Hall v. Nieukirk

Decision Date10 February 1906
Citation12 Idaho 33,85 P. 485
PartiesADIN M. HALL et al., Appellants, v. J. W. NIEUKIRK et al., Respondents
CourtIdaho Supreme Court

APPOINTMENT OF A RECEIVER-ALLEGATIONS OF THE COMPLAINT-WHEN RECEIVER WILL BE APPOINTED.

1. Upon a proper showing a receiver will be appointed for a corporation pendente lite.

2. Under the provisions of subdivisions 5 and 6 of section 4329 of the Revised Statutes, a receiver will be appointed where it is shown that the corporation is insolvent or in imminent danger of insolvency, and in all cases where receivers have heretofore been appointed by the usages of the courts of equity.

3. Under the allegations of the complaint, held that the court erred in refusing to appoint a receiver.

4. Under our statute an appointment of a receiver does not necessarily cause a dissolution of the corporation, unless the court so directs; the receiver may be appointed simply to manage the affairs of the company during the pendency of the litigation.

5. Upon the application of a stockholder where it is shown that the directors and officers of the corporation are mismanaging its affairs for their own personal advantage and gain, and where it is shown that the profits of the business of the corporation are being absorbed by such mismanagement in paying the salaries of favorite employees whose services are not necessary to the proper conduct of the business of the corporation, and where gross mismanagement is shown, which if continued would necessarily result in insolvency of the corporation, a receiver should be appointed.

(Syllabus by the court.)

APPEAL from the District Court of Fourth Judicial District for Elmore County. Hon. Lyttleton Price, Judge.

Application for the appointment of a receiver, which was denied by the trial judge. Reversed.

Reversed and remanded with directions. Costs of this appeal awarded to appellants.

E. M Wolfe and E. J. Dockery, for Appellants.

"A receiver of a corporation upon proper application by a proper party, may be appointed, when upon application of a stockholder it is shown that the directors and officers of the corporation are mismanaging its affairs, as for their own personal advantage and gain." (Smith on Receivership, p 395, sec. 225, subd. c; Haywood v. Lincoln Lumber Co., 64 Wis. 639, 26 N.W. 184; Supreme Lodge Co. O. of I. H. v. Baker, 134 Ind. 293, 33 N.E. 1128, 20 L. R. A. 210; Wayne Pike Co. v. Hammons, 129 Ind. 368, 27 N.E. 487.) "When the majority stockholders are clearly violating the chartered rights of the minority and putting their interests in imminent danger," a receiver will be appointed by a court of equity. (Smith on Receivership, p. 362, sec. 225, subd. j; State v. Second Judicial District Court, 15 Mont. 324, 48 Am. St. Rep. 682, 39 P. 316, 27 L. R. A. 392.)

Minority stockholders may secure the appointment of a receiver pending investigation of gross fraud by the majority stockholders. (State v. Second Judicial District Court, 15 Mont. 324, 48 Am. St. Rep. 682, 39 P. 316, 27 L. R. A. 392.)

When the conduct of the officers of a corporation is satisfactorily established as fraudulent it is not only proper, but it is the duty of the court to wrest from such officers the management of the company and place the company in charge of a receiver. (Smith on Receivership, p. 369, sec. 228, note 2; Nichols v. Perry Pat. Arm. Co., 11 N.J. Eq. 126; Attorney General v. Bank of Columbia, 1 Paige, 511.)

Fraud and collusion on the part of the officers and directors of a corporation which may result in danger of the loss of the property of such corporation constitute sufficient grounds for interference of a court of equity and the appointment of a receiver over its property and business. (Smith on Receivership, p. 366, sec. 227; Miner v. Belle Isle Ice Co., 93 Mich. 97, 53 N.W. 218, 17 L. R. A. 412; Haywood v. Lincoln Lumber Co., 64 Wis. 639, 26 N.W. 184; Hedges v. Paquett, 3 Or. 77; Ellis v. Ward, 137 Ill. 509, 25 N.E. 530.)

If possession of defendants is obtained by fraud, or that the income is in danger of loss from neglect, waste or misconduct justifies appointment. (Gilbert v. Block, 51 Ill.App. 516.) Mismanagement, diversion of funds, applying assets to benefit of officers are grounds for receiver. (In re Lewis, 52 Kan. 660, 35 P. 287.) "When the business of a corporation is mismanaged and its property misappropriated by its officers, and such mismanagement is likely to continue, courts of equity will appoint a receiver for it." (Stevens v. South Ogden Land etc. Co., 14 Utah 232, 47 P. 81.)

Conspiracy of officers to dissipate corporate funds and to fraudulently absorb and apply its assets to the individual benefit of such officers are grounds for appointment of receiver. (In re Lewis, 52 Kan. 660, 35 P. 287.) There may be very exceptional circumstances under which a court of equity may appoint a receiver and wind up a corporation at the suit of a stockholder, even in the absence of a statute. (2 Clark & Marshall on Corporations, p. 1713, sec. 556; Sternberg v. Wolf, 56 N.J. Eq. 389, 67 Am. St. Rep. 494, 39 A. 397, 39 L. R. A. 762; Dickerson v. Cass County Bk., 95 Iowa 392, 64 N.W. 395; Wallace v. Pierce-Wallace Pub. Co., 101 Iowa 313, 63 Am. St. Rep. 389, 70 N.W. 216, 38 L. R. A. 122; Miner v. Belle Isle Lce Co., supra; Supreme Sitting O. I. H. v. Baker, 134 Ind. 293, 33 N.E. 1128, 20 L. R. A. 210, and innumerable other cases.) Haywood v. Lincoln Lumber Co. et al., 64 Wis. 639, 26 N.W. 184, holds squarely that receiver may be appointed when company is being mismanaged and assets in danger of being lost to stockholders. Miner v. Bell Ice Co., supra, holds when fraud, abuse of trust or misappropriation of corporate funds, at the instance of a single stockholder a court of equity will appoint a receiver. Likewise Supreme Sitting Order of Iron Hall v. Baker, 134 Ind. 293, 33 N.E. 1128, 20 L. R. A. 210; Smith on Receivership, p. 382. sec. 233. 385, subd. e; Brandt v. Allen, 76 Iowa 50, 40 N.W. 82, 1 L. R. A. 653.

W. C. Howie, for Respondents.

Practically all the decisions, Idaho included, are to the effect that receivers will not be appointed except in those cases expressly authorized by statute. Courts, before judgment, can appoint receivers only in those cases mentioned in section 4329, and then only in particular cases. (Sweeny v. Mayhew, 6 Idaho 455, 56 P. 85, and see the numerous cases hereinafter cited.)

Where a receiver pendente lite is sought, it must be conclusively shown that there is great danger that the property will be lost by the delay till the cause can be tried. In sustaining the above principles see the following, among other authorities: High on Receivers, sec. 288; Coquard v. National Linseed Oil Co., 171 Ill. 480, 49 N.E. 563; People v. Weighley, 155 Ill. 491, 40 N.E. 300; People v. District Court, 33 Colo. 293, 80 P. 908; Neall v. Hill, 16 Cal. 145, 76 Am. Dec. 508; French Bank Case, 53 Cal. 495; Smith v. Superior Court, 97 Cal. 348, 32 P. 322; State Investment Ins. Co. v. Superior Court, 101 Cal. 135, 35 P. 549; Fischer v. Superior Court, 110 Cal. 129, 42 P. 561; Jones v. Bank of Leadville, 10 Colo. 464, 17 P. 272; Mason v. Supreme Court of Equitable League, 77 Md. 483, 39 Am. St. Rep. 433, 27 A. 171; Espucla Land etc. Co. v. Bindle, 5 Tex. Civ. App. 18, 23 S.W. 819; State v. Murphy, 118 Mo. 7, 25 S.W. 95.

The necessity to bring suit to recover property of the corporation is no ground, as the stockholders themselves can sue as well as a receiver. (Hallenborg v. Cobre Grande Copper Co. (Ariz.), 74 P. 1052.)

The court has no power to appoint a receiver, except upon express statutory authority, because of internal dissension or bickerings. (Republican etc. Mines Co. v. Brown, 58 F. 645, 7 C. C. A. 412, 24 L. R. A. 776.) A court of equity has no power to remove the officers of a corporation, unless expressly given it by statute. Many states have conferred that power on them, hence the decisions to that effect, but ours has not. (3 Clark & Marshall on Corporations, pp. 2039 (4), 2044-2048; Neall v. Hill, 16 Cal. 145, 76 Am. Dec. 508.)

SULLIVAN, J., STOCKSLAGER, C. J. Stockslager, C. J., Sullivan, J., concurring. Ailshie, J., expresses no opinion.

OPINION

SULLIVAN, J.

This is an appeal from an order of the judge of the fourth judicial district court denying the application of the appellants for the appointment of a receiver for the Charles R. Kelsey Company, Limited, a corporation organized under the laws of the state of Idaho and doing a general merchandising business in Elmore county. The application was based on the amended complaint in the action. All of the allegations of that complaint were admitted by the respondents, as they did not by answer or otherwise deny any of them at the time said application for a receiver was presented and passed upon by the judge. Among many of the allegations of the complaint we find the following: That Charles R. Kelsey, on or about February 1, 1901, owned and operated a general merchandise store in Mountainhome, said county, and that on or about said day was organized the defendant corporation; that the appellants were inexperienced in the merchandising business and that said Kelsey represented to them that his merchandising house was doing a prosperous business and that the new corporation would make large profits, and guaranteed to the plaintiffs or to the appellants, and to all owners of preferred stock an annual dividend of ten per cent, and to that end he caused the stock of said corporation to be issued in preferred and common, $ 25,000 of each. All of the preferred stock he sold to plaintiffs and others who paid cash therefor; that plaintiffs were led to believe that said preferred stock would receive a ten per cent dividend which would be paid semi-annually, but as a...

To continue reading

Request your trial
9 cases
  • Cronan v. District Court First Judicial Districto of State of Idaho
    • United States
    • Idaho Supreme Court
    • June 26, 1908
    ... ... & Trust Co. v. Piper, Judge, 4 ... Idaho 463, 40 P. 144; Dalliba v. Winschell, 11 Idaho ... 364, 114 Am. St. Rep. 267, 82 P. 107; Hall v ... Nieukirk, 12 Idaho 33, 118 Am. St. Rep. 188, 85 P. 485; ... Hanna v. State Trust Co., 70 F. 2, 16 C. C. A. 586, ... 30 L. R. A. 201; ... ...
  • Lowder v. All Star Mills, Inc.
    • United States
    • North Carolina Supreme Court
    • January 6, 1981
    ...or neglect on the part of those operating it, Id. § 60; where there is evidence of diversion of corporate funds, Hall v. Nieukirk, 12 Idaho 33, 85 P. 485 (1906); and even where there is a refusal to permit inspection of corporate books, at least when such a refusal occurs in combination wit......
  • Riley v. Callahan Mining Co.
    • United States
    • Idaho Supreme Court
    • February 8, 1916
    ...28.) A receiver should have been appointed, stock and cash distributed, and the Callahan company dissolved. (Gibbs v. Morgan, supra; Hall v. Nieukirk, supra; Smith Receiverships, sec. 225; Miner v. Belle Isle Ice Co., supra; 4 Thompson on Corp., 2d ed., sec. 4622; Ponca Mill Co. v. Mikesell......
  • Ryan v. Old Veteran Mining Co.
    • United States
    • Idaho Supreme Court
    • August 4, 1923
    ... ... 196, 44 N.W. 56; Riley v. Callahan Mining Co., 28 ... Idaho 525, 155 P. 665; Pfirman v. Success Mining ... Co., 30 Idaho 468, 166 P. 216; Hall v ... Nieukirk, 12 Idaho 33, 118 Am. St. 188, 85 P. 485; ... Miner v. Belle Isle Ice Co., 93 Mich. 97, 53 N.W ... 218, 17 L. R. A. 412; Frontier ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT