State ex rel. McCoy v. Farmers' Co-Op. Packing Co.

• Decision Date: 31 December 1926
• Docket Number: 6245.
• Citation: 211 N.W. 602,50 S.D. 627
• Parties: STATE ex rel. McCOY et al. v. FARMERS' CO-OP. PACKING CO. et al.
• Court: South Dakota Supreme Court

211 N.W. 602

50 S.D. 627

STATE ex rel. McCOY et al. v. FARMERS' CO-OP. PACKING CO. et al.

No. 6245.

Supreme Court of South Dakota

December 31, 1926

Appeal from Circuit Court, Beadle County; Alva E. Taylor, Judge.

Petition by the State of South Dakota, on the relation of J. C. McCoy and others, to dissolve the Farmers' Co-operative Packing Company. The petition was granted, and from an order denying the petition of C. W. Best to intervene and set aside the judgment he appeals. Affirmed.

Kirby Kirby & Kirby, of Sioux Falls, for appellant.

McCoy & McCoy and Gardner & Churchill, all of Huron, for plaintiffs and respondents.

Null & Royhl, of Huron, for defendant and respondent.

GATES P. J.

Defendant Farmers' Co-operative Packing Company Company became incorporated under the laws of South Dakota in July, 1917. At about the month of June, 1922, it had completed the construction of a packing plant near Huron at an approximate cost of $750,000. The stockholders, officers, and directors were never able to secure financial means to operate the plant. On March 6, 1925, it was adjudged bankrupt, and on June 29, 1925, the plant was sold at bankruptcy sale for $751,000. On February 1, 1926, the state's attorney of Beadle county, on relation of himself and certain stockholders of the corporation, obtained leave from the circuit court to bring, and did begin, by the service of summons and complaint, an action to dissolve the corporation. The corporation demurred to the complaint for want of facts which was overruled, and, defendant electing to stand upon the demurrer, testimony was taken, and the court entered judgment as prayed on February 15, 1926.

On February 24, 1926, one Best, a stockholder claiming to act for himself and a majority of the stockholders, submitted to the court a proposed answer in intervention and obtained from the court an order requiring plaintiff and defendant to show cause why the judgment should not be vacated and leave granted to file the petition and answer in intervention.

At the hearing the parties submitted evidence pro and con, and on March 18, 1926, the court entered an order denying the relief sought by Best. From such order he appeals.

Appellant's first assignment of error is as follows:

"(1) That the court upon the proceedings as shown by the record had no jurisdiction to enter judgment against the defendant corporation dissolving said corporation."

If this assignment presents anything for review under Supreme Court rule 4, it presents only the naked question as to whether the court had jurisdiction of the subject-matter of the action and of the person of the defendant. Aside from the matter of the effect of the adjudication in bankruptcy on the status of the corporation, which is hereinafter referred to, the court had jurisdiction of the subject-matter of the action by virtue of sections 2782, 2783, Rev. Code 1919, as amended by chapter 289, Laws 1919. It had jurisdiction of the person of the defendant by the service of process upon defendant and its appearance in the action.

Appellant next urges:

"(2) That such judgment was entered in collusion and fraud between the plaintiffs and defendant."

This so-called assignment asserts error, but does not point out error. Hedlun v. Holy Terror Min. Co., 16 S.D. 261 281, 92 N.W. 31, 36; Mahoney v. Smith, 41 S.D. 278, 170 N.W. 140. However, a study of the affidavits reveals nothing to convince us that the trial court abused its discretion in refusing to vacate the judgment. Not only was no fraud shown on the part of relators and defendant, but the court affirmatively found that Best and his associates secured by fraud and misrepresentation proxies from a large number of stockholders and voted them against voluntary dissolution contrary to the representations made by them when they received the proxies.

Appellant next assigns:

"(3) That no findings of fact or conclusions of law were made upon which the judgment of dissolution could be based."

The court included in the judgment a general finding to the effect that all of the allegations of the complaint were true. The practice of inserting such a general finding in the judgment is not to be commended, but it is not cause for reversing the judgment even if the proposed intervener is in position to raise the question.

Appellant's next assignment of error is:

"(4) That the defendant corporation, being in bankruptcy, its powers were suspended and the circuit court of Beadle county could acquire no jurisdiction over such company without first obtaining the consent of the federal court and without joining the trustee in bankruptcy as a party defendant."

There are a few cases which hold that by reason of adjudication in bankruptcy, or even of hopeless insolvency, the corporation is to be deemed dissolved for the purpose of determining the liability of stockholders, but they go no farther than that. Slee v. Bloom, 19 Johns. (N. Y.) 456, 10 Am. Dec. 273; State Savings Assoc. v. Kellogg, 52 Mo. 583; Penniman v. Briggs, Hopk. Ch. (N. Y.) 300; Sprague-Brimmer Mfg. Co. v. Murphy F. G. Co. (C. C.) 26 F. 572. But the great weight of authority is to the effect that adjudication in bankruptcy does not dissolve a corporation nor suspend the right of the corporation to elect officers or take corporate action. Thus in Black on Bankruptcy (3d Ed.) § 146, the author says:

"But there is nothing in the language of the act, nor in the necessary consequences of such a proceeding, to prevent the corporation from resuming its business and the exercise of all its corporate functions, after it shall have obtained a discharge; and so long as that is possible, it cannot with any propriety be said that the company is dissolved. This view has been picturesquely expressed by the court in Georgia in the following terms: 'The bankruptcy of a corporation does not put an end to its corporate existence nor vacate the office of its directors.' A corporation of this state cannot be dissolved by an act of Congress, nor by the administration thereof through the federal courts. Georgia created, and she alone can destroy. Besides, it is not the purpose of the bankruptcy law to dissolve corporations. The assets are

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