Hayes v. Jasper Land Co.

• Decision Date: 30 June 1906
• Citation: 147 Ala. 340,41 So. 909
• Parties: HAYES v. JASPER LAND CO. ET AL.
• Court: Alabama Supreme Court

41 So. 909

147 Ala. 340

HAYES v. JASPER LAND CO. ET AL.

Supreme Court of Alabama

June 30, 1906

Appeal from Chancery Court, Walker County; Alfred H. Benners Chancellor.

"To be officially reported."

Bill by J. H. Hayes against the Jasper Land Company and others. From an order refusing to appoint a receiver, complainant appeals. Affirmed.

London & London, for appellant.

Davis &amp Fite and E. H. Cabaniss, for appellee.

DOWDELL J.

The bill in this case is by a minority stockholder, and in which the corporation and its president are made respondents. The purpose of the bill is to require an accounting by the respondent Musgrove, the president of the corporation, for certain alleged dealings and transactions by him as such officer, and the bill also prays for the appointment of a receiver for the respondent corporation, and is accompanied by a petition to the chancellor for such appointment. On the hearing of this petition the chancellor refused to appoint a receiver, and it is from this order refusing to appoint that the present appeal is prosecuted.

The equity of the bill, and the right of the complainant as a minority stockholder to file the same, are questions that we need not consider. The chancellor, in his opinion accompanying the decree, upheld the equity in the bill, and there is no contention by counsel for appellees that the ruling of the chancellor in denying the petition for a receiver should be here considered with reference to these questions, but solely with references to the question of any necessity for a receivership, on the facts as presented by the petition, bill, answer, and affidavits, on which the application for the appointment of a receiver was heard.

The bill, as amended, avers that of the 4,990 outstanding shares of the capital stock of the Jasper Land Company, the complainant owns 22 1/3 shares, having purchased the same on the 2d day of September, 1905; that the respondent Musgrove has controlled the affairs of the land company since the 29th day of April, 1901, owning or controlling over 4,700 shares of said capital stock; that he has abused his control of said corporation and his trust as vice president and general manager, and later as president that he has loaned to himself, and to companies owned and controlled by him, large sums of money belonging to the land company; that he has called stockholders' meetings without notice, and has presented and had allowed by the stockholders and directors unfounded claims and demands against the land company; that on September 13, 1905, he procured to be declared a dividend of $29.50 per share of the stock of the land company, which was paid out of the capital assets of the company; that he has taken and is now taking from the treasury excessive sums in the form of salaries and expenses; that he is in the absolute control of the said land company, and of its money and assets; and that, unless the same is taken from him and protected by a court of equity, he will continue to appropriate the same to his own use, under various guises and devices, which would make it difficult, if not impossible, to trace and recover the same. It is not averred in the bill that either Musgrove or the respondent corporation are insolvent. The bill further shows that the defendant corporation has a board of directors and officers that have the management and control of its business and affairs, and it is not denied that these officers are administering the business purposes of the corporation, though it is charged that the board of directors are under the domination and control of the said Musgrove, and that through his mismanagement and fraud the corporation will ultimately be destroyed. The answer of Musgrove denies, circumstantially and in detail, the various charges of fraud and mismanagement, and avers that he is perfectly solvent and able to respond in any amount that may be found to be due to the land company upon any of the charges set forth in the bill. He offers to come to an accounting with the company and pay whatever may be found to be due from him to the company. It is further alleged in his answer that both he and the land company are entirely solvent. It is also averred upon information and belief that the complainant is not the bona fide owner of the 22 1/3 shares claimed by him, but that the transfer to him was merely colorable, in furtherance of a conspiracy to harass the respondent Musgrove by bringing this suit. The answer of the land company adopts the answer of Musgrove.

The general rule is well established that the power to appoint a receiver and sequestrate property will be exercised with great caution, and a resort to this remedy can only be had in extreme cases, and where it appears that without it the plaintiff will sustain irreparable loss. Alderson on Receivers, § 49; High on Receivers (3d Ed.) §§ 18,...