M.H. McCarthy Co. v. Central Lumber & Coal Co.

• Decision Date: 20 September 1927
• Docket Number: 37693
• Citation: 215 N.W. 250,204 Iowa 207
• Parties: M. H. MCCARTHY COMPANY et al., Appellants, v. CENTRAL LUMBER & COAL COMPANY et al., Appellees
• Court: Iowa Supreme Court

215 N.W. 250

204 Iowa 207

M. H. MCCARTHY COMPANY et al., Appellants, v. CENTRAL LUMBER & COAL COMPANY et al., Appellees

No. 37693

Supreme Court of Iowa, Des Moines

September 20, 1927

Appeal from Dubuque District Court.--P. J. NELSON, Judge.

Minority stockholders' suit for the appointment of a receiver and the winding up of the affairs of the defendant Central Lumber & Coal Company, a domestic corporation. Decree for defendants. Plaintiffs appeal. Order denying receivership pendente lite and temporary injunction incorporated in final decree affirmed. Final decree reversed, and case remanded.--Affirmed in part; reversed in part.

Affirmed in part; reversed in part.

Kenline Roedell, Hoffmann & Tierney, for appellants.

Brown Lacy & Clewell and Frantzen, Bonson & Gilloon, for appellees.

MORLING J. EVANS, C. J., and STEVENS, FAVILLE, DE GRAFF, ALBERT, KINDIG, and WAGNER, JJ., concur.

OPINION

MORLING, J.

This case was here on certiorari to review the same judgment, report of which may be found in McCarthy Co. v. Dubuque District Court, 201 Iowa 912, 208 N.W. 505. Reference may be had to the opinion there for a statement of the case. It was there held that the remedy by appeal was adequate, and that certiorari would not lie.

I. Did the plaintiffs submit themselves and the case to a final determination of the issues and for the rendition of final judgment?

The petition was filed September 2, 1925. It alleges that the charter had expired, and that the corporation could continue as such solely for the purpose of winding up its affairs; that plaintiff, as a stockholder, was opposed to renewal; that the defendant majority stockholders, instead of providing for liquidation, as provided by law, passed a resolution attempting to authorize the board to proceed with the liquidation in such manner as in their judgment seemed best; that, assuming to act under such authority, the majority adopted a resolution attempting, without right, to authorize the officers temporarily to make such purchases, incur such indebtedness, and do such other things as are reasonably necessary to temporary conduct of the business; that, pursuant thereto, the officers undertook to continue the business, instead of winding it up as speedily as possible; that the officers by means set out therein were seeking to force plaintiffs to become liable, as unwilling partners, in continuing the business, and to avoid speedy liquidation; that the loss of good will is manifest; that the overhead expense of about $ 85,000 per annum is maintained, as for a going business; that further delay in winding up by sale of the yards before they lose their value as going concerns will cause irreparable injury, and will result in waste; that there are internal dissensions as to liquidation, as well as to the right of the corporation to continue business as a going concern. The prayer is:

"That a time of hearing be fixed, and notice thereof be prescribed; that, upon such hearing, a suitable person be appointed receiver, to take charge of and wind up the affairs of the corporation, as provided by law; to have the action of the board in continuing the business rescinded, and decreed null and void, and for an accounting by a personal judgment against the defendant managing officers, and for general relief, including judgment against the defendants for costs."

On the same day, which was a regular day of the May term of court, the court ordered that the hearing on the petition "for the appointment of a receiver be had at 10 o'clock in the forenoon of the 10th day of September, 1925, * * * and that, unless voluntary appearance is made, 5 days' notice thereof be given to defendants" in the manner prescribed. The abstract and amendment recite that, on September 3, 1925:

"There was placed with the sheriff of Dubuque County, for service, a notice to the defendants of the filing of said petition, of the court's order so fixing the hearing on said petition for appointment of a receiver, and, unless appearance thereto is made, the court will appoint a receiver to take charge of the assets of said corporation and wind up its affairs; and further, that, on final hearing, the court is requested to make permanent said appointment of a receiver to wind up the affairs of the Central Lumber & Coal Company, to grant general relief, and for judgment for costs, and requiring appearance and defense thereto before noon of the second day of the next October term, 1925, of said court, which will commence October 5, 1925, otherwise default will be entered, and judgment and decree rendered, as prayed."

On September 4, 1925, there was filed an appearance for all the defendants. The St. Anthony & Dakota Elevator Company was not then named as defendant. On September 7, 1925, the defendants filed answer, the first paragraph of which consisted of a denial that the facts well pleaded were sufficient to entitle plaintiff to have a receiver appointed, or to any other relief. No motion to dismiss or other motion directed to the pleadings was filed. The answer took issue upon the principal allegations of the petition, and prayed that the evidence presented "on the hearing of the application herein be by oral evidence of the witnesses in court, and the prayer of plaintiffs' petition be denied," and petition dismissed, with costs.

The record before us does not set out any order or agreement for change in date of hearing, but recites that, on September 17, 1925, a regular day of the May term, "proceedings were had and continued to and including September 25, 1925, as follows:

"'The Court: Proceed.

"'Mr. Kenline: I take it the court has been advised of the nature of this hearing for the appointment of a temporary receiver.

"'The Court: Just that there was an application made for an appointment.'"

Counsel for defendants thereupon argued that the hearing was not for the appointment of a temporary receiver, but on the question whether the court would take the property out of the hands of the board of directors and put it into the hands of a receiver. He asked for a statement from plaintiffs' counsel "of what he thinks we are going to try." Plaintiffs' counsel then stated:

"It is our claim that we are simply introducing testimony and submitting the record to the court for the purpose of determining whether the facts are such that, under the law, the court should appoint a receiver of the assets of this corporation. The petition, of course, asks other relief that properly will come up in the main hearing and trial of this action. It isn't involved at this time. Here is a petition filed, and in the nature of things, a trial upon the merits can't be had until the October term of court; but at this time we are asking the court to hear the evidence upon the question as to whether or not, under the facts, the court should appoint a receiver of the assets of this company. Whether they call him a temporary receiver or a receiver doesn't matter very much, since, in either event, the receiver has charge of the property under the direction of this court."

"Mr. Brown: I understand that counsel, then, isn't asking for the appointment of a temporary receiver, as distinguished from any other receiver, but that the question for trial here and now is whether or not this court will appoint a receiver to take possession of the business and property of this company; and that is our theory of what is here for hearing, so that there is evidently no dispute on that proposition. * * * That the question to be tried now by this court is whether or not this court will appoint a receiver for the property of Central Lumber & Coal Company. Of course, I may suggest to the court and counsel that, if a receiver is appointed, it must necessarily, for all practical purposes, be a final appointment of a receiver; because this business is of a character that, if a receiver is appointed, the property cannot be taken over and stand still without great loss. * * * If a receiver is appointed at all, it must be a permanent receiver."

The plaintiffs counsel then proceeded to make a statement of the facts, concluding thus:

"We believe that, under this state of facts, it is the duty of this court to appoint a receiver to do what the law says should be done, to wind up its affairs, and avoid a condition which both parties here unite in saying will cause irreparable loss to the stockholders."

Defendants' counsel made his statement in accordance with his contention that a final determination should be made. The court asked whether there was a serious dispute on the facts, defendants' counsel replying that there were no facts pleaded in the petition. The court then said:

"I believe from my examination of these pleadings that there are issues of fact to be determined. You may proceed."

The parties then proceeded with the introduction of their evidence, occupying several days. During the hearing, the plaintiffs amended their petition, alleging, in substance misconduct of the officers in contracting for the sale of a group of yards without competitive bidding, and alleging that a better offer had been made by another company, which the officers refused to consider. The amendment prayed for an injunction, and that the officers be required to offer the group to competitive bids, and that, upon final hearing, the injunction be made permanent. Defendants answered the amendment. At the conclusion of the argument, the court announced that the application for a receiver and application for an injunction would be denied, and, in response to a question by defendants' attorney, said further that an order would be made, dismissing the petition. On September 26, 1925, plaintiffs filed exceptions to the proposed decree, on the ground, among others,...