Arcola Sugar Mills Co. v. Burnham, 6826.

• Citation: 67 F.2d 981
• Decision Date: 15 December 1933
• Docket Number: No. 6826.,6826.
• Parties: ARCOLA SUGAR MILLS CO. v. BURNHAM.
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

67 F.2d 981 (1933)

ARCOLA SUGAR MILLS CO. v. BURNHAM.

No. 6826.

Circuit Court of Appeals, Fifth Circuit.

December 15, 1933.

Walter F. Brown, of Houston. Tex., for appellant.

W. W. Naman, of Waco, Tex., and G. H. Penland, of Dallas, Tex., for appellee.

Before BRYAN, FOSTER, and HUTCHESON, Circuit Judges.

BRYAN, Circuit Judge.

This is an appeal by the Arcola Sugar Mills Company, a Texas corporation, from a decree ordering its dissolution, and appointing a receiver to dispose of its assets, pay off its liabilities, and distribute any surplus remaining among the stockholders.

The decree is based on appellee Burnham's bill in equity which avers that he owns 400 shares of the corporation's capital stock; that the corporation had abandoned the business it was created to carry on; that Miss Kate Scanlan, the principal stockholder, had taken possession of all its property, collected and converted to her own use the income therefrom, had failed to keep an accurate account or record of receipts and disbursements, and was indebted to the corporation in a large sum, but refused to disclose to appellee its financial condition, or to allow him to inspect such incomplete books and partial records of account as were available. These averments were denied in appellant's answer, but after hearing they were all, except as to the alleged indebtedness, found by the court to be true. It was not alleged or proved that either the corporation or Kate Scanlan was insolvent. The court therefore assumed that the corporation was solvent. On the question of Kate Scanlan's indebtedness to the corporation, the court found that there were "strong reasons" for believing that she was largely indebted to it, but that whether or not this was true could only be determined upon a full accounting. The evidence which was submitted on this subject rather supports, as we think, the opposite conclusion that the corporation was heavily indebted to Kate Scanlan. At any rate, it appears that she is a woman of considerable wealth and is amply able to pay any debt she may be held to owe the corporation upon a complete statement of accounts between them.

The Arcola Company was incorporated in 1903 with a capital stock of $750,000, divided in 7,500 shares of $100 each, for the purpose of manufacturing sugar, and was authorized to acquire the ownership of such buildings, machinery, equipment, and land as might be necessary for that purpose. It acquired a tract of 8,600 acres of land on which it established its plant, but has not manufactured any sugar since 1914. The machinery was sold because it was damaged in a storm which occurred in 1915, and also because it was becoming obsolete. Since 1914, upon some of the land annual crops, principally cotton, corn, and hay, have been grown, and other parts of it have been used as a pasture. All the capital stock, aside from 400 shares which appellee Burnham claims to own, belongs to Kate Scanlan and her sisters.

Burnham claims title to the 400 shares of stock in dispute as purchaser. In 1921 Kate Scanlan, who was indebted to him in the sum of $19,000, evidenced by her unsecured note, gave him a renewal note for that amount secured by 400 shares of stock of the Arcola Company. The note authorized Burnham to sell the security at private or public sale without advertising and...