10 Haw. 209 | Haw. | 1896
Lead Opinion
OPINION OP THE COURT.
This matter comes before tbis court upon several appeals from a decree and rulings of tbe Circuit Judge, First Circuit.
Tbe petition shows — that plaintiff and defendant are Hawaiian corporations doing business in Honolulu; that defendant is indebted to plaintiff in tbe sum of $5184.65; that tbe business of defendant is managed by a board of directors elected at an annual meeting for one year, which board appoints' a manager; that tbe said board' consists of five officers, president, vice-president, treasurer, secretary and auditor, S. F. Graham being secretary and treasurer, and also tbe manager; that said
Summons was issued on January 8, 1896, returnable forthwith. And a notice to appear addressed to J. S. “Walker, auditor, and J. D. Holt, vice-president, was filed the same day. Upon this is endorsed their admission of service.
On January 8, 1896, the matter was heard, the two directors named being present besides representatives of nearly all of the stock in the defendant corporation', and upon evidence being taken in support of the bill and on consent and request of the two directors and representatives of over 230 of the 250 shares, Cecil Brown, Esq., was appointed receiver.
The receiver at once took possession of the property of the corporation, and carried on the business, advertised for accounts, made collections, and received offers for the purchase of defendant’s property. Upon the 5th of February, he filed a report showing debts of over $10,000 and assets comprising a lease from Mrs. Moorhead, horses, carnages, feed and other para-
On the 23d January, 1896, papers were filed in the Circuit Court in equity entitled “J. W. McDonald, Margaret Moorhead and Ah Hin v. Club Stables Co., Ltd. etc., and Cecil Brown, receiver.” Although by the title it would appear to be a different action, it has been treated all through as a motion in this case and will be so regarded. Leave is asked to enter proceedings in bankruptcy against the Club Stables. The motion is supported by affidavits showing that McDonald and Ah Hin are general creditors and that Mrs. Moorhead is entitled to five months’ rent in arrears. The motion for bankruptcy proceedings was denied, as were motions subsequently made for leave to distrain; to quash the proceedings and for permission to the receiver to raise money to pay the rent. Appeals were taken to this court by Mrs. Moorhead, Messrs. McDonald and Ah Ilin from the orders overruling such motions (except the last) and the order of sale, and from the order of appointment of receiver.
OPINION OF
The above proceeding comes before this court on several questions, the most important of which is the validity of the appointment of a receiver. If this should be held invalid there would be no necessity for deciding the other questions as they would virtually be determined.
Beach on Receivers, Sec. 404;
1 Morawetz on Private Corporations, Secs. 284-5.
There seems to be a mistake with regard to the position of the plaintiff in this matter. This is not a creditor’s bill in any sense, and there is no necessity that it should be such. The relief asked is not, that assets which cannot be reached by law should be put in position by a Court of Equity to become subject to execution. It is on the other hand an application to save property from destruction in a matter peculiarly within the jurisdiction of a Court of Equity, in which a Court of Law would be not only helpless, but the result of proceedings as desired by McDonald and Ah Hin would, on the showing made by the evidence, result in the probable destruction of at least three-fourths of the property to which creditors must look for the satisfaction of their claims.
There may be some doubt whether the receiver should be appointed at the instance of a mere general creditor as was done in this case. It appeared, however, in evidence that the petitioner was also a stockholder in the defendant corporation, and that the holders of most of the stock consented to the appointment of a receiver, and expressed the opinion that this would be for the interest of all concerned.
The petition may be amended by an allegation that the petitioner is also a stockholder.
The prayer also would better be amended so as to show more clearly the main object of the bill, the only particular prayer aside from that for process at present being for the appointment of a receiver. Such amendments may be made upon terms to be named by the Circuit Judge.
The remaining questions before this court which arise upon the various appeals are upon nlatters which are within the discretion of the Circuit Judge. This discretion does not appear to have been exercised improperly or without due consideration of the interests of all concerned.
The decree appointing a receiver is sustained on condition that such amendments be made, and the appeals are dismissed.
OPINION OF
While anxious to grant relief to the parties concerned in this suit, if it can be done consistently with the well settled principles of law, I am still unable to find that the bill is sufficient upon which to maintain the appointment of a receiver.
First. • The bill does not show that the plaintiff has a real interest in the property of the Olub Stables Company. The plaintiff by the bill is a creditor at large, having no judgment or lien of any kind in the property. The bill does not allege that the plaintiff is a shareholder in the defendant corporation. It seems to me, after a review of the law, that it is fundamental that the party applying for a receiver must have an interest in the property. Beach, Receivers, Sec. 50; High, Receivers, Secs. 11 and 12. This is not a creditor’s bill, nor is it intended to be, for the legal remedies are not exhausted.
Secondly. There must be a pending suit. It is not essential that the suit be a separate one. But the bill must have some ultimate object, within the province of equity, to be attained to which the appointment of a receiver is auxiliary. The very purpose of a receivership is to preserve the property in controversy from danger of loss or injury until the rights of parties interested in it are determined, and the danger must appear to be imminent. Beach, Sec. 5.
The object to be attained is not, to my mind, sufficiently expressed in the bill. It does allege the insolvency of the defendant corporation, but it does not pray with distinctness that the assets of the corporation be disposed of and the receipts distributed pro rata to the creditors. Shareholders may in certain circumstances be entitled to such relief, but not general creditors, for they have their remedies ah law. I think, too, that courts cannot appoint receivers to wind up the business
But I see no objection to shareholders finding tbe corporation hopelessly insolvent, and its officers either unwilling or unable to act, obtaining tbe intervention of tbe court by tbe appointment of a receiver to wind up tbe business of tbe company, and distribute its assets.
This cessation of business and distribution of tbe assets of tbe defendant corporation would not be a legal dissolution of tbe corporation nor extinguish its franchises. To accomplish this tbe statutory method must be pursued. I tbink tbe bill is amendable, even at this stage of tbe proceedings on terms, and if this is done, tbe motion to vacate tbe appointment of a receiver will be dismissed.
Tbe other orders refused, and appealed from, i. e., tbe refusal to allow bankruptcy proceedings to be begun, and tbe refusal to allow distraint for rent, and to forbid tbe sale of tbe property, etc., were properly made in tbe discretion of tbe court.
Concurrence Opinion
OPINION OF
I concur in the foregoing opinions, which seem to me to be susbstantially tbe same in effect., I will add merely that in thus concurring I understand that, while it is held that under tbe circumstances of this case, tbe affairs of a corporation may be wound up in a Court of Equity at tbe suit of a shareholder petitioning for himself and other shareholders, it-)'is not intended to be held that under no circumstances may this be done at tbe suit of a creditor.