Mack v. De Bardeleben C. & I. Co.

• Decision Date: 19 June 1890
• Citation: 90 Ala. 396,8 So. 150
• Court: Alabama Supreme Court
• Parties: MACK v. DE BARDELABEN C. & I. CO.

8 So. 150

90 Ala. 396

MACK v. DE BARDELABEN C. & I. CO.

Supreme Court of Alabama

June 19, 1890

Appeal from chancery court, Jefferson county; THOMAS COBBS Chancellor.

Bill by T. A. Mack against the De Bardelaben Coal & Iron Company. From a decree dissolving an injunction granted thereon complainant appeals.

R H. Pearson, Hewitt, Walker & Porter, and Tompkins &amp Troy, for appellant.

Webb & Tillman and Weatherly & Percy, for appellee.

STONE C.J.

The Eureka Company is a mining and manufacturing corporation, having its Situs and business residence in Oxmoor, in Jefferson county. Its history may be briefly stated as follows: There was first an association and incorporation under the general statutory provisions, but it had a different name. By special enactment, approved November 5, 1862, (Sess. Acts, p. 118,) it was incorporated as the "Red Mountain Iron & Coal Company." Its declared purposes were "mining for coal and iron, and the making and general manufacture of iron on their lands in Shelby and Jefferson counties." This act of incorporation was somewhat amended by act approved March 3, 1871, (Sess. Acts, p. 257.) By statute, its name was changed to the "Eureka Mining Company of Alabama." (Sess. Acts, 1866-67, p. 558.) By act approved December 6, 1873, (Sess. Acts, 139,) some additional provisions were enacted in reference to said corporation.

What we have stated above we have gleaned from private enactments, which, with the exception of a clause in the act of 1873, to be considered further on, are not before us in such form as that we can consider them. They are introductory to the opinion which follows, and will make it more easily understood. This is the sole purpose of their insertion here. No ruling will be based on their provisions, save the one clause in the act of 1873. The De Bardelaben Coal & Iron Company is another corporation in Jefferson county, engaged in substantially the same lines of business and trade, and has its business Situs nine miles from that of the Eureka Company. In the further progress of this opinion we will characterize them as the "Eureka Company" and the "De Bardelaben Company." The present bill was filed by Mack, a stockholder and director of the Eureka Company. It sets forth that the stock of the Eureka Company consists of 8,308 shares, of which complainant, Mack, owns 3,185 shares. That in October, 1889, the De Bardelaben Company purchased and became the owner of 4,673 shares of the Eureka Company's stock, being a majority of the whole number of shares. That soon thereafter a meeting of the Eureka Company was held in Cincinnati, Ohio, at which three of its directors, including its president, resigned, and H. F. De Bardelaben, D. Roberts, and A. T. Smythe were elected in their stead, De Bardelaben being made president, and Roberts secretary. De Bardelaben was president of the De Bardelaben Company, and Roberts and Smythe were directors in that corporation. A clause in the bill contains, we suppose, a clerical error, which renders it difficult to be understood. It should probably be read as follows: "That they, [the controlling board of the De Bardelaben Company,] in this way had sufficient number of themselves to assume the office of directors of said Eureka Company, to make a majority of the board, and in this way unlawfully and illegally assumed to act as directors, and at once took absolute charge and control of all the property of the Eureka Company." The import of this averment is that, in the election at Cincinnati, the De Bardelaben Company, through its majority voting power, acquired a majority of the governing body, by electing, through its majority of the stock in the Eureka Company, three of its own board, (De Bardelaben, Roberts, and Smythe,) and that these three constituted a majority of the board of directors of the Eureka Company. Based, as we suppose, on the assumed truth of this averment, the present bill was filed, and seeks to enjoin the De Bardelaben Company, an alleged rival corporation, from voting its majority stock in an election of directors for the Eureka Company, soon to come off. The bill makes no averment that complainant, before instituting his suit, made any attempt, or preferred any request, to have the wrongs he complains of redressed by a suit instituted by and in the name of the corporation, and it is not pretended that he made such request. If it were true that De Bardelaben, Roberts, and Smythe, president and directors of the De Bardelaben Company, constituted a majority of the board of directors of the Eureka Company, this would excuse Mack for not requesting proceedings for redress through the corporate authorities of the latter corporation. Elected as they were by the De Bardelaben Company, holding the majority of the stock as it did, the presumption that a request of suit would be denied is so strong as to relieve Mack of the necessity of making it. The law never requires a vain ceremony. Manufacturing Co. v. Cox, 68 Ala. 71; Merchants & Pl. Line v. Waganer, 71 Ala. 581; Nathan v. Tompkins, 82 Ala. 437, 2 South. Rep. 747; Rothwell v. Robinson, 38 N.W. 772; Railroad Co. v. Woods, 88 Ala. 630, 7 South. Rep. 108, 647; Hawes v. Oakland, 104 U.S. 450.

In consequence of certain denials contained in the answer it became necessary to file an amended bill, which was done February 3, 1890. By that amendment it is shown that the board of directors of the Eureka Company consists of seven members, only three of whom (De Bardelaben, Roberts, and Smythe) were elected after the De Bardelaben Company became the owner of a majority of the Eureka's stock. Four of the directors (Mack, M. H. Smith, L. E. Miller, and J. W Means) were directors in the Eureka Company before and at the time of the purchase, and are still directors. It is not charged that either of these four is a stockholder or director in the De Bardelaben Company. The charge in reference to M. H. Smith is as follows: "That the said 4,683 shares also includes the 10 shares of stock now standing on the books of the Eureka Company to M. H. Smith, who is one of the directors of the said Eureka Company, but who has no interest in said company or its stock, but who holds the same in the interest of said De Bardelaben Coal & Iron Company, and who acts in all matters connected with said Eureka Company in the interest of, and as requested by, the defendant, H. F. De Bardelaben." If said M. H. Smith had not been a director before the De Bardelaben Company's purchase of the stock in the Eureka Company, but, like De Bardelaben, Roberts, and Smythe, had been elected after the purchase, possibly the presumption would be that he would exercise his power in the interest of the company to which he owed his election. And, possibly, in such case, no request for suit by the corporation would be necessary as a prerequisite to a suit by a stockholder. We need not decide these questions, as this case does not raise them. According to the averments of the bill, Smith had no interest in either corporation, and he was not indebted to the De Bardelaben Company for his election. We cannot presume that he will contribute to or sanction bad faith in the government of the corporation. It is only when interest antagonizes duty that equity will stretch forth its restraining hand. Railroad Co. v. Woods, 88 Ala. 630, 7 South. Rep. 108; Cook, Stocks, § 618; Moses v. Scott, 84 Ala. 608, 4 South. Rep. 742. We think the bill, as amended, is fatally defective in not averring a previous request or appeal to the majority of the directors to institute proceedings in the name of the corporation, to restrain the apprehended abuse of power by the De Bardelaben Company, through its ownership of a majority of the stock of the Eureka Company. We announce this principle as the logical result of our ruling in the case of Railroad Co. v. Woods, not because of alleged wrongs perpetrated. We place it on broader grounds than that. It is our intention to adhere literally to the doctrine there announced. The answers of the defendant, while they do not dispute the alleged intention of the De Bardelaben Company to vote its entire stock in the election of directors for the Eureka Company, deny every charge of...