Merchants & Planters Line v. Waganer

STONE, J.

The first forty, and the last four pages of the *585 record in this case, contain every thing that can be considered on the questions raised by the present appeal. There are other one hundred and eighteen closely written folio pages, made up of affidavits filed for and against the appointment of a receiver; a motion that was never acted on in the court below, and, of course, is not and can not be the subject of an assignment of error. The appeal is from an interlocutory decree of the chancellor, overruling a demurrer to the bill. Nothing should have come before us except the bill and its exhibits, the process and service thereof, the demurrer, the decretal order of the chancellor, and the papers pertaining to the appeal, with the register’s proper certificates. The affidavits were no part of the record, and could not become such, until they were made the basis of judicial action, either in granting, or refusing to grant an order for a receiver. Counsel should have seen to it, that these affidavits were omitted from the transcript, for the double reason, that it would have curtailed more than half the expense of this appeal, and would have left the transcript much less cumbrous. It does not sufficiently appear who is at fault for the insertion of .this unnecessary matter, and we therefore make no order in this case in reference to the cost of it. Should another record come before us, needlessly incumbered as this is, we will allow no costs for the superfluous matter.

In November, 1879, ten persons as coiporators and shareholders made application to be incorporated under the general laws of the State of Alabama. They filed their declaration in writing, and therein set forth, that their corporate name was to be “The Merchants and Planters Line,” and that their corporation was formed “for the purpose of chartering and buying and owning steamboats and other water crafts, for the object and purpose of establishing and regulating a line of steamboats and other water crafts to ply and transport freight and passen-. gers, for proper compensation, on the Bigbee, Little Bigbee,.. Warrior, and Alabama and Mobile rivers, and all the rivers and streams tributary thereto, and the bay of Mobile.” The capital stock was fixed at ten thousand dollars, divided into two hundred shares of fifty dollars each. The ten corporators, in subscribing the declaration, set opposite their names the amount of stock they severally proposed to take, and in this way the whole two hundred shares were taken. They, soon after filing their declaration, held a stockholders’ meeting, adopted a system of by-laws, elected five directors, chose one of the number to be president and treasurer, and entered upon their corporate existence, dating from November, 1879.

It is stated that some of the statutory steps, preliminary to a proper incorporation, Avere not taken ; and on that account, the inquiry is raised whether the company ever was in fact in *586 corporated. We use the word inquiry, because it can scarcely be affirmed that counsel contend such is the case. There is nothing in the suggestion. If this were a proceeding by scire facias, or in the nature of a quo warranto, then this question could be considered. It can not be raised in a proceeding such as this, which is a bill filed by certain stockholders, seeking to hold the corporation and a majority of the board of directors accountable for alleged mismanagement of the trust.—Ang. & Ames on Corp. §§777-8; Boone’s Man. of Corp. §203; Morawetz, Priv. Corp. § 658; Baker v. Backus, 32 Ill. 79 .

Have the complainants averred sufficient facts to authorize them, representing, as they do, a minority of the stock, to come into equity for the redress of the wrongs they complain of, while the corporate powers are still in exercise? Yery true, the present bill charges that three, a majority, of the directors have combined and formed a ring for their own private profit, at the expense of the other stockholders, and many acts of wrong-doing are charged against those three directors. No act is charged that is ult/ra vires, and there is no averment that the corporation effects are imperiled by the insolvency of the parties. Neither is there averment in the bill that any request has been made known, soliciting the use of the corporate name in bringing suit against the alleged offenders. Nor is it shown that any attempt has been made to obtain a meeting of the stockholders. In Tuscaloosa Manufacturing Co. v. Cox, 68 Ala. 71 , the questions presented arose on bill filed by a minority of stockholders. True, the abuses chai-ged in that case were less flagrant than those complained of in this; but the difference is in degree, not in kind. In that case, we ruled that complainants had shown no ground for equitable relief. We said, “in the government of corporations, much must be left to the judgment and discretion of the directory, and much must be credited to the fallibility of human judgment. If it be supposed an unwise course is being pursued, or that the interests of the corporation are suffering, or likely to suffer through the inefficiency or faithlessness of an official, an appeal should first be made to the directory or governing body, to redress the grievance. Railing there, in ordinary cases the next redress will be found in the power of the ballot, which usually comes into exercise at short intervals.” We quoted approvingly the cases of Greaves v. Gouge, 69 N. Y. 154 , and Brewer v. Boston Theatre, 104 Mass. 378 . In Hawes v. Oakland, 104 U. S. 450 , Justice Miller, in delivering the opinion of the court, stated that a stockholder could appeal to the courts for relief, “where the board of directors, or a majority of them, are acting for their own interest, in a manner destructive of the corporation itself, or of the rights of the other shareholders.” *587 That is precisely what is averred in this case. “But,” Justice Milleb adds, “in addition to the existence of'grievances which call for this kind of relief, it is equally important that before the shareholder is permitted in his own name to institute and conduct a litigation which usually belongs to the corporation, he should show to the satisfaction of the court that he has exhausted all the means within his reach, to obtain, within the corporation itself, the redress of his grievances, or action in conformity to his wishes. He must make an earnest, not a simulated effort, with the managing body of the corporation, to induce remedial action on their part, and this must be made apparent to the court. If time permits, or has permitted, he must show, if he fails with the directors, that he has made an honest effort to obtain action by the stockholders as a body, in the matter of which he complains; and he must show a case, if this is not done, where it could not be done, or it was not reasonable to require it.” These principles commend themselves to our approval by the strongest of considerations. A corporation, to attain the highest success, should, like a family, dwell together in unity. And when disputes arise between members of this body politic, or law-created household, they should, if possible, 'be adjusted among themselves. It should be a strong case to justify a resort to personal litigation, which almost invariably leads to personal alienation, if not open hos tility. —Pratt v. Jewett, 9 Gray, 34 .

There is a remaining question. The by-laws, adopted at the stockholders’ meeting which organized the corporation, are made part of the bill. By-law number 14 is in this language: “ This corporation shall be dissolved on the first day of January, 1881.” In Aug. & Ames on Corp. § 766, after enumerating several modes by which corporations may be dissolved, the authors say: “To these modes of dissolution may be added one grown to be quite common in this country; the dissolution of a corporation by expiration of the term of its duration, limited by charter or general law.” And in section 772 the same authors say: “ In this country, the power of a private corporation to dissolve itself by its own assent, seems to be assumed by nearly all the judges who touch upon the point.” Many authorities are cited in support of this; but the authors add: “ It would seem that, as there are two parties to the charter compact, the assent of both would be necessary to the abrogation of the contract.” In Treadwell v. Salisbury Manuf. Co., 7 Gray, 393 , the Supreme Court of Massachusetts held that corporations of a private nature, established solely for manufacturing purposes, may by vote, even of a majority of their members, wind up their business and close their operations, if they elect to do so. It will be observed that this right is placed on *588 tbe ground that the corporation was purely of a private nature, in which the public could not be supposed to have any interest. Between such corporation and any joint adventure in which parties may associate themselves, there can be little or no difference, so far as the rights of the public are concerned. In Morawetz, Priv. Corp. § 629, speaking of the methods by which such corporations may be dissolved, the author names as one of them, “ surrender of the franchises to the State.” In section 215, the same author, speaking of clauses limiting the duration of charters, said : “If the provision is intended merely as a limitation upon the duration of the franchises granted to the cor-porators, there is no reason why the majority should not be held to have implied authority, as in other cases, to wind up the business of the company whenever they deem this to be expedient.”

The business of the Merchants and Planters Line, so far as the same is disclosed in the declaration and in the by-laws, appears to be a purely private enterprise, entered upon solely for the benefit of the shareholders. No matter of public duty, or duty pertaining to the public welfare is any where discovered, which would not equally obtain, if the stockholders had, without incorporation, formed a joint stock company, or partnership, having the same objects'in view. It would seem this corporation was organized solely for private emolument.

This argument is strongly fortified by the language and policy of our statutes, which make provision for annulling private corporations. It will be observed that such proceeding may be instituted “on the information of any person,” and that the judgment of vacation may be pronounced on the single ground that the corporation has surrendered “ its corporate rights, privileges and franchises.” — Code of 1816, §§ 3419, 3434. We hold that the stockholders of this corporation had the power to dissolve it, without obtaining the consent of the State. This principle was so announced in Savage v. Walshe, 26 Ala. 619 . See, also, M. & O. R. R. Co. v. State, 29 Ala. 573 ; McLaren v. Pennington, 1 Paige, 102 ; Enfield Toll Bridge Co. v. Conn. Riv. Co., 7 Conn. 45 ; Slee v. Bloom, 19 Johns. 456 ; Canal Co. v. R. R. Co., 4 Gill & Johns. 1; McIntyre Poor School v. Zanesville Canal Co., 9 Ohio, 203; Mumma v. Potomac Co., 8 Pet. 281 .

In the very act of organizing this coi-poration, the stockholders, by a by-law, fixed the term of its duration. Their language was, it shall be dissolved on the first day of January, 1881. A more solemn agreement and compact could not be entered into. We can not know that in the absence of that compact the corporation ever would have been organized, or its duties entered upon. We hold that such stipulation, embodied *589 in tbe original compact, is at least as obligatory on the stockholders, as a resolution afterwards adopted would be. This put an end to the corporation, as a corporation, January 1st, 1881. Its continuance afterwards was merely permissive, the result of silent acquiescence, and can only be regarded as a joint stock company, having no fixed duration, and liable to be terminated at the mere will of any of the parties in interest. Filing a bill for an account is one mode of putting an end to it. We do not hold, however, that any change had been wrought in the several rights and liabilities of the shareholders, by the agreed dissolution of the corporation. So long as they continued to act in joint adventure, they must be presumed to have agreed to be governed by the same authority and rules, as those which governed the corporation.

There is nothing in the demurrer for multifariousness. The complainants, according to the averments of the bill, are each entitled to relief of the same kind, and to have an accounting and settlement of the enterprise. It is not important, in such a bill, that the complainants shall be entitled to joint, or coextensive relief. Settlement of the entire accounts is the purpose, and in taking the account, complete adjustment should be made among all the parties, plaintiff and defendant. Each, no matter what his position may be as a party to the record, should have the relief a proper statement of the account entitles him to, and should be held to account for any and all sums he has improperly received. Precisely this, and nothing less, the bill calls for. — 1 Dan. Ch. Pr. (5th Amer. Ed.) 341, note 4; Sto. Eq. PL §§ 110, 159, 162, 166, 218.

All the present shareholders, if the averments of the bill be true, are made parties to the suit. Of course, there can be no relief for or against any person not a party. The demurrer for non-joinder was properly overruled.

Considered as a bill to settle the accounts of a dissolved corporation, and of its successor, a quasi joint stock company, the chancellor did not err in overruling the demurrer.

Affirmed.