Meyer v. Meyer Bros., Ltd.

• Decision Date: 26 March 1906
• Docket Number: 15,763
• Citation: 40 So. 794,116 La. 456
• Court: Louisiana Supreme Court
• Parties: MEYER et al. v. MEYER BROS., Limited, et al

40 So. 794

116 La. 456

MEYER et al. v. MEYER BROS., Limited, et al

No. 15,763

Supreme Court of Louisiana

March 26, 1906

APPEAL from Sixth Judicial District Court, Parish of Ouachita Luther Egbert Hall, Judge.

Action by Annie R. Meyer and Sol Meyer, Jr. against Meyer Bros Limited, and Sol Meyer, Sr. Application for receiver was denied, and plaintiffs appeal. Affirmed.

Albert H. Leonard and E. Tyler Lamkin, for appellants. Hudson, Potts & Bernstein, for appellees.

OPINION

BREAUX C.J.

Under the order of the district court the action was limited to a suit for the appointment of a receiver to manage and liquidate the business of Meyer Bros., Limited.

Plaintiffs originally sued for the appointment of a receiver, and asked that, in the event the court should conclude that Meyer Bro Limited, is not a corporation, then that the property be judicially sequestered and the business liquidated through the court's action.

The order of the court compelling the defendant to elect had the effect of limiting the demand to the appointment of a receiver.

Meyer Bros., Limited, is a commercial firm, large, successful, and prosperous. The firm originally consisted of three brothers Herman, Sigmund, and Solomon, Sr. The latter only survives, and is sued by his sister-in-law, the widow of Herman Meyer, who with Sol Meyer, Jr., are the testamentary executors of the last will and testament of the late Herman Meyer.

After the death of Sigmund in 1895, Herman and Sol, Sr., became the owners of the interest which Sigmund left at his death, and they continued the business under the same firm name.

In 1901, they (Herman and Solomon) agreed to form a joint-stock company, limited. They, with other incorporators, whose interest was comparatively limited, signed a charter of incorporation known as "Meyer Bros., Limited." The capital stock was fixed at $ 250,000.

The original subscription list, forming part of the charter, shows the amount of shares subscribed.

Plaintiffs' main contention is that Meyer Bros. did not transfer the property that they were to transfer to the corporation and that no stock certificates were issued at the time.

The stock was, none the less, subscribed for in full.

Herman Meyer died on the 17th day of March, 1904.

Plaintiffs allege, in substance, that after the death of Herman Meyer, A. A. Goldschmidt, the bookkeeper of Meyer Bros., with Solomon Meyer, Sr., in order to defraud the estate of Herman Meyer, made a sale from Meyer Bros. to Meyer Bros., Limited, and shortly thereafter followed the sale with an entry on the books of the firm of Meyer Bros., Limited, in order to make it appear that Meyer Bros. had transferred, in accordance with their understanding, their stock to Meyer Bros., Limited. The asserted false entry reads as follows:

"February 29, 1904. The transfer to Meyer Bros., Limited, having now been effected, the following entries are made:

Solomon Meyer has interest, May

1, 1901

$ 57,186 93

Herman Meyer has interest, May

1, 1901

81,933 43

Reserve account

$ 41,587 19

Adjusted

200 79

41,787 98

$ 180,908 34

Good Will

29,991 66

Total

$ 210,900 00

"For which Meyer Bros. received 2,109 shares, equal to $ 210,900."

Plaintiffs further charge that, still conspiring to defraud the heirs of Herman Meyer, Goldschmidt and Solomon Meyer, Sr., falsely executed as of date February 29, 1904, certificates of stock in Meyer Bros., Limited, as follows:

Solomon Meyer

1,055 shares

Herman Meyer

1,054 shares

A. A. Goldschmidt

100 shares

M. Hoffman

50 shares

Alfred Feibleman

20 shares

H. P. Marks

75 shares

Fred Levi

50 shares

W. B. Fox

10 shares

James Meyer

1 share

Leaving not issued

85 shares

2,500 shares

It is charged that the certificates of stock were not issued by the secretary of the company in February, 1904, but were executed and issued after the death of Herman Meyer.

Plaintiffs aver the additional ground that the business was profitable before the death of Herman Meyer, but since his death it is unprofitable and unsatisfactory -- results, it is urged by plaintiffs, brought about by the large and unjustifiable increase of the salaries paid to officers and employes, and by the false and fraudulent entries made May 29, 1903, on the books for the purpose of defrauding the estate. Plaintiffs specially point to a misleading entry of $ 22,500 made to wrong them. Plaintiffs aver that the entry is untrue, for the reason that no note was executed at the time; that Herman Meyer paid the draft for sad amount; that the attempt was, on the part of defendant, to keep the matter secret in order to appropriate the amount. We will hereafter, in our decision, specially take up this charge.

Fraud, mismanagement, and usurpation are laid at the door of Solomon Meyer, Sr., by plaintiffs. Plaintiffs charge that he failed, neglected, and refused to render them statements and inform them touching their interests in the firm, and that they repeatedly requested him to let them examine the books. He persistently refused. After repeated attempts they, in the end, succeeded in having the books examined by a competent accountant, and a balance sheet struck, which show that on January 1, 1905, the assets of the business amounted to $ 442,354.34, and the liabilities to $ 154,578.14. Plaintiffs urge that the assets will be greatly diminished to their loss and injury. They ask for a statement of accounts and for the balance which they claim is due them. They pray for a judicial sequestration of the whole business.

The defendant interposed an exception of the ground that there was an improper joinder of parties defendant; there was no privity of interest between Meyer Bros., Limited, and Sol Meyer; and that the demands of plaintiffs are inconsistent and antagonistic. The exception also sets forth that there was an improper cumulation of actions against Meyer Bros., Limited, to wit, the suit for an appointment of a receiver, and in addition in the same petition a suit against Sol Meyer for the liquidation of the commercial firm of Meyer Bros. and against said Meyer personally. Lastly, defendant pleaded estoppel, on the ground that the late Herman Meyer signed the charter incorporating the firm of Meyer Bros., Limited; that he was one of the creditors and its vice president, and received an annual salary, and holder of a large amount of the issued and outstanding capital stock of the company; that Herman Meyer, from the creation of the corporation in 1901 until his death in 1904, participated in the business affairs of Meyer Bros. and as vice president of the corporation in the absence of the president he acted as president, and always held out that the corporation had been legally organized.

Sol Meyer, Sr., interposed an exception in all respects similar.

Reverting to the exception of improper joinder of defendants, the district court found that the demands were inconsistent, and sustained the exception to the extent of ordering the plaintiffs to elect on which of the two demands set forth in the petition they elected to proceed.

Plaintiffs, in compliance with the court's direction to elect elected to proceed on the demand for the appointment of a receiver, and by reason of this election the other demand was dismissed as in case of nonsuit.

After this action of the court, the defendants answered, denying generally the allegations of plaintiffs, except they alleged that the corporation of Meyer Bros., Limited, had been legally organized; that after it had been organized the shares had been issued.

They further alleged in defense that shares of the corporation subscribed for by the clerks of Meyer Bros., Limited, had been partly issued and were held in trust by the company for the subscribers until fully paid; that other shares subscribed for had not been issued because not paid.

Defendants admitted that on the 30th day of May, 1903, they had received Herman Meyer's draft on J. Weis for $ 22,500 as a loan, and they alleged that they delivered to Herman Meyer its note for the amount and 6 per cent. interest, payable to the company's order, and by it indorsed in blank; that the entry of the transaction was made upon its books at the time; that the said note, by whatever hands held, is a valid claim against the corporation. They deny all other charges brought against them by the plaintiffs.

The trial was subsequently proceeded with and a number of witnesses were heard.

The application for the appointment of a receiver to defendant company was rejected by the court.

Plaintiffs appeal.

The application, as the issues come to us on appeal, is for the appointment of a receiver. The charges brought by plaintiffs are of a very serious nature. Testimony covering many pages has been introduced to sustain them. At least as many pages were taken up by defendant's testimony in opposition.

We have considered carefully these issues, and are not convinced that in the present state of the case there is ground for the appointment.

Our reasons for thus concluding are that the rights of stockholders do not seem to be in the least peril. The corporation is entirely solvent. The surviving brother, Solomon Meyer, Sr., is a man of large means and amply able to meet all the demands urged. It does not appear to us that in any view the business has been so grossly mismanaged as to require such a radical change as that for which plaintiffs contend.

For reference sake we reproduce in the margin three of the sections of the law germane to the subject. ^[1]

The plaintiffs seek to bring the case within the terms of the statute; that is, within the provision of the quoted sections in the margin.

The fraud charged would require strong evidence to be convincing.

The purpose of the defendant company...