Williams v. Croft Hat & Notion Co.

• Decision Date: 17 September 1918
• Docket Number: 3574.
• Citation: 96 S.E. 929,82 W.Va. 549
• Parties: WILLIAMS ET AL. v. CROFT HAT & NOTION CO. ET AL.
• Court: West Virginia Supreme Court

96 S.E. 929

82 W.Va. 549

WILLIAMS ET AL. v. CROFT HAT & NOTION CO. ET AL.

No. 3574.

Supreme Court of Appeals of West Virginia.

September 17, 1918

Submitted September 10, 1918.

Syllabus by the Court.

A written contract made by the individual stockholders of a corporation, disposing of the corporation assets, and taking in lieu thereof stock in a new corporation, and attempting to appoint trustees as the holders of the legal title to such stock for a period of ten years, with power to vote the same in all stockholders' meetings of the new corporation, and which expressly provides that it shall not become operative or binding on any signer thereto until the owners of all the shares of stock of the corporation shall have signed and ratified it, is void, unless such condition has been complied with.

Laches cannot be imputed to a nonresident stockholder, who refuses to sign such agreement, and who has no knowledge of the attempt by the other stockholders, who did sign it, to put it into operation, for a period of nearly four years, and who brings his suit to cancel it within eight months after learning thereof.

Delay to assert one's right, when properly explained, is not laches.

Acquiescence cannot be imputed to one who is ignorant of the facts on which it is predicated.

A bill brought by one-fifth in interest of the stockholders of a corporation, alleging that the corporation has sold all of its assets, and has made no distribution of the proceeds to the individual stockholders, and has ceased to hold any stockholders' or directors' meeting, or to perform any of its corporate functions, for a period of two consecutive years or more, is maintainable under section 57 c. 53, Barnes' Code (Code Supp. 1918, c. 53,§ 57 [sec 2889]), and shows "sufficient cause," prima facie entitling plaintiffs to a decree dissolving such corporation and distributing such proceeds among the stockholders.

Appeal from Circuit Court, Cabell County.

Bill by J. M. Williams and others against the Croft Hat & Notion Company and others. Demurrer to bill sustained, suit dismissed, and plaintiffs appeal. Reversed and remanded.

Miller J., dissenting.

Livezey & Irons and Campbell, Brown & Davis, all of Huntington, for appellants.

Williams Scott & Lovett, of Huntington, for appellees.

WILLIAMS J.

This suit is brought by J. M. Williams, A. P. Hudson, and H. O. Boette, stockholders in the Croft Hat & Notion Company, a West Virginia corporation, against the said corporation, C. C. Henking, S. M. Croft, and J. R. McMahon, as trustees and also in their individual rights, and others, stockholders in said corporation, praying for its dissolution and the winding up of its business, and for the cancellation of a certain voting trust agreement entered into between the stockholders of said corporation and the aforesaid trustees on the 28th of July, 1913, and also for general relief. The court sustained a demurrer to the bill and dismissed the suit, plaintiffs not desiring to amend, and they have appealed.

The first question presented is whether the averments of the bill are sufficient to show a right in plaintiffs to maintain the suit. It appears from the bill that the capital stock of the Croft Hat & Notion Company did not exceed $100,000 and that plaintiffs own more than one-fifth of it; that said corporation was, until some time in 1913, engaged in the wholesale dry goods and notion business in the city of Huntington, and since that time has ceased to carry on its business as a corporation; that on the 8th of July, 1913, S. M. Croft, who was then president of said corporation, agreed with O. L. Stanard that they would organize a new corporation to be called the Croft-Stanard Company, with a capital stock of $300,000, $100,000 of which was to be preferred stock bearing 7 per cent. interest, and the remaining $200,000 common stock which was to be divided equally between said Croft and Stanard, to be placed as they should elect; that said Croft agreed to deliver all the stock of goods and fixtures owned by the Croft Hat & Notion Company, which for the sake of brevity we will call the old corporation, to the new corporation to be thereafter formed, at a price to be agreed upon, and said Stanard was to convey to the new corporation certain real estate which he owned in the city of Huntington, and the new company was to take over all the bills receivable and assume all the liabilities of the old corporation. At a general meeting of the stockholders of the old corporation, held on the 26th of July, 1913, the aforesaid agreement was submitted to the stockholders and approved by a resolution duly passed, and pursuant thereto the new corporation, known as the Croft-Stanard Company, was organized, and is now engaged in the same kind of business in the city of Huntington that was previously carried on by the old corporation. No corporate action has been taken by the old corporation with reference to the disposition or distribution of its 1,000 shares of stock in the new corporation, nor has there, since that time, been a meeting of its stockholders or directors. But on the 28th of July, 1913, a written agreement was entered into between S. M. Croft, C. C. Henking, and S. P. Robertson, as trustees, of the one part, and all of the individual stockholders of the old corporation, except the plaintiff J. M. Williams, of the other part, which was to continue until the 1st of August, 1923, reciting the sale of the corporation's assets to the proposed Croft-Stanard Company, and the resolution approving the same, whereby it was agreed that the new company should issue to said trustees and their successors 1,000 shares of stock in the new company for the assets of the old corporation, and providing that it should be held by them as attorneys in fact for the respective stockholders of the old corporation, and that there should be issued to said stockholders assignable "voting trust certificates" in proportion to the stock in the old corporation previously held by them. J. M. Williams refused to sign or ratify the agreement, and it contains a clause providing that it "shall not become operative or binding on any signer thereto until the owners of all the shares into which the stock of the Croft Hat & Notion Company is divided shall have signed and ratified" it. It is averred that the value of the assets of the old corporation, which it turned over to the new corporation, did not exceed $60,000, and that the aforesaid trustees executed to the new corporation their note for the difference between said value and the $100,000 of stock in the new company, which the old corporation was to receive, and that the $100,000 of stock was issued to the trustees and they had pledged it to secure their aforesaid note; that subsequently said trustees borrowed money with which to pay their note, and again pledged said stock to secure the payment of the money borrowed; that no corporate action was ever taken by the old corporation authorizing or ratifying the aforesaid voting trust agreement. The bill avers that the trustees have received several dividends on the 1,000 shares of stock in the new company and have made no distribution thereof to the holders of the stock in the old corporation or the trust certificates, but that they have used it and permitted it to be used to discharge indebtedness and obligations of the old corporation incurred since the sale and transfer of all its assets to the new company, such, for instance, as in the payment of corporation license taxes; that they have also permitted some of the money, thus coming into their hands, to be applied to the payment of individual obligations of said S. M. Croft; and that the liabilities of the old corporation exceed its assets, and consequently it is insolvent.

...