Manufacturers' Land & Improvement Co. v. Cleary

• Decision Date: 09 November 1905
• Citation: 121 Ky. 403,89 S.W. 248
• Parties: MANUFACTURERS' LAND & IMPROVEMENT CO. v. CLEARY et al.
• Court: Kentucky Court of Appeals

89 S.W. 248

121 Ky. 403

MANUFACTURERS' LAND & IMPROVEMENT CO. v. CLEARY et al.

Court of Appeals of Kentucky.

November 9, 1905

Appeal from Circuit Court, Kenton County.

"To be officially reported."

Action by Walter Cleary and others against the Manufacturers' Land & Improvement Company. From an order appointing a receiver, defendant appeals. Reversed.

S.D Rouse, for appellant.

Meyers & Howard, for appellees.

O'REAR J.

Appellant corporation was organized under the general law in 1887, to endure for 25 years unless sooner dissolved by its stockholders. The corporation's business, as stated in its articles, was to deal in real estate and to buy, own lease, improve, and sell real estate. Its authorized capital is $100,000, but it was provided that it might begin business upon $50,000 being subscribed. About $84,000 was subscribed and was paid up, except three subscribing stockholders appellees' ancestor, W. W. Cleary, being one of the three. It invested its capital near about the time of its organization in certain unimproved real estate in the city of Covington. In addition it incurred debts of some $15,000 in buying real estate, which are secured by mortgages on its property. Its real estate is rented out at about $3,100 per annum. Its salary list is $120 a year, payable to its secretary, the only salaried officer. Its taxes are about $900 a year. It has $7,000 of purchase-money notes for land sold, and some $3,400 cash in its treasury. It is officered, and is a going concern. Appellees, representatives of W. W. Cleary, deceased, a stockholder, brought this suit for a dissolution of the corporation, because, it was alleged, it was doing nothing, had never made any money, its purpose was impossible of execution, and it was insolvent. As an incident to that final relief, appellees sought and obtained the appointment of a receiver of the corporate assets. This appeal is prosecuted from the order of the court appointing a receiver.

Those who embark in a corporate enterprise as stockholders impliedly agree that its affairs shall, so far as they are confined to the scope of the business set out in the articles of incorporation, be controlled by a governing board, selected in the manner provided in the articles and in accordance with the law, and that the corporation shall endure for the purpose for which it was organized for the entire period fixed by the articles, unless sooner dissolved by operation of law. The judgment or discretion of the governing body, usually a board of directors, as to matters intra vires, is entirely beyond the control of the stockholders through the intervention of the courts, except for frauds committed or threatened against the corporation or the minority stockholders. An exception to this general rule is where the corporate enterprise is one impossible of execution. But whether the plan being executed by the governing body is wise, or even whether it may not involve the corporation in ultimate losses, is a matter that the courts could not inquire...