Wallace v. Pierce-Wallace Pub. Co.

• Decision Date: 11 February 1897
• Citation: 101 Iowa 313,70 N.W. 216
• Parties: WALLACE v. PIERCE-WALLACE PUB. CO. ET AL.
• Court: Iowa Supreme Court

101 Iowa 313

70 N.W. 216

WALLACE

v.PIERCE-WALLACE PUB. CO. ET AL.

Supreme Court of Iowa.

Feb. 11, 1897.

Appeal from district court, Polk county; Thomas F. Stevenson, Judge.

Suit in equity for the appointment of a receiver of a corporation known as the Pierce-Wallace Publishing Company, for the winding up of its affairs, and for general equitable relief. The lower court ordered the appointment of a receiver for 118 shares of the capital stock of a corporation known as the Homestead Company, owned by the Pierce-Wallace Publishing Company, and directed him to attend the meetings of the stockholders in the Homestead Company, and vote the stock for the Pierce-Wallace Company, and to care for and to preserve the said stock under the orders and direction of the court in the premises. Defendants appeal. Reversed.Guernsey & Baily, for appellants.

Bishop, Bowen & Fleming and Dudley & Coffin, for appellee.

DEEMER, J.

The Pierce-Wallace Publishing Company is a corporation organized under the laws of this state, having its principal place of business in the city of Des Moines. The stock is owned in equal shares by plaintiff and the defendant J. M. Pierce, and these parties are the sole directors and officers of the corporation; Pierce being the president and business manager, and Wallace the secretary and treasurer and editor. This corporation owns 118 shares of the capital stock of another corporation known as the Homestead Company, and also owns and conducts two newspapers,--one known as the Wisconsin Farmer, conducted and carried on at Madison, Wis.; and another known as the Live Stock Indicator, published at Kansas City, in the state of Missouri. The 118 shares of stock owned by the Pierce-Wallace Company in the Homestead Company is a majority of the stock in the latter company. The other stock is owned by S. F. Stewart, Frank Dunning, A. G. Lucas, and Pierce and Wallace in their individual capacity. In his original petition the appellee asked for a dissolution of the corporation, and a distribution of its assets, but this he afterwards amended by striking out the prayer for dissolution, and the relief asked when the case was tried was the appointment of a receiver, and such equitable relief as the facts would warrant. His claim in this court is (using the language of his counsel): (1) That Pierce and Wallace were the sole and equal owners of the stock in the Pierce-Wallace Publishing Company. (2) That between these two men differences of a personal nature had arisen, and from an accumulationof causes had become so intensified that nothing in the way of conference or communication between them was possible. (3) That, in consequence, no meeting of the board of directors or stockholders could be had, and no authoritative direction could be given in the affairs of the corporation. (4) That Pierce had taken possession of and assumed control over the affairs and property of the corporation, and by one means and another was excluding Wallace therefrom. (5) That in many respects the management by Pierce was not only contrary to the views of Wallace, but, having taken sole possession, and maintaining it by such means as might be required, he was manipulating matters in his own interest, and utterly disregarding the rights and wishes of Wallace. And he contends that the order appointing the receiver should be sustained.

We are at a loss to know whether or not appellee is asking for the dissolution of the Pierce-Wallace corporation. He struck out this part of the prayer from his original petition, and does not expressly insist upon this relief, although his contention seems to be that at the final hearing he should have such a decree as would practically amount to a dissolution of the corporation. It may be that the reason why he does not ask that the corporation be dissolved is to be found in the fact that his counsel are of the opinion that such relief cannot be had under the facts as they are disclosed by this record. But, whether this be the fact or not, it is certainly true that, in the absence of express statutory authority, jurisdiction of courts of equity does not exist over corporate bodies to such an extent as to justify them in dissolving corporations, or of winding up their affairs and sequestrating their property. This seems to be so well settled that there is scarcely a dissenting voice in authority. See High, Rec. (3d Ed.) §§ 288, 289; Beach, Rec. § 403; 20 Am. & Eng. Enc. Law, p. 57; Mor. Priv. Corp. §§ 282, 283; French v. Gifford, 30 Iowa, 153; Thomp. Corp. §§ 4538, 4539, 6703. Our statutes do not, in terms, authorize the appointment of a receiver for the purpose of winding up a going corporation. The only provision we have is general in character, and does not relate to any specific class of cases. It is as follows: “On the petition of either party to a civil action or proceeding wherein he shows he has a probable right to or interest in any property which is the subject of the controversy, and that such property or its rents or profits are in danger of being lost or materially injured or impaired, * * * the court, * * * if satisfied that the interests of one or both parties will be thereby promoted and the substantial rights of neither unduly infringed may appoint a receiver to take charge of and control such property under its direction during the pendency of the action and may order and coerce the delivery of it to him.” Code, § 2903. We have heretofore held that this section does not authorize the dissolution of a corporation by a court of equity, nor the placing of its property in the hands of a receiver which practically accomplishes the same purpose. French v. Gifford, supra. We have also held, however, that one who brings himself within the provisions of section 2903 may have a receiver appointed as well of the effects of a corporation as of an individual or co-partnership. Dickerson v. Bank, 64 N. W. 395. And we also said in French v. Gifford that there are cases in which a receiver will be appointed for the property of a corporation, as, for instance, where the officers have been guilty of a misappropriation of the funds or a breach of trust in the discharge of official duties.

Turning now to the record, to discover the facts upon which appellee relies for the appointment of a receiver, we find that his complaints are: (1) That Pierce had arrogated to himself the active management of the corporation, and excluded appellee therefrom, and withheld and refused to give appellee any satisfactory information as to the condition of the business, and had deprived him of the funds of the corporation, and of the management of its financial affairs, as treasurer of that concern. (2) That irreconcilable differences exist between appellee and Pierce, which render it impracticable and impossible for them to transact business with each other, or to consult together upon any business proposition. (3) That the corporation is indebted to each of the stockholders in the sum of $5,500, and by reason of the feeling existing between these parties no provision has or can be made for the liquidation of this indebtedness. (4) That no adequate provision can be made for the maintenance, operation, and continuance of the newspapers published by the corporation in Wisconsin and Missouri. (5) That the business of the corporation cannot be carried on as intended and provided for in its articles of incorporation, and that the objects of the corporation and the intendment of its stockholders are completely frustrated. These are the substance of the allegations of the petition. The evidence adduced in support of them shows that the state of feeling between these men is very bitter, and that they scarcely ever meet without some fuel being added to the flame. But it seems that their trouble grew out of, and largely, if not wholly, relates to, the management and control of the Homestead Company. Various and sundry disagreements arose between Pierce and Wallace as to the conduct and policy of this paper; and Wallace, who was until recently its editor, was finally deposed by action of its board of control. This and numerous other suits followed, and a train of unfortunate litigation is impending.

In considering the case we must carefully distinguish between the various corporations which are more or less involved in the proceedings. The suit is against Pierce and the Pierce-Wallace Publishing Company; not against the Homestead Company, nor its stockholders or officers. Of it, therefore, we have no jurisdiction. And we should approve of no order which will have the effect of controlling its management or directing its affairs, unless it of necessity results from giving effect to a proper order made in a proceeding against the Pierce-Wallace Company. The only difference between the parties relating to the Pierce-Wallace Company grew out of the publication in the Wisconsin paper of some essays delivered at a session of the Farmers' Institute in that state in advance of their official publication under the auspices of the dean of the University of Wisconsin. This difference arose in May, 1894, more than one year prior to the bringing of this suit, and seems to have been satisfactorily adjusted; at least the parties continued in business for many months after this dispute, and it was so inconsequential in character that no court would be justified in appointing a receiver on account of it. Wallace says that Pierce deposited all the funds of both the Homestead Company and the Pierce-Wallace Company in his own name, and assumed all the duties of treasurer of both corporations, although he (Wallace) was the duly-elected treasurer. The record discloses that Pierce did deposit the funds of both corporations in his own name, and for a time drew his checks against the deposits; that this was done at the suggestion of Wallace, or at least with his acquiescence, until more serious difficulties arose between the parties as to the...