Peiser v. Grand Isle, Inc., 40775

• Decision Date: 02 June 1952
• Docket Number: No. 40775,40775
• Citation: 60 So.2d 1,221 La. 585
• Parties: PEISER et al. v. GRAND ISLE, Inc.
• Court: Louisiana Supreme Court

Page 1

60 So.2d 1

221 La. 585

PEISER et al. v. GRAND ISLE, Inc.

No. 40775.

Supreme Court of Louisiana.

June 2, 1952.

Rehearing Denied July 3, 1952.

Deutsch, Kerrigan & Stiles, Robert Leake, Jr., New Orleans, for relators.

Montgomery, Barnett, Brown & Sessions, by Walter M. Barnett, Jr., Arthur L. Ballin, Leon S. Cahn, New Orleans, for Grand Isle, Inc., respondent, and succession of Alfred D. Danziger, intervenor.

FOURNET, Chief Justice.

The plaintiffs, Henry C. Peiser and Abraham L. Shushan, Sr., owners of stock in the defendant corporation, instituted suit for the appointment of a receiver and for a temporary restraining order prohibiting the corporation, its officers, directors or agents, from disposing of its properties or changing the status of its affairs, including particularly the liquidation of the corporation, pending hearing and determination on the application for receivership. A temporary restraining order and rule nisi issued, directing the defendant to show cause why a receiver should not be appointed, whereupon George Danziger, as administrator of the succession of Alfred D. Danziger--the holder of 97% of the stock of the corporation--intervened and joined with the defendant, Grand Isle, Inc., in opposing the appointment of a receiver. At the hearing on rules nisi, after the plaintiffs had presented their case, the court ordered the rule nisi for a preliminary writ of injunction recalled and set aside, the temporary restraining order dissolved, the rule nisi for appointment of a receiver recalled and set aside, and the case dismissed. On application of the plaintiffs we issued certiorari to review the proceedings below.

Grand Isle, Inc., was organized in 1931 by the late Alfred D. Danziger for the purpose of acquiring, developing, improving and selling real estate; as president and majority stockholder, he controlled its affairs until his death in April, 1948. George Danziger, his brother, was appointed administrator of the succession of Alfred Danziger, and on June 10, 1948, was elected president of the corporation. He has managed its affairs since that date, and by letter of December 14, 1951, in his capacity as president, he offered to purchase the shares owned by plaintiffs (2% of the outstanding stock of the corporation) at issuance value of $100 per share, so as to 'relieve the tax situation by liquidating the corporation and putting the assets through Alfred D. Danziger's succession, as sole stockholder.' A balance sheet of the corporation was furnished, on request, and the offer was then refused. Shortly thereafter plaintiffs received notice of a special meeting of shareholders to be held for the purpose of voting on the dissolution of the corporation by liquidation out of court, whereupon request was made that one of plaintiffs be appointed as coliquidator and their attorneys be allowed to participate in the liquidation. Upon refusal, this proceeding was instituted.

Plaintiffs' suit is predicated on subsections (2) and (11) of LSA-R.S. 12:752, which grants to all district courts in this State jurisdiction to appoint receivers 'At the instance of any shareholder or creditor, when the directors or other officers of the corporation are jeopardizing the rights of shareholders or creditors by grossly mismanaging the business or by committing acts ultra vires, or by wasting, misusing, or misapplying the property or funds of the corporation' (subsection 2), and 'At the instance of any shareholder when a majority of the shareholders are violating the charter rights of the minority and putting their interests in imminent danger' (subsection 11).

For cause of action the plaintiffs charge past and present gross mismanagement and misapplication of the funds of the corporation in many particulars, specifically complaining of (1) the actions of Alfred Danziger in failing to keep financial records of the corporation separate and apart from his personal records, commingling of funds, and his taking from the treasury of defendant for his personal use, without authority, a sum in excess of $100,000, never repaid; (2) the failure of present officers and directors timely to demand or take steps to obtain the return of said money; (3) the actions of past officers and directors (two of whom, Mrs. Isabelle D. Miller, sister of Alfred Danziger, and Miss Emma Pixberg, are still officers and directors) in entering minutes of meetings of shareholders never actually held and of which they (plaintiffs) have never received any notices (other than that of the meeting called for liquidation of the corporation), although the charter was purportedly amended in 1937 to effect a reduction in the value of the shares from $100 to $20 per share; (4) failure to call, give notice of, or hold, annual meetings of shareholders, or keep adequate records, and to submit reports as to the status of the corporation's affairs; (5) the failure to declare and pay dividends out of funds available for that purpose; (6) the purchase of shares of the corporation stock with its funds at varying prices and placing same in the treasury; (7) the action of a majority of the directors (Mrs. Miller and Miss Pixberg) in failing to discharge their duties and abdicating in toto to the majority shareholder; and (8) the payment to the Canal Bank & Trust Co., in Liquidation, of $21,126.86, plus interest, on account of a note dated August 25, 1945, made and subscribed by the corporation, per Alfred Danziger, payable to his order, and by him endorsed in blank, issued without consideration and negotiated by Alfred Danziger to secure his own personal obligations.

Upon trial the plaintiffs were precluded from offering evidence as to the status of the corporation's affairs prior to 1948 due to the court's consistent ruling that evidence as to events antedating the death of Alfred Danziger were inadmissible--receivership, as a remedy, looking rather to the...