Boyette v. Preston Motors Corporation

• Decision Date: 02 June 1921
• Docket Number: 6 Div. 271
• Parties: BOYETTE v. PRESTON MOTORS CORPORATION et al.
• Court: Alabama Supreme Court

89 So. 746

206 Ala. 240

BOYETTE v. PRESTON MOTORS CORPORATION et al.

6 Div. 271

Supreme Court of Alabama

June 2, 1921

Rehearing Denied June 23, 1921

Appeal from Circuit Court, Jefferson County; Hugh A. Locke, Judge.

Bill by I.E. Boyette against the Preston Motors Corporation, and certain individuals composing the officers and directors, to require the issuance by them to complainant of stock in said corporation or to pay an amount of money equal to the par value of the same. From a decree dismissing the bill complainant appeals. Affirmed.

Thomas J. Judge, of Birmingham, for appellant.

Roscoe Chamblee and Weatherly, Birch, & Hickman, all of Birmingham for appellees.

THOMAS J.

The bill, by a shareholder of the Preston Motor Car Company, was against the Preston Motors Corporation and certain individuals averred to be the officers and several of the directors of defendant corporation, to compel the issuance of stock to complainant in the latter corporation to the amount indicated, or an amount equal to the par value of stock held by plaintiff in the first named company.

It is averred that the Preston "Motor Car Company" was organized (does not state where incorporated) for the purpose of manufacturing and selling automobiles; that plans and specifications of cars called "Preston" and "Preston Four" were obtained by "much work labor, and expense" incurred by said corporation, and that the designs, names of the cars, and the good will of the company, and prestige acquired as the result of advertisement of said Preston cars, were the "only unincumbered assets of any practical value which were owned by the Motor Car Company." The respective corporations will be hereafter referred to as the Motor Car Company and the Motors Corporation.

Following the averment that the Motor Car Company was organized for the purpose we have indicated, that its only unincumbered assets of practical value were such designs averred to be of great value, it is averred that prior to the organization of the Motors Corporation, organized under the laws of the state of Delaware, the officers and directors of the Motor Car Company "informed the stockholders" and "led them to believe" that stock would be issued to them in the Motors Corporation; that the assets of the Motor Car Company "were fraudulently transferred" to the Motors Corporation "without any consideration," and that the Motor Car Company has ceased to carry out the objects and purposes of its incorporation; that the personnel of the organization which established the Motor Car Company and abandoned the same, at the time of the filing of the bill, devoted time, attention, and energies to the promotion of the Motors Corporation, and has "fraudulently transferred" to the latter corporation the above-named assets, together with the good will, plans, tradename and whatever prestige the Motor Car Company had acquired, together with access to its books and business affairs, in violation of the rights of the stockholders of the Motor Car Company, which "illegal acts are tantamount in effect to a merger" of the two corporations. It is further averred that after the organization of the Motors Corporation its directors adopted a resolution to the effect that its capital stock should be issued to the stockholders of the Motor Car Company in exact proportion to the amount of the capital stock held by such stockholders in the former corporation; that pursuant to this resolution stock has been issued in the Motors Corporation to a number of stockholders of the Motor Car Company upon surrender of their stock in said company, and, in lieu thereof, acceptance of stock in the Motors Corporation.

The bill contains the averment that the officers of the Motors Corporation are residents of Alabama; that said corporation owns no property in the state of Delaware; that its plant, and practically all its assets, are in Alabama; that meetings of the board of directors are held in Alabama; that its stock books, minute books and records are kept in this state, where stock is signed and issued by its officers.

The outstanding features of the foregoing bill may be thus summarized: (a) That the individual officers and directors of the old corporation who are named in the bill used the good will and the name of the cars of the old corporation for the benefit of the new corporation, paying nothing therefor; (b) that these individuals promised the stockholders of the old corporation that they would issue stock in the new corporation for the stock in the old corporation of equal par value, share for share; (c) that it is not averred that this promise was based upon any consideration; (d) that the capitalization or relative value of stock in said corporations is not averred; nor (e) is it averred how much of the stock of the Motors Corporation is owned or held by subscribers or purchasers for value who had no knowledge or notice of the interest (under the facts declared in the bill) of the Motor Car Company therein, or that there was available $18,000 of unissued stock of the Motors Corporation.

The relief sought is against the Motors Corporation (a Delaware corporation), that it be ordered to issue to the complainant an amount of stock of like number and value as that held by him in the Motor Car Company; failing in this, that the officers and directors of the Motor Car Company be required to pay complainant an amount equal to the par value of the stock held by him in said Motor Car Company, and that "a decree be made and entered for this amount against said parties."

Assuming, without deciding, that the bill is not multifarious, for the purpose of the plea to the jurisdiction, the relief sought will be treated as against the Motors Corporation and that it, through its officers, be required to issue stock in specific performance of the alleged undertaking (without having averred that such unissued stock was available); or, in lieu thereof, that its directors and officers pay the money value of complainant's stock in the Motor Car Company out of the funds of the Motors Corporation.

If such bill contains equity, it must rest upon the alleged merger of the old with or in the new corporation, or some privity between the new corporation and the stockholders of the old corporation, including complainant. No such privity is disclosed. Do the facts and conclusion contained in the bill show a merger of the two corporations?

The two amended pleas to the jurisdiction of the court (to the bill as amended) aver that the cause of action or controversy involves "the question of an alleged merger of the two corporations," and that the Alabama courts are without jurisdiction, and that no further cognizance of the cause be taken, and that it be dismissed with its reasonable costs sustained. Exceptions were filed to the pleas (separately), which were overruled. Plaintiff declined to plead further, the court dismissed the bill, and for such action of the court error is assigned.

The question presented is whether "visitorial power of an Alabama court over the respondent, a Delaware corporation," may be judicially exercised in awarding the relief prayed. The pleas are essentially alike, except that plea 1 is to the jurisdiction of the court over the subject-matter of the cause set forth in the bill, because the Motors Corporation, named as a respondent, is a foreign corporation, and pleads compliance with the Delaware laws, and that-- "The cause of action or controversy evidenced in and by the bill of complaint is one involving the alleged rights of stockholders, as such, of one of said corporations against another of said corporations, and involves questions relating to the internal management of the affairs of one or both of said foreign corporations and the exercise by this court of visitorial powers over said Preston Motors Corporation, and involves particularly the question of the alleged right of complainant, as a stockholder of Preston Motor Car Company, to be admitted as a member or stockholder of Preston Motors Corporation, and to have its stock issued to him, or to be compensated for some alleged damage or injury to him, as a stockholder of said Preston Motor Car Company, against the officers and directors thereof, constituting matters over which the government, or the court, of the state of Delaware have sole and exclusive jurisdiction."

Plea 2 is to the jurisdiction of the court "over the subject-matter of the cause or causes set forth, or attempted to be set forth, in said bill of complaint in the first aspect," so far as said bill is applicable to and seeks relief against the Motors Corporation, because said corporation is a foreign corporation.

The last plea presents the simple question of jurisdiction of the Alabama court to entertain the cause of action as to the Motors Corporation; and this aspect of the case will be now considered. Though the bill avers that the Motors Corporation was organized under the laws of Delaware, it is not averred that it maintains a principal office and place of business in Wilmington, Delaware; and though it does aver that the Motor Car Company was organized for the purpose indicated, it does not aver that it was incorporated under the laws of the state of Delaware. Hence, the sufficiency of the bill was not questioned by demurrer, such matter being set up by the special pleas to the sufficiency of which exception was taken.

It is established that a corporation must dwell at the place of its creation (Bank of Augusta v. Earle, 13 Pet. 588, 10 L.Ed. 274; La Fayette Ins. Co. v. French, 59 U.S. [ 18 How.] 404, 408, 15 L.Ed. 451; Sioux Remedy Co. v Cope, 235 U.S. 197, 35 Sup.Ct. 57, 59 L.Ed. 193), though it may do business wherever its charter permits, provided that right is...