134 Minn. 422 | Minn. | 1916
Plaintiffs, the one a creditor and the other a stockholder of the defendant, a domestic corporation, brought this action, in behalf of themselves and all others similarly situated, against the corporation and Anton Mickelson, its president, to the end that the court might take possession and control of all the assets of the defendant corporation as trust property for the benefit of plaintiffs and all others who show themselves entitled thereto, and in furtherance of that purpose appoint a receiver to take charge of the assets and business of the corporation and to restrain Mickelson from wrongfully taking and destroying its property and business and for such further relief as might be proper. The grounds for this application are quite fully set forth in the complaint. We mention only the chief facts alleged: That the corporation has built up an extensive business in the manufacture and sale of certain poisons compounded according to secret formulas; that a large part of the business and stock are in Canada; that the corporation is heavily indebted, the obligations are maturing, and it is not possible to meet these since the assets are not readily convertible into cash, so that there is imminent danger of insolvency; that Anton Mickelson, the owner of onelialf the common stock, a director and the president of the corporation, has wrongfully appropriated $2,500 of the corporation funds, and withdrawn for personal purposes $12,500 worth of the stock in trade which the corporation owns and had stored in Canada; and that for his own profit he is making use of the secret formulas, trade-name and trademarks of the corporation to the destruction of its business. The corporation answered, admitting all the allegations of the complaint.. No jurisdiction was obtained of Mickelson. Hpon the answer coming in, the
Apart from the question of jurisdiction to appoint a receiver, the appellant cannot be heard to raise any question in respect to the validity of the orders appealed from not raised in the court below. We may, therefore, dispose of some assignments of error quite readily. Whether the notice of the hearing on October 12, 1915, of the order to show cause
His attack upon the order confirming the sale cannot be considered here for two reasons: The record does not show what objections, if any, were made in the court below, and, secondly, the only objections that could have been urged are confined to irregularities in the sale and inadequacy of the bid. Hospes v. Northwestern Mnfg. & Car Co. 41 Minn. 256, 43 N. W. 180. The record does not suggest any deviation in the conduct of the sale from that prescribed by the court in its order of October 12, 1915, nor is there a hint of inadequacy of the bid. The order of sale specifically provided that any party to the action and any holder of claims allowed against the corporation might become a bidder, and that claims duly allowed against the corporation would be accepted as cash. Whether the successful bidder, who had acquired these claims at a discount and used them at their face value in making payment, as directed by order of the court, shall account to the creditors and shareholders for the profit made in purchasing the same, is not involved upon this appeal and is not considered.
No assignment of error here nor any objection in the court below makes the point that the court was without jurisdiction to appoint a receiver, but in the oral argument as well as in the brief appellant insists that no authority is found to appoint a receiver for a corporation except under section 6634, G. S. 1913, hence all steps taken by this receiver, who was not appointed thereunder, are void. It is true, that the authority to dissolve corporations is wholly statutory, and that courts, as a rule, refrain from appointing receivers to take over the property and business of a corporation, when so doing will virtually result in a dissolution. But at the same time the general equity powers of the court to appoint a receiver for a corporation pendente lite, the same as for an individual, are recognized. Furthermore, the last two subdivisions of section 7892, G. S. 1913, expressly authorize the appointment of receivers under facts disclosed in the complaint herein. That said section 7892 is a recognition, and not a limitation, of the customary equity jurisdiction in the appointment of receivers is the holding in Lowell v. Doe, 44 Minn. 144, 46 N. W. 297. Under similar statutory provisions such authority has been held conferred. Wayne Pike Co. v. Hammons, 129 Ind. 368, 27 N. E.
But it is contended that a receiver appointed pendente lite cannot be authorized to sell all the assets of a corporation defendant, thus virtually destroying or dissolving the corporation. It is to be noted that the complaint alleged that it was necessary for a receiver to be appointed to take over all the property and business.and administer it as a trust fund, because the corporation was indebted to various persons for more than $12,500; that these debts were falling due from day to day; and that the corporation had been compelled to suspend payment of its obligations, and was no longer able to carry on the objects and purposes of its incorporation, had no means of paying its current expenses and maturing obligations that were and would be protested for nonpayment, and the holders of which were ready immediately to enforce their demands by legal seizure of the property, which moreover had by its president, defendant Mickelson, been wrongfully appropriated for his own use. The answer of the corporation admitted all the allegations of the complaint and consented to the appointment of a receiver as asked. So far as the corporation was concerned, this amounted to a confession of insolvency and a consent that the court take full charge of its property and affairs for the payment of its creditors and the protection of its shareholders, and a winding u|p of its affairs if necessary. Such conduct has been held a waiver of the prerequisites specified in section 6634, G. S. 1913, as authorizing a court to sequester the property of a corporation and wind up its affairs. “That the complainant has not exhausted its remedy at law — for example, not having obtained any judgment or issued any execution thereon — is a defense in an equity suit which may be waived, as it is stated in the opinion in the above case (Hollins v. Brierfield Coal & Iron Co. 150 U. S. 371, 14 Sup. Ct. 127, 37 L. ed. 1113), and when waived the case stands as though the' objection never existed.” In re Metropolitan Railway Receivership, 208 U. S. 90, 28 Sup. Ct. 219, 52 L. ed. 403. The court also cited Brown v. Lake Superior Iron Co. 134 U. S. 530, 10 Sup. Ct. 604, 33 L. ed. 1021; Town of Mentz v. Cook, 108 N. Y. 504, 15 N. E. 541, and Horn v. Pere Marquette Ry. Co. 151 Fed. 626.
Without deciding whether a waiver by the corporation binds its share
The claim that the sale was improvidently granted cannot be sustained. We believe the record fully vindicates the action of the court. There were claims allowed against the corporation, amounting to more than $15,000, not including interest. Most, if not all, of these debts or claims were nearly two years overdue. The affidavit of appellant, upon which the application to vacate the order of sale was predicated, states not a single fact tending to dispense with the necessity of a sale.
In our opinion the lower court had jurisdiction to appoint a receiver, and appellant has failed to show that the court erred in any one of the three subsequent orders attacked by this appeal.
The orders are affirmed.