Van Antwerp Realty Corporation v. Cooke

• Decision Date: 13 June 1935
• Docket Number: 1 Div. 847
• Parties: VAN ANTWERP REALTY CORPORATION et al. v. COOKE.
• Court: Alabama Supreme Court

162 So. 97

230 Ala. 535

VAN ANTWERP REALTY CORPORATION et al. v. COOKE.

1 Div. 847

Supreme Court of Alabama

June 13, 1935

Appeal from Circuit Court, Mobile County; J. Blocker Thornton Judge.

Suit in equity by Emily A. Cooke against the Van Antwerp Realty Corporation and others. From a decree overruling a demurrer to the bill, respondents appeal.

Affirmed.

B.F McMillan, Jr., and Mahorner & Mahorner, all of Mobile, for appellants.

Inge Stallworth & Inge, of Mobile, for appellee.

FOSTER Justice.

This is a minority stockholders' bill, and alleges an array of misdeeds by the management, which the directors and stockholders have been called on to correct, and which they refuse to do, but rather approve such conduct. Complainant is not an officer, but alleges that she owns 679 shares of the par value of $100 each. The bill alleges that she and respondents own all the stock as follows:

Complainant 679 shares

Gabriella Bates 10 shares

Cecil Bates 5 shares

Emily Seibt 10 shares

Gabriella Van Antwerp 714 shares

James C. Van Antwerp 714 shares

Dan Van Antwerp 724 shares

Edith Covey 357 shares

Paul T. Van Antwerp 357 shares

John F. Aldridge 1 shares

Sallie Van Antwerp Aldridge 713 shares

Garet Van Antwerp 714 shares

They all inherited from

Mrs. Catherine Van Antwerp 2 shares

---- ---------

Total number of shares 5000

Par value $500,000.

Its name is Van Antwerp Realty Corporation, Inc., organized under the laws of Alabama, and owns many pieces of very valuable real estate in Mobile. Its chief income consists of rents received from that property.

The bill alleges that the directors are Gabriella Van Antwerp, James C. Van Antwerp, Dan Van Antwerp, John F. Aldridge, and Garet Van Antwerp. All are brothers and sisters, except that Mr. Aldridge is a brother-in-law, the husband of Sallie Van Antwerp Aldridge; and that complainant is another sister; that the other stockholders are children of brothers or sisters; that the stock was all given them by Mrs. Catherine Van Antwerp, the mother and grandmother, respectively, of the stockholders or their wives, except two shares which she retained, and which they inherited from her at her death; that it was founded by the late Dr. Garet Van Antwerp, their father or grandfather. That she is the only living child of these parents who is not a director of the corporation.

The bill then sets forth in several paragraphs a catalogue of items of mismanagement due in part to negligence, and in part to an intent to donate large sums to various persons, some for rent as tenants, and some by way of loans to the stockholders, or their family connections. It alleges that many solvent tenants have accumulated large debts for rent, aggregating approximately $20,000, by reason of the negligence of the officers in not collecting them. The names and amounts of each are given, with a statement of their solvency and ability to pay the rent. That no serious effort has been made to collect the amounts from them. That there has been charged off on the books debts for rent aggregating $46,195.01, or more, due to the negligence of the management. That they permitted Dr. Garet Van Antwerp to withdraw $78,741.64 with no means except his stock in the corporation, worth less than the amount so withdrawn; and they continue to pay him large sums monthly as dividends on his stock. Likewise, they have advanced $18,000 to one, $22,000 to one, and $38,000 to another, all as loans, which is ultra vires the corporation, with no effort to collect them, and that large sums are paid them monthly as dividends declared on their stock, in equal proportionate amount with the other stockholders. That the total sum withdrawn in that form exceeds $100,000.

It then alleges the organization of a corporation called the Best Dairies, Inc., with funds of the defendant corporation, that its operation has been at a steady loss, and that the directors of said Van Antwerp Realty Corporation are supplying themselves with dairy products for which they pay nothing; all aggregating a large sum and without a proportionate allowance to complainant.

The bill shows that complainant has unsuccessfully sought to have corrected the said items of mismanagement through the directors and stockholders, but that they took no action in that respect.

The prayer is (1) for a receiver of the corporation to operate the business until it should be dissolved, in the judgment of the court; and then (2) dissolve it and distribute its assets; and (3) that the officers be enjoined from allowing or permitting the stockholders from withdrawing further funds or dividends or any distribution of assets until their indebtedness has been paid; and (4) that the officers be held to account to the corporation for the sums lost to it by reason of the negligence or their ultra vires acts, and for personal judgments against them for such amount; and (5) for general relief.

The bill does not set out a copy of the certificate of incorporation with its charter powers, nor are they otherwise stated in the bill.

The allegation that certain acts are ultra vires is therefore the statement of a conclusion, and not a proper pleading of facts.

It is well understood that a receiver will not be appointed of a corporation at the suit of a minority stockholder when the corporation is solvent and a going concern transacting the business for which it was incorporated, except when there is no properly constituted board of directors, or by reason of dissensions among them it is impossible to carry on ( Grand Lodge, K.P., v. Shorter, 219 Ala. 293, 122 So. 36), or there is a scheme to wreck the corporation and dissipate its assets, or "when, by fraud, conspiracy, or covinous conduct, or extreme mismanagement, the rights of minority stockholders are put in imminent peril and the underlying, original, corporate entente cordiale is unfairly destroyed" (Gettinger v. Heaney, 220 Ala. 613, 127 So. 195, 198; Lost Creek Coal & Mineral Land Co. v. Scheuer, 222 Ala. 440, 132 So. 615), or "to 'prevent fraud, save the subject of litigation from material injury, or preserve it from threatened destruction.' " Birmingham Disinfectant Co. v. Smith, 174 Ala. 374, 56 So. 721, 722; Fisher v. Bankers' Fire & Marine Ins. Co., 229 Ala. 173, 155 So. 538. And "the fact that the directors and officers of a corporation are fraudulently misappropriating the assets of the company will not alone of itself constitute ground for the appointment of a receiver. If they are solvent, they can be brought to an accounting, which will afford complete relief and is therefore an adequate remedy" (Hayes v. Jasper Land Co., 147 Ala. 340, 41 So. 909, 910), or if any other remedy affords ample protection (Hayes v. Jasper Land Co. supra; Gettinger v. Heaney, supra), or "that directors *** have voted and paid to the estate of a deceased kinsman, who was a director, money of the corporation which they had no authority to so appropriate." Alabama Coal & Coke Co. v. Shackelford, 137 Ala. 224, 34 So. 833, 97 Am.St.Rep. 23.

When tested by those rules, the right to a receiver is not here shown. Insolvency of the corporation or its officers is not alleged, nor any other fact which justifies the appointment of a receiver to operate its affairs.

But the bill seeks other relief than the appointment of a receiver. It is not filed in the alternative in various aspects, but...