Noble v. Gadsden Land & Improvement Co.

• Decision Date: 15 April 1902
• Parties: NOBLE ET AL. v. GADSDEN LAND & IMPROVEMENT CO. ET AL.
• Court: Alabama Supreme Court

31 So. 856

133 Ala. 250

NOBLE ET AL. v. GADSDEN LAND & IMPROVEMENT CO. ET AL.

Supreme Court of Alabama

April 15, 1902

Appeal from chancery court, Etowah county; R. B. Kelly, Chancellor.

Bill by John H. Noble and others against the Gadsden Land &amp Improvement Company and several of its stockholders. Decree denying the relief prayed for, and ordering the bill dismissed for want of equity, and complainants appeal. Reversed.

J. J Willett, for appellants.

Wm. H Denson, for appellees.

TYSON J.

The bill in this cause, after amendment, is the complaint of three stockholders owning in the aggregate 2,800 shares of the capital stock of the respondent corporation, and prays to have the corporation dissolved, and its assets, which consist of 600 acres of land, sold, and its proceeds distributed among the stockholders, and for general relief, etc. The corporation is a private trading one, and has a capital of $2,500,000, divided into 25,000 shares, of the par value of $100 each. The purpose of its organization was the building of a town upon the tract of land owned by it. To this end this land was to be divided into lots, to be sold to those who could be induced to purchase them; and the company was to procure, if possible, the location of industrial enterprises on its land, and thus enhance its value, and make salable its lots. In short, it is what is known as a "boom concern." It was organized when the country was rife with speculation, and now that conservatism in financial matters has returned, after a severe experience during the years of financial depression, the company is left with this tract of land, and nothing more, worth probably fifteen or twenty thousand dollars. Fortunately, it has no creditors, and therefore no one interested in its affairs, except its stockholders, who are shown to have abandoned the enterprise, leaving it to be managed by its board of directors as best they can. For five years its president and secretary have made diligent efforts to have the stockholders meet. Many of them are nonresidents of this state, and those who are residents decline to attend the meetings when called, after being notified and urged to do so. There are 345 of them, and the whereabouts of one-third of the number is unknown and unascertainable, and the remaining two-thirds have lost all concern or interest in the affairs of the company. The fixed charges which the corporation is bound to meet annually, in the way of taxes, licenses, etc., is between six and seven hundred dollars. Its income annually is only about fifty dollars. So that each year a portion of its tract of land is sold by the state, county, and city of Gadsden to pay these charges. It is wholly without credit, and its assets are being sacrificed; the corporation, on account of the abandonment of it by the holders of the majority of its stock, being powerless to prevent it. It is upon substantially the foregoing state of facts, which is shown both by the averments of the bill and the testimony, that the complainants seek relief. On final hearing the chancellor dismissed the bill for want of equity; holding that, in the absence of a statute, the chancery court is without jurisdiction to dissolve the corporation and to distribute its assets at the suit of a minority stockholder.

Where the corporation is a going concern, it is undoubtedly true that a minority stockholder cannot maintain a bill to have it dissolved or to have its assets distributed. In such case, if the shareholders disapprove of the company's management or consider their speculation a bad one, their remedy is to elect new officers, or to sell their shares and withdraw. "They cannot insist on having the company's business closed, and the assets distributed, against the will of a single shareholder who wishes to have the business continued." 1 Mor. Priv. Corp. § 283. But where the corporation has been abandoned by its stockholders, as here, and is therefore powerless to protect its assets, and to discharge its duty to the stockholders as their trustee, minority stockholders, who are cestuis que trustent, if the chancery court has no jurisdiction to rescue the trust fund from the perils endangering its destruction, would be remediless. No efforts of theirs to have their trustee sell the lands and distribute its proceeds could avail them, for the obvious reason that it would require the consent of the holders of a majority of the stock to thus strip the corporation of its assets, which is shown in this case cannot be obtained, not because of their unwillingness to give it, but on account of their lack of interest in the company. Clearly, its directors cannot do so; the corporation not being insolvent. They are merely the managing agents of the business of the corporation, to promote the ends designed by its charter, and do not possess such power or authority. Land Co. v. Dowdell, 113 Ala. 186, 20 So. 981, 59 Am. St. Rep. 105; 3 Thomp. Corp. § 3983; 1 Mor. Priv. Corp. § 513; 2 Cook, Corp. (4th Ed.) § 670. These complainants, desiring, as they do, to have this trust fund protected and administered so as they may get their part of it, have, in our opinion, under the facts of this case, the right to maintain this bill to have the land sold, and its proceeds distributed among the stockholders. On former appeal ( McKleroy v. Improvement Co., 126 Ala. 193, 28 So. 660) we said: "It is held in Planters' Line v. Waganer, 71 Ala. 581, that a private corporation, entered into solely for benefit of the shareholders, and involving no public duty, may be dissolved by the stockholders; and, on the same principle, when the purpose of such an association is a failure, we quite agree with Mr. Thompson that there should be in the chancery court an inherent power to administer the property so as to restore to the cestuis que trustent (the stockholders) their ultimate interest. 4 Thomp. Corp. §§ 4443, 4538, 4545; Fougeray v. Cord, 50 N....