Best v. Southern Hide Co

• Decision Date: 02 July 1930
• Docket Number: 30572
• Citation: 170 La. 997,129 So. 614
• Court: Louisiana Supreme Court
• Parties: BEST v. SOUTHERN HIDE CO

129 So. 614

170 La. 997

BEST v. SOUTHERN HIDE CO

No. 30572

Supreme Court of Louisiana

July 2, 1930

Rehearing Denied July 19, 1930

Appeal from First Judicial District Court, Parish of Caddo; J. H Levy, Judge.

Suit by Mrs. Ruby L. Best, administratrix of the succession of W. C Best, against the Southern Hide Company. Judgment for defendant, and plaintiff appeals.

Affirmed.

Joseph H. Levy, of Shreveport, for appellant.

Crain & Johnston and Jackson & Smith, all of Shreveport, for appellee.

OPINION

LAND, J.

This is an application by Mrs. Ruby L. Best, administratrix of the succession of W. C. Best, for the appointment of a receiver for the Southern Hide Company, a Louisiana corporation, with its domicile in the city of Shreveport.

From a judgment rejecting her demands and refusing the application, the administratrix has appealed.

At his death on November 25, 1928, W. C. Best was a minority stockholder in defendant company, and owned 119 shares, Mrs. I. L. Helpman, 211 shares, and W. J. McGuire, 170 shares, out of a total of 500 shares of the par value of $ 100 each.

The stock of decedent was acquired during his marriage to applicant, Mrs. Ruby L. Best, who was duly appointed and has qualified as administratrix of his succession, and who has also been duly confirmed as natural tutrix of the minor, W. C. Best, Jr.

The corporation was organized on January 7, 1927, with Wallace J. McGuire, president, W. C. Best, vice president, and Mrs. I. L. Helpman, secretary-treasurer, as the officers and the first board of directors, and so continued until the death of W. C. Best November 25, 1928. Since that date the corporation has been operated under the management of J. B. Best, brother of the decedent, together with Wallace J. McGuire and Mrs. I. L. Helpman, the remaining directors of the corporation.

The application for appointment of receiver was made September 19, 1929, on the grounds that the directors and officers of the corporation are jeopardizing the rights of the stockholders and creditors of same by grossly mismanaging the business, by committing acts ultra vires, and by misusing the property and funds of the corporation; and that a majority of the stockholders is violating the charter rights of the minority and putting their rights in imminent danger.

Applicant alleges that the corporation, from November 1, 1928, to August 10, 1929, has lost the sum of $ 9,260.90 through mismanagement on the part of the board of directors.

Plaintiff alleges that, after the death of her husband November 25, 1928, the business was under the management of McGuire, that he was a mere bookkeeper, and without experience as a hide, wool, and fur man.

In other words, plaintiff attributed the losses complained of to McGuire's alleged unfamiliarity and inexperience in the business managed by him.

In our opinion, the facts of the case do not support this contention. These losses were not the result of mismanagement, either on the part of the former officers of the corporation or on the part of Wallace J. McGuire and Mrs. I. L. Helpman, the directors named in plaintiff's petition, but were caused by a declining market.

In the early part of 1927 there was a slowly rising market on hides, and the market continued to advance until around December, 1927. Necessarily, there was a profit for that year. The advance continued through 1928 until about July, 1928, when there was a break from about 22 cents to around 15 or 16 cents. There was a little advance after November, 1928, up until the 1st of January, 1929, and then a decided break occurred in 1929 to 6 or 7 cents per pound for hides, and continued practically throughout that year.

It is apparent that business experience cannot control market prices, and that a decline in prices entailing losses is not mismanagement of the affairs of the corporation by the directors.

The other grounds alleged by plaintiff for the appointment of a receiver are:

(1) That the corporation has been paying excessive prices for hides.

This allegation is without proof to sustain it.

(2) That its pay roll is greatly excessive, and, particularly, that there was no necessity for the employment of Herbert Loeb at a salary of $ 200 per month, or for the employment of B. E. Wilson at a salary of $ 200 per month.

The pay roll of the corporation during the year 1928, until the death of W. C. Best, was as follows:

W. C. Best

$ 250.00

W. J. McGuire

$ 250.00

J. B. Best

$ 150.00

--------

Total

$ 650.00

Since the death of W. C. Best, the corporation has paid the following salaries:

W. J. McGuire

$ 250.00

Herbert Loeb

$ 200.00

J. B. Best

$ 150.00

W. J. Van Lear

$ 100.00

--------

Total

$ 700.00

The actual increase in salaries has been $ 50, or between 7 and 8 per cent.

Herbert Loeb has been engaged in the wool, hide, and fur business for a number of years, and is, admittedly, an expert in that line of business. Plaintiff first complains of losses because of the inexperience of McGuire, and again complains when McGuire employs a competent man at $ 200 per month, apparently a reasonable salary for the services rendered.

B. E. Wilson was a buyer for defendant corporation, and was located at Alexandria, La. At the date of the death of Best, which occurred in the midst of the fur season, Wilson was called in by McGuire for one monthat a salary of $ 200. His presence in Shreveport as an experienced buyer was clearly necessary, and was a matter of emergency, as W. C. Best, the vice president of defendant corporation, an expert in buying and selling hides, etc., had died. We find no mismanagement as to the increase in salaries. The employment of Loeb and Wilson was clearly necessary.

(3) That its telephone and telegraph and traveling expenses are excessive, considering its volume of business, and that the services of W. J. McGuire are not worth over $ 100 per month, while he was drawing $ 250 per month.

There is no proof that the above expenses were excessive. McGuire received $ 250 per month when W. C. Best, vice president, was manager. After the death of Best, plaintiff alleges that the affairs of the corporation have been managed by McGuire. His salary is only $ 250, the same that it has always been, although his work now includes being manager of defendant company.

The charge that McGuire's services are worth only $ 100 per month is the mere ipse dixit of plaintiff. McGuire, before his connection with defendant corporation, had received from Wray-Dickinson Company and the Dickinson Motor Company of Shreveport, La., an average from $ 6,000 to $ 10,000 a year. His position with the Dickinson Motor Company was that of sales manager. Later, he was made secretary-treasurer and then vice president of that company.

The defendant company is a family affair, and very far from being a harmonious one, as shown by the attitude of plaintiff in the present case. Plaintiff is the sister of Mrs. I. L. Helpman, named in the petition as one of the directors of the corporation, of whose acts the plaintiff is complaining. McGuire, the other director, is the husband of plaintiff's niece, and J. B. Best, acting as director, is the brother of plaintiff's deceased husband, W. C. Best.

Plaintiff operates in the city of Shreveport a competing wool, fur, and hide business within one block from the plant of defendant corporation, and is much aggrieved that she has not been placed on its board of directors by...