McKleroy v. Gadsden Land & Improvement Co.

126 Ala. 184
CourtSupreme Court of Alabama
DecidedNovember 15, 1899
StatusPublished
Cited by14 cases

This text of 126 Ala. 184 (McKleroy v. Gadsden Land & Improvement Co.) is published on Counsel Stack Legal Research, covering Supreme Court of Alabama primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
McKleroy v. Gadsden Land & Improvement Co., 126 Ala. 184 (Ala. 1899).

Opinion

TYSON, J.-

The order or decree -appealed from is neither such an interlocutory decree nor a final decree as will support an appeal. — Code, §§ 426, 427. Without a final decree or a special appeal from certain interlocutory orders, ‘this court is without jurisdiction to entertain an appeal from orders of a lower court in a pending suit. In the order attempted to be-appealed from, in this case, there is no adjudication that Mc-Ivleroy.is a creditor or that his co-complainants are stockholders, or of auy matter of default on the part- of tire corporation. The motion to dismiss the appeal must he granted.

The application for a mandamus requires a more extended consideration.

A -simple contract creditor, -for a small amount, without a judgment or lien, united with a small minority of the stockholders of the Gadsden Land and Improvement Company, a corporation under the laws of Alabama, located at Gadsden, in a joint bill to collect the debt of the creditor, to appoint a receiver of the property, and to dissolve and wind up' the corporation and make a distribution of its assets among its stockholders after paying its debts, including the costs of the winding up process. This suit was brought against the corporation only; and the president of the defendant, it seems without request, accepted service of the summons before it was placed in the hands of the sheriff for service, and on the same day put in an answer admitting the allegations of the bill, saying nothing in-bar or preclusion of the decree -sought. On the same day, the cause was submitted in Chambers to the chancellor for the appointment of a receiver. The order-prayed for was granted on the ground, as shown by its recitals, that the averments of the bill had been ad[191]*191mitted to be true by tlie defendant “by answer this day filed.” The president of the corporation was (me of the receivers thus appointed. Two months after-wards, the cause was submitted for final .decree on the “original bill and report of the receivers,” the respondent corporation submitting on its answer, thus furnishing the' evidence for a decree. The chancellor rendered a decree in which he said, “it seems to the court, that the complainants are entitled to the relief prayed,” and thereupon, he ordered the stock certificates and a list of the debts to be filed in sixty days, and that the-register ascertain and report a list of the stockholders, and creditors, and the costs and expense of the suit, including a reasonable attorney’s fee and fees to the receivers, and the cash value of the property and a statement of liens thereon, and the most advantageous way of selling the property and whether it would be better to sell all the property, real and personal, in solido or in parcels. All other questions were reserved. Before the reference was held or the property sold, one Elliott, a stockholder who had not joined in the suit mentioned, filed his original bill in the same court against the parties to the first bill, attacking the proceedings in that cause for irregularity, collusion and fraud, and asking an order restraining the proceedings therein until the further order of the court, and on final hearing for á revocation of all orders therein’ and a dismissal of said bill and for general relief.

This last case was submitted to the chancellor on notice to the adverse parties, for the restraining order prayed for. The solicitor of complainants in the first suit, it seems, appeared as amicus curiae and resisted the application by filing affidavits, by consent, of a number of the defendants in opposition to the granting of the order. In the days of strict pleading at the common law, this “venit” might perhaps be termed only “half defense.” — 1 Cliitty on Head. pp. 443-4, bottom pp. 553-4.' But in this court,. where the substance of things only is regarded, we must take it as a full appearance by the defendants, if it were material. 'The chancellor granted the order;, and this court is now [192]*192•asked for a mandamus, on the record of both cases, to •compel the chancery court to vacate the decree ancl to proceed to wind up the affairs of the corporation under the bill in the first cause.

We are of the opinion that the action of the chancellor in calling a halt in the proceedings to wind up the affairs of the corporation in the absence of the persons adversely interested therein was eminently proper. 'The relation of- the stockholders of a corporation to the corporate body is, in many respects, the-.same as that of cestuis que trust and trustee. The corporation holds the legal title to the property and through its directors has the absolute right of disposition and management in bona fide proceedings for the purposes for which the corporation was formed, but, subject to this, the stockholders have a joint equitable interest in the property and effects, and have a right at any time to have protection in the courts from abuse of corporate power. First Nat. Bank v. Winchester, 119 Ala. 168; Swift v. Swift, 65 Md. 428; Robinson v. Smith, 3 Paige, 222; Fougeray v. Cord, 50 N. J. Eq. 185; Thompson on Corp. §§ 4545, 5096; 1 Morawetz on Oorp., §§ 515, 516. In the proper business of the association, ;the corporate body only can be dealt with, and it is the only necessary party plaintiff or defendant to represent corporate interests. When, however, it comes to a destruction of the association and a distribution of its assets, the cestuis-que trust, the stockholders, must be parties to the litigation. The corporation, in such case, has no authority to represent them singly or as a whole. The necessary effect of every such suit is to disturb and disrupt the relation of the corporation and the stockholders, and as in similar suits in reference to trust property, the cestuis que trust are necessary parties.—Carey v. Brown, 92 U. S. 171-2; Kerrison v. Stewart, 93 U. S. 155; 15 Ency. Pl. & Pr. 584, 593.

Assuming that the court had jurisdiction to decree a dissolution of the corporation on the joint 'bill of a simple contract creditor, and a minority of the stockholders, a question .which we do not decide, it is evi[193]*193dent that the court 'was right, in refusing to proceed without the presence of the stockholders at large as parties. — 3 Brick. Dig. 373, § 98. And such parties, whose rights would, be seriously affected by the proceedings in the first suit, had the right to file an original bill for their protection.—Curry v. Peebles, 83 Ala. 225; Ala. Nat. Bank v. Mary Lee Co., 108 Ala. 299; Tal. Mer. Co. v. Jenifer, 102 Ala. 259.

It is held in Merchants & Planters Line v. Waganer, 71 Ala. 581, that a private corporation entered into solely for benefit of the shareholders, and involving no public duty, may be dissolved by the stockholders, and, on the same principle, when the purpose of such an association is a failure, we quite agree with Mr. Thompson that there should be in the 'Chancery court an inherent power to administer the property so as to restore to the cesta is que trust, the .stockholders, their ultimate interest.—4 Thomp. on Corp. § 4545; Fougeray v. Cord, supra; Price v. Holcomb, 56 N. W. Rep. 407.

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Bluebook (online)
126 Ala. 184, Counsel Stack Legal Research, https://law.counselstack.com/opinion/mckleroy-v-gadsden-land-improvement-co-ala-1899.