293 F. 315 | 8th Cir. | 1923
after stating the case as above, delivered the opipion of the Court.
It will be observed that the proceedings brought against the Dold Company by the receiver were not for the purpose of obtaining-an order relieving him from performance of the lease contract during receivership, as a burden on the estate in administration detrimental to the rights of others having superior claims to the assets in his hands and which might be jeopardized if he were required to, perform. Railway Co. v. Lusk, 224 Fed. 704, 140 C. C. A. 244; Peabody Coal Co. v. Nixon, 226 Fed. 20, 140 C. C. A. 446. What the receiver sought and what the court granted was a striking down of the contract, with its obligations, duties, rights and burdens, as though it had never been executed. It is further apparent from .the facts in the case that the Skinner Packing Company was, at the time the receiver was appointed and at the time of the' hearing, amply solvent. It had assets many times more in value than all of its indebtedness. The procedure instituted both by the receiver and stockholders cannot therefore be said to have been brought in behalf of or for the protection of creditors, nor can the order and decree of the court be regarded in any sense as having been made for that purpose. The largest creditor was the Dold Packing Company for money expended by it in additions and changes made in the plant under the terms of the contract; and while the court, on cancelling the contract, held that the Dold Company was not entitled to repayment of those sums in accordance with the contract, it did decree that the Skinner Packing Company should be held indebted to it for their reasonable value.
“Additions, betterments and changes made in the plant by the Dold Company were made, without securing the prior consent of or any notice to the Skinner Packing Company, and since the appointment of the receiver he has received no notice of any character from the Dold Packing Company regarding any proposed alterations, changes, etc.”
As a matter of fact, the record shows that immediately on the execution of the contract the Dold Company brought an experienced naan from Chicago, who made a complete inspection of the plant in company with the representatives of the Dold Company and at tire request of the president of the Skinner Company to ascertain what changes and improvements should be made, and early in November, 1920, the Dold •Company submitted to the president of the Skinner Company a written •statement showing in detail the changes and improvements in the plant necessary for its proper and economical conduct. The list divided the proposed improvements and changes into three classes: those immediately needed, those needed in the near future, and those which might be installed later on, and, in a letter from the Dold Company to the Skinner Company accompanying the list, it urged immediate action and stated that the Dol'd Company expected to start killing in a very few days. The Skinner Company received the letter and list. Again, on February 5, ' 1921, a list of needed changes and improvements was submitted to the Skinner Packing Company. It failed to make any of them and the Dold Company put them in at its expense and charged the cost to the Skinner Company, all of which remains unpaid. After the receiver was appointed, the Dold Company submitted to him its accounts for improvements that it. had made.
“But. it is a clearly recognized principle, that if there be only partial failure of performance by one party to a contract, for which there may be compensation in damages, the contract is not put an end to. And the right to abandon the contract vests only in the party who has been guilty of no default; for a man cannot take advantage of his own wrong in order to put an end to a contract into which he has entered. So, such right, when it does exist, must be exercised within a reasonable time. Nor can a contract, in general, be rescinded in toto by one of the parties where both of them cannot be placed in the identical situation which they occupied when the contract was made.”
Bishop on Contracts (Enlarged Ed.) § 828, after announcing that there cannot be rescission if there is only partial failure of performance by one party to a contract for which there may be compensation in damages, says:
“And, in general terms, the doctrine is, that the breach, to justify a re-eisfdon, must be of a dependent covenant or willful or in a substantial part comprehending the root of the whole.”
Eor a list of cases sustaining this fundamental principle, see 9 C. J. 1181.
“No corporation shall sell lease, consolidate or in any manner part with its franchises or its entire property or any of its property, corporate rights or privileges essential to the conduct of its corporate business and purposes otherwise than in the ordinary and usual course of its business except with the consent of its stockholders at an annual or special meeting, the call for which shall give notice of the proposed sale or consolidation. All such sales, leases and consolidations shall b.e subject to the provisions of this and the eleven following sections and to the prior liens of stockholders as therein defined.”
The eleven following sections of the Maine statute demonstrate that their purpose is solely for the protection of stockholders. They provide a remedy and mode of procedure to each dissenting stockholder by which the value of his stock may be judicially ascertained, which must be paid to him by the corporation, and if not .paid each dissenting stockholder is given a lien on the corporate assets for the amount so adjudged in his favor. A prerequisite to the right and remedy so given is that he shall have voted in the negative and shall file with the president, clerk or treasurer of the corporation, within one month from the day of such vote, his dissent. The corporation is then given one month after the dissents are filed to enter its petition with the Supreme Judicial Court, sitting in equity, setting forth the facts and names and residences of all dissenting stockholders whose dissents have been filed, making them parties, and praying that the court determine the value Of the share so dissenting. On failure of the corporation to file the petition, any dissenting stockholder may, within one month thereafter, enter such petition for the same purpose. After the value of the dissenting shares has been determined, the corporation is given an opportunity to deposit the amount, whereupon said dissenting shares become the property of the corporation. The statute provides that any stockholder who fails to file his dissent shall be deemed to have assented. This statute does not give, and does not pretend to give, to the corporation any rights whatever. They are given solely for the benefit of stockholders. Westerlund v. Black Bear Mining Co., 203 Fed. 599, 121 C. C. A. 627. It seems too clear for argument that the corporation could not be heard to maintain a suit to cancel this contract because the specific notice required by the statute was not given, nor can the receiver, who sues in its behalf. Moreover, in the contract between the Skinner Company and the Dold Company we find this:
“The Skinner Company shall cause this agreement to be submitted to and ratified by its Board of Directors and its voting stockholders.”
To permit it, or the receiver in its stead, to set up the regulatory requirements of the statute on corporate procedure is but to concede to it the right to take advantage of its own neglect of duty in
We will consider the stockholders’ complaint on the assumption it makes that both common and preferred stockholders can avoid the contract if the statutory notice is not given. They brought their suit fourteen months after the Dold Company took possession of the plant and began operation. During those months it did a large business, in which it had invested all of its capital and surplus and had borrowed
“There is no principle better established, in this court, nor one founded on more solid considerations of equity and public utility, than that which declares, that if one man, knowingly, though he does it passively, by looking on, suffers another to purchase and expend money on land under an erroneous opinion of title without making known his own claim, shall not afterwards be permitted to exercise his legal right against such person. It would be an act of fraud and injustice, and his conscience is bound by this equitable estoppel.”
On the plainest principles, by their laches, they were estopped to bring this suit, and should be held to have acquiesced in the lease contract, Westerlund v. Mining Co., 203 Fed. 599, 121 C. C. A. 627; Elder v. Mining Co. (C. C. A.) 280 Fed. 569; Watt’s Appeal, 78 Pa. 370; Hill v. Railroad Co., 143 N. C. 539, 55 S. E. 854, 860, 9 L. R. A. (N. S.) 417; Rabe v. Dunlap, 51 N. J. Eq. 40, 25 Atl. 959; Bishop v. Kent & Stanley Co., 20 R. I. 680, 41 Atl. 255; Sturm v. Wiess (C. C. A.) 273 Fed. 457; 2 Pomeroy’s Eq. Jurisp. §§ 816-820, 965; 16 Cyc. 158, 162.
“Where property, in the possession of a third person, is claimed by the receiver, the complainant must make such person a party by amending the Mil, or the receiver must proceed against him by suit in the ordinary way.”
For other cases announcing the same principle, see Wheaton v. Daily Telegraph Co., 124 Fed. 61, 59 C. C. A. 427; Mississippi Valley Trust Co. v. Railway Steel Spring Co., 258 Fed. 346, 354, 169 C. C. A. 362; Fidelity & Deposit Co. v. Johnson (D. C.) 275 Fed. 112; Horn.v. Railroad Co. (C. C.) 151 Fed. 626.
We think the position taken by the intervening stockholders was the right one. They insisted that when the receiver, within two months after his appointment, succeeded in removing the president of the company and his associates on the Board of Directors who had been utilizing the company for their personal advantage and benefit, the purposes for which the receivership was instituted had been accomplished, that there was nothing else that could be made the subject of judicial determination in the receivership cause; and that the receivership should be wound up and the company and its affairs restored to its stockholders. In Pusey & Jones Co. v. Hanssen, 261 U. S. 491, 43 Sup. Ct. 454, 67 L. Ed. 763, it is said:
“Whether the debtor be an individual or a corporation, the appointment of a receiver is merely an ancillary and incidental remedy. The receivership is not final relief. The appointment determines no substantive right; nor is it a step in the determination of -such a right. It is a means of preserving property which may ultimately be applied toward the satisfaction of substantive rights.”
See also Brictson Mfg. Co. v. Close (C. C. A.) 280 Fed. 297; Myers v. Occidental Oil Corporation (D. C.) 288 Fed. 997.
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