Reynaud v. Uncle Sam Planting & Mfg. Co.

• Decision Date: 30 June 1922
• Docket Number: 23973
• Citation: 152 La. 811,94 So. 405
• Parties: REYNAUD v. UNCLE SAM PLANTING & MFG. CO
• Court: Louisiana Supreme Court

94 So. 405

152 La. 811

REYNAUD v. UNCLE SAM PLANTING & MFG. CO

No. 23973

Supreme Court of Louisiana

June 30, 1922

Rehearing Denied November 27, 1922

Appeal from Twenty-Seventh Judicial District Court, Parish of Saint James; Philip H. Gilbert, Judge.

Suit by Fermin Reynaud against the Uncle Sam Planting & Manufacturing Company. From a judgment appointing a receiver, defendant appeals.

Judgment annulled and set aside, and petitioner's demand denied.

Charles Louque, of New Orleans, and Howell, Wortham & LeBourgeois, of Convent, for appellant.

Dart Kernan & Dart, of New Orleans, and Guion & Lambemont and Henry L. Himel, all of Convent, for appellee.

DAWKINS J. LECHE, J., takes no part. O'NIELL and ST. PAUL, JJ., dissent.

OPINION

DAWKINS, J.

Plaintiff brought this suit for a receiver for the defendant corporation, alleging in substance the following reasons, to wit:

1. That he was the owner of one-half of the capital stock, amounting to $ 75,000, a director, vice president, and treasurer of the defendant. That he had been refused recognition and denied the right of participation in any of its corporate affairs, including the right to examine or inspect any of its books, papers, and records, as well as all the other rights and privileges of an officer and stockholder.

2. That the other officers and stockholders had willfully wasted the funds of the corporation by denying the ownership of Leon Graugnard of certain mortgage notes against its property, which forced the bringing of suit thereon and the useless payment of $ 4,000 attorney's fees, costs, etc., in connection with the foreclosure suit upon said indebtedness.

3 (by supplemental petition). That notwithstanding there had been realized from the crops of 1917 and 1918 an amount more than sufficient to pay the mortgage indebtedness of $ 41,000, instead of paying same, a large portion of said funds had been paid to the stockholders, other than petitioner, and used in other ways unauthorized by law; as to all of which, petitioner was at no time notified by the other officers of said corporation. This, it was alleged, amounted to mismanagement and a misuse of the property and funds of the corporation to the injury of petitioner and in violation of law; and constituted "a violation by the majority stockholders * * * of the rights of your petitioner, whose interest as such stockholder has thereby been put in imminent danger."

4. That there had been executed against the property another mortgage for $ 15,000, purporting to be for money borrowed to pay for supplies to make the crop, when, as petitioner believed and alleged (not being able to inform himself of the true facts because of being denied access to the records of the corporation) no resolution or proper authority had been adopted for that purpose, and further that no necessity existed therefor. That "petitioner bases and founds said belief upon the fact that, although he is a director of said corporation, and vice president and treasurer thereof, and entitled to be notified of all meetings of the board of directors, he was never, at any time notified to attend," and that this likewise amounted to mismanagement and a misapplication of the corporate funds, in violation of the charter rights of petitioner.

Defendant denied that plaintiff was a lawful stockholder and officer in said corporation, and averred that he had illegally and tortiously possessed himself of certain certificates of stock; that they were obtained while he was receiver for said corporation, and that he used his said official position to obtain possession thereof and having them made out in his name; that they were without any just or legal consideration, because of the plaintiff's inability to deal in the property and stock of the corporation while acting as such receiver; and further, because of the unusual circumstances surrounding the corporation and its stockholders, at the time, it and they were placed in duress, and compelled to submit to the demands of the petitioner.

After a trial on the merits, a receiver was appointed, and directed to continue its business as a going concern; from which judgment, defendant appealed suspensively.

Opinion.

In an opinion handed down this day, in the case of Jacob et al. v. Reynaud, 152 La. 353, 93 [152 La. 815] South. 121, ^[1] on the docket of this court, on rehearing, we have disposed of the issue of the ownership of the stock, holding that as to the 70 shares transferred to Reynaud by the individual stockholders, his title was valid. Hence it is no longer necessary to consider that question here. The sole issue is as to the correctness of the judgment appointing a receiver.

The law of this state governing the appointing of receivers is to be found in Act No. 159 of 1898, the provisions of which, touching the rights of stockholders in cases like the present, are paragraphs 2 and 11 of section 1, reading as follows:

"2. [A receiver will be appointed] at the instance of any stockholder or creditor, when the directors or other officers of the corporation are jeopardizing the rights of stockholders 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.

* * * * * * *

"11. At the instance of any stockholder when a majority of the stockholders are violating the charter rights of the minority and putting their interests in imminent danger."

We will take up the grounds for appointment in the reverse order of their statement above.

4. An examination of the record discloses that there was nothing irregular or unusual in the borrowing of $ 15,000 (save the question of the failure to notify plaintiff as an officer and director which we shall dispose of later in connection with the first ground relied on), but that it became necessary towards the end of the year (October) to finance the farming operations, which, up to that time had been done from funds arising from the crop of the year before; and the said indebtedness was promptly paid out of the crop of the year for which it was incurred.

3. No money was paid to the other stockholders, save such as were officers and employes of the corporation, and then only for services actually rendered. The mortgage indebtedness of $ 41,000, that it was contended under this allegation should have been paid, arose when Mr. Graugnard (whom plaintiff had induced while receiver of defendant company to acquire the mortgage of J. B. Levert on the property) instituted foreclosure proceedings about the time the first receivership ended. The corporation, at that time, had on hand approximately $ 40,000 cash, which was applied on the Graugnard debt, amounting in round figures to $ 80,000, and left a balance of $ 41,000. This latter amount was raised by executing a new mortgage in favor of other parties. In explanation of the failure to apply the cash which the company had on hand upon this last-mentioned indebtedness, it is shown that to have done so would have necessitated the placing immediately upon the property another mortgage to raise funds for the crop of the ensuing year. It was decided, therefore, to allow the existing mortgage to remain and to make the crop with the money in hand.

We see nothing irregular or injurious to interests of stockholders in this.

2. We find that the incurring of the attorney's fees, costs, etc., upon the original mortgage, amounting to approximately $ 4,000, was caused under the following circumstances:

In opposition to the account of plaintiff as receiver in the original receivership of the defendant corporation, the stockholders Jules J. Jacobs, Jr., et al. alleged that the said mortgage indebtedness had been paid. Thereupon Graugnard brought foreclosure proceedings against the property and the fees and costs had to be paid. In justification of this allegation in the opposition to the receiver's account, which, as above stated, was made by the individual stockholders and the corporation at a time when all of its affairs were in the hands of the plaintiff, on the trial of this case it was shown that plaintiff had failed or refused to inform the...