M. H. Mccarthy Co. v. Dubuque Dist. Court
| Citation | 201 Iowa 912,208 N.W. 505 |
| Decision Date | 06 April 1926 |
| Docket Number | No. 37385.,37385. |
| Parties | M. H. MCCARTHY CO. ET AL. v. DUBUQUE DISTRICT COURT. |
| Court | United States State Supreme Court of Iowa |
OPINION TEXT STARTS HERE
Certiorari to District Court, Dubuque County; P. J. Nelson, Judge.
Original proceedings in this court on certiorari, to review the legality of the defendant's ruling dismissing the plaintiff's petition for the appointment of a receiver to wind up the affairs of a corporation whose charter has expired. Writ annulled.Kenline, Roedell, Hoffmann & Tierney, of Dubuque, for petitioners.
Brown, Lacy & Clewell and Frantzen, Bonson & Gilloon, all of Dubuque, for respondent.
The charter of the Central Lumber & Coal Company, an Iowa corporation, expired January 18, 1925, and has not been renewed. Since the above date, its assets and affairs have been in the possession and under the control of the board of directors and officers thereof.
[1] On September 2, 1925, the M. H. McCarthy Company and T. H. McCarthy, who together own approximately one-third of the common stock of the corporation, filed a petition in the office of the clerk of the district court of Dubuque county, praying the appointment of a receiver to wind up the business and affairs of the corporation and for an accounting. On the same day, the court fixed a date for hearing upon the application for a receiver and prescribed a notice to be served upon the defendants, which included the corporation and remaining stockholders. The defendants appeared and filed answer joining issue on the merits. The petition was entitled at the May term of the district court which terminated after the conclusion of the trial. An original notice of the commencement of the action was also served upon all of the defendants returnable at the October term of court. The trial consumed seven or eight days, during which a large amount of testimony was introduced by both parties. It appears from the evidence that the corporation, at the time of the expiration of its charter, owned and operated fifty lumber yards, most of which were located in this state; that the business of each of the several units was continued under the direction of the board of directors; that new obligations were incurred for the purpose of securing money to continue the corporate affairs; that new material aggregating a large sum was purchased; and that large expenses were incurred in the operation of the several yards. The petition did not charge fraud on the part of the corporate officers nor the misappropriation in any other way of its assets. The real controversy between the minority and majority stockholders is over the method of winding up the corporate business; the majority contending that the assets can be better handled and disposed of by continuing, so far as possible, the business of the several units, whereas the plaintiffs contended that, so far as this was desirable, and legally possible, it should be done by a receiver acting under the authority and direction of the court. At the conclusion of the trial, the court declined to appoint a receiver, and dismissed the action. The plaintiff also asked that the defendants be enjoined from carrying out a contract entered into for the sale of some of the yards. This question has, by the abandonment of the contract, became wholly moot. Immediately following the dismissal of plaintiff's petition, this proceeding was commenced in this court for a writ of certiorari, which was granted and issued.
[2] The illegality alleged in the rulings of the court below, of which complaint is made, was its refusal to appoint a receiver and the dismissal of the cause of action without a final hearing on the merits. The hearing was before the court, and not before a judge in vacation. Thompson v. Benepe, 24 N. W. 601, 67 Iowa, 79;State v. Van Auken, 68 N. W. 454, 98 Iowa, 674;Savings Bank v. Byington, 112 N. W. 192, 135 Iowa, 151.
Section 12713, Code 1924, authorizes the appointment of a receiver by the court or by a judge in vacation for certain purposes. This statute is as follows:
“On the petition of either party to a civil action or proceeding, wherein he shows that he has a probable right to, or interest in, any property which is the subject of the controversy, and that such property, or its rents or profits, are in danger of being lost or materially injured or impaired, and on such notice to the adverse party as the court or judge shall prescribe, the court, or, in vacation, the judge thereof, if satisfied that the interest of one or both parties will be thereby promoted, and the substantial rights of neither unduly infringed, may appoint a receiver to take charge of and control such property under its direction during the pendency of the action, and may order and coerce the delivery of it to him.”
[3][4] An effort was made in the court below, before the trial began, to secure an agreement on behalf of the plaintiffs to a trial of all of the issues upon the merits. Counsel for plaintiff refused to consent thereto, preferring to limit the hearing strictly to the application for the appointment of a temporary receiver. This, counsel for petitioner contends in this court, was the full scope of the trial, whereas it is urged on behalf of the respondent that the trial was on the merits of the only issue tendered by the petition. If the application for the appointment of a receiver was based wholly upon the grounds stated in the statute quoted above, and was for the appointment of a temporary receiver only, then it must be clear that the court had the right to exercise some discretion in passing upon the application. The duty of the court to appoint a receiver under this statute exists when it is satisfactorily shown that the interests of one or both of the parties will be thereby promoted and the substantial rights of neither unduly infringed. The decision of the question as to whether the appointment would promote the welfare of the parties and not infringe upon or impair the interests of either was largely a question of fact. The court might err in its judgment as to the weight and effect of the evidence, or as to the wisdom or necessity of the appointment of a receiver, but error in this respect would not amount to an illegality reviewable on certiorari.
The real point urged by petitioners, however, is that the court was clothed with no discretion in the matter, and that it was its absolute duty to appoint a receiver to take charge of the assets of the corporation and wind up its affairs, the charter having expired and the entity passed out of existence, except for the limited purpose of converting the assets into cash, paying the corporate debts, and making distribution to the stockholders.
[5] Section 8392 of the Code 1924 authorizes corporations “whose charters expire by limitation or the voluntary act of the stockholders [to] continue to act for the purpose of winding up their affairs.” This statute was clearly intended to enable corporations...
To continue reading
Request your trial