111 Wash. 39 | Wash. | 1920
For many years prior to 1918, the appellant and the respondent Falk, as copartners, had been engaged in the junk business in the city of Spokane, Washington, and for a somewhat similar period, the respondent Schwartz had been engaged in a like business in the city of Seattle. In June, 1918, the agreed value of the assets of the firm of Kahan and Falk was $116,000, and the agreed value of the assets of the business belonging to Schwartz was $498,000. For some time prior to 1918, these parties had discussed a consolidation of their assets and energies. On May 6, 1918, a preliminary written consolidation agreement was executed by the parties. On June 12, 1918, a final and full agreement was entered into which took the place of the preliminary agreement. All of the parties to this action, except the Alaska Junk Company and the bank, were parties to this final agreement. That instrument provided that a corporation should be created under the name of the Alaska Junk Company, with a capital stock of $500,000, consisting of 5,000 shares, each of the par value of $100. The parties subscribing to such capital stock were as follows: Frank Schwartz, 3,838 shares; Louis Dulien, 1 share; Mayo Cahen, 1 share; Bernhard Kahan, 580 shares; and Isidore E. Falk, 580 shares. Schwartz was to turn over to the corporation all of his assets, for which the company was to issue him the shares for which he had subscribed, and pay him the sum of $24,200 in cash out of money subsequently earned by it. Dulien and Cahen were to' pay cash for their stock.
Pursuant to this agreement, the Alaska Junk Company, a corporation, was created and its stock issued, and each of the parties made over to the corporation the assets according to the agreement. The new company then commenced to transact business, and continues so to do.
The answers of the various defendants are substantially general denials as to all wrongdoing. The trial court, after a full hearing, made a judgment dismissing the action. The plaintiff has appealed.
The questions involved are largely those of fact. We have conscientiously read all of the abstract of the testimony, consisting of more than two hundred pages, and much of the statement of facts, of nearly six hundred pages. In our opinion, the record fails to show that Schwartz was guilty of any material misrepresentations of fraud in bringing about the so-called consolidation of the business of the appellant and himself. Before going into this corporation the appellant not only had ample opportunity to examine all of the business affairs of Schwartz, but actually did make such examination. There is very little testimony tending to show that the property which Schwartz turned into the corporation was of less value than the amount
The chief thing in this case which gives us pause is the charge that the respondents, other than the bank, have caused, and still do cause, the business affairs of the corporation to be carried on in a dishonest and criminal manner. Much testimony, for and against this charge, was presented.
If it be conceded that a court of equity has power to appoint a receiver of a corporation which is a going and prosperous concern and is neither insolvent nor in danger of insolvency, simply because it does things which are dishonest, to what extent must such practices go before such power will be exercised? Cer
The complaint alleges that Schwartz has “caused said Alaska Junk Company systematically to engage in thievery and robbery as aforesaid; to engage in systematic violation of the criminal laws of the state.” We think that is the line. The evil practices must be systematic and habitual and so interwoven as to become a part of the general business. If so, then we are not called upon to determine whether there have been isolated or occasional dishonest or criminal acts,, but we are called upon to determine whether the business has been, and will continue to be, carried on in a systematically dishonest manner. The law recognizes that most men do business honestly and fairly, and that
It would serve no useful purpose to here undertake to review in detail the testimony. The most damaging portion of it is with reference to the alleged practice of removing from cars, coming in without having previously been weighed, a portion of the contents and then having the cars weighed and making settlement on such weight; and also in removing a part of the contents of cars coming in, which have been previously weighed, and then selling the car to others according to such previous weight. The testimony shows that a very small percentage of the cars came in without having been previously weighed. The respondents deny this charge about unweighed cars with as much vigor as appellant has made it. They seem to admit that, when weighed cars come in, it was and is a practice to remove a part of the material from all or a part of the cars, but they claim that only a certain class of materials, which would not be serviceable to the person to whom the car had been sold, would be removed, and that additional materials, probably of lesser value, would be put on the car to make up the weight of that which had been removed. Whatever may be said against this confessed way of doing business, it is not necessarily dishonest, and the proof that it is dishonest must be convincing. Schwartz, against whom most of the charges are made, started a very small junk business in Seattle some twenty-five or
But there are other features of the case which greatly impress us. It cannot seriously be considered that it is necessary to appoint a receiver for the protection of appellant’s property rights; the proof shows but little prospect of its loss. If the corporation has. been and is likely to be guilty of frauds and dishonesty, whether to a small or to a considerable extent, appellant can complain to a court of equity only because he
For all these reasons, we feel that the judgment must be affirmed. It is so ordered.
Holcomb, C. J., Tolman, Fullerton, and Mount, JJ., concur.