Secord v. Wheeler Gold Min. Co.

• Decision Date: 22 June 1909
• Citation: 102 P. 654,53 Wash. 620
• Parties: SECORD et al. v. WHEELER GOLD MINING CO. et al.
• Court: Washington Supreme Court

102 P. 654

53 Wash. 620

SECORD et al. v. WHEELER GOLD MINING CO. et al.

Supreme Court of Washington

June 22, 1909

Appeal from Superior Court, Spokane County; E. H. Sullivan, Judge.

Suit by B. C. Secord and others against the Wheeler Gold Mining Company and others. From an order appointing a receiver for the corporation, defendants appeal. Reversed, with directions to dismiss.

Happy & Hindman, for appellants.

Samuel R. Stern, for respondents.

MOUNT J.

Respondents brought this action as minority stockholders in the appellant corporation, alleging the insolvency of the corporation, and also that the trustees named as defendants have been guilty of negligence and mismanagement of the affairs of the corporation, and prayed for the appointment of a receiver thereof to take charge of the books, accounts, and property of the corporation. The appellants answered, denying all the allegations of the complaint relative to negligence mismanagement, and insolvency. The cause was tried to the court, and, at the conclusion of the trial, a receiver was appointed as prayed for. No findings of fact were made. The appeal is prosecuted from the judgment appointing a receiver.

We have examined the evidence in the case and are satisfied that there is no good reason for the appointment of a receiver and that the court abused its discretion therein. The appellant Wheeler Gold Mining Company is a Washington corporation, with its principal office in Spokane. It owns certain mines in the state of California. All its business except the annual meetings of the stockholders, is conducted in California. The office of the secretary and the books and papers of the corporation had been kept in San Francisco for about a year prior to the commencement of the action. In short, all the property of the corporation is located in California, except that the secretary's books were brought to Spokane for the regular annual meeting of the stockholders, about the time this action was begun. The evidence conclusively shows that, at the time of the trial the mines, together with the development work and machinery thereon, had cost the company more than $40,000. These mines were estimated to be worth at least $50,000, and at the time the mines were being operated and were producing between six and seven tons of ore per day at a net profit of $4 per ton. The total indebtedness of the company was about $4,000. The creditors were not making any complaint. These facts show conclusively that the corporation is solvent. In fact, there is no evidence in the record to the contrary. In regard to mismanagement and negligence of the officers, the proof shows that the president, Mr. Jacobs, was one of the three trustees. He was the active head of the company and the manager of the work at the mines. In December, 1907, he notified the other two trustees that he would expect a salary of $100 per month after January 1, 1908, as manager of the mines. This was approved by the other two trustees. The by-laws provide that: 'The members of the board of trustees shall receive no compensation for their services as such; nor shall the company pay for any services rendered except as so expressly provided.' The evidence also shows that Mr. Jacobs made two trips from San Francisco to Spokane to attend stockholders' meetings of the company, and credited his account with $250 for expenses of such trips. It was also shown that the secretary's office and the books and papers were removed from Spokane, Wash., the main office of the company, to San Francisco, Cal., by order of the trustees, for the convenience of the company's business, and it is shown that the company is indebted to Mrs. Jacobs, the wife of the president of the company, in the sum of $3,680, which indebtedness was not shown on all of the semiannual statements issued by the secretary, and the fact of this indebtedness was not known to the stockholders; but the evidence shows that this is a bona fide debt. It is shown that certain stockholders, upon inquiring at the main office, were not furnished with all the information they desired, and did not obtain copies of the by-laws when demaned.

We are satisfied that none of these things above mentioned constitute mismanagement sufficient to justify the appointment of a receiver of a solvent corporation. It is not clear that the president of the company, when acting as manager of the mines, is not entitled to a salary and expenses, especially when the board of directors authorizes the payment thereof. The by-laws are certainly capable of that construction. The books and papers were removed to San Francisco...