Williams v. Watt

• Decision Date: 18 November 1914
• Docket Number: (No. 5348.)
• Citation: 171 S.W. 266
• Parties: WILLIAMS et al. v. WATT et al.
• Court: Texas Court of Appeals

Page 266

171 S.W. 266

WILLIAMS et al. v. WATT et al.

(No. 5348.)

Court of Civil Appeals of Texas. San Antonio.

November 18, 1914.

Rehearing Denied December 9, 1914.

Appeal from District Court, Kleberg County; W. B. Hopkins, Judge.

Action by J. A. Williams and others against R. F. Watt and others. From an order denying a temporary injunction, plaintiffs appeal. Affirmed.

T. Wesley Hook, of Kingsville, for appellants. Pope & Sutherland, of Corpus Christi, and Pollard & Crenshaw, of Kingsville, for appellees.

MOURSUND, J.

This is an appeal from an order made by Hon. W. B. Hopkins, judge of the Twenty-Eighth judicial district, refusing to grant a temporary injunction. The injunction was applied for by J. A. Williams, the Kingsville Planing Mill & Manufacturing Company, a Texas corporation, and about 15 other persons and companies, and it was alleged that plaintiffs comprise all the stockholders of said corporation, except Don Payne and E. M. Crawford, two of the defendants, and comprise the holders of eight-tenths of the liabilities of said corporation, exclusive of what is due stockholders for their stock. The petition is long, and, together with the exhibits attached thereto, comprises about 160 pages of typewritten matter. It was alleged that on February 21, 1914, upon the petition of Don Payne and E. M. Crawford, a copy of which was attached as an exhibit, and without notice to plaintiffs, R. F. Watt was appointed receiver for said corporation; that on March 4, 1914, said J. A. Williams and the said corporation, through their then counsel, Judge Reese, prepared a motion to vacate said receivership proceedings, and sought a hearing upon the same, but the judge did not grant a hearing until the district court met in Kleberg county on May 19, 1914, when he granted a hearing upon an amendment to said motion and overruled it; that evidence was introduced upon said hearing, a copy of which was attached as an exhibit, as well as copies of the motion and answer thereto.

It was further alleged that the said evidence showed the following: (a) That the stock issued to Payne and Crawford had been issued without their having paid anything into the corporate funds, and consequently they were not stockholders, and not entitled to maintain a stockholders' action for a receiver for said corporation; (b) that neither of said stockholders had a cause of action against Williams, or any one else, other than that they wished the said corporation's affairs wound up, and the appointment of a receiver for such reason only was not justified at the instance of a stockholder; (c) that no creditor has asked for the receivership, but eight-tenths of the creditors opposed the same, and the assets of said corporation, if sold, would just pay the creditors, and there would be nothing left for the stockholders, and the latter, therefore, had no real interest in the proceeding; (d) that the receiver was an interested party, because he was one of the bondsmen on the cost bond filed in the proceeding for a receiver, and said receiver will probably be called upon to pay such costs; (e) that one of the bondsmen of the receiver had withdrawn from the bond; (f) that the receiver had been appointed on a petition false as to all material allegations.

It was further alleged that thereafter both parties announced ready on these petitioners' plea in abatement and demurrers to the petition for said receivership, and, a jury being demanded, the court refused to hear said plea, but that it should have been granted because said evidence showed: (a) That Payne and Crawford had stock issued to them without paying therefor, and the same should be canceled, and then they could not maintain a stockholders' action for receivership proceedings, and, not being 25 per cent. of the creditors, could not maintain a creditors' action therefor; (b) that Payne and Crawford had no interest in the property of the corporation now, and therefore could not maintain an action for a receiver for it against the opposition of eight-tenths of the creditors thereof.

It is further averred that the demurrers were overruled, but should have been granted; that the court, after announcing that the cause had been continued, fixed the receiver's salary at $100 per month, without giving petitioners an opportunity to object; that the receiver was given notice of the withdrawal of one of his bondsmen; that the receiver is selling the assets of the company, consisting of a stock of lumber, in order to pay his salary, and is hiring a man to run the mill of the company, paying him $4 per day, and is selling lumber to himself for 21 per cent. less than it is worth, and is constantly depleting the assets of the corporation to pay his salary and the other running expenses of the business; that the mill does not pay running expenses and the receiver is running same at a loss of $150 per month, and the receiver's salary should be but $25 per month as mere custodian of the property, as many other receivers could be procured for that amount; that the action being prosecuted by Payne and Crawford is maintained for the sole purpose of forcing plaintiff to buy them out; that their stock is worthless; that they will not submit any "give or take proposition," nor accept such a proposition made by plaintiffs, to the effect that plaintiffs will pay all the creditors if the assets of the corporation are turned over to them, or will turn over the assets to Payne and Crawford if they will pay all the creditors; that plaintiffs have no adequate remedy at law; that the time for appealing from the order appointing the receiver expired without any appeal being taken, and plaintiffs believe no appeal will lie from the order overruling the motion to vacate the receivership; that there are 8 civil cases on the docket of the district court of Kleberg county ahead of this case, and there are 15 criminal cases on said docket; that said court holds but one week every six months; that it will take a week to try this case, and the court will not take up the plea in abatement until he tries the case; that the assets of the corporation are constantly being depleted; that the total assets of the corporation consist of about $1,500 worth of machinery and "some $3,000" worth of lumber, material, etc., and a drain upon the same of $250 per month on account of the receivership will soon deplete such assets; that the liabilities amount to just about the same sum of money, but if the assets were sold during this time of money stringency plaintiffs could not raise sufficient money to bid them up to their face value, and besides such purchase would amount to a recognition of the receivership, but the assets, with careful handling and with the line of business and credit the corporation had built up, would have been worth more than the said sum, and to a degree the result is still obtainable if the property of the corporation is turned back to it; that the evidence adduced upon the hearing of the motion to vacate shows that plaintiff Williams, while manager of the corporation, conducted the business in a manner so satisfactory to the creditors that none of them have ever concurred in the application for a receiver, and enhanced the assets to the extent of $1,000, comparing same with the liabilities, and had an active business and a nice line of credit; that the property should be turned back to the corporation, because the receiver is unable to conduct the business successfully, and in fact is running same at a loss of about $150 per month. Plaintiffs prayed that Watt be restrained from acting longer as receiver, that Payne and Crawford be restrained from further prosecuting their suit for a receiver for said corporation, that the sheriff deliver the property of the corporation back to it, that the stock issued to Payne and Crawford be canceled, and for general relief.

Defendants answered, but their answer was not verified as required by law. Plaintiffs excepted to the sufficiency of the verification, but the court overruled such exception.

In this state a court of equity has no power to appoint a receiver of a corporation ancillary to a stockholder's suit to wind up its affairs. Article 2128, Statutes of 1911, does not entitle a stockholder to the appointment of a receiver for the corporation upon the ground of insolvency, or imminent danger of insolvency, alone; but a stockholder urging such ground must, in addition thereto, show that he has a cause of action against the corporation independently of the receivership, and that his interest as such stockholder requires the appointment to be made. People's Investment Co. v. Crawford, 45 S. W. 738; Farwell v. Babcock, 27 Tex. Civ. App. 162, 65 S. W. 509; Iron Co. v. Blevens, 12 Tex. Civ. App. 410, 34 S. W. 828. In said case of People's Investment Co. v. Crawford, the court held further:

"Courts of equity, by virtue of their general equitable jurisdiction, will not appoint a receiver of a corporation, and assume control and management of its affairs, at the suit of a stockholder alleging fraud, mismanagement, and collusion on the part of the corporate authorities, or ultra vires acts of the directors or of the corporation itself, but in such cases will limit the redress granted to the specific wrongs...