Marcuse v. Gullett Gin Company

• Decision Date: 01 May 1900
• Docket Number: 13,452
• Citation: 52 La.Ann. 1383,27 So. 846
• Court: Louisiana Supreme Court
• Parties: SAMUEL H. MARCUSE v. GULLETT GIN COMPANY

27 So. 846

52 La.Ann. 1383

SAMUEL H. MARCUSE v. GULLETT GIN COMPANY

No. 13,452

Supreme Court of Louisiana

May 1, 1900

APPEAL from the Civil District Court, Parish of Orleans. -- King, J.

Lazarus & Luce, for Plaintiff, Appellant.

Farrar & Lemle, for Defendant, Appellee.

OPINION

NICHOLLS C.J.

STATEMENT OF THE CASE.

Plaintiff's demand is based upon allegations that he is the owner of twenty-five shares of the par value of one hundred dollars each, of the capital stock of the Gullett Gin Manufacturing Company, a corporation created and existing under the laws of the State of Louisiana, with its domicile in the Parish of Orleans; that the capital stock of said corporation, as organized under its charter, is one hundred thousand dollars and that petitioner is advised, informed, believes and so avers, that all of said capital stock was subscribed and paid for.

That the objects and purposes of said corporation are declared to be for the manufacture of cotton gins, cotton presses agricultural implements, engines, and any and all kinds of machinery, and the sale thereof; that under the charter of said corporation, the superintendence and management of its affairs are confided to a Board of Directors, who are to be elected annually, and from said Board are chosen the executive officers of said corporation; and that all of the foregoing will more fully, and at large, appear by reference to the charter of said corporation, a certified copy whereof will be produced upon the hearing of this cause.

That he is advised, informed, believes and so charges, that immediately upon the formation of said corporation the control of its stock was centralized and syndicated in the hands of Albert Baldwin, John H. Hanna, Cartwright Eustis and others presently unknown to petitioner, but who acted in confederation with said parties and under their direction and control; that among those so assisting the said Baldwin, Hanna, Eustis and others, in the operation of the business of said corporation was one B. W. Taylor, who, owning a limited amount of the capital stock, parted with the equitable title thereto, in July, 1887, by the pledge thereof at, or about, the value of said stock at that time, and which said stock was subsequently acquired by the pledgee and transferred for a good and valid consideration.

That the business of said corporation has been large and valuable, and its profits great; that it has continuously accumulated a surplus from its earnings, so that, as appears by the last report to the stockholders of said corporation, on January 1st, 1899, said company had a surplus over and above its capital stock, based upon estimated values (the said statement, under Section 5 of the charter, being made upon the oath of the president and secretary of said corporation), exceeding the sum of $ 143,000.00, thus making the capital stock of the value of $ 243.00 per share.

That the outstanding liabilities of said corporation, as appears by the aforesaid statement submitted by the president and secretary to the stockholders' meeting on December 31, 1898, and which statement was under oath as aforesaid, amounted to the sum of $ 71,422.59; that, after making all allowances for the aforesaid liabilities, the capital stock of said corporation, and the surplus thereof, amounted to the sum of $ 243,603.72, all of which will more fully, and at large, appear by the aforesaid statement, a copy of which is annexed and made part hereof.

That it was the duty of said Board of Directors, after making provision for the discharge of the company's liabilities, to pro-rate and divide among the stockholders, who had invested their funds in said corporation, the profits and earnings thereof, and not by indirection and in violation of law, and without the sanction of the requisite vote of the stockholders, to attempt to increase the capital stock of said corporation, beyond the limit fixed in its charter, by setting aside from the earnings of said corporation the largest portion thereof, and dedicating it as a surplus fund, when, in the conduct of said business, there was no necessity for the same; and that the aforesaid acts of said Board of Directors controlling a majority of the stock were in bad faith and to the wrong and injury of the minority stockholders who were entitled to a fair and just distribution of said company's earnings.

That the management in control of the stock and administration of said corporation, have, with the view, with the intent, and for the purpose of depriving the minority stockholders of their right in and to a just and fair distribution, continuously set aside from the earnings of said company the funds realized from the conduct of said business, and constituted the same a surplus as aforesaid, in order that they might profit thereby, to the prejudice of the minority stockholders, and that the said stock of said corporation has no market value, and petitioner is unable to dispose of the same at anything approximating its value, notwithstanding the fact that he has made repeated efforts to sell said stock to those in control of said corporation, but who, knowing the disadvantage under which petitioner labors (he having no voice in the administration of the affairs of said corporation, and the same being operated in their interest), have declined to purchase said stock, except at a nominal price therefor.

That the capital stock of said corporation, under and by virtue of its charter, is fixed at the sum of $ 100,000.00, no provision being made in said charter for an increase of said capital stock, the only authority for any such increase being made by amendement of said charter in accordance with the provisions of law existing at the time of the organization of said corporation; and that upon the protection afforded to petitioner by the provisions of the charter, and the law controlling the same, he was induced to purchase stock in said corporation, being advised that he was entitled to a fair and just distribution of the earnings of said company, and that it is bad faith on the part of said managing directors to deny petitioner his right to a participation in said fund, under the pretext of creating a surplus, and thereby indirectly increasing the total stock of said corporation without an observance of the provisions of law in such cases made and provided as aforesaid.

That he is, therefore, entitled to an accounting through the instrumentality of a receivership herein of his proportion of the profits earned by said corporation, with interest at the rate of five per cent. per annum from the time when said profits should have been distributed among the stockholders of said corporation, but which were in bad faith withheld from petitioner and the minority stockholders similarly situated.

That the administration of the governing body of said corporation has been reckless and extravagant; that they have from time to time allowed salaries to those forming the "combine" or syndicate, largely in excess of the value of their services, thus operating to the prejudice of the stockholders of said corporation, and particularly of your petitioner and those similarly situated; that there is no provision in the charter of said corporation according to the executive officers thereof salaries for their services, although empowered by said charter to appoint such officers, clerks and agents as they may deem necessary for the business of said company; that under the power so conferred by said charter, the compensation of the executive officers, if allowable, should be commensurate with the services rendered, and not extravagant in the interest of those controlling a majority of the stock and voting themselves large and extravagant compensation.

That the liabilities, as shown by the last annual statement of said corporation's affairs, aggregate the sum of $ 71,000.00; that had the administration of those in charge of said corporation been for the benefit and advantage of the stockholders generally, instead of those particularly favored by the parties in control, there would have been no indebtedness whatever at this time due or owing by said company, and that while said statement shows the alleged indebtedness, petitioner, at the proper time, will surcharge and falsify the same, and upon information, advice and belief, he now denies that the corporation is liable for the amount set out in said statement, with accumulated interest thereon, at the highest conventional rate therefor.

That those in charge of said corporation and its administration and management, to-wit: Albert Baldwin, John H. Hanna, Cartwright Eustis, and those combining and confederating with them, have abused their trust in misapplying the moneys and property of said company to their personal advantage and benefit, and to the great wrong and injury of petitioner and those similarly situated, as well as to the great wrong and injury of said corporation and the creditors thereof; that said parties thus combining and confederating have, from time to time, in closed meeting, appropriated to their personal use and under the guise of "donations" to each other, a total amount of upward of $ 35,000.00, and that said "donations" were made at meetings of the directors, in which the said Baldwin, Hanna, Eustis, and others participated.

That on July 27th, 1885, John H. Hanna moved a "donation" to Albert Baldwin, for his services, in the sum of $ 3,000.00 of the corporation's money; that said motion having been carried, the said amount, as petitioner is advised, informed believes and so charges, was paid out of the corporate fund; that at said meeting, also in addition to the annual compensation allowed George A. Peete, secretary of said company, a "donation" of $...