Orlando Orange Groves Co. v. Hale

• Decision Date: 29 April 1935
• Citation: 161 So. 284,119 Fla. 159
• Parties: ORLANDO ORANGE GROVES CO. et al. v. HALE et al.
• Court: Florida Supreme Court

161 So. 284

119 Fla. 159

ORLANDO ORANGE GROVES CO. et al. v. HALE et al.

Florida Supreme Court, Division A.

April 29, 1935

Suit by Henry M. Hale and others against the Orlando Orange Groves Company and others. From the decree, defendants appeal.

Reversed with directions. Appeal from Circuit Court, Orange County; J. C B. Koonce, judge.

COUNSEL

Tilden & Hays, W. H. Poe, Dickinson & Dickinson and Pleus, Williams & Pleus, all of Orlando, for appellants.

E. W. &amp R. C. Davis, of Orlando, for appellees.

OPINION

BROWN Justice.

This suit was brought by certain minority stockholders, one of whom, Henry M. Hale, was a director, against the Orlando Orange Groves Company, a corporation, and its other directors and officers, and against J. P. Holbrook and the J. P. Holbrook Company.

This case has been before us before on an appeal from an order made December 30, 1931, granting, without notice, a temporary injunction, restraining the defendants, appellants here, from allowing any further withdrawals of the funds of the Orlando Orange Groves Company or any further dealings in the property of the company, until further order of the court, and from an order denying a motion to dissolve the injunction. On the former appeal, this court granted a supersedeas of the injunction pending the appeal, and on November 25, 1932, rendered an opinion and decision, wherein this court reached the conclusion that 'it has not been shown that the bill is without sufficient equity to authorize the chancellor to issue the said temporary restraining order'; and the orders appealed from were affirmed. See Orlando Orange Groves Co. et al., v. Hale et al., 107 Fla. 304, 144 So. 674, 677, wherein most of the allegations of the bill and answer are summarized.

The case is now before us on an appeal from the final decree, in which the chancellor denied the application for a receiver, and made no reference to the charges against F. H. Thwing, the president of the corporation, which were contained in the bill, and against whom an accounting was prayed as to certain purchases of corporate assets made by him, but did find that 'the said J. P. Holbrook or J. P. Holbrook Company, acquired no interest or right to the drawing account under said contract by virtue of the pretended assignment from F. E. Baxter, and that the defendants J. P. Holbrook and J. P. Holbrook Company were not entitled to draw from said Orlando Orange Groves Company in excess of $300.00 per month,' and that all moneys drawn in excess of said amount by J. P. Holbrook or J. P. Holbrook Company, unless warranted by realized net profits, under and by virtue of said contract, were improperly drawn from the Orlando Orange Groves Company, and decreed that an accounting be had, at the expense of the defendants, before a designated special master, to ascertain, under certain rules laid down in the decree, what amount, if any, was due the company by said Holbrook and said Holbrook Company. The final decree modified the injunction theretofore granted so as to enjoin merely the payment by the defendants of any further moneys of the company to Holbrook or the Holbrook Company on account of said contract until the further order of the court.

A motion filed by the complainants as the final hearing, asking the court to restrain the directors and officers of the defendant corporation from paying, out of the funds of the corporation, any solicitors' fees incurred in the defense of this suit, was denied by the chancellor.

But the chancellor decreed that the defendants pay the costs of the suit and the solicitor's fee of the complainant's solicitors for the bringing and maintenance of the suit, up to the entry of a decree on the accounting, the amount of said fee to be determined when the special master's report of said accounting came in.

It was also decreed that the individuals composing the board of directors of the company (the complainant Hale not being named) return to the treasury of the company the sum of $5,100 paid to the J. P. Holbrook Company by authority of the board of directors after the supersedeas of the injunction order heretofore issued.

A petition for rehearing was made by the defendants, and denied, and the defendants took this appeal from the final decree and the order denying the petition for rehearing, filing some ten assignments of error, and the defendants J. P. Holbrook and J. P. Holbrook Company filed several additional assignments of error. Complainants filed two cross assignments of error, one going to the denial of their application for a receiver and the other to the denial of their motion that the officers and directors of the corporation be enjoined from paying any solicitor's fee incurred in the defense of this suit.

The transcript on this appeal, well prepared and carefully indexed, comes to us in ten volumes, comprised mostly of the testimony and exhibits introduced on the hearing before the special master.

We take it what the failure of the chancellor to order any accounting against the president of the Orlando Orange Groves Company, F. H. Thwing, with reference to the sale of certain securities of the corporation to him, or to even mention the matter in his decree, amounts to a vindication of Mr. Thwing from the charges made in the bill of improper conduct on his part in connection with the sale to him of such securities. In this conclusion the chancellor is amply sustained by the testimony. The applicable legal doctrine to this feature of the case was stated in our former opinion as follows:

'This court is in harmony with the view that a purchase by a director, officer, or agent of a corporation of property from the corporation is not void, but is voidable at the option of the corporation, and that the burden of showing the validity of such a contract, and the fairness and honesty of such a transaction with the corporation is on the director, officer, or agent. Chipola Valley Realty Co. v. Griffin, 94 Fla. 1151, 115 So. 541. See, also, 14a C.J. 120; 7 R. C. L. 760.'

Neither the corporation itself, nor its board of directors, ever questioned these two transactions, one in 1930 and the other in 1931, by which president Thwing, a large stockholder in the company, purchased at one time certain notes and mortgages held by the company having a face value of about $39,000 for about $33,000, and at another time a note of the face value of $50,000, secured by mortgage, for which Thwing paid $47,000. The evidence shows that at the time these sales of securities to Thwing mere made the company was greatly in need of funds to meet pressing demands, upon which suits were threatened, and on account of the business depression and great financial stringency then existing it was very hard, if not impossible, to raise money on securities of this nature. The evidence further shows that president Thwing purchased these securities at the urgent insistence of the manager, and that he paid for them their then full fair market value, or more, and that he would not have made these purchases at any such figures had it not been that he was heavily interested, as a stockholder, in the welfare of the company. So, if the burden of proof had been on Mr. Thwing to establish the fairness and validity and good faith of these transactions, such burden was abundantly borne. Indeed, the evidence shows that the Orlando Orange Groves Company was fortunate in having as its president, and as a large stockholder, a man of means, who could, and did, come to its aid in a time of imperative need.

Nor does the evidence sustain the charge made in the bill that the officers and members of the board of directors of the defendant corporation (excepting from such charge, of course, Mr. Hale, one of the complainants) were 'dominated and controlled' by the defendant J. P Holbrook. The testimony of the directors indicates that they, or most of them, were active business men of Orlando, men of affairs, who could not easily be dominated or controlled by any one, and certainly not by a man who held his position with the corporation under a contract which by its terms the directors could have terminated at any time. The directors who took the stand and testified in regard to this charge, as well as to the charges made against president Thwing, were C. DeWitt Miller, M. C. Overstreet, Clarence Brown, E. C. Duckworth, L. M. Robertson, J. P. Holbrook, and N. P. Yowell, all residents of Orlando, and F. J. Thwing, a resident of Kansas City, Mo., who spent a large part of each year in Orlando. They testified that Holbrook never at any time made any attempt to influence their action as directors, either individually or as a board; that he never approached them in advance of a meeting to find out how they would vote, or to influence their vote, on any proposition that was to come up; that when he had any matter to bring before the board, he did so in open meeting, presented the facts and discussed the proposition on its merits, without attempting any high-pressure methods, and left it up to the board of directors to take such action as they saw fit. These defendant directors were more heavily interested in the financial welfare of the corporation than the complainants, as they owned 853.95 shares of the company's stock, whereas the complaining minority stockholders owned only 257.25 shares. The total number of shares of capital stock issued and sold by the corporation amounted to 3,973.55 shares of a par value of $100 per share; so the minority stockholders who filed this bill owned a fraction over 6 per cent. of the capital stock. The evidence does show that the defendant members of the board of directors had great confidence in Holbrook and high regard for his business ability, and considered that he had...