Opinion
6 Div. 431.
January 16, 1930.
Appeal from Circuit Court, Jefferson County; Gardner Goodwyn, Judge.
Huey Welch and W. G. Stone, all of Bessemer, for appellants.
In a suit brought by one or more stockholders for the benefit of a corporation, the corporation is a proper and indispensable party. 14 C. J. 941; Kendig v. Dean, 97 U.S. 423, 24 L.Ed. 1061; Dacovich v. Canizas, 152 Ala. 287, 44 So. 473; Decatur M. L. Co. v. Palm, 113 Ala. 531, 21 So. 315, 59 Am. St. Rep. 140; Tillis v. Brown, 154 Ala. 403, 45 So. 589; 3 Pom. Eq. Jur. (2d Ed.) § 1095. And the failure to make the corporation a party leaves the stockholders without a right of action. Shawhan v. Zinn, 79 Ky. 300; Starr v. Heald, 28 Okl. 792, 116 P. 188; Lawrence v. So. Pac. Co. (C. C.) 180 F. 822; Morshead v. So. Pac. Co. (C. C.) 123 F. 350. The stockholder, in order to maintain suit, should show that he exhausted all means within his reach, within the corporation itself, to redress his grievances. Hawes v. Oakland, 104 U.S. 450, 26 L.Ed. 827; Steiner v. Parsons, 103 Ala. 215, 13 So. 771; Decatur M. L. Co. v. Palm, supra. A bill for appointment of a receiver should be verified by the affidavit of some one having knowledge of the truth of the averments therein. Petchey v. Allendale L. Co., 216 Ala. 167, 112 So. 818. Resort to appointment of a receiver can be had only in extreme case, or where it appears irreparable loss would be sustained by plaintiff. Henry v. Ide, 209 Ala. 367, 96 So. 698.
McEniry McEniry, of Bessemer, for appellees.
Upon actual or virtual refusal of the corporation to sue, an individual stockholder may sue on behalf of himself and other stockholders and for the benefit of the corporation to redress a wrong which is primarily to the corporation. 14 C. J. 925; Glass v. Stamps, 213 Ala. 95, 104 So. 237; Ellis v. Vandergrift, 173 Ala. 142, 55 So. 781; Crow v. Florence, etc., Co., 143 Ala. 541, 39 So. 401; Steiner v. Parsons (Ala. Sup.) 16 So. 6; Perry v. Tuskaloosa C. S. O. M. Co., 93 Ala. 364, 9 So. 217; Tillis v. Brown, 154 Ala. 403, 45 So. 589. When the bill shows the wrongs complained of are those of the governing board, no demand or request need be shown as a condition to maintenance of the bill for relief. Glass v. Stamps, supra; Henry v. Ide, 208 Ala. 33, 93 So. 860; Tillis v. Brown, supra. There is no necessity to swear to a bill for a receiver unless action is required by the court before complainant has had time to prove his case. Code 1923, § 6527; Sims Ch. Pr. 191. When the demurrer does not raise the question of the absence of a necessary party, the question of nonjoinder of said party is not presented on appeal. Code 1923, § 6553; Baisden v. Greenville, 215 Ala. 512, 111 So. 2.
The appeal is from a decree overruling demurrers to the bill. The court in sustaining the plea in abatement as to J. W. Leggett Jewelry Company, eliminated the corporation as a party to the cause, but was evidently of the opinion the averments of the bill in connection with its caption sufficiently indicated that W. B. Seymour in his individual capacity was also a party complainant. The caption of the bill is omitted from the transcript (Supreme Court Rule 26), but was before the chancellor, and we are of the opinion there should here be concurrence in the conclusion of the trial court. So considered, the bill remains as one by Seymour, a minority stockholder, against the officers and manager of the corporation who own and control the majority stock.
The bill seeks an accounting of funds of the corporation alleged to have been fraudulently converted to the personal use of the defendants, and that wasted in unauthorized expenditures. There are averments of false entries in the books, incapacity on account of so frequent intoxication on the part of defendant J. W. Leggett to manage and operate the business, and a continued loss of money for the last several years, to such an extent that, if permitted to continue under present management, the whole estate of the corporation will be wasted.
The bill also seeks an accounting by defendants with the corporation, and that certain real estate alleged to have been purchased with the corporate funds be declared the property of the corporation, and further that a receiver be appointed.
Appellants insist the corporation is a necessary party, citing Kendig v. Dean, 97 U.S. 423, 24 L.Ed. 1061, and that the demurrers should have been sustained. But this authority was dealing with submission of the cause for final decree, and in the instant case there is no ground of demurrer taking the point. While it may be conceded the corporation should be made a party to the suit, yet upon submission for decree on demurrer, as distinguished from one for final decree, it is essential that this deficiency of the bill be pointed out by appropriate ground of demurrer. The question was fully considered in Baisden v. City of Greenville, 215 Ala. 512, 111 So. 2, and needs no further discussion.
While in a bill of this character ordinarily it should appear that an appeal has been first made to the governing board to redress the wrongs of the corporation, yet, when the bill shows the wrongs complained of are by those of the governing board, as in the Instant case, such demand is unnecessary as a condition precedent to the maintenance of the suit. Henry v. Ide, 208 Ala. 33, So. 860; Glass v. Stamps, 213 Ala. 95, 104 So. 237; Henry v. Ide, 209 Ala. 367, 96 So. 698; Holcomb v. Forsyth, 216 Ala. 486, 113 So. 516.
The bill, among other things, prays for the appointment of a receiver, and, of course, as a condition precedent thereto, complainant must offer satisfactory proof in some form. Petchey v. Allendale Land Co., 216 Ala. 167, 112 So. 818; Burgess v. Martin, 111 Ala. 656, 20 So. 506. We know of no rule, however, rendering a bill of this character demurrable for a failure of its verification. Sims' Chancery Pract. § 303.
We have here discussed the questions seriously treated by counsel for appellants in their brief, and conclude that the decree overruling the demurrers to the bill should be here affirmed.
Affirmed.
ANDERSON, C. J., and BOULDIN and FOSTER, JJ., concur.