54 Wash. 117 | Wash. | 1909
The complaint in this action alleges, in substance, that the defendant company is a corporation organized and existing under the laws of this state, and that the individual defendants are its executive officers; that the capital stock of the company is divided into 15,000 shares of the par value of $1 per share; that in the month of Jan-, uary, 1908, the plaintiff became the purchaser of 4,125 of such shares; that at that time the assets of the company were of the value of $27,000; that the company is the owner, of a shingle mill equipped with modern machinery and all necessary appliances to give it a capacity of 250,000 shingles
Issues were framed by answer and reply and the cause came on for trial. At the commencement of the trial the court sustained an objection to the introduction of any testimony under the complaint, except under the allegation that the in
The ruling of the court that the appellant was not a stockholder of the respondent company is erroneous for two reasons. First, we do not think that the appellant’s ownership of the stock was put in issue by the answer; for while the answer denied each and every allegation of the complaint, except as therein expressly admitted, modified, qualified or explained, there was no express denial of the allegation that the appellant was a stockholder, and other portions of the answer are pregnant with admissions that such was the fact. The-answer denied that salaries were voted or allowed for the purpose of defrauding the appellant or any other stockholder, averred that during the year 1908 the plans adopted
Again, the court misconstrued the purposes of Bal. Code, § 4261, upon which its ruling was based. It has almost universally been held that such statutory provisions are intended for the benefit and protection of the corporation and its creditors, and that the corporation may waive a compliance therewith. Stewart v. Walla Walla Print. & Pub. Co., 1 Wash. 521, 20 Pac. 605; Isham v. Buckingham, 49 N. Y. 216; Robinson v. Nat. Bank of New Berne, 95 N. Y. 637; Cecil Nat. Bank v. Watsontown Bank, 105 U. S. 217, 26 L. Ed. 1039; Just v. State Sav. Bank of Ionia, 132 Mich. 600, 94 N. W. 200; Horton v. Mercer, 71 Fed. 153, 3 Clark & Marshall, Corporations, p. 1790; 2 Cook, Corporations, § 383; Morawetz, Private Corporations, § 222. Under the above authorities, and many more that might be cited, the respondents are estopped to deny that the appellant is a stockholder of the company, under the proofs and offer of proofs found in this record. This error calls for a reversal of the judgment, but in view of the new trial that must follow a reversal, we deem it necessary to discuss briefly the other errors assigned.
The ruling of the court excluding testimony under the complaint until the appellant first established the fact that he was a stockholder is assigned as error, but this assignment relates merely to the order of proof, a question resting very largely in the discretion of the court, and we perceive no abuse of discretion here. In any event the question cannot arise on a retrial..
This brings us to the sufficiency of the complaint to authorize the appointment of a receiver for any cause other than the voting of salaries to themselves by the officers of the respondent company.
*123 “The power of appointing a receiver is a discretionary one to be exercised with great circumspection, and only in cases where there is fraud, spoliation, or imminent danger of the loss of the property if the immediate possession should not be taken by the court; and such facts must be clearly proved. The policy of the law is to leave the affairs of corporate bodies to the management and control of their own chosen agents and that a minority of stockholders will not be permitted to displace corporate authority and control by substituting either for the policy, management and control of the courts, except in plain cases of such fraud or maladministration as works manifest oppression or wrong to them.” Beach, Receivers (Alderson’s ed.), § 424. Secord v. Wheeler Gold Min. Co., 53 Wash. 620, 102 Pac. 654.
Within this rule, which is sustained by substantially all the authorities, we are not prepared to say that sufficient cause for the appointment of a receiver could not be made out under the allegations of this complaint, liberally construed, and the complaint must be so construed, especially where objection to the sufficiency of the complaint is first raised by objection to the introduction of testimony at the trial.
If it be true, as charged in the complaint, that the assets of the respondent company were of the value of $27,000 at the beginning of the year 1908, that approximately one-third-of its entire capital was lost and dissipated during that year through maladministration, incompetency and mismanagement; if it is about to lose its mill site of the value of from $4,000 to $5,000, and will suffer irreparable injury by being compelled to remove its mill to another site from similar causes; if the same mismanagement and incompetency is to characterize the operations of the mill during the year 1909, and if the majority .stockholders have illegally voted salaries to themselves to pay for stock purchased to obtain and retain control of the company, it is manifest that the company is on the brink of insolvency, and that the appellant’s interest in the company will be utterly dissipated and lost. Such mismanagement and maladministration on the part of majority'
For these reasons we are of opinion that the appellant Was entitled to offer evidence generally under the allegations of his complaint; and to that end the judgment is reversed and a new trial ordered.