Platner v. Kirby

• Decision Date: 11 April 1908
• Citation: 115 N.W. 1032,138 Iowa 259
• Parties: WILLIAM E. PLATNER v. GEO. F. KIRBY, LE GRAND QUARRY COMPANY, and MT. VERNON STONE COMPANY, Appellants
• Court: Iowa Supreme Court

115 N.W. 1032

138 Iowa 259

WILLIAM E. PLATNER v. GEO. F. KIRBY, LE GRAND QUARRY COMPANY, and MT. VERNON STONE COMPANY, Appellants

Supreme Court of Iowa, Des Moines

April 11, 1908

Appeal from Linn District Court.-- HON. J. H. PRESTON, Judge.

ACTION in equity by plaintiff as stockholder in the Mt. Vernon Stone Company to have the company dissolved, its business closed up, and a receiver appointed for that purpose. There was a decree for plaintiff, from which defendants appeal.-- Reversed.

Reversed.

Chas A. Clarke & Son, for appellants.

Chas W. Kepler & Son, for appellee.

OPINION

MCCLAIN, J.

In 1894 the plaintiff, who was the owner of thirty-eight acres of land adjoining the town of Mt. Vernon on which was situated a stone quarry with machinery, and which he had been developing and operating for about a year, entered into an arrangement with the defendant Kirby for the formation of the defendant corporation, the Mt. Vernon Stone Company; it being mutually agreed that plaintiff should turn his property over to the corporation, and receive in exchange therefor one hundred and fifty shares of the full paid capital stock of the company of the par value of $ 15,000 and that said Kirby should pay into the treasury of the corporation, $ 15,000 in cash, receiving a like number of shares of full-paid capital stock. This contract was subject to the making of satisfactory arrangements with a railroad company for track and shipping facilities. Later the contract was modified, so that only $ 10,000 should be paid by Kirby, in the event that certain railroad connections were perfected, and a crushing plant established in the neighborhood, and stock of a corresponding par value should be issued to plaintiff for his land. This arrangement was carried out in the organization of the Mt. Vernon Stone Company, save that the money which Kirby agreed to furnish was furnished by the defendant, the Le Grand Quarry Company, of which Kirby was president and the principal stockholder, and the shares of stock in the Mt. Vernon Stone Company were issued to the Le Grand Quarry Company, instead of to Kirby. As plaintiff had knowledge of the issuance of the stock to the Le Grand Quarry Company instead of to Kirby, and the payment of $ 10,000 by that company, he cannot now object that that company, instead of Kirby, became the owner of one-half the stock in the Mt. Vernon Stone Company. Plaintiff duly executed a conveyance and bill of sale of his land and the machinery thereon to the Mt. Vernon Stone Company, and the Le Grand Quarry Company paid $ 10,000 in cash, and to it was issued one hundred shares of stock in the company thus organized.

In the articles of incorporation, it was provided that plaintiff, Kirby, and one Gregg, who was also an officer and stockholder in the Le Grand Quarry Company, should be directors until their successors were elected; Kirby being president and the plaintiff secretary and treasurer. At subsequent annual elections, as the record shows, the officers and members of the board of directors were re-elected from time to time. The business of the corporation was carried on without substantial disagreement between plaintiff and the officers of the Le Grand Quarry Company until 1902, when plaintiff, as a result of dissatisfaction with the results of the business, turned over his books to the officers of the Le Grand Company, and went south on other business, taking no further part in the management of the company until 1904, when this action was instituted to dissolve the corporation and appoint a receiver to wind up its affairs on the substantial allegations that the company has been a financial failure; that the value of its assets has decreased; that it has lost money and is in debt; that there is internal dissension between the stockholders to such an extent that the quarry cannot be operated; and that the Le Grand Quarry Company, being a competing corporation, has operated the company for the purpose of restraining trade and competition with it.

It is conceded that the business of the Mt. Vernon Stone Company has not been successful, and that no dividends have been paid; but it is not alleged nor proven that it is insolvent, and the substantial question for our determination is whether these facts authorize a court of equity at the suit of plaintiff, a stockholder, to dissolve and wind up the affairs of the company. We have omitted reference to many of the facts appearing in the record in regard to the complaints of plaintiff as to the management of the company by the officers of the Le Grand Quarry Company, for the reason that plaintiff's counsel admit in argument that no ground for dissolution is established, unless by Code, section 1640, authority is given to a court of equity to dissolve the corporation which would not otherwise have been possessed by such court. This provision which first appears in the statute law of this State as a section in the Code of 1897, is as follows: "Sec. 1640. Dissolution: receiver. Courts of equity shall have full power, on good cause shown, to dissolve or close up the business of any corporation, and to appoint a receiver therefor, who shall be a resident of the State of Iowa. An action therefor may be instituted by the Attorney General in the name of the State, reserving, however, to the stockholders and creditors all rights now possessed by them." It is to be noticed that the first sentence of this section authorizes courts of equity to dissolve a corporation "on good cause shown," and the second sentence authorizes an action therefor to be instituted by the Attorney General in the name of the State. Counsel for appellee admit that there is no interest of the public at stake requiring or authorizing the institution of such action by the Attorney General, and the question is whether dissensions among the stockholders and lack of success in the business of the corporation and the management of its affairs by its officers so as to discriminate against its business in favor of the business of a rival corporation owning half the stock, is such "good cause shown" as to justify interposition by a court of equity to wind up its affairs.

Section 29 of chapter 1 in title 9 of the Code as reported by the Code Commission (being the chapter relating to corporations for pecuniary profit) was in the following language "When a corporation violates the provisions in this chapter in its management or the transaction of its business or becomes insolvent any stockholder may bring an action in equity to dissolve the same and wind up its affairs and a like action may be brought by the Attorney General in the name of the State. If the court decrees a dissolution it may at the same time appoint a receiver who shall under its direction proceed to close up the business of such corporation." And with reference to the section thus reported the commission says: "It is thought that the protection of the interests of the stockholders, as well as of the public, ought to be provided for when the corporation acts unlawfully or becomes insolvent." When the reported Code was brought before the Legislature for consideration, the joint committee of the two houses in charge of the portion thereof which included the chapter above referred to reported a substitute in this language: "Courts of equity shall have full power on good cause shown to dissolve or close up the business of any corporation and to appoint a receiver therefor...