Anderson v. Buckley

DOWDELL, J. The bill in this case was filed by the appellants, Pelham J. Anderson and John B. Nicrosi, as shareholders in the Commercial Fire Insurance Company against the appellees as trustees, under the statute, of said -company, whose charter had expired by limitation of time—one of the purposes being for the removal of said trustees and for the appointment of a receiver. The court below on the hearing upon the motion to appoint a receiver, denied the motion and from this decree, the present appeal is prosecuted. The Commercial Fire Insurance Company was a domestic corporation -organized under the general statutes of this State and its charter expired by limitation of time. At tin1 date of the expiration of its charter, which under the law operated a dissolution of the corporation, the appellees together with the complainant Pelham J. Anderson constituted the board of directors of said corporation, and upon its dissolution they as managers of the business of the corporation at the time of its dissolution, became trustees under the statute, of the stockholders and creditors, for the purposes -and with the powers and duties named in the statute; and as such trustees, it is alleged in the bill, they entered upon the active discharge of the duties of their office. The dissolution of the corporation was not a voluntary dissolution as upon petition by a majority of the -stockholders owning three-fourths of the stock, but involuntary by operation of the law, and as much so, as if its charter had been forfeited by a decree or judgment of a court of competent jurisdiction upon adversary proceedings instituted against it for that purpose. The dissolution being involuntary, and its property and assets being in the custody, anck its affairs under the-management, of the persons designated by the statute,, the mere fact of dissolution without more, furnishes no630 ground for the appointment of a receiver.—Weatherly v. Capital City Water Co., 115 Ala. 156. It is however contended by counsel for appellants that for other grounds alleged in the bill the appellees as trustees should be removed and a receiver appointed. If the charges made by the bill were true and had been sustained by the proof there would be no doubt of the merit of this contention. A conflict of interest and duty on the part of the trustees is alleged in the bill, and it is also charged that said trustees have mismanaged the trust, have been guilty of misconduct, and have wasted the assets. All of these charges are expressly denied in the answer of the respondents. Many authorities are cited to show that it is a sufficient ground for the removal of a trustee from the management of the trust, that there is a conflict in interest and duty of such trustee. There can be no doubt of the soundness and wisdom of this doctrine, and as a general proposition of law it cannot be questioned. But conceding the legal proposition as stated, the . removal would not be granted upon the application of a ■stranger to the trust.—4 Am. & Eng. Dec. in Equity, p. ■699. The notes which were executed by the appellees as stockholders and directors of the corporation, and which it is alleged in the bill, they as trustees have failed and refused to collect, serve the basis of the averment or charge as to the conflict of interest with duty on the part of the trustees. These notes were executed under a resolution passed by the board of directors of which the appellant Anderson was a member, solely and exclusively for the benefit of creditors of the corporation, and in said resolution it was expressly provided that no non-contributing shareholder should, upon the dissolution of the corporation and upon a division and distribirtion of its assets among shareholders, participate in a'distribution of the fund so contributed. These notes are absolutely without consideration as to the ■complainants, who are not creditors, but merely shareholders of the corporation, and not contributing shareholders under said resolution. Under these conditions, it cannot be said that any trust has arisen by the execution of these notes in the collection of which the ap [631] pellants as shareholders can have any interest as cestyis que trust. Moreover it is shown by the proof that the assets of the dissolved corporation outside of these notes are ample and sufficient to pay all of the indebtedness of the corporation, and furthermore that the outstanding and unpaid debts of the corporation amounting to between five and six thousand dollars are secured by collaterals, and in addition to the collateral security, the notes evidencing said debts are endorsed by the appellees, whose solvency is not questioned. Under these facts, certainly no present necessity is shown to exist for the collection of these notes, nor is there a probability that the necessity will ever arise since the makers of the notes in question are personally liable as endorsers on the obligations of the dissolved corporation, on account of which said indebtedness these notes were made; nor can it be said under the facts, that any present conflict in duty and interest exists, or any probability that such condition will ever obtain. Being executed exclusively for the benefit of creditors no duty of payment arises, unless the demands of creditors call for it.' The complainants do not show any probable event in which they as shareholders would have any beneficial interest in the collection of these notes. No fraud is alleged in the sale of the Brewery stock by the trustees, a part of which was purchased by Le-Grand, one of the trustees. The facts show that this sale was fairly made and was made for the purpose of raising funds to pay debts of the corporation, and the proceeds arising from the sale were so applied; that the price paid for said Brewery stock was its full market value. In the absence of fraud or unfairness the purchase by a trustee of trust property is not ground for his removal.—1 Perry on Trusts (5th. ed.), § 276. Such a sale is not void, but only voidable at the election of the cestui que trust. The cestui que trust has the right to affirm or disaffirm the purchase. He may consider it to his interest that the purchase should stand. If public policy denounced such a transaction vicious without regard to the election of the cestui que trust, the beneficiary would thereby be deprived of a bargin that [632] might be highly advantageous to him.—Dexter v. McClellan et al., 116 Ala. 37. If there was any dereliction of duty on the part of said trustees in their failure to collect the several small items of debts due on account of the corporation mentioned in the bill, which charge we do not think is supported by the proof, the complainant Anderson, who was also a trustee with equal right and authority with the other trastees to demand payment of said accounts, and who never made any effort to collect, was equally guilty of such dereliction, and puts himself in the attitude of asking relief in this respect, on account of his own default. As to the allegations of waste and mismanagement, we think the proof clearly and abundantly shoivs that the management of the trust has not only been economical and conserving, but also judicious and capable. The court committed no error in-declining to appoint a receiver, and the decree must be affirmed.