Goodwin v. Milwaukee Lithographing Co.

Decision Date04 May 1920
Citation177 N.W. 618,171 Wis. 351
PartiesGOODWIN ET AL. v. MILWAUKEE LITHOGRAPHING CO. ET AL.
CourtWisconsin Supreme Court

OPINION TEXT STARTS HERE

Appeal from Circuit Court, Milwaukee County; Martin L. Lueck, Judge.

Action by H. W. Goodwin, administrator of the estate of J. Arthur Davis, deceased, and others, against the Milwaukee Lithographing Company, Alfred Von Cotzhausen and others for the appointment of a receiver and restitution of funds. An interlocutory decree was entered, and defendant named and F. Bode appeal. Modified and affirmed.

This action was commenced in June, 1915, by the plaintiff H. W. Goodwin, as administrator of the estate of J. Arthur Davis, deceased, and F. B. Thomas, minority stockholders of the Milwaukee Lithographing Company, against the Milwaukee Lithographing Company and Alfred Von Cotzhausen, its president, general manager, and treasurer, and other officers, for the appointment of a temporary and permanent receiver for said corporation to take charge of all its property and assets and to administer the same pending the determination of this suit, and for the restitution of funds alleged to have been unlawfully abstracted therefrom by the said Von Cotzhausen and other officers and directors of the corporation. The suit was brought by plaintiffs on their own behalf and on behalf of all other stockholders similarly situated. Thereafter petitions were made by Edgar A. Goetz and Lille A. Brosius, also minority stockholders, and they were made parties plaintiff, and they served separate supplemental complaints, and a joint second supplemental complaint, demanding a winding up of all the business, property, and affairs of the Milwaukee Lithographing Company, a conversion thereof into cash, to be applied to the payment of debts and then distributed among the stockholders.

Upon motion made October 9, 1915, a receiver was appointed March 9, 1916, who took charge of the property, business and affairs of the said Milwaukee Lithographing Company and continued to administer the same until the entry of the judgment herein.

On June 29, 1916, the case was referred to Hon. Max W. Nohl, court commissioner, to hear, try, and determine. In due course he made and filed his findings of fact and conclusions of law, in which he found that the Milwaukee Lithographing Company was organized June 7, 1902, with an authorized capital stock of $100,000, divided into 1,000 shares of $100 each; that by amendment of its articles of incorporation on the 28th day of April, 1910, its capital stock was increased to $250,000, divided into 2,500 shares of $100 each, and that at the time of the commencement of this action there were issued 1,867 shares of said stock, of which 677 shares were owned by Von Cotzhausen and 600 shares by the American Fine Art Company, a corporation controlled and dominated by the said Von Cotzhausen; that from its organization to the 29th day of August, 1913, J. Arthur Davis was its president and general manager; that from August 29, 1913, to March 9, 1916, Von Cotzhausen was the president and general manager thereof; and that from September 30, 1910, to March 9, 1916, the said Von Cotzhausen was treasurer thereof; that the Milwaukee Lithographing Company from the time of its organization up to the time that Alfred Von Cotzhausen became active in the control of it, in the year 1913, was a prosperous concern; that the gross sales made, net profits made, losses sustained, dividends paid, and the surplus at the end of each fiscal year of said corporation, from the time of its organization down to March 9, 1916 (the time at which the receivers were appointed in this case), according to the company's books, were as follows:

+---------------------------------------------------------------------------+
                ¦Year.                   ¦Sales.     ¦Profits.  ¦Losses.   ¦Dividends.      ¦
                +------------------------+-----------+----------+----------+----------------¦
                ¦1903                    ¦$138,583.50¦$12,361.24¦          ¦     ¦$ 3,354.28¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1904                    ¦143,036.27 ¦8,054.90  ¦          ¦     ¦5,011.12  ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1905                    ¦169,317.88 ¦9,531.23  ¦          ¦     ¦6,467.99  ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1906                    ¦           ¦22,913.49 ¦          ¦     ¦3,595.62  ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1907                    ¦215,864.33 ¦30,785.12 ¦          ¦     ¦16,232.50 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1908                    ¦192,101.79 ¦13,649.92 ¦          ¦     ¦30,200.00 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1909                    ¦255,993.53 ¦32,766.17 ¦          ¦     ¦21,690.00 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1910                    ¦250,823.00 ¦27,532.63 ¦          ¦     ¦1,010.00  ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1911                    ¦297,692.08 ¦39,794.62 ¦          ¦Cash ¦25,215.67 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦                        ¦           ¦          ¦          ¦Stock¦50,666.00 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1912                    ¦310,697.23 ¦45,465.50 ¦          ¦     ¦22,404.00 ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1913                    ¦289,192.93 ¦11,617.64 ¦          ¦     ¦          ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1914                    ¦164,508.45 ¦          ¦$21,260.85¦     ¦          ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦1915, to July 12        ¦25,783.27  ¦          ¦21,212.36 ¦     ¦          ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦July 12 to Nov. 12      ¦15,086.94  ¦          ¦8,379.72  ¦     ¦          ¦
                +------------------------+-----------+----------+----------+-----+----------¦
                ¦Nov. 12 to March 9, 1916¦           ¦          ¦22,772.92 ¦     ¦          ¦
                +---------------------------------------------------------------------------+
                

--that by various schemes and devices the said Alfred Von Cotzhausen, from the year 1911 down to the appointment of the receiver herein, fraudulently, corruptly, and unlawfully diverted various sums of money from the said Milwaukee Lithographing Company and appropriated the same to his own use, which, with interest thereon up to the time of the entry of judgment herein, approximated $60,000; that from on or about the 1st day of January, 1911, the said Alfred Von Cotzhausen did not faithfully or properly perform his duties as an officer, director, and employé of the said Milwaukee Lithographing Company or as manager thereof; that he, on the contrary, carelessly, negligently, and recklessly failed to properly manage the business and affairs of the said Milwaukee Lithographing Company and failed to perform his duties as an officer, director, and manager from such date down to the appointment of the receivers herein on March 9, 1916; that he was inattentive to his duties and mismanaged the said corporation's business, property, and affairs; that, by reason and in consequence of such carelessness, negligence, recklessness, failure, mismanagement, and inattention to the proper performance of his duties as an officer, director, manager, and employé of the said Milwaukee Lithographing Company, the said company was caused financial losses in the sum of $60,000, which losses the referee finds that the Milwaukee Lithographing Company sustained by reason of such careless, negligent, and reckless conduct and management, in addition to the specific abstractions before referred to; that the business of said company at the time the said Von Cotzhausen became actively connected with it was a well-regulated, steady, and constant business, not subject to other than ordinary fluctuations, which ordinary fluctuations could with ordinarily careful management be overcome to such an extent as to prevent the diminution of the average yearly profits; that from the time said Alfred Von Cotzhausen became so actively connected with said company he could and should have conducted the business thereof in substantially the same manner in which it had been conducted theretofore and with like good results; that at the time of the commencement of this suit and ever since the said Milwaukee Lithographing Company was, and now is, in grave and imminent danger of ruin and insolvency; that the defendant Alfred Von Cotzhausen for many years last past had, and still has, the reputation among the trade and business in which the Milwaukee Lithographing Company is engaged as being unreasonable, unreliable, dishonest, and litigious, and as being a dangerous man to deal with; that he is an unfit, an improper, and incompetent person to have the management or control or to be an officer, director, agent, or employé of the said Milwaukee Lithographing Company or any of its business, or to be actively interested in or identified with it; that, by reason of his said bad reputation, his personal character, his general unfitness, and his known ownership of the majority of the stock of the Milwaukee Lithographing Company, the said company cannot safely or profitably continue in its said business, and that by reason of the things found by the referee and of differences existing between the stockholders of the said Milwaukee Lithographing Company, continuance in business by the said company is impracticable and would be ruinous; that continuance in business would result in the stockholders thereof quickly losing the assets of the said corporation; that the...

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