Co. v. Kelsey, 23 Kan. 631; McCulloch v. Norwood, 58 N. Y. 562; Sturges v. Vanderbilt, 73 N. Y. 384; Venable Bros. v. Southern Granite Co. (Ga.) 69 S. E. 822; Crossman v. Vivienda Water Co. (Cal.) 89 Pac. 335; Newhall v. Western Zinc Min. Co. (Cal.) 128 Pae. 1040; Lowe v. Superior Ct. (Cal.) 134 Pac. 190; Root v. Sweeney, 12 S. D. 43; Miami Exporting Co. v. Gano, 13 Ohio, 271; United States v. Spokane Mill Co. 206 Fed. 999; National Bank v. Colby, 21 Wall. 609; Marion Phosphate Co. y. Perry (O. 0. A.) 74 Fed. 425; Harris-Woodbury Lumber Co. v. Coffin (O. C. A.) 179 Fed. 257; Robinson v. Mutual Reserve L. Ins. Co. (0. C. A.) 182 Fed. 850; Olds v. City Trust Co. (Mass.) 70 N. E. 1022; Merrill v. President, etc. 31 Me. 57, 50 Am. Dec. 649; Combes v. Milwaukee & M. R. Co. (Wis.) 62 N. W. 89; May v. State Bank, 2 Rob. 56, 40 Am. Dec. 726; Thornton v. Marginal Freight R. Co. 123 Mass. 32 (syllabus) ; Gulledge Bros. Libr. Co. v. Wenatchee Land Co. (Minn.) 132 N. W. 992; Sinnott v. Hanna, 141 N. Y. Supp. 505.
The Kansas statute and our own were before our court in Murphy v. Missouri & K. L. Co. 28 N. D. 519, 149 N. W. 957, same case, second appeal, Murphy v. Wilson, 163 N. W. 820. See also: 2 Beach, Corp. § 780; 17 Enc. PL & Pr. p. 722, as follows: “Notice must be served upon the debtor and other parties to the suit who are interested in the property adversely to the applicant.” People v. O’Brien, 111 N. Y. 1.
We know of no authority for a court to appoint a receiver of property vested in trustees, without cause and without notice to them, or opportunity afforded to defend their title and possession. Stuart v. Palmer, 74 N. Y. 184; Ferguson v. Crawford, 70 N. Y. 256. See also Bank v. Walker, 66 N. Y. 428.
“In a suit by a stockholder, a receiver will not be appointed to take the property out of the hands of the managers, except as a last resort and when it is considered absolutely necessary for the preservation of the trust fund.” 1 Pom. Eq. Rem. § 121.
In State Invest. & Inc. Co. v. Superior Ot. (Cal.) 35 Pac. 549, the supreme court of that state granted an application for an original writ of prohibition against the appointment of a receiver by the lower court.
“While it is true that the defendant, as a director of the corporation, was bound by all those rules of the conscientious fairness which courts of equity have imposed as the guides in dealing in such cases, it cannot be maintained that any rule forbids one director among several from loaning money to the corporation when the money is needed and the transaction is open and otherwise free from blame.” Buell v. Buckinham, 16 Iowa, 284; Hallam v. Llotel Co. 56 Iowa, 178, 9 N. W. Ill; Garrett v. Plow Co. 70 Iowa, 697, 29 N. W. 395; Smith v. Lansing, 22 N. Y. 520; Duncomb v. Railroad Co. 84 N. Y. 190; Welch v. Bank, 122 N. Y. 177, 25 N. E. 260; Hotel Co. v. Wade, 97 U. S. 13; Stratton v. Allen, 16 N. J. Eq. 229; Sims v. Railroad Co. 37 Ohio St. 556; Busby v. Einn, 1 Ohio St. 409; Stark v. Coffin, 105 Mass. 328; Holt v. Bennett, 146 Mass. 439, 16 N. E. 5; Saltmarch v. Spaulding, 147 Mass. 245. Eor other cases in applying the same rule, see: Savage v. Madelia Farmer’s Warehouse Co. (Minn.) 108 N. W. 296; Troy Min. Co. v. White (S. D.) 74 N. W. 236; Twin-Lick Oil Co. v. Marbury, 91II. S. 587; Bai’r v. Pittsburg Glass Co. 57 Fed. 86; Louisa Co. Nat. Bank v. Traer (Iowa) 16 N. W. 120; Stratton v. Allen, 16 N. J. Eq. 229; Smith v. Ferries & C. H. R. Co. (Cal.) 51 Pac. 710; Copsey v. Sacramento Bank (Cal.) 66 Pac. 7; Singer v. Salt Lake City Copper Mfg. Co. (Utah) 53 Pac. 1024; Oil Co. v. Marbury, 91 U. S. 587; Sims v. Petaluma Gaslight Co. (Cal.) 62 Pac. 300; International Wrecking & Transp. Co. v. McMorran (Minn.) 41 N. W. 510; Barr v. New York, L. E. & W. R. Co. (N. Y.) 26 N. E. 145; San Diego, O. R. & P. B. R. Co. v. Pacific Beach Co. (Cal.) 44 Pac. 333; Cannon v. Brush Electric Co. (Md.) 54 Atl. 121; Robotham v. Prudential Ins. Co. (N. J.) 53 Atl. 842; Manufacturers Sav. Bank v. O’Reilly, 10 S. W. 865; Kelly v. Newburyport & A. H. R. Co. (Mass.) 6 N. E. 745; Roy & Co. v. Scott Hartley & Co. (Wash.) 39 Pac. 679; Hill v. Nisbet, 100 Ind. 341; Brewer v. Michigan Salt Asso. (Mich.) 25 N. W. 374; Fudickar v. East Riverside Irr. Dist. (Cal.) 41 Pac. 1024.
“We have found no case, and plaintiff’s counsel have not cited any case, in which it has been held, under a statute like ours, that good will survived the death of the corporation.” Greene v. Bennett (Tex.) 110 S. W. 108.
The act of liquidation destroys the value of such good will, as a value separate and apart from the value of the tangible assets. Centralia Nat. Bank v. Marshall, 26 111. App. 440.

Opinion:
Robinson, J.
In this case there is no question concerning either the facts or the law. It is an appeal from an order of the district court denying a motion to remove the defendants as trustees of the Fargo Mercantile Company and to appoint a receiver for the company. Its corporate stock was 2,500 shares or $250,000. F. J. Langer owns 25 shares; William Langer, 100 shares. The affairs of the company had been so well managed for many years that its stock paid a dividend of 25 per cent. Its life term of twenty years expired on April 1, 1915,, and without noticing the lapse of time the company continued and did business as a de facto corporation until August 13, 1918. Then all the stockholders, excepting the Langers, formed a new corporation by the-name of "Fargo Mercantile Co." The business of the company was a valuable asset, and the new company took over and conducted the same as the heir or legal successor of the old company. In the reorganization the new company left out the plaintiffs and tendered them only the par value of their stock in the old company, though it was apparently worth much more than its par value. Then the trustees proceeded to sell to the new corporation of which they were officers all the property of the old corporation, and to conduct the business in just the same manner as if the new corporation were the legal successor of the old corporation. Now, of course, it goes without saying that the new corporation cannot in that way freeze out the Langers. They are entitled to receive either the full value of their stock or to share in the new corporation according to their stock the same as all the other members. The old corporation has always been perfectly solvent, and it has paid large dividends, commonly 25 per cent a year, and in truth the new corporation is merely the old corporation under the same name only that the letters "Co." are used for company. However, as the new company is perfectly solvent and as it has given a good bond in the sum of $35,000 to pay any judgment that the plaintiff may recover, there is no reason for appointing a receiver. Such an appointment would have done the plaintiffs no good and it would have done the new company a great and manifest wrong. Hence the court denied the motion, and of course that was perfectly right, and of course there was not the least reason or excuse for this appeal, nor was there any reason for counsel referring to the trustees and managers of the old corporation as crooks, thieves, and pirates. Crooks do not commonly manage a corporation so as to make its stock pay 25 per cent dividend.
Order affirmed and case remanded forthwith.