Green v. Nat'l Adver. & Amusement Co.

• Decision Date: 25 May 1917
• Docket Number: No. 20256[93].,20256[93].
• Citation: 162 N.W. 1056,137 Minn. 65
• Parties: GREEN v. NATIONAL ADVERTISING & AMUSEMENT CO. et al.
• Court: Minnesota Supreme Court

137 Minn. 65

162 N.W. 1056

GREEN

v.NATIONAL ADVERTISING & AMUSEMENT CO. et al.

No. 20256[93].

Supreme Court of Minnesota.

May 25, 1917.

Appeal from District Court, Hennepin County; Daniel Fish, Judge.

Action by Harry H. Green against the National Advertising & Amusement Company, a corporation, and others, for an accounting, a receivership, and for other relief. Judgment ordering appointment of a receiver and authorizing closing up of corporation's affairs, distribution of its surplus, etc., and from an order denying new trial, defendants appeal. Order affirmed.

Syllabus by the Court

The officers of a corporation are charged in the performance of their duties with certain obligations of trust and confidence to all the stockholders thereof without discrimination, to be performed with fidelity, and any intentional deviation or departure therefrom to the substantial injury of any of the stockholders constitutes willful mismanagement as a matter of law, for which a court of equity has jurisdiction to call them to account.

Where such officers, chosen by stockholders representing and owning one-half the corporate stock, in collusion with such stockholders intentionally manage and conduct the affairs of the company in the exclusive interests of those so electing them, allow themselves exorbitant salaries, wrongfully exclude the stockholders owning the other one-half of the stock from participation in the profits or property of the company, and there is such enmity and hostility between the contending stockholding factions as to render harmonious management of the company impossible, a court of equity may, without statutory authority, at the suit of the excluded stockholders, though the corporation be not insolvent, entertain proceedings to wind up the affairs of the corporation, convert its property into money for distribution to those entitled thereto, and appoint a receiver to conduct the affairs of the concern pending the proceedings.

The findings of the trial court are sustained by the evidence. Jay W. Crane, of Minneapolis, for appellants.

Keith, Kingman, Cross & Wallace, of Minneapolis, for respondent.

BROWN, C. J.

This action was brought to wind up the affairs of the defendant corporation, for an accounting by the officers thereof, the appointment of a receiver pending this action, and for other relief. The complaint sets out the facts at length and in detail, the material portions of which are put in issue by the answer. The action was tried by the court without a jury, at the conclusion of which the court made and filed findings disclosing substantially the following facts: The defendant National Advertising & Amusement Company is a corporation organized and existing under the laws of this state. Plaintiff owns one half of the corporate stock and defendants Jacob and Annie Barnet, husband and wife, the other half. The sole business of the corporation is the operation of a moving picture theater in Minneapolis. Subsequent to the organization of the company defendant Jacob Barnet was chosen president, plaintiff was chosen secretary and treasurer, and defendant Annie Barnet was named vice president. Under this management the corporation did a profitable business, and continued thereafter to be a paying and going concern. But dissensions arose between plaintiff and defendant Jacob Barnet, in apparent adjustment of which plaintiff relinquished his office as treasurer, Mrs. Barnet was chosen in his place, and plaintiff became vice president. Thereafter the Barnets, husband and wife, continued to conduct the affairs of the company, and are now in control thereof. Further dissensions arose between the parties, as a result of which defendants have excluded plaintiff from participation in the property or affairs of the company, and since November, 1914, have conducted the business solely in their own interests. They have allowed themselves excessive salaries, and refused plaintiff access to the books, or to information concerning the profits or expenses of the company. The court further found that by reason of the situation enmity and ill will had arisen between the parties, plaintiff on the one hand and Barnet and wife on the other; the latter being a sister of plaintiff. That by reason of the ill will of the parties toward each other, coupled with the equal distribution of the capital stock of the corporation, defendants have practically excluded plaintiff from participation in the management of the company's business and property; have handled the business in all respects in their own interests exclusively, and in disregard of the rights of plaintiff. That the quarrel between the parties has led to costly litigation, and to charges and counter charges concerning the management of the concern, and even to personal violence between plaintiff and Mrs. Barnet, who acts with her husband against plaintiff. The profits of the business have fallen off materially as a result, ‘probably due in part at least to mismanagement’ on the part of defendants. The court was not specific upon the question of mismanagement. Upon these facts and the situation as presented by the evidence, taken as a whole, the court concluded that an accounting should be had and a complete readjustment of the corporate affairs effected. Accordingly the court ordered the appointment of a receiver to take charge of the affairs of the corporation, ‘and, if necessary, to close up the affairs of the corporation, pay its debts, and distribute the surplus, if any, to the persons entitled thereto.’ Defendants appealed from an order denying a new trial.

Two principal questions are presented by the assignments of error: (1) Whether the findings of fact are sustained by the evidence; and (2) whether the conclusions of law are justified by the findings of fact.

[1][3] 1. We answer the first question in the affirmative without going into an extended discussion of the evidence. We gather from the evidence that plaintiff and one La Bar originally established the business, but some time in the year 1911 defendant Jacob Barnet was induced by plaintiff to purchase the La Bar interest, and thereafter and until the formation of the corporation plaintiff and Jacob operated the company as a copartnership. It was later turned over to the corporation and conducted by the officers as heretofore stated. The evidence further tends to show that since that time dissensions, wrangling, and...