Culver Lumber & Manufacturing Co. v. Culver

• Decision Date: 10 December 1906
• Parties: CULVER LUMBER & MANUFACTURING COMPANY v. CULVER
• Court: Arkansas Supreme Court

99 S.W. 391

81 Ark. 102

CULVER LUMBER & MANUFACTURING COMPANY v. CULVER

Supreme Court of Arkansas

December 10, 1906

Appeal from Lawrence Chancery Court; George T. Humphries Chancellor; affirmed.

Decree affirmed.

W. E Beloate and P. G. Taylor, for appellants.

A chancery court's jurisdiction of any particular case is determined by the allegations of the complaint. Wells on Jur. § 4. Courts of equity have no power to appoint a receiver of a corporation ancillary to a stockholder's suit to wind up its affairs. 5 Tex. Cir. App. 18; 23 S.W 819; High on Rec. 287-289; Smith on Rec. 220, note 1; Wait on Insol. Corp. 172; 2 Spelling on Corp. 842; 1 Mor. Priv. Corp 283; 53 Cal. 550. On allegations of fraud, etc., courts of equity will do no more than enjoin or forbid the misconduct. 34 S.W. 832; High on Rec. 288; Mor. Priv. Corp. 281; 30 Ia. 167; 68 F. 675; 98 Ga. 176.

In the absence of statutory authority, courts of equity have no jurisdiction, upon the application of an insolvent corporation, to take charge of and administer its affairs through a receiver. 10 Colo. 495; 32 P. 322; Chase, Dec. 466; Fed. Case No. 6840; 32 Mich. 11; 16 Cal. 145; 76 Am. Dec. 508; 30 Ia. 160; 43 Miss. 523; 2 Johns. Chy. 371; 2 A. 315; Wait on Insolv. Corp. 183; Gluck & Becker, Rec. 27. The facts and circumstances from which insolvency appear must be set out in the bill. 9 N.J.Eq. 95. Ex parte appointment of a receiver is absolutely void. Jurisdiction can not be conferred by consent. 3 N.Y. 552. The sale must be between the hours fixed by the statute. 23 Ark. 39; 38 Tex. 157; 4 Green (Ia.), 510. Inadequacy of price and improper notice of sale are sufficient to set the sale aside. 20 Ark. 381; 32 Id. 391.

Morris M. Cohn and John W. & Joseph M. Stayton, for appellees.

Appellants can not take the benefit of the court's jurisdiction and then question it. 53 Ark. 514; 49 Id. 318; 45 Id. 536; 25 Id. 99; 68 Id. 460; 56 F. 1006; 163 U.S. 160; 25 Ark. 108.

Stockholders are equally estopped with the company. Thomp. on Corp. §§ 5246 and 5269 et seq. The assets of a corporation stranded and going to pieces are a trust fund. Thomp. on Corp. § 6860; Cook on Corp. § 629; Beale, Foreign Corp. §§ 74, 791; 81 So. 694; 107 La. 145; 72 P. 733. Chancery courts are given jurisdiction over foreign corporations in this class of cases. Kirby's Digest, § 949; Const. art. 12, sec. 11; 69 Ark. 521; 63 Id. 165. After a case has been submitted to a court or jury, plaintiff can not take a nonsuit without prejudice to a future action. 23 Kan. 262; 69 Ark. 431. A corporation is insolvent when its embarrassments are such that early suspension and failure must ensue. 11 So. 350; 15 F. 786. Or is unable to pay its debts in the usual course of business. 38 N.E. 1017; 31 A. 799.

And insolvency is not necessary to give the court jurisdiction when it appears from other causes that business can not be carried on successfully. 82 F. 780.

OPINION

BATTLE, J.

On the 25th of August, 1902, Mary C. Culver instituted this suit against the Culver Lumber & Manufacturing Company in the Lawrence Circuit Court, on the equity side, which was afterwards transferred to the Lawrence Chancery Court, it having been created after the institution of this suit.

Plaintiff alleged in her complaint, substantially, as follows: She is a married woman and a resident of the State of Missouri. The defendant is a corporation, organized under the laws of the State of Missouri. Its capital stock amounts to $ 300,000 divided into shares of $ 100 each, of which she owns and holds as her separate estate 1725 shares, which is much more than one-half of the stock. It has been engaged in the business of sawing and manufacturing lumber and the selling of the same, and at the commencement of this suit was so engaged, with its mills at or near Sedgwick, in Lawrence County, in this State. It established, in 1902, in the State of Arkansas a planing mill with expensive machinery and facilities for making and furnishing the trade with all kinds of dressed lumber, sash, doors, mill and finishing work; and in the course of its business acquired considerable property, both real and personal, exceeding in value $ 500,000, and contracted an indebtedness in about the sum of $ 250,000. At a meeting of the board of directors, held in January, 1902, H. A. Culver was selected and appointed general manager of the business of the defendant, Elias W. Culver was elected president, Edgar W. Culver, treasurer, and Joe E. Culver, secretary. In March, 1902, the president, secretary and treasurer, without authority from the board of directors, purchased real estate, and recklessly, extravagantly and unnecessarily expended about $ 5,000 in building offices, and Edgar W. and Joe E. Culver, respectively, secretary and treasurer, have so extravagantly and recklessly conducted the business of the company that it became largely involved, and by such recklessness and extravagance alarmed the large creditors of the company, and caused them to induce the president to make an agreement in writing in and by which J. H. Jarrett and Frank I. Buckingham, of moderate means, were to be placed without bond, in the absolute charge and control of the entire business of the defendant yielding about $ 40,000 to $ 60,000 a month. Such managers are inexperienced in the management of similar business, and, if allowed to control, will in a short time cause great loss to defendant, if it does not render it bankrupt, and will imperil and wreck it financially. They have already taken possession of all the property at Kansas City, Missouri, and Kansas City, Kansas, "and refuse to act or conduct the business of the defendant under the directions or proper orders of its officers and managers, but that, instead, they are arbitrarily refusing to permit its officers, directors and legal managers to have any voice or control in the management of its business, and when its manager has drawn checks to pay for material used in the conduct of its business, they have refused to pay or permit the payment thereof, and are threatening, under and in pursuance of the alleged contract, to take charge of the business and property in the State of Arkansas, and hold and operate the same to the exclusion of the defendant or its board of directors or managing officers." Plaintiff "has requested the board of directors and officers of the defendant to bring suit to set aside said contract and take management of such business again, but they have refused and neglected to do so."

Plaintiff further stated that at the mills of defendant in this State, and elsewhere, "are employed about four hundred persons, and that there is now due to them in small sums, respectively, about $ 5,000, and that there is due on pay days, twice each month, to said hands about $ 2,000 or $ 3,000 each pay day, and that, being a foreign corporation, said sundry individual employees can attach the property of defendant to satisfy their claims and costs incident thereto, and that said proceedings would entail a large amount of costs and would wreck said property; that the employees and creditors are threatening to attach, and such attachment would cause a large amount of defendant's property to be sacrificed and lost, and that, for the protection of all creditors and the rights of the plaintiff and other stockholders, it is necessary that said property in this State be held intact as a manufacturing plant, at least until the product belonging to the defendant can be manufactured and disposed of;" and that if this is done its debts can be paid in a short time.

Plaintiff asked the court, first, to "issue an order restraining and enjoining all of the officers in this State of the defendant, or any one acting for them in the State of Arkansas, from removing, selling, mortgaging or otherwise disposing of the property, real or personal, in this State, and also restraining them and enjoining all persons from interfering in this State with the business, assets, property or affairs of the defendant; second, that the court appoint a suitable person as receiver to take charge and control of all the property of defendant within the State of Arkansas, with the power to manage, control and operate it, if necessary, under the orders of this court, as may from time to time be made in the premises; and that the cause be referred to a master in chancery, who shall by appropriate orders be authorized to hear, determine and report to the court all indebtedness due by defendant, and that out of the proceeds arising from the receivership the receiver be directed by appropriate orders from this court to pay the costs and expenses of this receivership, next all debts that may be adjudged and found due to the creditors of the defendant, and that the remainder, if any, to the several stockholders as their rights may appear."

On the 25th day of August, 1902, in the vacation of court, a receiver was appointed, and a temporary injunction was granted according to the prayer of the complaint. H. L. Ponder was the receiver, and as such he took charge and control of the assets of the defendant in this State.

No answer to the complaint was ever filed by the defendant

On the 5th day of March, 1904, the National Bank of Commerce of Kansas City, Mo., Traders' Bank of Kansas City and Holland Bank of Springfield, Missouri, filed a petition in this suit, and represented that the defendant was indebted to each of them in a large sum of money; that the intention of the plaintiff, acting in collusion with other stockholders and officers of the defendant, was to prevent its creditors from taking judgment against it; that Ponder the receiver, had no experience in the lumber business; that the business of the company, under his management, has been...