133 Ala. 250 | Ala. | 1901
The bill in this cause after amendment is the complaint of three stockholders owning in the aggregate twenty-eight hundred shares of the capital stock of the respondent corporation, and prays to have the corporation dissolved and its assets, which consist of six hundred acres of land, sold and its proceeds distributed among' the stockholders, for general relief, etc. The corporation is a private trading one and has a capital of two millions, five hundred thousand dollars ($2,500,000) divided into twenty-five thousand (25,000) shares of the par value of one hundred dollars ($100) each. The purpose of its organization was the building of a town upon tire tract of land owned by it. 'To this end, this land was to be divided into lots, to be sold to those who could be induced to purchase them, and the company was to procure, if possible, the location of industrial enterprises on its lands and thus enhance its value and make salable its lots. In short, it is what is known as a “boom concern.” It was organized when the country was rife with speculation; and now that conservatism in financial matters has returned, after a severe experience during the years of financial depression, the company is left with this tract of land, and nothing more, worth probably fifteen or twenty thousand dollars. Fortunately, it has no creditors, and, therefore, no one interested in its affairs, except its stockholders, who are shown to have abandoned the enterprise, leaving it to be managed by its board of directors as best they can. For five years, its president and secretary have made diligent efforts to have the stockholders meet. Many of them are non-residents of this State, and those who are residents-, decline to attend the meetings when called, after being notified and urged to do so. There are three hundred and fortyfivé of them, and the whereabouts of one-third of the
It is upon substantially the foregoing sítate of facts, which is shown both by the averments of the bill and the testimony, that the complainants seek relief.
On final hearing the chancellor dismissed the bill for want of equity, holding that, in the absence of a statute, the chancery court is without jurisdiction to dissolve the corporation and to distribute its assets at the suit of a minority stockholder.
Where the corporation is a going concern, it is undoubtedly true that a minority stockholder cannot maintain a bill ito have it dissolved or to have its assets distributed. In such case, the shareholders who disapprove of the company’s management or consider their speculation a bad one, the'ir remedy is to elect new officers or to sell their shares and withdraw. “They cannot insist on having the company’s business closed and the assets distributed, against the will of a single shareholder, who wishes to have the business continued.” — 1 Morawetz on Oorp. § 283. But where the corporation has been abandoned by its stockholders, as here, and is, therefore, powerless to protect its assets and to discharge its duty to the stockholders as their trustee, minority stockholders who are cestuis que trust, •if the chancery court has no jurisdiction to rescue the trust fund from the perils endangering its destruction, would be remediless. No efforts of theirs to have their trustee sell the lands and distribute its proceeds could avail them, for the obvious reason, that it. would require the consent of the holders of a majority of the stock to thus strip the corporation of its assets, which
0 In 2 Beach on Oorp., section .783, the author says: “Unless it appears beyond question, that the continuation of a profitable business cannot be had, the dissolution of a corporation not yet insolvent will not be decreed upon petition of a minority of its shareholders. If, however, it is clear that the business cannot be profitably continued, the petition of a minority for a dissolution will be granted.”
Spelling, in his work on Corporations, states the rule in substance to be, that the court would, in case the scheme was impossible, not allow the funds to be diverted to other purposes, but would enjoin such diversion at the suit of a stockholder and as incidental give full relief by decreeing a settlement of the corporate liability and a distribution of the remainder among the stockholders.
In Price v. Holcomb, supra, the Supreme Court of Iowa, notwithstanding the provisions of a statute that “No corporation can be dissolved prior to the period fixed in the articles of incorporation, except by unanimous consent, unless a different rule has been adopted in'their articles,” held that “if a sale of the property was necessary the right to make it would not be defeated even if it had the effect of dissolving the corporation.”
The case of O’Connor v. Knoxville Hotel Association (Tenn.), 28 S. W. Rep. 309, in its facts, is very similar to the one in hand. The bill was filed by a single stockholder against the corporation and other stockholders in which the facts alleged showed an abandonment of the enterprise and the original scheme to be impossible of consummation, and prayed for a distribution of the assets of the company. It was insisted there, as here, that the bill was without equity. The court after reviewing the authorities held the bill had equity and that the complainant was entitled to relief on common law grounds.
While the authorities are not in accord -as to the right of the -courts, in a proper case, to dissolve the corporation, they are practically unanimous, so far as ou;r research has extended, in sustaining' the right of the complainants, under the facts -of this case, to have the. assets of the corporation distributed, which may be done under the -orders and directions of the court through the agents of the corporation. And while the writer is inclined ¡to- the view that the court has the jurisdiction to -dissolve the corporation, yet it is not necessary to go to that extent, as the rights of the complainants can be fully -subserved by the ’court’s administration of the trust estate through the agents of the corporation.
The -other question, though not passed upon by the chancellor, but raised by demurrer, is that all the stockholders are not made parties to the bill. Of the total shares — twenty-five thousand (25,000) — of the capital stock, nine thousand eight hundred and ninety-nine (9,899) are owned and held by the parties to this cause. Of this latter number, seven thousand and ninety-nine (7,099) shares are -held and owned by (the thirteen (13) respondents to the bill. As stated above, one-third of the -stock is held by persons whose residences cannot be ascertained and who reside in all parts of this country. The respondents are, it is averred, the principal and largest -stockholders and fully and fairly represent the -adverse interest of -all the stockholders in the corporation; that all the -stockholders belong to the same -class, and their respective interests are analogous. It is also averred that it would be impossible to ever bring the cause to a final hearing, if complainants are required to make all the stockholders parties; and such a requirement would result in inconvenience, oppressive delays and a consumption of
The decree dismissing the bill for want of equity will be reversed and the cause remanded, with directions to the lower court to enter a decree ordering a sale of the land for distribution, and for such other orders or decrees as may be necessary to an equitable and orderly administration of the trust estate.
Reversed and remanded.