73 F. 386 | U.S. Circuit Court for the District of Western North Carolina | 1896
This case comes up on a motion to vacate an order filed 14th January, 1896, permitting the petitioners and all other stockholders and creditors of the West Asheville Improvement Company to intervene pro interesse suo in the main cause, as defendants therein, with all the rights incidental thereto. It is proper to say that the motion is made by counsel with the permission granted to them by the judge who signed the order, and that without such permission it would not have been entertained.
The West Asheville Improvement Company was a corporation organized under the law of North Carolina. Some time about June or July of the past year, it was discovered that the legislature of North Carolina, at the session immediately preceding the discovery, had repealed the charter of the corporation. This discovery was a surprise to all parties interested in the corporation, and up to this time there seems to be a mystery connected with it. At the time of this repeal, the corporation was doing a large business, was in the enjoyment of a large and valuable property, owed a considerable debt, by way of mortgage securing outstanding bonds and a floating-debt, but was by no means in an insolvent or even dangerous pecuniary condition. Called upon to meet this wholly unexpected emergency, a meeting of those who theretofore had been the president and directors of the corporation was called; and, after consultation with counsel, the proceedings in the main cause were instituted, the chief purpose and motive for which were the appointment
As a general rule, the corporation represents all the shareholders in suits by a third party; and the directors control the action of the corporation. But if the directors are false to their duty, and there is danger that they will, from corrupt motives or blind obstinacy, abandon, neglect, or sacrifice the interests of the shareholders committed to their charge, then the courts of equity will permit stockholders to intervene for their own protection, aud to seek aud obtain the aid of the court. Bronson v. Bailroad Co., 2 Wall. 302. But, in the absence of such misconduct, on the part of the controlling authorities of the corporation, they will not be permitted to intervene. And for obvious reasons. If such privilege be accorded to one, it must be allowed to all. And so a case will be burdened by a number of parties, and be exposed constantly to abatement: by death, change of.relation, or circumstance of individuals, and justice be greatly impeded. The questions hi every case are: Is the complaining stockholder remediless unless lie represent his own interest? Is there danger of the commission of a flagrant wrong? If these questions be answered in the affirmative, he will be aiiowed to intervene, notwithstanding that tlie remedy is an extreme one, and should not be permitted without hesitation and caution.
The board of directors of the Asheville Improvement Company consisted of persons the majority of whom are men of great business experience aud judgment, of unexceptionable character, and possessing public confidence. There is no charge or suspicion of charge that they have acted or would act treacherously to the trusts eon
"'All corporations whose charters shall expire by their own limitation or shall be annulled by forfeiture or otherwise shall nevertheless be continued bodies corporate for the term of three years after the time when they have been so dissolved, for the purpose of prosecuting and defending actions by or against them, and of enabling them gradually to settle and close their concerns, to dispose of and convey their property and to divide their capital stock; but not ,for the purpose of continuing the business for which such corporation may have been established.”
The provisions of this section are free from any ambiguity. The mischief to be remedied was the confusion possibly resulting from the abrupt dissolution of the corporation from any cause. The plan adopted was the continuation of the corporate character solely for the purpose of winding up its affairs. It is urged with great ingenuity that this section became and was by the operation of law a part of the charter of this corporation, the West Asheville Improvement Company, and that, when its charter was repealed quoad hoc, this provision was repealed also. But the proposition is as unsound as it is ingenious. It is not a provision of the charter of the West Asheville Improvement Company, but a general provision of law applying to all corporations. The repeal of this particular charter does not repeal it pro tanto. Indeed, the repeal makes it applicable actively to this particular corporation, as a sort of statutory letters of administration; whereas before the repeal it was a passive provision, if one may so speak. This being the case, the corporate character is continued by the statute, especially for the very purpose of a suit of this nature. And this is a corporate act, especially provided for. And as all corporate acts must be effected by agents, and as the directors are the general agents of the corporation, the petitioners could and should have applied to them to raise the issues they now present.
It is contended, however, that Code N. C. § 668, has provided a mode in which a receiver can be appointed for a defunct corporation; and that, under the decisions of the supreme court of North Caro
DICK, District Judge. I have carefully read and considered the foregoing opinion, sent me by the circuit judge, and readily concur in the disposition made of the motion of petitioners.