Gibson v. Thornton

33 S.E. 895, 107 Ga. 545, 1899 Ga. LEXIS 109

• Court: Supreme Court of Georgia
• Decided: July 26, 1899
• Status: Published

Opinion

Fish, J.

In this case several amendments to the plaintiffs’ petition had been offered and allowed prior to the amendment which they filed on the 13th of August, 1897. This last amendment had not been allowed by the court when the case came on for trial at the March term, 1898, and the defendants then moved the court to disallow and strike it. After argument upon this motion, the court ordered all of this amendment stricken except the 13th’and 14th paragraphs thereof. Plaintiffs in error, in their bill of exceptions, allege that the court erred in disallowing the portion of the amendment which was ordered stricken. The stricken portions of the amendment consisted of a detailed statement of all that had previously transpired in the case, together with allegations in reference to the conduct of the defendant directors since the filing of the petition and the interlocutory hearing of the case. Its purpose seemed to be to obtain another interlocutory hearing of the application for injunction and receiver, upon the same pleadings and evidence which were before the judge when he denied the prayer for an injunction and refused to appoint a receiver; the plaintiffs claiming that they had failed to obtain a hearing in the Supreme Court u*pon their bill of exceptions to his decision to this effect, because of the failure of the judge to certify the bill of exceptions within the time prescribed by law. But no interlocutory hearing was ever had after this amendment was filed, and when the motion was made to strike it the case was up for final trial in term. Certainly to encumber the record with a circumstantial account of everything that had transpired in the case, from the filing of the petition to the dismissal of the writ of error in this court, could then answer no useful purpose whatever. It mattered not then whether the judge at chambers had denied the application for injunction and had refused to appoint a receiver, or had granted both prayers of the plaintiffs. The case came up then to be tried, de novo, upon all the pleadings previously allowed, and upon all competent evidence which might be introduced by the plaintiffs on the one side and the defendants on the other. The interlocutory judgment was but temporary and provisional, and its force could only be operative from the time of its rendition until the case should be heard upon its merits and a final decree rendered therein. Consequently all the allegations in the amendment with reference to the previous history of the case were, when the case was before the court for final trial upon its merits, useless and irrelevant. In so far as the portion'of the amendment which was stricken undertook to set up facts which had transpired since the interlocutory hearing, it failed to materially strengthen the plaintiffs’ case as it was made by the petition and the amendments which had already been made thereto. It in effect simply charged that the defendant directors had, since the interlocutory hearing, continued to pursue the same course of unlawful conduct with which they were charged in the previous pleadings of the plaintiffs. It was, in this respect, a mere reiteration of the allegations which were already contained in the amended petition as it stood before this last amendment was filed. The plaintiffs were not hurt when the stricken portions of the amendment were disallowed by the court.

2. After the court had allowed the plaintiffs to amend their petition by incorporating therein the matter included in the 13th and 14th paragraphs of this amendment, the defendants offered to demur to the petition as amended. The plaintiffs objected to the consideration of this demurrer, “ 1st, because the defendants had, at previous terms of the court, filed their answers to-the petition and the amendments thereto; 2nd, because the court had previously overruled a demurrer filed and urged by the defendants; 3rd, because the last amendment was not of such materiality as opened the entire case for demurrer.” The court overruled these objections, allowed the demurrer to be filed, and, after argument thereon, sustained the same and dismissed the plaintiffs’ petition; to which rulings the plaintiffs excepted. The court had already overruled a demurrer to the plaintiffs’ petition, as it stood after all the various amendments thereto, save this last one, had been allowed, and the defendants had answered. Therefore no other demurrer could be legally entertained, unless this last amendment reopened the case to demurrer. An amendment which materially changes the . cause of action opens the petition, as amended, to demurrer, but an immaterial amendment does not. Civil Code, § 5068. Did this amendment materially change the plaintiffs’ cause of action? Did it so vary the case as to change the plaintiffs’ equity? As we have seen, only the 13th and 14th paragraphs of this amendment were allowed. The allegation in the 14th paragraph, that the previously alleged and described fraudulent acts of the three defendant directors “are and have been beyond the charter powers of said corporation,” added nothing to the plaintiffs’ case. The acts complained of were alleged to be fraudulent, and,- from the description of the same, were clearly and grossly so. It did not help the plaintiffs’ case to charge that these palpably fraudulent acts of the individual defendants were ultra vires. Strictly speaking, none of them, except the alleged fraudulent issue of stock certificates, could be termed ultra vires acts of the corporation, but were, as alleged, the fraudulent acts of the individual directors, which were not perpetrated in the name of the corporation. It had already been alleged that the issue of these stock certificates was without authority of law and in violation of the charter and by-laws of the corporation. The other allegations in this paragraph are mere repetitions, in general terms, of charges previously made. It is apparent, therefore, that this paragraph of the amendment was immaterial, as it did not in any respect vary the plaintiffs’ cause of action.

Let us see whether the'charge contained in the 13th paragraph, that the corporation had been rendered insolvent by the mismanagement of the defendant directors, changed the equity of the plaintiffs’ case. Whether the corporation was solvent or insolvent, the plaintiffs were not entitled to have a receiver appointed for the purpose of taking charge of its property and affairs and carrying on its business for the benefit of the stockholders. Empire Hotel Co. v. Main, 98 Ga. 176, 184; 2 Cook on Stock & Stockholders, § 746. Therefore the allegation of insolvency was immaterial so far as the prayer of the plaintiffs that a receiver should be appointed for this purpose was concerned. For a similar reason, this allegation was immaterial when considered in connection with the prayer that a receiver should be appointed, and all the property and franchises of the railroad company sold, and the proceeds of the sale, after paying the expenses incident thereto, applied to the payment of its debts, and the balance, if any, distributed among the stockholders in proportion to their respective shares. Whether the corporation was solvent or insolvent, the court had no power to grant this prayer. In the absence of express statutory authority, a court of equity has no power to dissolve a corporation and appoint a receiver to administer its assets. High, Rec. (3d ed.) §§288, 289; Beach, Rec. (Alderson’s ed.) 100; 9 Am. & Eng. Enc. L. (2d ed.) 601; Thomp. Corp. §§4538, 4539, 6703; Mor. Priv. Corp. §282; Neal v. Hill, 16 Cal. 146, 150; Verplanck v. Mercantile Ins. Co., 1 Edw. Ch. R. 84; Bank Com’rs v. Bank of Buffalo, 6 Paige, 497; Strong v. Mc-Cagg, 55 Wis. 624; Bayless v. Orne, 1 Freem. (Miss.) 161, 172; Robertson v. Bullions, 11 N. Y. 252; French v. Gifford, 30 Iowa, 148; Wallace v. Pierce-Wallace Pub. Co., 101 Iowa, 313; State v. Merchants Ins. & T. Co., 8 Hump. 235, 252; Baker v. Backus, 32 Ill. 79; Howe v. Deuel, 43 Barb. 504; Belmont v. Erie Ry. Co., 52 Barb. 665, 667; Fountain Ferry Turnpike R. Co. v. Jewell, 8 B. Mon. (Ky.) 142; Atty. Gen. v. Earl of Clarendon, 17 Ves. 491; Slee v. Bloom, 5 Johns. Ch. 379; Van Pelt v. U. S. Metallic Spring Col., 13 Abb. Pr. (N. S.) 331; Atty. Gen. v. Bank of Mich., Har. (Mich.) 315; People v. Weigley, 155 Ill. 491; State Investment & Ins. Co. v. San Francisco, 101 Cal. 135; Havemeyer v. Superior Court, 84 Cal. 327; Denike v. N. Y. Cement Co., 80 N. Y. 599. In this State such authority has not been conferred upon courts of equity. Section 1882 of the Civil Code provides ■ how a corporation is dissolved in this State, viz., by expiration of its charter; by forfeiture of its charter; by a surrender of its franchise; by the death of all its members without provisions for á succession.

If a court of equity can not dissolve a corporation, can it do what would be — certainly in a case of the present character— tantamount to the same thing, that is, appoint a receiver, sequester its property, decree a sale of all of its property and franchises and a distribution of the fund arising from such sale among its creditors and stockholders? When the affairs of a railroad corporation are wound up, its property, including its franchise to construct, own, and operate a railroad between designated points, all sold, and the proceeds of the sale distributed to creditors and stockholders, is it not, for all practical purposes, dissolved? Theoretically it may not be dissolved, because having once been created and organized as a corpora-tion, so long as the mere right to be a corporation, which does not pass by a sale of its corporate franchises, continues, the mere, naked, legal entity, known by a designated name as a particular corporation, may still survive, but for every conceivable t practical purpose the corporation is' as completely destroyed as it would be if a decree of corporate dissolution had been regularly and legally rendered. The principle that a court of equity can not dissolve a corporation would be utterly useless if, upon the application of minority shareholders, a going railroad corporation can be put into the hands of a receiver, its property and franchises sold, and the proceeds thereof distributed to its creditors and stockholders. A railroad corporation shorn in this way of all its property and corporate franchises, helpless and hopeless, might exist, in legal contemplation, as a pure mental abstraction; but it would be mere mockery to hold that the court by the exercise of whose power it was reduced to this state of helpless and permanent inertia could not dissolve it. In our investigation we have found a few instances, in each of which an exceptionally strong case was made for the interposition of equity, where courts have held that the affairs of a mere private business corporation could be wound up by a court of equity, upon the application of minority stockholders. But we are aware of no instance in which this power has been exercised, upon the petition of minority shareholders, in reference to a going railroad corporation, which is a quasi public corporation, whose charter and franchises were conferred upon it, not for the mere benefit of its stockholders, but, in a large measure at least, in order that it might construct, maintain, and operate a public highway, and in connection therewith discharge important duties, directly affecting the interests of the public, the continued and faithful discharge of which is a matter of public concern. If there is such a case, it has escaped our attention.

We are of opinion that the court had no power to grant the prayer for a winding up of the affairs of the corporation and a distribution of its assets among its creditors and shareholders. In support of this opinion we cite the following authorities: Thomp. Corp. §4539; Spelling, Extraord. Rel. §758; Hinckley v. Pfister, 83 Wis. 64; Strong v. McCagg, supra; State v. Merchants Ins. Co., 8 Humph. (Tenn.), 235, 252; Com. v. Union Ins. Co., 5 Mass. 230; Denike v. N. Y. Cement Co., 80 N. Y. 599; Baker v. Backus, 32 Ill. 79; Ramsey v. Erie Ry. Co., 7 Abb. Pr. (N. S.) 156, 181; Howe v. Deuel, supra; Latimer v. Eddy, 46 N. Y. 61; Belmont v. Erie Ry. Co., 52 N. Y. 637, 665; Hardon v. Newton, supra; Mason v. Supreme Court of Equitable League, 77 Md. 483; Brown v. Home Savings Bank, 5 Mo. App. 1; Wallace v. Pierce-Wallace Pub. Co., supra; Mor. Priv. Corp. 283; Bayless v. Orne, French v. Gifford, Atty. Gen. v. Bank of Mich., supra. It is, we think, very clear that the allegation of the insolvency of the corporation added nothing material to the strength of the plaintiffs’ case, so far as the other prayers of the petition are concerned. Whether they were, or were not, entitled to any particular portion of such relief did not depend upon the solvency or insolvency of the corporation. Certainly this is true in reference to the question whether they were entitled to an injunction restraining the defendants from a repetition of their fraudulent acts. More good could be accomplished by such an injunction before the corporation became insolvent than afterwards. So the question whether the court had the power to compel these directors to account for the assets of the railroad company, which they had fraudulently converted to their own use,® could not turn upon the solvency or insolvency of the corporation. Nor could the questions presented by the remaining prayers of the petition. It being settled that the court did not err in striking the portions of the amendment which were •disallowed, and that the amendment as allowed was not of such materiality as to reopen the case to another demurrer, the only questions upon which the rulings of this court have been invoked have been disposed of. We, therefore, express no opinion as to the character and extent of the relief to which ■the plaintiffs are entitled, if the allegations contained in their pleadings are sustained by the evidence, as such an opinion would be merely obiter.

Judgment reversed.

All the Justices concurring.