Schmidt v. Mitchell

• Decision Date: 30 October 1895
• Citation: 98 Ky. 218,32 S.W. 599
• Parties: SCHMIDT et al. v. MITCHELL et al. (two cases). KELLY v. SAME.
• Court: Kentucky Court of Appeals

32 S.W. 599

98 Ky. 218

SCHMIDT et al. v. MITCHELL et al. (two cases).

KELLY v. SAME.

Court of Appeals of Kentucky.

October 30, 1895

Appeals from circuit court, Jefferson county.

"To be officially reported."

Action by John Mitchell and others against A. L. Schmidt and others to recover possession of the offices of a corporation, and for other relief. From certain orders made in the cause defendants appeal. Reversed in part, and affirmed in part.

B. F Buckner, C. B. Seymore, Byron Bacon, and Ernest Macpherson for appellants.

Pinckney F. Green, for appellees.

LEWIS J.

November 17, 1893, John Mitchell and others, stockholders and alleged officers of the Oregon Gold-Mining Company, a corporation organized under a statute of Kentucky, and having its principal place of business in Louisville, brought this action in the Jefferson circuit court against George L Deitz, A. L. Schmidt, and H. B. Bohmer, the company being by subsequent order also made a defendant. In their petition plaintiffs state, in substance, that for several years the company has owned gold-mining property in the state of Oregon, upon which a large amount of money has been expended, and indebtedness incurred of $40,000 and $200,000, evidenced by bonds, to secure payment of which mortgages on its property were executed. There appears, however, to be another mortgage bond for $30,000 outstanding. They further state defendants Deitz, Schmidt, and Bohmer were, prior to October 17, 1893, president, treasurer, and secretary, respectively, of the company; but, notwithstanding on that day a new board of directors was duly elected, who chose plaintiffs Wolters, Peters, and Matthews in their stead, they have since persisted in an illegal attempt to manage the affairs of the company, and retain possession of its books, papers, and property; and in consequence of the conflict between the old and new boards of directors and executive officers, thus caused, the company is in danger of being wrecked. Charges of mismanagement and refusal to make report or exhibit of their transactions as executive officers, or of the actual financial condition of the company, as they were required to do, are made in the petition against Schmidt, Deitz, and Bohmer; and the relief asked is in these words: "Wherefore plaintiffs pray that said defendants Deitz, Schmidt, and Bohmer be enjoined from interfering with or preventing the said new board of directors or new executive officers from taking possession of the books, papers, and assets of the company, and from further refusing to deliver over any and all books, papers, money, accounts, and other assets in their hands of the company to its new executive officers and new board of directors; and that a receiver may be appointed to take charge of the property until it can be placed in the hands of its new officers; and they pray for all equitable relief." December 7, 1893, Deitz, Schmidt, and Bohmer filed answers, in which, after denying various allegations of the petition, they state and charge that for reasons mentioned, and valid if true, the election of October 17, 1893, was illegal and void as to two directors then elected; and because there was not, excluding them, a quorum present when plaintiffs Wolters, Peters, and Matthews claim to have been chosen president, treasurer, and secretary, they are not legal successors of defendants, nor entitled to be treated as executive officers of the company. December 11, 1893, the lower court, on its own motion, made an order that pending hearing of the motion of plaintiffs for appointment of a receiver neither party should "cause any steps taken, nor allow any application in their names for possession of the mines in Oregon, or for a receiver in Oregon, or any court other than the law and equity division of the Jefferson circuit court." And December 13, 1893, another order was made appointing Charles Merriweather receiver, and authorizing and directing him in that capacity to take immediate possession and control of all property of the company, wherever situated, including lands, money, machinery, and implements in Union county, Or., also all books, papers, and money; and under direction of the court to manage the business, bring and defend suits, and do whatever necessary to acquire, care for, and protect the property, franchises, and rights of the company. It was further ordered that it and all superintendents, agents, officers, or employés forthwith attend to and recognize the rights of the receiver to take possession of all property and assets, and deliver them to him. Defendants Deitz, Schmidt, and Bohmer were ordered to surrender to him all property, money, books, papers, and assets in their hands and under their control, and enjoined from interfering with his taking possession or refusing to deliver to him possession thereof.

The three mortgages referred to were executed by the company to defendant A. L. Schmidt, as trustee for the holders of the bonds, and each contained a clause providing that, in case the company made default in payment of two installments of interest on any of the bonds after due presentation and demand, the trustee should have the right, upon request of the holders of a majority of the bonds, to demand, enter upon, and take possession of the mortgaged property, and as agent of the company use and operate it for the purpose of applying the proceeds and income left after deducting costs and expenses to the payment of accrued interest, and ultimately principal, of the bonds. It appears that about November 10, 1893, Schmidt, as trustee, directed his attorney in Oregon to take possession and operate in his name the mining property, permitting, however, the resident superintendent to remain in possession as his agent. But, the latter declining to recognize his right to possession Schmidt, as trustee of the bondholders, instituted, December 11, 1893, a suit in the circuit court of Union county, Or., to foreclose the mortgages. And December 15, 1893, upon his motion, an order was made by the judge of the Sixth...