Ashton v. Penfield
| Decision Date | 21 March 1911 |
| Citation | 135 S.W. 938,233 Mo. 391 |
| Parties | LUCINDA B. ASHTON and ASHTON INVESTMENT COMPANY v. A. H. PENFIELD, ANNIE A. PENFIELD, EFFIE McDONALD SMITH and MERCHANTS' IMPROVEMENT & INVESTMENT COMPANY, Appellants |
| Court | Missouri Supreme Court |
Appeal from Buchanan Circuit Court. -- Hon. Lucian J. Eastin, Judge.
Reversed and remanded (with directions).
Chas C. Crow and Rusk & Stringfellow for appellants.
(1) The court erred in appointing a receiver of the Merchants' Improvement and Investment Company. (a). The petition did not state facts sufficient to constitute a cause of action or entitle the plaintiff to any relief. Nothing is better settled than that the appointment of a receiver is not the end and object of litigation, but merely a provisional remedy resorted to for the purpose of preserving property involved in litigation, so that the relief awarded by the court, if any, may be effectual. State ex rel. v. Ross, 122 Mo. 435; Miller Bros. v. Perkins, 154 Mo. 637; Vila v. Light Co., 68 Neb. 222. In the absence of a statute, and except as to proceedings under statutes, we believe no exception will be found to the rule that the appointment of a receiver is ancillary. (b) There was no property or interest in jeopardy requiring handling by the court. The appointment of a receiver has been called an equitable execution. A receiver is an officer through whom the court preserves or administers property impounded by it. There must first be property in its custody, and some suit pending involving rights or interests in this property. 23 Am. and Eng. Ency. Law, 1001; Miller v. Perkins, 154 Mo. 629. (c). This corporation was a solvent and going concern. "So long as a corporation is solvent and a going concern no court has the right to place it in the hands of a receiver." State ex rel. v. Deering, 184 Mo. 647. (d). No evils were shown to exist warranting this appointment. State v. Deering, 184 Mo. 647; State ex rel. v. Bank, 197 Mo. 574. The usual grounds for the appointment of a receiver are not stated in the petition, and the evidence as shown by the record disproves the existence of any ground for such action, and even where evils are shown the extreme measure of appointing a receiver should not be resorted to when any other means of correction are available. The appointment of a receiver is employed as a last resort. High on Receivers (3 Ed.), sec 553; St. Louis National Bank v. Field, 156 Mo. 306; Alderson on Receivers, secs. 349, 351. A court will not appoint a receiver when the party applying can assert his rights by direct action at law. 23 Am. and Eng. Ency. Law 1003. The petition prays that the officers and directorships be declared vacant. There are no allegations in the petition warranting this prayer, and even if there were this proceeding is not the proper one by which to arrive at that result. Amotion of corporate officers was never a branch of equity jurisdiction. Thomp. Corp., secs. 4554, 826, 3877, 3878. It may also be said that there was no order or decree made ousting the officers and directors. The principal action taken was to appoint a receiver, and the only judgment finally rendered was that of dissolution. (2) The court erred in entering a decree to dissolve the company. It is admitted in this case that the Merchants' Improvement and Investment Company is a corporation duly organized and existing under and by virtue of the laws of Missouri; that it has property of the value of twenty-five thousand dollars; that it is not indebted to any person in any sum whatever; and that Mrs. Smith and Mrs. Penfield are the owners of the majority of the stock of the corporation, and are two of the three directors managing the corporation. The only relief granted plaintiff was a dissolution of the corporation in a suit where she was the only party plaintiff and an order that the property owned by this corporation be distributed to the stockholders. Clearly the court had no power to render this decree. Wheeler v. Pullman Co., 17 L. R. A. (Ill.) 818; Platner v. Kirby, 115 N.W. 1032; Atty. Gen. v. Utica Ins. Co., 2 Johns. Ch. 371; 10 Cyc. 988, 1305; 17 Ency. Pl. & Pr. 414; 9 Am. & Eng. Ency. Law, 601; State ex rel. v. Railroad, 140 Mo. 511. The demurrer to the petition, motion to strike out, objection to introduction of evidence, and the motion to set aside the order appointing receiver, should all have been sustained. There is no evidence of any improper act committed by any of the defendants, and even if there was the penalty would not be the death of the corporation and the taking of its property without compensation or consideration; the only remedy would be to correct improper conduct, if any, but in this case there is no evidence of any improper conduct. The property of this company has been taken by the court, and the owner thereof has been deprived of its possession and enjoyment, without requiring the person at whose instance it was taken to give any bond to protect it from loss or damage. The constitutional provision prohibiting the taking of private property for private purposes has been wholly ignored and violated. Mo. Constitution, art. 2, sec. 20. (3) The court erred in holding the petition sufficient as a foundation for any relief and in finding that there was evidence for the foundation of any decree under the petition. Pullis v. Pullis, 157 Mo. 565; State ex rel. v. Deering, 184 Mo. 661. Defendant corporation was solvent, was a going concern, was in the hands of its regularly constituted officers, had no assets that were perishable or in any way in jeopardy. It is not charged with the violation of any law that would forfeit its life, nor with having abandoned the purposes of its organization, nor with acting ultra vires nor against the policy of the law, nor to have done or suffered to be done anything to render it an outlaw, or to make it a proper subject of dissolution. The only relief asked is the ouster of the directors and officers, the appointment of a receiver, an accounting from Penfield, who was merely a hired agent of the corporation, and the dissolution of the corporation. The relief of ouster could be had if grounds existed at law and under the statute, and the appointment of the receiver was improper, as was also the dissolution of the corporation. As to the prayer for recovery against Penfield, alleged to be the hired secretary of the company, there is neither allegation nor proof on which to base any relief in this regard, but even if there were there is no suggestion made in the petition, nor intimation from the evidence, nor any reason apparent why such recovery, if any is due, might not be had against Penfield or Mrs. Penfield, his wife, if he was acting for her, just as recovery might be had against any agent for misappropriating his principal's funds. If an equity can be derived and a receiver appointed by joining Penfield with the other defendants in this way, even supposing he had been charged and found guilty, why can the same result not be accomplished whenever an agent is found to have been unfaithful to the corporation by which he is employed? This is not primarily a business man's suit nor a suit founded on monetary considerations. The gravamen of the petition is that plaintiff has been "snubbed" by the other members of the corporation. If there is any object in this suit referable to monetary or business considerations it rests in the fact that it is an attempt to put the minority in control, and in default of this to wreck the company and require it to distribute the remnants of its assets. Nothing is better settled than that if the object be to put the minority in control, relief will not be granted. Peatman v. Centerville Co., 100 Ia. 245; Wallace v. Pierce-Wallace Pub. Co., 101 Ia. 313; Bridgeport Development Co. v. Tritsch, 110 Ala. 274; Rumsey v. Cattle Co., 116 Mich. 640; Ponca Co. v. Mikesell, 65 Neb. 98; Fluke v. Emporia City R. C., 48 Kas. 577.
C. F. Strop and Fulkerson, Graham & Smith for respondents.
(1) The court did not err in appointing a receiver of the Merchants' Improvement and Investment Company. The record shows a course of mismanagement, fraudulent and covinous conduct and ultra vires acts on the part of appellant A. H Penfield, as secretary, approved, consented to and connived in by directors Annie A. Penfield and Effie McDonald Smith (also appellants), wholly unfitting them to conduct the company's business; and such conduct and mismanagement as would, unless checked, soon wreck the corporation. The stockholders are all directors. If the Merchants' Improvement and Investment Company were a large corporation with numerous stockholders, ordinarily the removal of the offending directors and officers might be an adequate remedy, but in this case, where there are no stockholders who can take the place of the offending ones, and where it would seem that the enmity against respondent is so intense that appellants are willing to jeopardize their own interests to make her holdings unprofitable, and the dissensions are so great as to prevent the successful carrying on of the business, and where the corporation has already become one in which there is no pecuniary gain; in other words, when it has ceased to perform the functions for which it was created by the State, certainly the ends of justice can only be met and equity satisfied by the appointment of a receiver. Cantwell v. Lead Co., 199 Mo. 42; Coal Co. v. Edwards, 103 Ill. 476; Hill v. Gould, 129 Mo. 116; Hingston v. Montgomery, 121 Mo.App. 451; Schmidt v. Mitchell, 32 S.W. 601; Sternberg v. Wolff, 39 A. (N. J.) 397; Cameron v. Groveland Imp. Co., 54 P. 1128; Jasper Land Co. v. Wallis, 123 Ala. 652; Haywood v. Lumber Co., 26 N.W. 184; Edison v. Phonograph Co., 52 N.J.Eq. 620; Du Pay v. Transportation Co., 82 Md. 408; Sparhawk v....
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