Commonwealth v. United Whse. Co., Inc.

• Citation: 293 Ky. 502
• Parties: Commonwealth ex rel. v. United Warehouse Co., Inc.
• Decision Date: 05 March 1943
• Court: United States State Supreme Court — District of Kentucky

293 Ky. 502

Commonwealth ex rel. v. United Warehouse Co., Inc.

Court of Appeals of Kentucky.

March 5, 1943.

1. Corporations. — Although courts are authorized in their discretion to forfeit the charters of private commercial corporations they are disinclined to do so, and the reasons for declaring such forfeiture must be solid, weighty, and cogent, including violation of specific charter or statute provisions, or a plain abuse of power, or some act of misuser or nonuser touching matters involving the public interest (KRS 271.310; Const. sec. 205).

2. Corporations. — Forfeiture of the charter of a private commercial corporation must rest upon grave cause and be warranted by material misconduct (KRS 271.310; Const. sec. 205).

3. Corporations. — The "misuser of charter privileges" which authorizes forfeiture of the charter of a private commercial corporation embraces misuser with respect to matters which are the essence of the contract between the corporation and the state, which must be done by the corporation with knowledge of its unlawfulness, and which must inflict injury upon the public generally, and a mere irregularity in performance of statutory requirements is not such misuser (KRS 271.310; Const. sec. 205).

4. Corporations. — Actual injury to the public need not be proven to establish "misuser of charter privileges" so as to authorize forfeiture of the charter of a private commercial corporation, but it is sufficient if the inevitable tendency of the act is shown to be injurious to the public (KRS 271.310; Const. sec. 205).

5. Corporations. — A departure from charter authority by a private commercial corporation will authorize forfeiture of the charter when the departure threatens the welfare of the people, destroys the corporation's normal functions, maims its separate activity, and takes away its free action, so as to disappoint the purpose of its creation and to affect unfavorably the public interest (KRS 271.310; Const. sec. 205).

6. Corporations. — Generally, if no public detriment is involved, a statute providing generally that failure by a private commercial corporation to comply with its charter, or an abuse of its corporate powers, shall be ground for forfeiture of charter and omitting to specify particulars for which forfeiture will be granted, will be liberally construed.

7. Corporations. — Proceedings to forfeit charters of private commercial corporations are guided by rule that forfeitures are not favored by the courts.

8. Corporations. — In exercising jurisdiction to forfeit the charter of a private commercial corporation, the courts proceed with due caution, and will not declare a forfeiture or a dissolution of the corporation except in a clear case.

9. Corporations. — Unless a statute so requires, forfeiture or dissolution of a private commercial corporation will not be decreed for acts merely in excess of the corporate powers, especially if the matter complained of relates only to the method and manner of transacting the corporate business although such method and manner departs from the customary ones to the extent that they might be enjoined at the suit of interested persons.

10. Corporations. — A breach by a private commercial corporation of the implied condition of its incorporation that the corporation shall so manage its affairs that it shall not become dangerous to the safety or well being of the state in which it transacts its business, authorizes forfeiture of the charter of such corporation.

11. Warehousemen. — Where two corporations incorporated to engage in business of tobacco warehousemen appropriated their facilities to accomplish their corporate purposes under the supervision of a committee of three directors of each corporation, and each corporation was to share equally the net profits and losses, the committee were "agents" of each corporation subject to their corporate principals' orders and the corporate powers were not exceeded or surrendered to the committee so as to authorize forfeiture of accused corporations charter (KRS 271.310, 271.990; Const. sec. 205).

12. Corporations. — Generally, a corporation incorporated under a charter granting to it specific privileges may not form a partnership with another corporation or with an individual especially when the business of the partner is not of the same character in which the corporate partner was authorized to engage (KRS 271.310; Const. sec. 205).

13. Corporations. — The rule forbidding a corporation incorporated under a charter granting to it specific privileges to form a partnership with another corporation, does not apply to joint adventure embarcations, especially when the corporate partner does not deviate from the business for which it was organized (KRS 271.310; Const. sec. 205).

14. Corporations. — Although a corporation cannot jointly prosecute its corporate business in partnership with another, such prosecution of business is the adoption of unauthorized methods for prosecution of authorized business and does not authorize forfeiture of the corporation's charter (KRS 271.310; Const. sec. 205).

15. Warehousemen. — Where two corporations incorporated to engage in business of tobacco warehousemen appropriated their facilities to accomplish their corporate purpose under the supervision of a committee of three directors of each corporation and each corporation was to share equally in net profits and losses of the business, there was no "misuser of corporate privileges" so as to authorize forfeiture of accused corporation's charter (KRS 271.310, 271.990; Cost. sec. 205).

16. Corporations. — Forfeiture of the charter of a private commercial corporation should not follow a departure from the required conduct of the corporate affairs, where such departure may be corrected through afforded proceedings by those interested in the corporate affairs, without dissolving the corporation, especially when the complained of departure produces no danger to the public or those interested in the corporate affairs (KRS 271.310, 271.990; Const. sec. 205).

Appeal from Mason Circuit Court.

D. Bernard Coughlin for appellant.

B.S. Grannis and D.L. Wood for appellee.

Before C.D. Newell, Judge.

OPINION OF THE COURT BY JUDGE THOMAS.

Affirming.

On and prior to September 1, 1939, two of a considerable number of corporations engaged in the business of tobacco warehousemen, located in the city of Maysville, Kentucky, were appellee and defendant below, United Warehouse Company, and the Banner Warehouse Company. On the day indicated they entered into a written "mutual working agreement and joint venture for the operation of the warehouses" owned and operated by the two parties to the agreement, the joint supervision of the business to be conducted by a committee of six members composed of three directors of each of the corporate parties to the agreement. They were to share equally the net proceeds and to bear the losses equally, if any. The contract as entered into was limited to "during the tobacco season of 1939-40," but it is alleged in the petition herein that the parties continued to operate under the agreement from the time it was made until the filing of this action on August 19, 1941.

The instant action is the one prescribed by section 480 of our Civil Code of Practice, and was instituted by the Commonwealth on relation of its Attorney General, to forfeit the charter of only one of the parties to the agreement, i.e., appellee and defendant, United Warehouse Company, there being no effort to dissolve or to forfeit the charter of the other party to the agreement, the Banner Warehouse Company. The ground for the relief sought — generally stated — is, that defendant by entering into the agreement on the terms stated committed such acts and misuse and abuse of its corporate authority as to create cause for forfeiting its charter as is contained in section 271.310 of KRS (section 569 of Baldwin's 1936 Revision of Carroll's Kentucky Statutes). The court sustained defendant's demurrer filed to...