Wallace v. Pierce-Wallace Pub. Co.
| Decision Date | 11 February 1897 |
| Citation | 70 N.W. 216,101 Iowa 313 |
| Parties | HENRY WALLACE v. THE PIERCE-WALLACE PUBLISHING COMPANY AND J. M. PIERCE, Appellants |
| Court | Iowa Supreme Court |
Appeal from Polk District Court.--HON. 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 one hundred and eighteen 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 preserve the said stock under the orders and direction of the court in the premises. Defendants appeal.
Reversed.
Guernsey & Bailey for appellants.
A court of equity has no inherent jurisdiction to appoint a receiver for a private corporation.
High Receivers, paragraph 288; Beech, Receivers, section 403; 20 Am. & Eng. Enc. Law, page 57; Bangs v. McIntosh, 23 Barb. 598; Attorney General v. Bank of Niagara, Hopkins Ch. 354; Smith v. Los Angeles Superior Court, 97 Cal. 348; Howe v. Duel, 43 Barb. 505; Belmont v. Erie Railway Co., 52 Barb. B. 637; Pond v Framington & L. R. Co., 130 Mass. 194; State, Merriam v. Ross, 122 Mo. 435, 23 L. R. A. 534; Jones v. Bank of Leadville, 10 Colo. 464; Heap v. Heap Manufacturing Co., 97 Mich. 147; Murray v. American Surety Co., 44 U.S. App. 43 (70 F. 341); Fischer v. San Francisco Superior Court, 10 Cal. 129; La Society Francaise v. Fifteenth Judicial District Court, 53 Cal. 495.
Our statutes with reference to the appointment of receivers, applicable alike to corporations and natural persons is, Code, section 2903, McClain's Code of 1888, section 4113.
In order to warrant the appointment of a receiver, there must exist:
1. A civil action or proceeding pending.
2. There must be some specific property in controversy, or, to use the language of the statute, "property which is the subject of the controversy."
3. The application must be made by a party to such suit.
4. In his application he must show that he has a probable right to, or interest in, the property in controversy, and "that such property or its rents or profits are in danger of being lost or materially injured or impaired," pending the disposition of the main controversy.
5. The receiver may be appointed "to take charge of and control such property" under the court's direction, "during the pendency of the action."
The plaintiff has no title to the property in controversy; he has not a right to its possession; he has not a lien upon it; he has not a lien upon the proceeds of it; he cannot sell it; as a stockholder in the Pierce-Wallace Publishing Company he owns his stock in that company.
White v. Griggs, 54 Iowa 650; Clark v. Raymond, 84 Iowa 251; High, receivers, paragraphs 11, 12; May v. Rose, Freeman, Ch. (Miss.) 703; Steele v. Aspy, 128 Ind. 367.
If an injury were threatened this stock, and the evidence absolutely fails to show it, Wallace, as a stockholder in the Pierce-Wallace Publishing Company, could not maintain a suit, until he had first applied to the corporation and requested it to do it, and the corporation, under circumstances tantamount to fraud and bad faith, had refused. A mere refusal would not be enough. The element of fraud or bad faith, or such circumstances as would throw doubt upon the good faith of the decision of the corporate authorities not to act, must be involved.
Cook, Stock & Stockholders (3d Ed. ), sections 644, 646; Dodge v. Woolsey, 59 U.S. 18 Howard, 331, 15 L.Ed. 401; Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827; New Birmingham Iron & L. Co. v. Blevens, 12 Tex. Civ. App. 410.
In the absence of proof and averment of danger of impairment of the value of this stock, pending this suit, no receiver could be appointed, under any circumstances.
Loomis v. McKenzie, 31 Iowa 425; Sleeper v. Iselin, 59 Iowa 379; Silverman v. Kuhn, 53 Iowa 436; Paine v. McElroy, 73 Iowa 81.
A receiver can only be appointed as an incident to a pending action.
Ex parte Whitfield, 2 Atkins, 315; Gluck & Becker, Receivers of Corporations, section 10; High, Receivers (3d Ed.), sections 1, 13; French v. Gifford, 30 Iowa 148; Maish v. Bird, 59 Iowa 307; Clark v. Raymond, 84 Iowa 251; State v. Ross, 2 Ohio N. P. 368; Jones v. Bank of Leadville, 10 Colo. 464; People v. Weigley, 155 Ill. 491; Republican Mountain Silver Mines v. Brown, 19 U.S. App. 203 (58 F. 644), 24 L. R. A. 776.
The record discloses no cause of action over which the court had jurisdiction.
The question presented is, whether a court of equity has jurisdiction on the petition of a private individual to dissolve a corporation.
A court of equity has no such jurisdiction.
Morawetz, Priv. Corp., sections 282, 283; High, Receivers, sections 288, 289; French v. Gifford, 30 Iowa 153; Hickley v. Pfister, 83 Wis. 64; Hardon v. Newton, 14 Blatchf. 376; Re Mart, 22 Abbott (N. C.) 227; Magee v. Geneseo Academy, 17 N.Y. S. R. 221; Wheeler v. Pullman Iron & S. Co., 143 Ill. 197, 17 L. R. A. 818; Neall v. Hill, 16 Cal. 145 (76 Am. Dec. 508); La Societe Francaise v. Fifteenth Judicial District Ct., 53 Cal. 495; Mason v. Supreme Court of Equitable League of America, 77 Md. 483; Folger v. Columbian Insurance Co., 99 Mass. 267; Heap v. Heap. Mfg. Co., 97 Mich. 147; Republican Mountain Silver Mines v. Brown, 19 U.S. App. 203 (58 F. 644), 24 L. R. A. 776; Verplanck v. Mercantile Insurance Co., 2 Paige, 452; Bayless v. Orne, Freeman, Ch. (Miss.) 172; Waterbury v. Merchants Union Express Co., 50 Barb. 167; Robertson v. Bullions, 11 N.Y. 252; State v. Merchants Insurance & Trust Co., 8 Humph. 252; Baker v. Backus, 32 Ill. 101; Bank Commissioners v. Bank of Buffalo, 6 Paige, 502; Fountain Ferry Turnpike Road Co. v. Jewell, 8 B. Mon. 142; Attorney General v. Earl Clarendon, 17 Ves. Jr. 491; Slee v. Bloom, 5 Johns. Ch. 379; Van Pelt v. United States Metallic Spring B. & S. Heel Co., 13 Abbott, Pr. N. S. 331; Attorney General v. Bank of Michigan, Harr. Ch. (Mich.) 315; Fischer v. San Francisco City & County Superior Ct., 110 Cal. 129.
A decree of dissolution does not necessarily involve a receivership.
Havemayer v. San Francisco City & County Supreme Ct., 84 Cal. 377, 10 L. R. A. 627.
Does a disagreement between stockholders, in the absence of any charge of fraud, warrant a dissolution of a corporation under our statutes? The articles of incorporation constitute a contract.
Heald v. Owen, 79 Iowa 23; Republican Mountain Silver Mines v. Brown, 19 U.S. App. 203 (58 Fed. Rep 644), 24 L. R. A. 776.
The fact that there are deadlocks, and that the parties must seek relief from mutual concessions, forces concessions and makes interference unnecessary.
Loomis v. McKenzie, 31 Iowa 425; McGeorge v. Big Stone Gap Improv. Co., 57 F. 262; Glenn v. Liggett, 47 F. 474; Jones v. Bank of Leadville, 10 Colo. 464; Gluck & Becker, Receivers of Corporations, section 27; Einstein v. Rosenfeld, 38 N.J.Eq. 309; Little Warrrior Coal Co. v. Hooper, 105 Ala. 665; American Loan & T. Co. v. Toledo, C. & S. R. Co., F. 416; Vanduzer v. Vanduzer, 70 Iowa 614; Maben v. Maben, 72 Iowa 658.
The court, by its order, practically undertakes the management of the Homestead Company, which it cannot do in this action.
Hook v. Bosworth, 24 U.S. App. 341 (64 F. 443).
Dudley & Coffin and Bishop, Bowen & Fleming for appellee.
As a stockholder in the defendant corporation, the plaintiff possesses the right to a voice in its management, and to have a share in its profits and ultimate assets.
Cook, Stock and Stockholders, section 11.
If his share, or right to share, in the corporate management of property is materially interfered with, and the corporation itself refuses, or is unable, to redress the wrong, the ear of a court of equity ought to be open to him.
French v. Gifford, 30 Iowa 148.
The following authorities distictly recognize the right of a stockholder to sue by reason of his interest as such, and to have a receiver.
Hill v. Glasgow Railway Co., 41 F. 610; Zabriskie v. Cleveland C. & C. Railway Co., 64 U.S. 23 How. 381, 16 L.Ed. 488; Edison v. Edison United Photograph Co., 52 N.J.Eq. 620; Einstein v. Rosenfeld, 38 N.J.Eq. 309; Featherstone v. Cooke, L. R. 16 Eq. 298; Lawrence v. Greenwich Fire Insurance Co., 1 Paige 587.
The corporation, as such, cannot act, and neither director would respond to a call for aid from the other. With this condition of affairs existing, it is clear that either may sue, and have such relief as the facts may warrant.
Wayne Pike Co. v. Hammons, 129 Ind. 368; Supreme Sitting of O. of I. H. v. Baker, 134 Ind. 293, 20 L. R. A. 210; Cook, Stock and Stockholders, section 741, and note.
The prayer of plaintiff is also that it may have general equitable relief. Hereunder it may have any relief consistent with the pleadings and proofs, even though not specially asked for.
Pond v. Waterloo Agricultural Works, 50 Iowa 596.
The court may appoint a receiver to avoid loss, and preserve the property until it can ascertain what are the rights of the parties. As a matter of course, the receiver may take possession of all the property. It has been held that this does not have the effect to work a dissolution.
Life Association of America v. Rundle ("Rolfe v. Rundle") 103 U.S. 222, 26 L.Ed. 337; Parsons v. Charter Oak Life Insurance Co., 31 F. 305; Hasselman v. Japanese Development Co., 2 Ind.App. 180.
To deprive a corporation of all its assets does not have legal effect to dissolve it, or even to impair its franchise. State, Attorney General, v. Merchant, 37 Ohio St 251; Thompson,...
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