Court Opinion

ID: 6519972
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:30:10.449364+00
Date Added: 2024-06-11T15:55:07.412296
License: Public Domain

MoCLELLAN,-G. J.
It/is no ground for the appointment of a receiver of a corporation that 'tire directors in office are holding over after' the year 'for which they were elected in default of the election of their successors by the stockholders. And the- cause of such default is of no consequence. It may be that 'the stockholders desired the directors to.continue in office and it was inconvenient to meet and re-elect them, or that an. election was permitted 'through mere inadvertence, or 'that there were such dissensions among the: shareholders and the holdings-of the, dissentients were, so equally divided that a majority could not be brought to the support of any set of individuals for the directorate; but whether the failure to elect 'resulted from any one or the other of these pauses or any other whatever, it would leave and continue in office — whether de jure'ox de facto is immaterial-directors competent to conserve the ¡property and carry on the business of the corporation, and there would be no-necessity to take the concern- out of their hands and commit it-to a receiver. If 'the corporation had no directors and none could be elected, a different case would be presented. If there were directors among whom such dissensions existed as that the-corporate1 functions could not be discharged and its assets and business were imperiled in consequence, necessity for the!.intervention of the court of chancery by the.appointment *231of a receiver might .arise. (Sternberg v. Wolff, 39 L. R. A. 762.) Or if there are two sets pf men, each claiming to constitute the directory, the claim of each being of substantially doubtful validity, and each is scrambling for the possession of the corporate property and the control of the corporate business, a temporary, receiver may bei appointed -at the suit;of the stockholders. (Jasper Land Co. v. Wullis, 123 Ala. 562. ) In all -these cases there is strangulation-and paralysis of the corporate functions and resulting) probability of .serious detriment to its property and business, which can be averted only by the. appointment of a receiver... This, is not true of the case first stated, which.is the case .at bar. Here there is no strangulation, no paralysis. Here is a board of directors in office, in undisputed possession and control of the corporate assets, and in the exercise of all corporate powers and. functions; and they are legally competent to conserve the .corporate property and carry on its business. Their acts as directors are as efficacious and valid as if they had been elected at the last annual date for the election of directors. ■ They are. in the same sense and to the same extent trustees for. the stockholders and answerable to them for any breach or abuse of the trust. The property in their hands is in no more peril of ma,l-administration and the business of the concern is no more likely to be improperly carried on than if they had been elected on yesterday. Being trustees, if they have voted to pay and paid to the estate of a deceased kinsman who was a director moneys of the corporation which they had no authority to so appropriate, the complainant- as a. stockholder has the .right to call upon them to sue in the name of the corporation for its recovery, and, they declining, he may file, a bill in his OAvn, name on behalf of the corporation to ‘that end. So, too, if they as directors have voted to themselves salaries as officers of the corporation in abuse of their trus1' the complainant, has like rights and remedies. If they undertake to sell the lands of the corporation in fraud of it to other corporations in which they are interested— of which there is a bare innuendo in Shackelford’s affidavit — the court of chancery is node open.toi Shackelford both for discovery of the facts and relief upon- them. *232Moreover, at Shackelford’s instance the stockholders adopted a by-law, which he insists is valid and operative, to the effect that no lands of the corporation should he sold without the consent, by ratification or confirma •tion, of a majority in value of holdings of all the stockholders, and tlms assurance is made clonhly sure that no receiver is necessary to protect his- interests in respect of the sale of lands. Then there is something in the bill about complainant not being allowed access to the books and papers of the corporation. These averments were not only not proved hut affirmatively disproved on the hearing; and were they true the remedy is plain, adequate and complete short of the appointment of a receiver. Then, too, it is said that the directors refuse1 to disclose material facts connected with the corporate business* the value of its lands and the like. This too fails of proof and constitutes no ground for a receiver if true; and, moreover, the complainant swears that he Avonld not have believed such disclosures if they had been made, and that he so informed the directors.
It is made to appear in the case that practically the only business of this corporation was the collection of a large judgment it had recovered for the taking- of coals out of its lands, the settling of titles to its lands, the prosecution of an action for the recovery of certain parcels of it held by a trespasser, and the sale of its lands. The directors in office are not only fully competent to carry on all this business, hut they are prosecuting it diligently and properly so far as appears. If any difficulty should arise in the sale of the lands, it can only come from Shackelford’s own unwarranted and capricious objection as a stockholder under the by-law adopted at- his instance and to which we have referred above; and surely he cannot invoke the action of a court of cquitv to meet a necessity thus produced bv his own v rong.
■ As to the action prosecuted by the corporation for the recovery of parcels of its lands, and which is now pending in this court on. appeal from a judgment in its fav- or, it transpires that the Taw Coal & Coke Co-, is- the defendant in that action, and Shackelford is the president *233of that company. In respect of the money judgment in favor of this corporation and which it was endeavoring to collect when this bill was filed, it is to be noted that said Ivy Company of which Shackelford is president is the defendant, therein, and that Shackelford himself is personally liable thereon as the company’s surety mi supersedeas bond for appeal to this court where the judgment was affirmed.. As to these matters it would obviously not be the most appropriate thing imaginable for him to exert a controlling influence in the conduct of the corporation although he owns one-half of its capital stock. He sought a negatively controlling power by insisting that the number of directors should be increased from three, to four and that he and an agent of his should be given two of the places. This might well have produced or resulted in a deadlock and the paralysis of The corporate business; and there is indeed room for suspicion that the motive: of this proposal was to thus throw the corporation into convulsions and 1 hen call in a receiver to doctor the convulsions. However that may bo, in view of the antagonistic attitude of ¡Shackelford to the corporation in respect of said action of ejectment and said money judgment, in connection with the further fact that he bought into the company pending those actions and from a third party who appears to have been in harmony with the directory, it is not surprising that the holders of the other half of the stock, Avho are the directors now in office, should havei declined this proposition of Shackelford; and there is no room to say that in so doing they Avere not faithfully representing the interests of the corporation. Their counter proposition to make him one of the three directors was all that fairness could require from them.
On the case submitted to the chancellor and now again submitted to us, we find no necessity for the appointment of the receiver. The order annotating him must be reversed, and an order will be here entered denying and dismissing the application for the auno’Tdment.-
T’eversed and rendered.