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RECEIVERS-Corporations. It is No Ground for the appointment of a receiver for a corporation that its stockholders are not allowed access to the corporate books and papers, or that the directors refuse to disclose material facts connected with the corporate business. (p. 26.)

RECEIVER FOR CORPORATION.-A stockholder in a cor. poration cannot invoke the action of a court of equity in appointing à receiver for the corporation to meet a necessity produced by his own wrong. (p. 26.)

Smith & Smith, for the appellants.
London & London, for the appellees.

230 MCCLELLAN, C. J. It is no ground for the appointment of a receiver of a corporation that the directors in office are holding over after the year for which they were elected in default of the election of their successors by the stockholders. And the cause of such default is of no consequence.

It may be that the stockholders desired the directors to continue in office and it was inconvenient to meet and re-elect them, or that an election was permitted through mere inadvertence, or that there were such dissensions among the shareholders and the holdings of the dissentients were so equally divided that a majority could not be brought to the support of any set of individuals for the directorate; but whether the failure to elect resulted from any one or the other of these causes or any other whatever, it would leave and continue in office—whether de jure or de facto is immaterial—directors competent to conserve the property and carry on the business of the corporation, and there would be no necessity to take the concern out of their hands and commit it to a receiver. If the corporation had no directors and none could be elected, a different case would be presented. If there were directors among whom such dissensions existed as that the corporate functions could not be discharged and its assets and business were imperiled in consequence, necessity for the intervention of the court of chancery by the appointment 231 of a receiver might arise: Sternberg v. Wolff, 56 N. J. Eq. 389, 67 Am. St. Rep. 494, 39 Atl. 397. Or if there are two sets of men, each claiming to constitute the directory, the claim of each being of substantially doubtful validity, and each is scrambling for the possession of the corporate property and the control of the corporate business, a temporary receiver may be appointed at the suit of the stockholders : Jasper Land Co. v. Wallis, 123 Ala. 562, 26 South. 659. In all these cases there is strangulation and paralysis of the corporate functions and re

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sulting probability of serious detriment to its property and business, which can be averted only by the appointment of a receiver. This is not true of the case first stated, which is the case at bar. Here there is no strangulation, no paralysis. Here is a board of directors in office, in undisputed possession and control of the corporate assets and in the exercise of all corporate powers and functions; and they are legally competent to conserve the corporate property and carry on its business. Their acts as directors are as efficacious and valid as if they had been elected at the last annual date for the election of directors. They are in the same sense and to the same extent trustees for the stockholders and answerable to them for any breach or abuse of the trust. The property in their hands is in no more peril of maladministration and the business of the concern is no more likely to be improperly carried on than if they had been elected on yesterday. Being trustees, if they have voted to pay and paid to the estate of a deceased kinsman who was a director moneys of the corporation which they had no authority to so appropriate, the complainant, as a stockholder, has the right to call upon them to sue in the name of the corporation for its recovery, and, they declining, he may file a bill in his own pame on behalf of the corporation to that end. So, too, if they, as directors, have voted to themselves salaries as officers of the corporation in abuse of their trust, the complainant has like rights and remedies. If they undertake to sell the lands of the corporation in fraud of it to other corporations in which they are interested-of which there is a bare innuendo in Shackelford's affidavit-the court of chancery is wide open to Shackelford both for discovery of the facts and relief upon them. 232 Moreover, at Shackelford's instance, the stockholders adopted a by-law, which he insists is valid and operative, to the effect that no lands of the corporation should be sold without the consent, by ratification or confirmation, of a majority in ralue of holdings of all the stockholders, and thus assurance is made doubly sure that no receiver is necessary to protect his interests in respect of the sale of lands. Then there is something in the bill about complainant not being allowed access to the books and papers of the corporation. These averments were not only not proved but affirmatively disproved on the hearing; and were they true the remedy is plain, adequate and complete short of the appointment of a receiver. Then, too, it is said that the directors refuse to disclose material facts cona Dected with the corporate business, the value of its lands and

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the like. This, too, fails of proof and constitutes no ground for a receiver if true; and, moreover, the complainant swears that he would not have believed such disclosures if they had been made, and that he so informed the directors,

It is made to appear in the case that practically the only business of this corporation was the collection of a large judgment it had recovered for the taking of coals out of its lands, the settling of titles to its lands, the prosecution of an action for the recovery of certain parcels of it held by a trespasser, and the sale of its lands. The directors in office are not only fully competent to carry on all this business, but they are prosecuting it diligently and properly so far as it appears. If any difficulty should arise in the sale of the lands, it can only come from Shackelford's own unwarranted and capricious objection as stockholder under the by-law adopted at his instance and to which we have referred above; and surely he cannot invoke the action of a court of equity to meet a necessity thus produced by his own wrong.

As to the action prosecuted by the corporation for the recovery of parcels of its lands, and which is now pending in this court on appeal from a judgment in its favor, it transpires that the Ivy Coal and Coke Company is the defendant in that action, and Shackelford is the president 233 of that company. In respect of the money judgment in favor of this corporation and which it was endeavoring to collect when this bill was filed, it is to be noted that said Ivy company of which Shackelford is president is the defendant therein, and that Shackelford himself is personally liable thereon as the company's surety on supersedeas bond for appeal to this court where the judgment was affirmed. As to these matters it would obviously not be the most appropriate thing imaginable for him to exert a controlling influence in the conduct of the corporation, although he owns one-half of its capital stock. He sought a negatively controlling power by insisting that the number of directors should be increased from three to four, and that he and an agent of his should be given two of the places. This might well have produced or resulted in a deadlock and the paralysis of the corporate business; and there is indeed room for suspicion that the inotive of this proposal was to thus throw the corporation into convulsions and then call in a receiver to doctor the convulsions. However that may be, in view of the antagonistic attitude of Shackelford to the corporation in respect of said action of ejectment and said money judgment, in connection with the further


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fact that he bought into the company pending those actions and from a third party who appears to have been in harmony with the directory, it is not surprising that the holders of the other half of the stock, who are the directors now in office, should have declined this proposition of Shackelford; and there is no room to say that in so doing they were not faithfully representing the interests of the corporation. Their counter-proposition to make him one of the three directors was all that fairness could require from them.

On the case submitted to the chancellor and now again submitted to us, we find no necessity for the appointment of the receiver. The order appointing him must be reversed, and an order will be here entered denying and dismissing the application for the appointment.

Reversed and rendered.

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Grounds for the Appointment of a Receirer for a corporation are diseussed in the monographic notes to Cameron v. Groveland Imp. Co.

, 72 Am. St. Rep. 48-60; Cortelyou v. Hathaway, 64 Am. Dec. 485, 456; and the subsequent cases of Sheridan Brick Works v. Marian Trust Co.

, 157 Ind. 292, 87 Am. St. Rep. 207, 61 N. E. 666; Interna. tional Trust Co. v. United Coal Co., 27 Colo. 246, 83 Am. St. Rep. 59, 60 Pac. 621; Ball v. Maysville etc. R. R. Co., 102 Ky. 486, 80 Am. St. Rep. 362, 43 8. W. 731.

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(137 Ala, 283, 34 South, 174.) CORPORATIONS_Right of Stockholder to Maintain Suit. Before a minority stockholder in a corporation can maintain suit in his own name to redress supposed corporate wrongs, he must allege that he has made demand upon the managing officers or governing board of the corporation to correct the wrongs complained of, by legal proceedings or otherwise, and that, meeting with failure or refusal, he has sought redress through the stockholders as a body, or be must allege facts showing that such demand would have been useless. (p. 28.)



F. S. White & Sons, for the appellant.

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R. H. Thach, for the appellees.

280 TYSON, J. It cannot be doubted that the alleged wrongs complained of in the bill in this cause, if cognizable at all

, are such as could have been righted upon the complaint of the corporation, in which the complainants are stockholders.

In other words, the purpose of this bill is to redress certain alleged injuries done the corporation, which are charged to be damaging to the rights of the complainants as stockholders.

290 It is thoroughly well settled in this state that before a minority stockholder, or any number of them, can maintain a bill of this sort, he or they must make demand upon the managing officers or governing board of the corporation to correct the wrongs complained of, by legal proceedings or otherwise, and meeting with failure or refusal, he or they must next seek redress through the stockholders as a body. And such demand or request must be clearly averred in the bill. Of course, this demand is not required when it is made clearly to appear that it would be refused, or that the litigation following would necessarily be under the control of persons opposed to its success, or when the persons constituting the governing board or a majority of them are the wrongdoers or under their control, and any effort to obtain redress through the stockholders would be unavailing for want of time or other cause. Of course, the excuse for not making the demand upon the governing board or if made upon that body, then the excuse for not seeking redress through the stockholders must be clearly and distinctly averred in the bill: Montgomery Light Co. v. Lahey, 121 Ala. 131, 25 South, 1006, and authorities there cited.

There is not an averment in this bill, which can by any possible construction afford the remotest inference, that the stockholders of the corporation have ever been applied to by these complainants to redress the grievances complained of, nor is there even an inference, from the facts averred, that any good reason exists for not making the application to them. Indeed, we think it can be said that no proper demand is shown to have been made upon the directors. All that is shown in this respect is that one J. A. Van Hoose, who was a stockholder, on the seventeenth day of October, 1899, addressed a letter to “Members of the Board of Directors of Woodlawn Cemetery Co.," requesting them to immediately call a meeting of the board of directors and of the stockholders of the corporation for the purpose of redeeming the property of said company from the respondent, before the expiration of the time of redemption, and demanding that they take such immediate steps as are necessary in order to make such redemption. It is obvious from the language employed that the board of directors were not in session when this letter was written, nor is there one word in it calling their attention to the facts upon which the relief is


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