Henry v. Ide

• Decision Date: 03 May 1923
• Docket Number: 7 Div. 365.
• Parties: HENRY ET AL. v. IDE ET AL.
• Court: Alabama Supreme Court

96 So. 698

209 Ala. 367

HENRY ET AL. v. IDE ET AL.

7 Div. 365.

Supreme Court of Alabama

May 3, 1923

Appeal from Circuit Court, Calhoun County; A. P. Agee, Judge.

Bill by H. C. Ide and others against C. B. Henry and others, and petition for appointment of receiver. From a decree appointing a receiver, defendants appeal. Affirmed.

See also, 208 Ala. 165, 93 So. 860.

Knox Acker, Sterne & Liles and J. F. Matthews, all of Anniston for appellants.

Sydney J. Bowie and Borden Burr, both of Birmingham, for appellees.

THOMAS J.

The former appeal is reported as Henry et al. v. Ide et al., 208 Ala. 165, 93 So. 860.

The submission of complainants for decree was on the "motion for the appointment of a receiver pendente lite," and the decree of the lower court thereon, in the appointment of a receiver, is not subject to the objection that final disposition of the rights of the parties had been adjudged other than as provided by law. When we consider the prayer of the bill with the averments of the petition for receiver, the decree thereon "in accordance with the prayer of this petition," and the submission for decree on pleading and proof "as noted by the register," we are of opinion that the appointment of receiver was pendente lite. It will be so treated in reviewing the action of the lower court in rendition of the decree from which the appeal is taken.

The general principles or rules underlying the appointment of, or the denying of an application for, a receiver are stated by Judge Freeman in his notes to Cameron v. Groveland Improvement Company, 72 Am. St. Rep. 26, 33. He declared of the exercise of this power:

"The appointment of a receiver is not a matter of right. The court acts only upon a proper case being made out for the exercise of its jurisdiction, according to well-established principles. It is in that sense only that a receiver can be said to be ex debito justitiæ. The application for this appointment is addressed to the sound discretion of the court, and, while this proposition does not 'teach much,' it is gathered from the authorities that the discretion is not arbitrary or absolute, but is a sound and judicial discretion, taking into account all the circumstances of the case, exercised for the purpose of promoting the ends of justice and of protecting the rights of all the parties interested in the controversy and subject-matter, and based upon the fact that there is no other adequate remedy or means of accomplishing the desired objects of the judicial proceeding. Furthermore, this discretion is to be exercised with great caution and circumspection, and only in cases where there is fraud or spoliation, or imminent danger of the loss of the property, if the immediate possession should not be taken by the court."

Among the many cases cited by this eminent authority is Ft. Payne, etc., Co. v. Ft. Payne Coal & Iron Co., 96 Ala. 472, 476, 478, 11 So. 439, 38 Am. St. Rep. 109. That bill was by creditors of a corporation for appointment of a receiver, and relief was denied on account of the generality of the allegations of fraud, which fact was stated by way of conclusion. However, the court said that the power existed in a proper case to appoint a receiver, observing:

"We do not announce what would be our ruling, if it were shown that the governing body and management were acting faithlessly, or were wasting or destroying the property of the corporation. The present bill fails to show such is the case."

In this jurisdiction the general rules declared for the appointment of a receiver are: (1) That resort to that remedy can only be had in extreme cases; or (2) "where it appears that without it the plaintiff will sustain irreparable loss;" and (3) "a receiver should not be appointed at any stage of the proceedings if any other remedy will afford adequate protection to the party applying." From such rules came the corollaries that to justify the appointment of a receiver in limine, before the decree upon the merits of the bill, (a) "a reasonable probability" must be shown "that the complainant will succeed ultimately in obtaining the general relief sought," and (b) that without such appointment in limine there is "imminent danger to the property, the subject of the suit." Hayes v. Jasper Land Co., 147 Ala. 340, 41 So. 909.

In Birmingham Disinfectant Co. v. Smith, 174 Ala. 374, 56 So. 721, the bill was for accounting by the holders of a majority of the stock in defendant corporation, and for the appointment of a receiver. The appeal there was taken from the action of the lower court appointing the receiver without notice to the opposite parties in interest. It is there said, on the authority of Briarfield Iron Works v. Foster, 54 Ala. 622, that receivers should be appointed only "to prevent fraud, save the subject of litigation from material injury, or rescue it from threatened destruction," and that the mere allegation of a disagreement among directors or stockholders as to the management of the business, "in the absence of fraud, would ordinarily be no sufficient grounds to justify such appointment." Little Warrior Coal Co. v. Hooper, 105 Ala. 665, 17 So. 118. The rule stated in Hayes v. Jasper Land Co., supra, is quoted with approval in Wright v. Wright, 180 Ala. 343, 60 So. 931; and in Skidmore v. Stewart, 199 Ala. 566, 75 So. 1, the bill was for foreclosure of the mortgage and the prayer was for the appointment of a receiver. Held, that the appointment of a receiver in aid of a foreclosure suit is not a matter of course, since it must be clearly shown by allegation and proof "that the mortgage security is inadequate, and the mortgagor insolvent, or that there is fraud or other misconduct whereby the rights of the mortgagee are actually imperiled."

The case of Hayes v. Jasper Land Co., supra, was considered by the court on former appeal, and, after reviewing many authorities, it is declared:

"It is recognized by all the authorities that the appointment of a receiver upon application of the minority stockholders is a power exercised with the greatest caution. Several of the authorities illustrating that this power should be exercised only in the plainest cases are found cited in the recent case of Dixie Lumber Co. v. Hellams, 202 Ala. 488, 80 So. 872; but that such receiverships are necessary although the corporation is solvent, under some circumstances, is shown by numerous authorities, as well as standard textwriters."

See Henry v. Ide, 208 Ala. 33, 93 So. 860, 866.

It will be noted of the Hayes Case, supra, that the court was considering the exercise of the lower court's discretion in refusing a receivership, while here it is considering the exercise of discretion by the lower court in granting receivership pendente lite. See, also, 4 Thompson on Corporations (2d Ed.) § 4622; 1 Foster's Federal Practice (4th Ed.) pp. 468, 469; Smith on Receivership, p. 359; Brent v. Brister Sawmill Co., 103 Miss. 876, 60 So. 1018, 43 L. R. A. (N. S.) 720, Ann. Cas. 1915B, 576; High on Receivers (4th Ed.) § 295b.

In Howze v. Harrison, 165 Ala. 150, 156, 51 So. 614, 616, the court said:

"The chancery court will not, as a rule, appoint a receiver to take charge of a corporation and wind up its affairs except in case of insolvency. Edison v. Edison Phonograph Co., 52 N. J. Eq. 620, 29 A. 195. There seems to be an exception to the rule as to insolvency, when the corporation has no properly constituted governing board, or because there are such dissensions in its governing body as to make it impossible for the corporation to carry on its business with advantage to its stockholders; but this power must be exercised with great caution, and only for such time and such extent as may be necessary to preserve the property of the corporation and protect the rights and interests of the stockholders. Edison Case, supra; Jasper Co. v. Wallis, 123 Ala. 656, 26 So. 569."

It is not necessary to again review the several authorities cited by the respective counsel. They were before this court and some of them were discussed on former appeal. However, it should be said that Ashurst v. Lehman, Durr & Co., 86 Ala. 370, 371, 5 So. 731, was a bill for the foreclosure of a mortgage, and the appointment of a receiver was asked without notice; and the right of such receivership is recognized where it appears that the estate "is in danger of loss, from waste, misconduct, or insolvency, if the defendant is permitted to retain the possession," and there is "a reasonable probability of success on the part of the complainant."

In Thompson v. Tower Mfg. Co., 87 Ala. 733, 6 So. 928, the appointment of a receiver without notice was being considered, under a creditor's bill to set aside a fraudulent conveyance, and it was declared:

"It should be a strong case of emergency and peril, well fortified by affidavits, to authorize the appointment of a receiver without notice to the other party."

In Roman v. Woolfolk, 98 Ala. 219, 237, 13 So. 212, the bill in equity was by minority stockholders against the corporation and its officers to protect the interests of the minority stockholders, and it was there announced that the policy of the law is "to leave the affairs of corporate bodies to the management and control of their own chosen agencies, and that a minority of stockholders will not be permitted to displace corporate authority and control, by substituting therefor the policy, management and control of the courts, except in plain cases of such fraud or maladministration as works manifest oppression or wrong to them; and that, before calling upon the court to take into its hands the administration of the corporate affairs it must be made clearly to appear, not only that such oppression or wrong to them depends, but that every reasonable effort...