172 Mich. 519 | Mich. | 1912
The bill is filed by a minority of the stockholders of the Duplex-Power Car Company, and it prays for the discovery and collection of the assets of the company, through a receiver, for a dissolution of the corporation and the distribution of its assets. There is
“Complete the cars now in course of construction, and to employ such help as may be necessary therefor to sell not to exceed five of said cars, until the further order of the court, and at the best price that can be obtained. The cost of such completion to be a charge against the assets coming into his hands, and the receipt therefrom to be an asset belonging to said company. It is further ordered that said receiver may borrow money to an amount not to exceed one thousand dollars for the purpose of completing said cars and to pledge the assets of said company to pay the same, until the further order of the court.”
Defendants claim the benefit of an appeal “ from the final order and decree, and other orders and decrees rendered in said cause on, to wit, April- 23d, A. D. 1912, and on other prior dates, and filed and entered in said court and cause by the register thereof.” It is the contention of appellants that the court exceeded its powers both in granting and keeping in force the injunction and in appointing a receiver.
The Duplex-Power Car Company was organized September 22, 1909, under Michigan laws by three of the defendants. In the articles of association its business is stated to be the manufacture and sale of commercial and pleasure motor cars, motor trucks, motor wagons, motor
Needing more capital, the remaining treasury stock was offered for sale and certain of the defendants agreed to purchase the balance of $32,000 at par. The arrange
Complainants offer to indemnify the noteholders and the trustee in the mortgage against damage or,loss on account of the nonpayment of the said notes if the court shall determine that the money represented thereby is actually due and owing. It is further charged that the complainants have good reason to believe, and do believe, that the trustee is about to dispose of all the assets of the corporation under the power of sale contained in the mortgage, and are justly apprehensive that he will do this unless restrained by injunction; that they have good reason to believe, and do believe, that the board of directors will sell and dispose of the personal property of the corporation, unless restrained by injunction, to the irreparable injury of complainants. Amendments later made to the bill, pursuant to an order of March 18, 1912, charge that Todd Lunsford, before he and his associates acquired stock in the corporation, obtained a written agreement securing the right to name four out of the seven directors
It has been stated that the material allegations of the bill, and it should be added of the amended bill, are denied by defendants under oath. It should be noted, also, that nineteen or more persons made defendants answer, admitting each and every allegation of the bill to be true according to their information and belief. In the answers of other defendants to the amended bill, it is set up that at the meeting at which the directors who have been named were elected the complainants were present, or were represented, voted for them for directors of the company, and that every vote cast at the meeting was
To complete the pertinent history of the proceedings, it should be stated that the injunction was issued August 4, 1911, when an order was made to show cause on September 5, 1911, why a receiver should not be appointed, defendant Farlin H. Ball, the trustee named in the mortgage, and a nonresident of the State, conceiving that as to him*
“ I can see no good reason why this case should not be heard at the coming April term, and the interests of the parties to the cause will be best subserved if a speedy hearing is had.”
Accordingly, an order was entered March 18,1912, pursuant to the said announcement, except that no reference is made therein to the motion for a receiver and the motion for a receiver is not therein denied. It was not until after April 8, 1912, that all answers to the amended bill of complaint were filed, or were required to be filed by the order of the court. The April, 1912, term of court began April 8th. A motion was made by defendants to strike the cause from the calendar. On April 16, 1912, the court made and filed the following opinion and decision:
“ I am of the opinion that this motion must be granted. In the memo opinion filed March 16, 1912, in this cause, denying a motion for the appointment of a receiver, the court said that there seemed to be no good reason why this case should not be heard at the April term, and that the interest of the parties would be best subserved by a speedy trial. I think that the case should be heard speedily, and I can see no good reason why it may not be. I do not think, however, that the defendants can be compelled to go to a hearing, and, having moved that the cause*528 be stricken, the motion is granted. The motion of the complainants filed March 1st last for the appointment of a receiver was denied, believing that the case would surely be heard this term. No order has as yet been signed denying the motion. The situation is such that the court feels it a duty to appoint a receiver if the case is to be continued. The complainants may have an order for the appointment of Frank P. Town as receiver of the Duplex-Power Car Company, with such restrictions as will conserve the property and such bond as may hereafter be fixed by the court on application for the same.”
The order appointing the receiver followed.
The sufficiency of the bill is challenged by appellants; but not by demurrer and not with respect to the power'of the court upon final hearing to wind up the affairs of the company, and for that purpose to appoint a receiver. Therefore we may say, as we did in Woodmansee v. Brick Co., 164 Mich. 688, 691 (130 N. W. 311):
“ Whether the bill states a case for equitable cognizance is a question not presented on this appeal.”
It is proper, however, to give some attention to the scope and purpose of the bill and to some general rules governing the jurisdiction exercised in such cases.
The general jurisdiction of equity over corporate bodies does not extend to the dissolving of the corporation, winding up its affairs and sequestrating corporate property. Courts of equity will not ordinarily, by virtue of their general equitable jurisdiction, or by virtue of their visitatorial powers over corporate bodies, sequestrate the effects of the corporation, or take the management of its affairs from its officers and commit it to a receiver, whether upon the application of creditors or of shareholders. High on Receivers, § 288 et seq.; Fuller v. McCormick, 156 Mich. 518 (121 N. W. 280). It was said in Miner v. Ice Co., 93 Mich. 97, 112 (53 N. W. 218, 223 [17 L. R. A. 412]):
“ The general rule undoubtedly is that courts of equity have no power to wind up a corporation, in the absence of statutory authority. This rule is, however, subject to qualifications.”
“ I think a court of equity, under the circumstances of this case, in the exercise of its general equity jurisdiction, has the power to grant to this complainant ample relief, even to the dissolution of the trust relations.”
Miner v. Ice Co. came into the court after a hearing on the merits in the court below. In Torrey v. Cement Co., 150 Mich. 86 (113 N. W. 580), heard on demurrer to the bill, the court followed, upon the question of jurisdiction, Miner v. Ice Co. See, also, Avery v. Manufacturing Co., 27 N. J. Eq. 412. These cases are exceptional and decision seems to proceed upon the .theory that, in the exercise of jurisdiction to relieve from fraud and the effects of breaches of trust, relief may be granted to a suitor, although it involves sequestrating the property and winding up the affairs of a corporation; the result to the corporation being an incident merely of adequate and complete relief. In the New Jersey case referred to, á receiver was appointed merely to hold and preserve assets of a corporation, admittedly insolvent, with no available assets, against which numerous suits were pending.
The courts have power, derived from the statute, to entertain the bills and petitions of shareholders of a corporation, to compel officers of the corporation to account for official conduct in the management and disposition of corporate funds, to suspend and to remove them, to order new elections of directors, to set aside, and to restrain alienations of corporate assets. The courts have power, also derived from the statute, to sequestrate the property of a corporation and appoint a receiver thereof at the suit of a judgment creditor in certain cases, and in certain other cases to adjudge dissolution of the corporation. See 3 Comp. Laws, § 9757 et seq. (5 How. Stat. [2d Ed.] § 13530). It is plain that no statutory authority of the
It is equally plain that the case made by the original bill did not warrant the injunction which was granted. The stockholder of the Duplex-Power Car Company had joined in an adventure the success of which depended upon the application of certain alleged novel and patented ideas to motor cars, upon the demonstration of the practicability and popularity of the vehicle which it was proposed to manufacture. It was a going concern at that time, in the hands of duly elected officers. No device better calculated to destroy the corporation and all of its assets can be conceived than one which would interrupt its business, prevent the necessary demonstration of its vehicle, and wholly prevent the carrying on of the corporate business. This was the necessary effect of the injunction. It would have been proper enough to restrain a threatened foreclosure of the mortgage temporarily upon condition that the complainants furnished indemnity to those creditors of the company who were secured thereby. The injunction which was granted forbade the sale of vehicles and their removal from the company’s place of business.
Nothing is claimed for those charges in the bill which relate to the original organization of the company and the alleged false representations contained in the articles of association. The bill proceeds upon the theory that the patent was acquired, is the property of the company, and that cars were being manufactured for sale. The insolvency of the company is not made to appear. On the contrary, the facts stated indicated solvency if the patent had any real value. The charges concerning mismanagement, lack of necessity for borrowing such money as was borrowed, and failure to realize money from the sale of cars are most general, lacking entirely in detail and in certainty. No specifications were furnished by way of affidavits filed with the bill. It must be inferred that be-pause complainants charged upon information and belief
We express no opinion upon the merits, or apparent merits, of the controversy. We are of opinion that the injunction granted was too broad, and should have been limited to restraining the trustees and all others interested from a foreclosure of the mortgage, upon condition, however, that complainants secure eventual payment of the debts secured by the mortgage, if found to be valid debts of the corporation. Likewise the order appointing the receiver should have confined him to preservation merely of the assets of the corporation. Whether a case can be made which will warrant the court in winding up the affairs of the company in order to grant complainants proper relief must be determined at the hearing.
Appellants may have the order indicated herein, and will recover one-half the taxable costs of this appeal.