Court Opinion

ID: 7361421
Source: CourtListenerOpinion
Date Created: 2022-07-27 23:04:18.157195+00
Date Added: 2024-06-11T16:20:39.189828
License: Public Domain

TYSON, J.
It appears from the bill in this case that complainant is a shareholder in the Manufacturers’ Export Company. The corporation had contracts with the Bay City Lumber Company, the Baird Lumber Company, and the J. E. North Lumber Company, for the sale of the products of the saw mills of said companies with the except! m of such portion thereof as might be sold by said companies in their local market.
*583Tlie contract provided that the Manufacturers’ Export Company should receive a commission of 5 per cent on the amount of sales made by them. And it is averred that the profits from these commissions would approximate twenty thousand dollars per year. These contracts remained in force until the 7th day of July, 1902, “when they were in form rescinded, or pretended to be rescinded by the board of directors of- said companies, by and with the consent of the officers of said three saw mill companies.” It appears that said rescission was accepted for the Bay City Lumber Company by J. T. McKeon, for the J. E. North-Lumber Company, by J. E. North, and for the Baird Lumber Company, by William McGee. At the time of the rescission McGee was the geiieral manager of the Baird Lumber Company and a stockholder therein, North was the president of the J. E. North Lumber Company and a stockholder therein, and McKeon was a stockholder and an officer of the Bay City Lumber Company. All three Avere members of the board of directors of the Manufacturers’ Export Company, composed of five members, and voted for the rescission. It does not appear that the rescission Avas opposed by the other members of the board. It appears that during the first year of the existence of the company, the mill companies began to handle their sales through other sources than the Manufacturers’ Export Company. Notwithstanding this fact, it appears that during the first year’s business, the profits of the company aggregated nearly one hundred per cent on the paid in capital stock. It appears that during the second year’s business, the company lost money, “though had saicl mill companies stuck to their contracts, it Avould have made money, notwithstanding said loss.” Complainant Avas the manager of the export department of the company from the time of its organization, about the 19th day of September, until the 31st day of October, 1901, AA’hen he Avas discharged. . During the second year and after complainant’s discharge, the management of the business.devolved upon McKeon, as president, and McGee as its treasurer,''but the bill avers that other business engaged McKeon and McGee the greater portion of their 'time, andili consequence, the business of the company Avas “Avifhout their valuable services.”
*584It is averred that the business of the company did not suffer by reason of this fact because of active management devolving upon a bookkeeper who was paid a salary of $1800.00 per year, admitted not to have been unfair. It further appears that during all this time, while the business was practically managed by the book-keeper) McKeon and McGee, president and treasurer, continued to draw from the company salaries of $3000.00' and $2500.00 per annum, respectively, which it is averred was grossly excessive, and that the salaries were unearned, the latter fact being admitted by McKeon and McGee at a stock meeting of the stockholders on the 7th day of July, 1902. On June 30th, 1902, complainant addressed a letter to each of the members of the board of directors in whicli he demanded that the contracts between the company and the three mill companies be enforced, and protested against the payment of fancy salaries to the officers of the company, who performed nominally or no seiwic.es therefor. lie required that action be taken at the approaching annual meeting to collect all sums of the company, and the letter contained a notice that unless complainant’s demand was complied with, he would file a bill in equity for the purpose of having a receiver appointed who would enforce such claims against said companies, and for the protection against said unearned salaries. It appears that North, McKeon, McGee, and Baird owned all but 27 1-2 shares of the 125 shares constituting the capital stock of the company. At the meeting of the shareholders on July 7th, 1902, the president, Mc-Keon, suggested the postponement until 7 o’clock of the same day. It was between the postponement and the hour appointed that the board of directors held a special meeting and rescinded the contracts with the saw mill companies.
The prayer of the bill is that McGee and North be removed from the management of the affairs of the company, that they be enjoined from exercising any power as stockholders or directors, for the appointment of a receiver to collect all sums due the company from the three mill companies, and the unearned salaries of Mc-Keon and McGee, and that the company be dissolved and the assets distributed.
*585Demurrers were interposed to the bill which were sustained, and complainant infused to amend, submitted upon the original bill alone, and a final decree was rendered dismissing the bill.
It is unnecessary to consider whether the complainant could file the bill in his own name, for if this fact be conceded, complainant was not entitled to relief.
If the contracts with the three mill companies were fraudulently rescinded, complainant upon a proper predicate being shown may file a bill in his own name, in behalf of the. corporation for the enforcement of its rights thereunder. So too, if the director® have in abuse of their trust paid to themselves unreasonable salaries as officers of the corporation, complainant has like rights and remedies. — Alabama Coal & Coke Co. v. Shackelford, 137 Ala. 224.
It appears from the bill that the business of the corporation is not confined to the execution of the contracts with the three mill companies. It is not shown that the directors have any adverse interest in such independent business, nor does it appear that there is any mismanagement of the corporation in relation to the same. Under such circumstances, it certainly cannot be said that the assets and business of the corporation are imperiled, necessitating the intervention of the court of chancery for the appointment of a receiver. Nor for the same reason is there sufficient ground why the respondents should be removed from the management, of the affairs of the company or restrained from exercising powers as stockholders' or directors thereof. The remedy of complainant, as is stated above, is to redress the wrongs complained of in the name of the corporation.
The demurrer to the. bill was well taken and the decree of th( f'li'aidK'A.y court must be affirmed.
Affirmed.
McClellan, C. J., Simpson and Anderson, J. J., concurring.