Court Opinion

ID: 7197658
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:04:20.83454+00
Date Added: 2024-06-11T16:16:24.380489
License: Public Domain

The opinion of the court was delivered by
Miller, J.
The plaintiffs appeal from the judgment against them •on their rule to appoint a receiver for the Excelsior Co-operative Association, and for an injunction to restrain any- further action of the officers of the association.
For many years the Serewmen’s Benevolent Association has existed in this city, incorporated in 1871, under the general law for the organization of charitable corporations. Revised Statutes, Sec. 677 et seq. In 1895 the Screwmen’s Association conceived it to be their interest to promote the formation of a body corporate and twenty-one parties, all members of the Screwmen’s Association, signed the act, incorporating them as the Excelsior Co-operative Association, with an authorized capital of ten thousand dollars, divided into shares of ten dollars each, the corporation to commence business when five thousand dollars of the capital was subscribed: the object of the new corporation was the execution of contracts for the loading and unloading of ships in this port, and we gather from the testimony, it was contemplated the work secured by the contracts of the Excelsior was to be performed by the members of the Screwmen’s Association. We find in the record a paper signed by the president of the Screwmen’s Benevolent Association, expressing its subscription to five hundred and fifty shares of the stock of the Excelsior; there are also entries in the books of that association stating its ownership of ten thousand dollars of the Excelsior, and it is put beyond all controversy that the ten thousand dollars was furnished with which the Excelsior has conducted its business, and it is in evidence that the dividends on the subscription have been paid and employment afforded by Means of the Excelsior to the screw-men as contemplated when the subscription was made; it further appears that when this suit was brought the Excelsior had on hand eleven thousand or twelve thousand dollars, owed no debts, save its stock liability to the Screwmen’s Aasociation and contemplated the continuance of its business.
In this condition the present suit was brought by some of the twenty- one parties who became subscribers to that number of shares of the *1062Excelsior, praying that its affairs be put into the hands of a receiver, that the association be decreed not a corporation, and that its assets' be divided. The grounds of the petition are, that the subscriptions to-the capital stock were not obtained required as a condition precedent for going into th'e business of the corporation; that hence the association has no corporate capacity; that the petitioners only became aware recently of the illegality of the subscriptions, and of the fact the association had no corporate existence. The petition-further avers tha't the president named in the charter is unfit, the-grave misapprehension of law and fact under which, it is alleged,, the association commenced business, and the responsibilities of the petitioners, different, it is charged, from those claimed and intended, lead to the fears of petitioners of embarrassment and trouble in the future, and they assert their right to a division of the assets of the asspciation, and to the injunction and appointment of the receiver. The exception and answer negative the allegations in the petition ;• aver that the business of the association is prosperous, and, after-paying dividends, has on hand a cash surplus, besides implements; the suit is charged to have been brought in bad faith, from selfish-motives, arising from the failure of one of the plaintiffs to secure his re-election as secretary, and the respondents deny there is any occasion for the injunction, receiver or other relief sought by the petition. There is an intervention by the Screwmen’s Benevolent Association, averring its ownership of five hundred and fifty shares of the stock of the Excelsior Company, and the solvency and prosperous business of that company; that the plaintiffs participated in the organization and all other acts of the Excelsior Company, are estopped from seeking and have no interest to demand the relief claimed in the petition, and defendants deny there is any cause for the injunction or appointment of the receiver. On the rule to appoint the receiver and for the injunction the organization of the Excelsior Association, the subscriptions to its stock, the modes and results of its business, and its financial condition, owing no debts, with no creditor, and with cash on hand in excess of that debt, were developed iu the copious testimony we find in. the record, and resulted in the judgment from which plaintiffs appeal denying the relief prayed by them and affirming the legality of the defendant’s charter.
During the trial the plaintiffs excepted to the ruling of the court *1063against questions propounded by plaintiffs to show that the president of the Excelsior Association was of drinking habits. It is claimed the testimony should have been received under the allegation in the petition that the president was unfit by reason of his health and habits. We do not think that on this general allegation the court could make any decree, and if there were acts of misconduct or mismanagement on his part there should have been the specification of the acts. On these applications for receivers the facts relied on for the relief should be distinctly and specifically set forth; ” and ¡ again, “ while fraudulent conduct or danger to the property is frequently the foundation for a receivership, it will not do to allege such fraud or information generally, and a bill containing only vague and general allegations presents no case for the appointment of a receiver.” High on Receivers, Sec. 17. The discussion of the other bills to the exclusion of questions touching the authority of the president of the Screwmen’s Benevolent Association to make the subscription is, in our view, useless. The books of that association, the testimony that the subscription was discussed at the corporate meetings, and the ineontestible fact the amount subscribed was furnished, used and recognized by the Excelsior, by entries on their books and dividends received by the Screwmen’s Association, remove the fact of the subscription and the authority by which it was made, whatever its effect, beyond the domain of controversy.
On the theory that the Excelsior Association is not a corporation, plaintiffs would be deemed simply owners in common of assets. On this view the usual remedies afforded by our Code for the division of property thus held must be deemed ample, without resort to the receivership, not granted even in chancery as between tenants in ¡ommon of personal property, except, at least, in special cases. Sigh on Receivers, Sec. 20.
The main ground of plaintiff’s suit is that the Excelsior has 10 corporate existence, because of the alleged invalidity of the ubscription to its stock by the Screwmen’s Association, and in his connection we are referred to the general rule, that one corpor.tion can not subscribe to the stock of another. The Serewmen’s Lssociation organized to assist its members, to that end was accusomed to rely on the investment of its surplus funds. The real purpose of the subscription was by means of the capital thereby Burnished the Excelsior, to secure dividend and the no less impor*1064tnnt object, obtain employment for the Screwmen in executing the contracts of the Excelsior Association. Our attention has been called to the decision of our predecessors, that a number of corporations can not unite to form another. Factors and Traders Insurance Company vs. New Harbor Protection Company et als., 37 An. 233. There is no uniting in this case of two corporations. It admits of serious question whether a subscription by an organization of laborers to the stock of another corporation, created to secure contracts affording employment to laborers, and when the object of the subscription is to secure that employment for the laborers, members of the subscription corporation can be deemed ultra vires on its part. There are cases in which the subscription by one to the stock of another corporation is upheld, when the subscription contributes to the object for which the subscribing corporation is organized. Cook on Shareholders, Sec. 64, announces the general rule with its qualification. But irrespective of the question of the principle supposed to forbid this subscription, have these plaintiffs any basis to force a receivership and the winding up of the Excelsior, upon the other shareholders and on the Screwmen’s Association, with its large interest in the controversy before us resisting the plaintiffs’ demands? We find the subscription has resulted advantageously in dividends for the Serewmen’s Association and employment for its members. We perceive no mismanagement or losse of its funds proved, or even charged. The Excelsior Associatio has in its treasury, after paying the dividends to the Screwmen, funds more than adequate to pay the entire amount the Screwmen’ Association furnished. No complaint in respect to the subscriptio and the corporate capacity, of the Excelsior is made by any one save plaintiff, and the election for its officers resulting in the dis placement of one of the plaintiffs, quickly followed by the presen suit, is not without influence in appreciating the basis on which th plaintiffs call for the winding up of the corporation. Two of th plaintiffs have been officers of the corporation, all of them parbiei pated in its formation; all knew and approved of the subscriptio and according to the testimony have shared in the benefits derive from the Excelsior as a source of the dividend and of employme for the screwmen. While defects of a radical character in organi zing corporations may be deemed incapable of ratification, we d not think a subscription like that under consideration, and t *1065corporate capacity resting in part on that subscription, can be repudiated by parties concurring in obtaining the subscription, and who, for a length of time, have recognized and affirmed the corporation they now attack, and attack with a view to a receivership sought by one of the plaintiffs of funds applicable to satisfy the claim if urged, of the Screwmen’s Association desiring no receivership and resisting plaintiffs’ demand. The intervention of that association we think increases the force of the estoppel urged against plaintiffs by the other shareholders. The ten thousand dol - lars was obtained on the pledge of the corporate capacity of the Excelsior Company and plaintiffs concurred in that pledge. We do not think plaintiffs are entitled to reverse their position to the prej - ■ udice of the Screwmeri’s Association by subjecting funds applicable to their claim to the expense of a receiver, with no function, if appointed, but to turn over to the receiver funds they are content and desirous shall remain in the present custody. In our opinion, both with respect to the other shareholders and the Screwmen’s Association, the plaintiffs are estopped from asserting the pretensions advanced in this suit.
In another aspect the plaintiffs’ suit for a receivership and injunction can not be maintained. They exhibit no wrong. In this connection it is impressive that they have not paid any part of their stock subscription. They allege they apprehend trouble in the future from engagements that may be formed in the future by the Excelsior Company for which the plaintiffs may .be held. The mere possibility of future injuries to the plaintiff seeking a receiver is not deemed sufficient to appoint receivers. With no allegations of mismanagement, misapplication or waste of the- funds in respect to which the receivership is claimed, we understand no appointment of receiver in this class of cases is made by the equity courts. High on Receivers, Secs. 17, 11, 14, 288, 293.
The whole case made, by the petition was developed on the trial of the rule to appoint the receiver. That and the injunction constituted the relief sought. The issue presented on the rule and the petition was the alleged right to have the corporation or association wound up because of the invalidity of the subscription and the resulting alleged want of corporate capacity. We find no reason for requiring another trial when the judgment on the rule disposes of the controversy and leaves no issue to be determined.
*1066It is therefore ordered, adjudged and decreed that the judgment .of the lower court be affirmed with costs.