Minona Portland Cement Co. v. Reese

EVANS, J. One of the appellants, Minona Portland Oement Company, is a private domestic corporation organized under the laws of the State of Alabama. The bill in this case ivas filed in the city court of Selma by certain persons who own preferred stock in said corporation against those owning the common stock therein, together with the officers of said corporation and the said corporation itself. The purpose of the bill is to dissolve the corporation and to cancel, certain stock issued, which is alleged to have been fictitiously paid up, to distribute the. assets of the corporation among the stockholders, as may be decreed, to those entitled thereto, and for general relief. According to the allegations of. the bill, the said corporation has no creditors, and no one is interested in its affairs, save the stockholders themselves. The bill further alleges that the. corporation has wholly failed of the purpose for which, it was organ ized, and sets forth matters as facts which, if true, show that the objects held in view by the promotors and organizers of the corporation have become impossible of accomplishment, and that it is impossible to proceed further with the work or business proposed. The bill was twice amended , in the court below, and from, a decree overruling the demurrer to it as last, amended this appeal was taken. The contention of appellants is that, before individual stockholders in a corporation can bring suit to remedy corporate wrongs, they must first apply to the directors for relief, unless facts are alleged and proved which, would render an application to the directors fu [488] tile and vain. This contention is correct as to corporrate wrongs, but has no application to a case like the one we are now considering, so far as the general equity of this bill is concerned. It is not to redress the wrongs of directors or officers of the corporation that is the primary object of this bill, but simply to have a nongoing corporation, one that has utterly failed of the object for which it was formed, and which owes no debts, dissolved, and the assets distributed, according to law, to those entitled. In such a case there is no necessity to apply to the directors for redress, for the directors, as such, have no authority to dissolve a corporation; their business being usually to see that the corporation is properly conducted to work out the purposes for which it was formed. A court of equity is the proper place to have such dissolution decreed and the assets properly distributed.—Ross v. American Banana Company, 150 Ala. 270, 43 South. 817; Central Land Co. et al v. Sullivan, 152 Ala. 361, 44 South. 644; Noble et al. v. Gadsden Land & Improvement Co. et. al., 133 Ala. 251, 31 South. 856, 91 Am. St. Rep. 27. The allegations of the original bill that the corporation was a failure, and setting up facts which, if true, show conclusively that it is a failure, and that the business for which it was formed can never be inaugurated or carried on, gave the court jurisdiction, and was not subject’to demurrer; and, the court having taken jurisdiction for the purpose of dissolving the corporation, it will settle all the equities arising out of the subject-matter of the bill. There is no question of . laches appearing upon the face of the bill that could defeat any of the rights of complainants. The corporation was not formed until November 14, 1906, and the bill in this case was filed June 12, 1908. The bill charges that the 1,250 shares [489] of common stock, estimated as of the par value of $100 each, were paid for by respondents with lands worth $15,400. In other words, $125,000 worth of common stock was paid for with $15,400 worth of land. This was in plain violation of section 26 of an act approved October 2, 1903. See Gen. Acts Ala. 1903, p. 327, which provides how subscriptions to capital stock of corporations may be discharged, and one of the ways is by a transfer of property at its reasonable value. If the allegations of the bill are true (and we must take them to be true for the purposes of the demurrer) then the larger part — the difference between $15,400, the value of the land, and $125,000, the face value of the common stock — was a fiction, and complainants would be entitled to relief against this, unless they have lost this right by laches, acquiescence, or participation in the unlaAvful and fictitious issue of stock, or for some other sufficient cause. As none of these appear from the allegations of the bill, the question could not be raised by demurrer. Hence the ground of demurrer attempting to raise this question was properly overruled. We have discussed and decided all questions presented and urged in the brief of appellants’ counsel, and find them all against appellants. The decree of the judge of the city court, overruling the demurrer, is affirmed. Affirmed. Doavdell, C. J., and Anderson and Sayre, JJ., concur.