General Electric Co. v. West Asheville Imp. Co.

• Decision Date: 20 March 1896
• Citation: 73 F. 386
• Parties: GENERAL ELECTRIC CO. v. WEST ASHEVILLE IMP. CO. Ex parte CARRIER et al.
• Court: U.S. Court of Appeals — Fourth Circuit

73 F. 386

GENERAL ELECTRIC CO. v. WEST ASHEVILLE IMP. CO.

Ex parte CARRIER et al.

United States Circuit Court, W.D. North Carolina.

March 20, 1896

C. M Stedman, for General Electric Co.

Merrimon & Merrimon and John P. Arthur, for petitioners.

Before SIMONTON, Circuit Judge, and DICK, District Judge.

SIMONTON Circuit Judge.

This case comes up on a motion to vacate an order filed 14th January, 1896, permitting the petitioners and all other stockholders and creditors of the West Asheville Improvement Company to intervene pro interesse suo in the main cause, as defendants therein, with all the rights incidental thereto. It is proper to say that the motion is made by counsel with the permission granted to them by the judge who signed the order, and that without such permission it would not have been entertained.

The West Asheville Improvement Company was a corporation organized under the law of North Carolina. Some time about June or July of the past year, it was discovered that the legislature of North Carolina, at the session immediately preceding the discovery, had repealed the charter of the corporation. This discovery was a surprise to all parties interested in the corporation, and up to this time there seems to be a mystery connected with it. At the time of this repeal, the corporation was doing a large business, was in the enjoyment of a large and valuable property, owed a considerable debt, by way of mortgage securing outstanding bonds and a floating debt, but was by no means in an insolvent or even dangerous pecuniary condition. Called upon to meet this wholly unexpected emergency, a meeting of those who therefore had been the president and directors of the corporation was called; and, after consultation with counsel the proceedings in the main cause were instituted, the chief purpose and motive for which were the appointment of a receiver to take charge of the assets and affairs of the late corporation. Receivers were appointed, and took charge but no further steps were taken, the manifest desire being not to hasten progress until an opportunity was afforded of going before the legislature of North Carolina, and of obtaining a correction of an error if the repeal was the result of an error, or of a reconsideration of the action of the general assembly if the repeal was intentional. Pending this proceeding, the petition in question was filed. One of the petitioners, E. G. Carrier, was the president of the corporation before and up to the date of the repeal of its charter, and was present at and presided over the meeting called upon the discovery of the repeal above spoken of; and J. D. Carter, another of the petitioners, was secretary of the corporation. The other petitioners are friends and relations of E. G. Carrier. The petition alleges acts of fraudulent dealing on the part of the complainant, in derogation of the rights and interests of the West Asheville Improvement Company and of the petitioners individually. It does not state that an approach has been made to the directors of the West Asheville Improvement Company, requesting that these issues be raised in the pending suit; nor does it allege any fraudulent conduct or partisan relation on the part of these directors; nor does it state any reason whatever for not applying to them for co-operation with the petitioners. It asks that they themselves be allowed to intervene and protect their own rights, in their own name. The order of the court not in question grants them this privilege, and extends it to all the other stockholders and creditors of the West Asheville Company.

As a general rule, the corporation represents all the shareholders in suits by a third party; and the directors control the action of the corporation. But if the directors are false to their duty, and there is danger that they will, from corrupt motives or blind obstinacy, abandon, neglect, or sacrifice the interests of the shareholders committed to their charge, then the courts of equity will permit stockholders to intervene for their own protection, and to seek and obtain the aid of the court. Bronson v. Railroad Co., 2 Wall. 302. But, in the absence of such misconduct on the part of the controlling authorities of the corporation, they will not be permitted to intervene. And for obvious reasons. If such privilege be accorded to one, it must be allowed to all. And so a case will be burdened by a number of parties, and be exposed constantly to abatement by death, change of relation, or circumstance of individuals, and justice be greatly impeded. The question in every case are: Is the complaining stockholder remediless unless he represent his own interest? If these questions be answered in the affirmative, he will be allowed to intervene, notwithstanding that the remedy is an extreme one, and should not be permitted without hesitation and caution.

The board of directors of the Asheville Improvement Company consisted...