Watkins v. National Bank of Lawrence

• Decision Date: 08 April 1893
• Parties: J. B. WATKINS v. THE NATIONAL BANK OF LAWRENCE et al
• Court: Kansas Supreme Court

32 P. 914

51 Kan. 254

J. B. WATKINS v. THE NATIONAL BANK OF LAWRENCE et al

Supreme Court of Kansas

April 8, 1893

Error from Douglas District Court.

PROCEEDINGS by Watkins against The National Bank of Lawrence and others to appoint a receiver and close up its affairs. At the February term, 1890, the district court refused to appoint a receiver, and plaintiff comes to this court. The opinion states the facts.

Judgment affirmed.

T. A Hurd, S. A. Riggs, and W. J. Patterson, for plaintiff in error:

We contend that these five defendants [Bowersock, Vaughan Sparr, Brown, and Hadley] have not now and never have had, since the 11th day of April, 1889, any lawful right or authority, as directors of the defendant bank or otherwise, to interfere with its property or to manage its business, and were and are usurpers; that at least from April 11, 1889, they have not been eligible to the office of directors of said bank, as neither of them has held or holds 10 shares of its stock in his own right; that the pretended election to place the defendant bank in liquidation was wholly void, because the persons voting for the resolution were not the owners of the stocks voted or any part of it; and that the court should take possession of the property, and appoint a receiver to take the charge and control of the property and business of the said bank.

If it were conceded that these men are lawfully the directors of the defendant bank, we contend that they have not proceeded and are not proceeding honestly and in good faith to close up the business of the bank for the benefit of any of the stockholders other than the Douglas County National Bank, and it is their intent and purpose to so manage its business that the plaintiff and the other minority stockholders shall realize little if any part of the value of the stock owned by them, and that they are proceeding in fraud of the rights of such minority stockholders; and that the evidence produced fully sustains all the charges of malfeasance charged in the plaintiff's amended petition herein.

The evidence shows that these individual defendants are not acting fairly toward the plaintiff or the defendant bank, and that the purpose of the purchase of the stock before mentioned was, that the Douglas County National Bank might absorb the good will and business of the defendant bank without payment therefor, and that these defendants, as directors of both banks, are directing and managing their business so as to subserve such purpose.

We are not unmindful of the allegations of the petition and the admissions of the answer; but evidence was introduced on the trial, without objection, contradicting both, and making out a different case than as stated in pleadings in some material respects. The case must be decided on the evidence produced; and, if either party requires it, the court may direct the amendment of the pleadings to correspond to the facts proved. Gen. Stat. of 1889, P P 4246, 4247.

S. O. Thacher, for defendants in error:

The pleadings must govern the trial and the appellate court as to what the issues were, and what facts must be taken as true and cannot be controverted. Counsel for plaintiff seem to have some idea of this inflexible rule, for, at the close of their brief, they admit they "are not unmindful of the allegations of the petition and the admissions of the answer," and their argument rests on supposed facts "contradicting both." In other words, we are now asked in this court of review to consider a case not presented by the pleadings, a case not heard or tried in the court below. Is such a request fair to the trial court? Certainly it is not allowable here. Gray v. Crockett, 30 Kan. 138; Sargent v. K. M. Rld. Co., 48 id. 679. See, also, Brenner v. Bigelow, 8 Kan. 496; Brookover v. Esterly, 12 id. 152.

From the facts averred in the petition and admitted and averred in the answer, it follows that the defendants' position as duly-elected directors and officers of the defendant bank cannot be assailed in this court. Neither is the lawful liquidation of the defendant bank open to attack. The petition and answer both agree that the necessary two-thirds of the stockholders voted to place it in liquidation.

This court has so often said that it would not disturb the findings of a court or the verdict of a jury where the evidence was conflicting, or where there was evidence sustaining the finding or verdict, that a citation of authorities is needless.

The court heard the testimony of all the parties, for and against, and properly held that the plaintiff had failed to make a case for the wresting of the assets of the defendant bank from the hands of its "legally-elected" custodians and confide them to a stranger. The chancellor exercises the best of his own powers, and looks with caution on any invasion of private ownership or possession by the summary decree of his court. High, Rec., §§ 7, 8, and note; Blondheim v. Moore, 11 Md. 365.

The plaintiff seeks to have the court go back of the pleadings to try the question whether these defendants were directors. While this cannot be done, yet it is to be observed that the evidence does not sustain his contention. The stock books of the corporation are the only evidence admissible as to stockholders, either for purposes of voting or for asserting statutory liabilities. Ex parte Wilson, 7 Cow. 402; Ex parte Basher, 6 Wend. 509; Richmond v. Irven, 121 N.Y. 58; Beach, Corp., § 220; Mor. Corp., § 1009.

The motives of the defendants in buying the stock of the National Bank of Lawrence are not a subject of judicial inquiry. The act being a lawful one, courts do not concern themselves with the reason. L. L. & G. Rld. Co. v. Comm'rs of Douglas Co., 18 Kan. 169-181; Irwin v. Oregon Rly. & Nav. Co., 20 F. 577; Duryee v. Old Colony Rld. Co., 87 Mass. 242.

JOHNSTON, J. All the Justices concurring.

OPINION

JOHNSTON, J.:

This proceeding brings up for review a ruling of the district court of Douglas county refusing to appoint a receiver for the National Bank of Lawrence, which was in process of voluntary liquidation. The appointment of a receiver to wind up the business of the corporation seems to have been the sole purpose of the action. It was brought by J. B. Watkins a stockholder of the bank, on November 15, 1889, against the board of directors, who were duly elected in May, 1889, and who had been in control of the bank since that time. In his petition, he says that the bank was organized in 1866, with a capital stock of 1,000 shares of the par value of $ 100 each, and that for several years prior to the commencement of the action he was the owner of 261 shares of the stock. He further alleges, that on June 17, 1889, at a meeting of the stockholders, a resolution was adopted by the necessary two-thirds of the capital stock to place the bank in the process of voluntary liquidation, to take effect on the 29th day of June, 1889. He adds that the directors are not acting in good faith, nor endeavoring with due diligence to wind up the affairs of the bank for the benefit of the stockholders, and that his interest as a stockholder will suffer great loss and injury if the assets of the bank are left in the possession and under the control of the board of directors. In his petition are allegations that the directors were formerly interested in another bank, and that they had purchased the controlling interest in the defendant bank in order to obtain possession of its business and good will, and to deprive the plaintiff and other minor stockholders of the value of their stock in the defendant bank; that, while the purchase of the stock was in the names of...