72 F. 579 | U.S. Circuit Court for the District of South Carolina | 1896
On the 6th of January, 1896, the complainant, alleging that it is a creditor of the Palmetto Brewing Company, secured by mortgage of real estate of said company, and also by chattel mortgage, filed a bill in this court, in behalf of itself and all other creditors of the Palmetto Brewing Company, against the Palmetto Brewing Company, a body corporate under the laws of the state of South Carolina, making parties codefendant the Security Savings Bank,' another corporation of the state of South Carolina, a mortgage creditor, and the Consumers’ Coal Company, also a South Carolina corporation, a general creditor of the brewing company. The bill, after alleging that the complainant is a citizen of the state of New York and the defendants all citizens of the state of South Carolina, and alleging the nature and character of its claim against the brewing company, charges that the said company is wholly insolvent and unable to meet its liabilities; that, in addition to this, certain of the stockholders are having serious differences with the directors of the company, which have a disastrous effect upon the affairs of the company. It prays a foreclosure of its mortgages, marshaling of the assets, and a distribution of their proceeds among all the creditors. It also prays the appointment of a receiver. The bill being thus filed by a citizen of the state of New York against citizens of the state of South Carolina, the complainant setting up mortgages of realty and of personalty, the insolvency of its debtor being averred, and dissensions between the stockholders alleged, tending to show that this condition of insolvency would continue and the assets of the corporation be exposed to deterioration, and the rights of creditors disregarded, the jurisdiction of the court was unquestionable, and the complainant established its right to the appointment of a receiver. Kountze v. Hotel Co., 107 U. S. 378, 2 Sup. Ct. 911 (Bradley, J.). Hearing the bill and affidavits attached, this court appointed A. F. C. Cramer temporary receiver of the property of the Palmetto Brewing Company, and under its order the said receiver took peacable possession of the property out of the hands of the brewing company, in whose possession he found it, and now holds the same.
On the 17th of January, 1896, the petitioner, A. Bequest, intervened in the said suit and filed his petition therein. In his petition he shows that he was appointed receiver of the Palmetto Brewing Company by an order of Hon. W. C. Benet; judge of the First judicial circuit of South Carolina, and presiding judge of said circuit, bearing date the 13th of January, 1896, entered in a cause entitled “Theodore Wenzel and John W. Burmester, Plaintiffs, against the Palmetto Brewing Company, J. E. Doscher, Security Savings Bank, a Body
With regard to the right of the state court to entertain the cause filed therein to recognize the right of the plaintiffs, minority stockholders, to bring their action, and ivith regard to the validity of the action and orders of his honor, Judge Benet, therein, this court can make no question. These were the acts of a court of co-ordinate jurisdiction with this upon a matter within its jurisdiction, and this court has not the right to sit in review over the propriety and validity of this action. Any errors which may have been committed, if, indeed, there -were errors, — and on this point this court has no right to an opinion, — can he corrected in the court of last resort to which he is responsible. They cannot be examined in this court. We must treat the case, therefore, as the request of the receiver, bearing the credentials of the state court, which this court cannot gainsay or question. What this eourf has to decide is this: It having been brought to its attention that certain proceedings were instituted in the state court prior to any action by this court, which proceedings have culminated in the appointment of a receiver for the Palmetto Brewing Company, subsequent to the appointment of a receiver by this court, will this court now reverse its action, dispossess its receiver of the custody and control of the property, plant, and assets of the Palmetto Brewing Company, and order him to turn over Ms jiossession to the petitioner as receiver of the state court?
These proceedings were instituted by two minority stockholders of the Palmetto Brewing Company against the company itself, J. H. Doscher, president or manager of the said company, the Security-Savings Bank, and the De La Vergne Refrigerating Machine Company. After stating the corporate character of the brewing company, and that it was engaged in selling beer and other malt liquors, the purpose for which it was chartered, and that they are owners of certain shares of the capital stock of the company, the plaintiffs charge that the majority of the stock is owned or controlled by the said Doscher and his relatives and friends, and that so he is the president of the company. It further charges that, under what is known as the "Dispensary Law” of this state, the said brewing company has been licensed to manufacture and sell beer under the conditions prescribed in the act, a license subject to revocation at any time, in case the officers and directors of the company fail to comply with these conditions and the regulations of the board of control. That Dos-cher has frequently violated these conditions and regulations in certain particulars, charged in the complaint, by reason whereof the license of the company for the sale of beer is liable to be revoked, resulting in a total loss of the enterprise, and irremediable damage to the stockholders. They further allege that the stockholders can procure no redress from the management of the company, because the same is entirely in the hands of Doscher, under whose express directions and for whose profit the unlawful acts have been committed. They then charge loss of property bythe corporation, through the negligence of the directors, and a very serious loss in the goods manufactured by the company through one Richter at Wilmington, N. C., who has abused his powers and duties as agent of the company; that by the action of the directors and its president the credit of the company has been seriously impaired, so that it is insolvent and unable to meet its ordinary obligations as they mature,- — the loss of credit resulting in putting a large part of the floating debt of the company in the hands of Doscher; that the stock of the company has depreciated from f75 to $25 a share; that this mismanagement of the company in the interest of Doscher and the majority of the stockholders was a positive loss to the other stockholders. The plaintiffs-
It thus appears that the whole scope and purpose of the complaint is to secure to minority stockholders proper representation in the management of the company and the protection of (heir rights. To this end they seek to prevent any further violation of the conditions •and regulations under which the brewery was made a part of the dispensary, and thus preserve the valuable privilege to the company. It declares that, under proper management, (he company can be relieved from ils embarrassment., notwithstanding its present condition of insolvency. Although it mentions the fact that there are creditors of the company, two of them lieu creditors, it seeks no relief whatever as to them, and evidently contemplates that they should be provided for in the due course of business of the company, when the objectionable manager is removed and the affairs of the company put on a business basis. In oilier words, the object which the plaintiffs had in view was the keeping of their company a going concern, for the benefit of the stockholders of the company. ■ It is true that, incidentally, the creditors of the company might ultimately be benefited, but the purpose of the complaint is not to satisfy those liens, but to promote and protect and secure the interests of stockholders. The apparent motive in asking an- injunction against creditors was to compel them to stay their hands until the company could be reorganized, its unfaithful officers removed, and Us affairs placed upon a successful business basis. On the other hand, the proceeding in this court looks to the winding up of the company, marshaling its assets, ahd paying its creditors, the general creditors as well as the lien creditors. Its statements in one respect concur with the statements of the complaint; that is, as to
The counsel who argued this case with equal ability and earnestness have treated it as threatening a conflict of jurisdiction. But, as has been said, it is a question of comity. The jurisdiction of the
«But the petition, with its exhibits, discloses that the minority stockholders have reasons, satisfactory to them, to distrust the parties controlling the corporation, and, therefore, that the corporation will not properly represent their interests. It is therefore ordered that the petitioner, or any person representing the minority stockholders, may, if they be so advised, become parties to these proceedings, to take such course therein as may seem best for the interest which concerns them and may represent them.