Court Opinion

ID: 3928206
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:54:01.141366+00
Date Added: 2024-06-11T14:16:37.900644
License: Public Domain

This is an appeal from an interlocutory order granting a receivership and appointing a receiver to take possession of the property of the appellant, Berkshire Petroleum Corporation, which receivership was granted at the instance and upon the application of J. W. Moore, Ira J. Windbigler, J. L. Windbigler, E. I. Stewart, J. E. Jodgin, H. E. Smith, T. F. Barrett, G. H. Sutherland, L. H. Smith, Oscar S. Perkins, S. M. Duffie, E. V. Sprowl, C. W. Faris, L. L. Tyron, S. J. Young, D. W. Rowe, E. S. King, W. L. Miller, P. H. Faris, and F. W. McRee. Wilbur G. Close was appointed receiver. Appellant gave a supersedeas bond, and it was ordered that the receiver take no steps under his appointment pending this appeal.
It was alleged in the petition that the corporation was formed and incorporated for the purpose of buying and selling oil or mineral leases in lands and developing the same by drilling wells for the discovery of oil and gas to market for profit, and under its charter powers purchased and obtained a number of oil leases on lands, mainly in Starr county, Tex., and also some in Jim Hogg county, Tex., and that the leased acreage amounts to more than 28,000 acres of land. It was further alleged that the corporation had purchased trucks, automobiles, and two oil drilling rigs, which are fully described, iron casing, drill stem, derricks, camp houses, rollers and a number of tools; said property being reasonably worth $50,000. It was alleged that the corporation had refused and failed to perform its functions in drilling for oil, and was allowing the property to ruin and decay and the leases to lapse and be destroyed. The petitioners represented that each and all of them are owners of the capital stock of said corporation, the amount being 6,000 shares of said capital stock, of the value of $5 a share, and that the bulk of the shareholders reside in New York, who own about five-sixths of the capital stock, the total value of the whole of the capital stock being $150,000. It was alleged that the president and board of directors of the corporation reside in the state of New York, to whom the petitioners had often appealed for action under the charter, for the preservation of leases and property, and for them to give obedience to the laws of Texas in obtaining a permit to do business, as is required of foreign corporations, but their appeals had been ignored and disregarded.
The officers of the corporation were alleged to be residents of a distant state, and were beyond the jurisdiction of the court, and it was alleged that valuable leases were about to lapse for nonaction and the *Page 486 
personal property was being wasted and destroyed. These allegations showed the necessity for the appointment of a receiver, at the hands and on the request of the shareholders of a corporation, without notice, and independent of any suit for another purpose than the appointment of a receiver. From the fact that the corporation had abandoned the business for which it had been incorporated, and neglected its functions, and that there is danger of irreparable loss, the appointment of a receiver may be made the main purpose of a suit. Rev. Stats. arts. 2128, 2154; Cotton v. Rand (Tex.Civ.App.) 92 S.W. 266; Young v. City of Colorado (Tex.Civ.App.)174 S.W. 995, 996; Simpson v. Alexander (Tex.Civ.App.) 188 S.W. 285; Quintana v. Giraud (Tex.Civ.App.) 209 S.W. 770. As said in 23 Ruling Case Law, § 11, pp. 17, 18:
"A court of equity may, at the instance of minority stockholders, except perhaps where they own a comparatively small interest, appoint a receiver for a corporation where the business has been so mismanaged as to render it insolvent, or where it is absolutely necessary to preserve the property and business, or the interests of the stockholders."
That is a clear statement of the law in Texas.
The appointment of a receiver is largely a matter of discretion of the trial judge, and, unless it appears that there has been a clear abuse of such discretion, an appellate court will not interfere with such appointment. The only requirement in the exercise of such discretion is that it is sound and judicial. We fail to see any abuse of such discretion in the appointment of a receiver under the allegations of the petition in this case. The decisions cited by appellant do not militate against this ruling.
This suit was not brought under article 1203, Revised Statutes, providing for the dissolution of a private corporation, and appellees must not be held to a compliance with its provisions, but the case must be decided under the provisions of articles 2128 and 2154, hereinbefore cited. As said by this court in Kokernot v. Roos, 189 S.W. 505:
"There is no authority given a stockholder in article 1203 to apply for a receiver, but to obtain this authority he must go to article 2154, Revised Statutes, where it is provided that: `Any stockholder * * * of such joint stock or incorporated company may have his or their action against such company, and may have a receiver appointed as in ordinary cases.' The article places the stockholder in the same class with a creditor or other individual, and his right to a receiver must then depend on his ability to bring himself within the purview of one of the subdivisions of article 2128, which define the circumstances under which a receiver may be appointed. It would not matter whether the stockholder had twenty-five or one per cent. of the stock of the company; if he could show that he was entitled to a receivership the law would accord it to him."
The corporation cannot be dissolved under the provisions of articles 2128 and 2154, nor can a receiver be appointed under the provisions of article 1203, and the trial court will keep that in view in further proceedings in this case. The question of a permit to do business in this state can have no bearing on this case.
Although the appellees pray for a sale of the property by the receiver, that will be a matter for the receiver to determine under the orders of the court. The receiver may deem it best for the corporation to perform its functions under its charter, or he may conclude, as "the arm of the court," that the property should be sold and the proceeds divided among the shareholders, if there are no creditors. Under appellees' petition there can be no dissolution of the corporation.
The judgment is affirmed.
                          On Motion for Rehearing.
This is a clear case of the officers of a corporation, who are nonresidents, failing and refusing to perform their functions and permitting the property of the corporation to be destroyed and its interests to be neglected. Have the minority stockholders, living in Texas, who have invested their money in the corporation, no redress in a court of equity? That they have not is what, in effect, is contended for by the corporation.
Article 2128, after naming three specific cases in which a receiver may be appointed, provides:
"4. In all cases where receivers have heretofore been appointed by the usages of the court of equity."
That subdivision of the statute authorizes an inquiry into what action will be taken under a certain state of facts not provided for in the statute. That clause impinges in no manner upon the rights and powers given by the other clauses, but extends the scope of the statute so as to include all cases allowed under the usages of courts of equity. Shaw v. Shaw, 51 Tex. Civ. App. 55, 112 S.W. 127. There is no statutory provision either permitting or prohibiting the appointment of a receiver for a corporation when the officers are refusing to serve and the property is being destroyed, and, of course, no provision that the individual stockholder must sue the corporation for debt before he can obtain equitable relief. The statute in the first two instances provides that a suit must be brought for certain purposes, and the appointment of a receiver would be merely incidental to the main purpose of the suit. It is not so clear that suit independent of the application for a receiver must always be pending when a receiver is sought under the terms of the third clause of the *Page 487 
statute. If a shareholder could obtain any redress from the destruction of his corporate holdings, it would seem that under that clause he might obtain aid through a court of equity.
However, this suit was not brought because the corporation had been dissolved, or is insolvent, or that there is imminent danger of insolvency, or has forfeited its corporate rights, but because of the failure of the officers of the corporation to perform their fiduciary duties, and because such negligence was threatening to destroy the value of the shares held by those seeking a receivership.
Courts of equity have inherent power to appoint receivers independently of statutory authority, 5 Pomeroy's Equity Jur. § 116. And while, without a statute providing for it, equity recognizes no such thing as a suit for the mere appointment of a receiver, yet, if some final relief, as in this instance, is asked by a shareholder, a court of equity will recognize the suit. 5 Pom. Eq. Jur. § 118. In the older cases it was held that the general equitable powers of courts of equity would not justify the appointment of a receiver to assume the management of the affairs of a corporation at the suit of a stockholder alleging fraud or mismanagement. However, the trend of modern authority favors the inherent power of the court in a proper case to place the affairs of a corporation, at the suit of stockholders, in the hands of a receiver, when the officials are guilty of fraud or neglect. 5 Pom. Eq. Jur. §§ 120-122, and the numerous authorities cited in the footnotes in support of the text.
The motion for rehearing is overruled.