Williams v. Salisbury Ice Co.

• Decision Date: 11 January 1939
• Docket Number: No. 42.,42.
• Parties: WILLIAMS v. SALISBURY ICE CO.
• Court: Maryland Court of Appeals

3 A.2d 507

WILLIAMS

v. SALISBURY ICE CO.^*

No. 42.

Court of Appeals of Maryland.

Jan. 11, 1939.

Appeal from Circuit Court, Wicomico County; T. Sangston Insley, Judge.

Suit by Elmer C. Williams against the Salisbury Ice Company, a body corporate of the state of Maryland, for the appointment of a receiver. From a decree dismissing his amended bill of complaint, plaintiff appeals.

Affirmed.

Argued before BOND, C. J., and OFFUTT, PARKE, MITCHELL, and SHEHAN, JJ.

Frederick W. C, Webb, of Salisbury (Woodcock, Webb, Bounds & Travers and Joseph Y. Gunby, all of Salisbury, on the brief), for appellant.

L. Claude Bailey, of Salisbury, and Seymour O'Brien, of Baltimore (Miles, Bailey & Williams, of Salisbury, and Miles & O'Brien, of Baltimore, on the brief), for appellee.

MITCHELL, Judge.

The appeal in this case is from a decree of the Circuit Court for Wicomico County, Maryland, sitting as a Court of Equity, passed on the 18th day of February, 1938, dismissing the amended bill of complaint, of the appellant, the owner of 100 shares of the outstanding voting common stock of Salisbury Ice Company, a body corporate of the said State of Maryland, the appellee.

The bill of complaint, as amended, in substance alleges that the said company owns and operates plants and properties located in the City of Salisbury, for the manufacture and sale of ice, and for cold storage purposes, and that for many years past it has been engaged in retailing its product direct to consumers in the City of Salisbury and adjacent territory, and in selling the same at wholesale for the purpose of icing railway refrigerator cars and the storage of commodities under refrigeration.

It further alleges, as is conceded by the answer of the corporate defendant, that the issued and outstanding capital stock of said defendant consists of 550 shares of voting common stock, of the par value of $100 each; 285 shares of nonvoting common stock of like par value, and 491 shares of 7% nonvoting cumulative preferred stock of the par value of $50 per share.

That on or about April 4, 1936, one William F. Messick, who at that time was President, Treasurer, General Manager and the whole or controlling owner of the capital stock of the W. F. Messick Ice Company, a corporation which was engaged in the same line of business as that in which the defendant was engaged, and was a strong competitor of the latter, for the fraudulent and illegal purpose, and with the fraudulent and illegal object of obtaining control of the management of the defendant, and by that means make the defendant subservient to the interest of the W. F. Messick Ice Company, and thereby eliminate competition between the defendant and the Messick Company, and otherwise benefit the latter company at the expense and loss of the defendant, acquired control of a majority of the outstanding voting common stock in the defendant company. In line with this alleged fraudulent design, it is asserted by the plaintiff that on April 4, 1936, the said William F. Messick caused Paul E. Watson, S. Franklyn Woodcock, Thomas N. Potts, Jr., Charles H. Watson, Dorothy P. Taylor and Elmer C. Williams, the latter being the complainant, to be removed as directors of the defendant company, and the said Paul E. Watson, S. Franklyn Woodcock and Thomas N. Potts, Jr., as officers of said defendant, to be also removed as such officers. It is then set forth by the plaintiff that the said William F. Messick thereupon caused to be elected in place of the removed directors, in addition to himself, Jesse D. Price, Levin Claude Bailey, E. Homer White, Sallie A. Price and Ruth P. Woodcock, and that following their election, the latter directors elected in place of the removed officials the said Jesse D. Price as President, E. Homer White as Vice-President, William F. Messick as Treasurer and General Manager, and Levin Claude Bailey as Secretary. These directors and officers, it is alleged, were respectively re-elected at the annual meeting of the stockholders of the defendant held on November 18, 1936, with the exception of Sallie A. Price and Ruth P. Woodcock, in whose places George O. Hendrickson, Jr., and John G. Melson, both of whom at that time, and at the time of the filing of the bill of complaint, were employees, directors and stockholders of the Messick Ice Company, were elected.

Specifically the amended bill of complaint alleges that in furtherance of the fraudulent design of the said William F. Messick, since his procurement of the control of the defendant company, the business and affairs of the latter corporation have been grossly mismanaged and conducted, and its assets have been misapplied under his domination without any interest in its corporate welfare; in utter disregard of the rights of its creditors and stockholders, and solely in the interest of the said William F. Messick, individually, and the said W. F. Messick Ice Company, to the great loss, injury and damage of the Salisbury Ice Company. And in support of the next above allegation, the more serious items cited as representing an abuse of authority on the part of Mr. Messick are set forth as follows:

(a) The transfer of the retail ice business of the Salisbury Ice Company to the W. F. Messick Ice Company, and the purchase by the latter company of the delivery trucks and retail ice accounts, of the former company, at a price which it is contended was grossly inadequate. Under the terms of this sale, the Messick Company agreed with the Salisbury Company to assume sole control of the latter's retail ice business, and to purchase one-half of the manufactured ice used by the former company in supplying the combined retail ice trade of both companies, from the Salisbury Company, at prices agreed upon between the managers of the two companies which latter agreement, it is alleged by the plaintiff, was violated by William F. Messick.

(b) That in the course of transactions between the two companies, growing out of the above agreement, it developed that more ice was supplied for the purpose of said retail trade, by the Salisbury Company, than by the Messick Company, during the first year in which the above arrangement was in effect, and that the said William F. Messick, in his capacity as general manager of both companies, arbitrarily and without advising with any other official of the defendant company before doing so, caused the Salisbury Company to pay the Messick Company the sum of $3,981.27, as a purported refund for 995 tons of ice sold and delivered by the former company to the latter company, for retail consumption; the transaction resulting in a discrimination against the Salisbury Company to the extent of the above payment, and, unadjusted, in effect representing a total loss to the extent of the wholesale price of 995 tons of ice, to the Salisbury Company, and a total gain to the same extent, to the Messick Company.

(c) The alleged payment of counsel fees incurred by William F. Messick in his successful effort to gain control of the Salisbury Company, and due by him individually, out of the Company's funds.

(d) The alleged employment of workmen on the regular payroll of the Messick Company, in part time service with the Salisbury Company, at times when these workmen were not needed in the service of either company, to the end that the loss incident to lack of work for said employees, might be borne by the latter company.

(e) Failure to adjust and pay to the Salisbury Company, unexpired casualty and fire insurance premiums, and unexpired motor license charges, on the trucks purchased by the Messick Company as above set forth.

And, finally, the remaining specific charges of mismanagement and abuse of authority on the part of Mr. Messick as an official of the Salisbury Company, are concerned with an overpayment on an increase in his salary, which was made retroactive and authorized by the board of directors of the company; the unfair exchange between the two companies of storage ice of inferior weight and quality, for tank or newly manufactured ice of superior weight and quality; the alleged diversion of cold storage trade from the Salisbury to the Messick Company, through the activities of William F. Messick, based on information gained by him through his access to the books and records of the former company, and the general charge that the management of the Salisbury Company under Mr. Messick is so directed as to result solely in his personal interest and in the interest of the Messick Ice Company, to the great loss, damage and injury of the Salisbury Company, and its creditors and stockholders.

In his prayer for relief, the complainant seeks the appointment of a receiver to take charge of the assets and business of the Salisbury Ice Company to the end that the same may be operated under the direction of the Court in which the proceedings were instituted, until such time as the rights of creditors and stockholders of the corporate defendant may be permanently preserved, and for general relief in the premises.

The answer of the defendant corporation sets forth that for many years it has been engaged in the manufacture and sale of ice, and in the business of icing refrigerator cars and the operation of a cold storage plant; but denies that the retail sale of ice to consumers was other than a minor branch of its operations, and asserts that the sale of its equipment for the conduct of its retail business was effected in its interest, because the retail sale of ice was becoming unprofitable to the company.

It then asserts that on November 20, 1935, the board of directors which the amended bill of complaint alleges was subsequently, on April 4, 1936, removed, was illegally elected; and that during the period of approximately four and one-half months in which that board held office, the defendant corporation was involved in litigation relative to the membership of the board and the election of officers of the corporation; its business and...