Greenville Compress & Warehouse Company v. Planters' Compress & Warehouse Company

• Decision Date: 08 May 1893
• Citation: 13 So. 879,70 Miss. 669
• Parties: GREENVILLE COMPRESS & WAREHOUSE COMPANY v. PLANTERS' COMPRESS & WAREHOUSE COMPANY
• Court: Mississippi Supreme Court

13 So. 879

70 Miss. 669

GREENVILLE COMPRESS & WAREHOUSE COMPANY v. PLANTERS' COMPRESS & WAREHOUSE COMPANY

Supreme Court of Mississippi

May 8, 1893

March 1893

FROM the chancery court of Washington county, HON. W. R. TRIGG Chancellor.

Prior to 1891, the Greenville Compress & Warehouse Company and the Planters' Compress & Warehouse Company, corporations having charters under the laws of this state, owned and operated, each on its own account, a cotton compress and warehouse in the city of Greenville. In the spring of 1891 they conceived the idea of merging the two corporations into one, and a joint committee was appointed by the directors to devise a plan for consolidation. The plan agreed upon was that a new corporation should be chartered, to be known as the Greenville Cotton Press Association, and into this both corporations were to be merged, the property of the first-named company to be taken at a valuation of $ 100,000 and that of the latter at $ 90,000. This plan was reported to the officers of both corporations by their respective committees, and was approved by the directors of each; but this action of the directors was agreed to be submitted for ratification to the stockholders of each company, at a meeting to be held on the twentieth of August, 1891. At that time the stockholders of each corporation met, and the action of the directors, in agreeing to the terms of consolidation was approved, but no notice of the meeting had been given to the stockholders of the appellant company, and many were not represented. Acting under the authority thus thought to have been properly conferred, the directors of the two corporations met, and passed a resolution directing that both compresses and warehouses should be put into the hands of a joint committee, named by them at the time, and consisting mainly of the directors of the two corporations. This committee was authorized to take such steps as it saw proper to accomplish the consolidation, and meantime to manage the property and affairs of both corporations, dividing the profits in the proportion above stated.

The committee accordingly took possession, and, inasmuch as it was found that one compress was sufficient to do the work of both, as a matter of economy, the committee operated one of the compresses and warehouses--that of the Greenville Compress & Warehouse Company--and leased the other to third parties. The committee continued this joint management until early in November, and realized a large amount of net earnings, which were divided between the two corporations, as agreed, each accepting the division and apportionment. The result of this course was, that the business and patronage were diverted from the Planters' Compress & Warehouse Company to that of the Greenville Compress & Warehouse Company, operated by the committee. Meantime, it was ascertained that the meeting of the stockholders of the Greenville Compress & Warehouse Company, at which the action of the directors was approved, had been called without any previous notice to to the stockholders. Accordingly, early in November, pursuant to a call for a second meeting of stockholders, and after due notice to them, the stockholders of said company met and refused to ratify the action of the directors, and voted against the consolidation. Thereupon the directors of said company passed a resolution reciting that, as its stockholders had refused to ratify the plan for a consolidation, and, as the Planters' Compress & Warehouse Company had been closed down for the season, it was equitable and just that the latter company should have a share of the profits of compressing during the current cotton season, and an offer was made to pay to said company two-fifths of the net earnings of the season. This offer was communicated to the Planters' Compress & Warehouse Company, but was not accepted. Thereupon, the Greenville Compress & Warehouse Company, on November 10, 1891, resumed possession and control of its property, and begun to operate its compress and warehouse on its own account, ignoring entirely the joint committee. This continued until November 21, when the Planters' Compress & Warehouse Company filed this bill against the Greenville Compress & Warehouse Company and the members of its board of directors, to enjoin further interference with the management and control of the joint committee until the close of the current cotton season, or until the plan for consolidation could be carried out by the formation of a new corporation, and the merging therein of both companies. The bill also prayed an account of moneys received by the defendant from the tenth of November, the time when it resumed control, until the filing of the bill. An injunction was issued as prayed for, restraining the defendants from any interference with the joint committee, as then constituted and as might thereafter be constituted, until the closing of the cotton season, and until the consolidation of the two corporations could be effected. Under the protection of this injunction, the joint committee again took possession of all the property of the Greenville Compress & Warehouse Company, and controlled and operated it during the fall and winter.

The defendant answered, alleging the invalidity of the action of the directors of the two companies, and that the attempted effort to consolidate the two companies had been properly repudiated by the stockholders of the defendant. It is unnecessary to state the many other matters relied on by complainant and defendant, and set out in the pleadings. The charters of the two companies were introduced in evidence, and showed that neither conferred the power to make such consolidation. The answer was made a cross-bill, and an account asked to be taken of the moneys up to that time paid, or that might thereafter be paid, by the joint committee to the complainant, as dividends or otherwise, and that the amount so ascertained be decreed to be paid to the defendant.

Subsequently, in February, 1892, the injunction previously issued was modified and dissolved, so far as it sought to compel the defendant to enter into a new corporation to be formed by consolidation of the two companies. The injunction against interference with the joint committee was decreed to continue until the close of the business year, which was fixed by the court as the first day of June, 1892.

In October, 1892, the court entered a final decree, which recited that the defendant was not entitled to the relief prayed for in its cross-bill, which was accordingly dismissed; and, further, that it appeared that the complainants were entitled to the relief prayed for, so far as it sought to enforce the agreement entered into between the board of directors and the two companies during the season ending June 1, 1892, and the injunction previously issued was to that extent perpetuated. The decree further recited that, as the relief for which complainant prayed, and to which it was entitled, had been already obtained, the bill was dismissed at defendant's costs. From this decree defendant appeals.

Reversed and remanded.

Phelps & Larkin, for appellant.

1. Neither the directors of a corporation nor the majority of its stockholders have the power to sell its entire property and stop its business, unless the business is a failing one, and then only by sale for cash, and not for stock in a new enterprise. 1 Beach on Private Corporations, §§ 229, 357, 359; Waterman on Corporations, § 125; Cook on Stock and Stockholders, §§ 667, 668.

2. A single dissenting stockholder can forbid the consolidation of the corporation. 1 Beach on Private Corporations, § 353; 2 Ib., § 430; Cook on Stock and Stockholders, § 671; Railroad Co. v. Harris, 27 Miss. 517; 18 Wall., 233; 21 How., 441. The agreement for consolidation being void, appellant was justified in assuming control of its property.

3. It cannot be contended that appellant was estopped to resume possession of its press and business. The doctrine of estoppel does not apply in matters ultra vires. It can be invoked only in cases where the corporation has actually received property or money from another which it would be inequitable to hold. Even in such cases relief is confined strictly to executed contracts. Thomas v. Railroad Co., 101 U.S. 71. An ultra vires contract cannot, by partial performance, become a foundation of a right of...