Opinion
Opinion filed April 29, 1950.
1. CORPORATIONS.
Expenses duly authorized and properly incurred by a receiver of a corporation are payable from the funds of the estate.
2. CORPORATIONS.
In making distributions to stockholders in corporate liquidation, no stockholder may acquire or gain a priority over another.
3. CORPORATIONS.
Stockholders of a corporation have equal rights in the distribution of assets, subject to the right of set-off where a stockholder is indebted to the corporation.
4. CORPORATIONS.
Participation in the wrong to a corporation will not deprive a stockholder of his interest in the cause of action belonging to the corporation as an entity.
5. CORPORATIONS.
Statute providing that surplus fund in hands of a receiver of a corporation should be divided among the stockholders, means that the surplus should be divided equally among the stockholders (Williams' Code. sec. 10365).
6. CORPORATIONS.
Preferred stockholders whose alleged unlawful acts made certain expenditures by receiver necessary, were nevertheless entitled to share equally in surplus funds in hands of receiver, where they had paid amount adjudged due from them for the alleged unlawful acts (Williams' Code, sec. 10365).
FROM DAVIDSONARMISTEAD, WALLER, DAVIS LANSDEN, of Nashville, for Ledyard.
NORVELL MINICK, of Nashville, for Thomas H. Temple Co.
FUQUA, CHESHIRE DODSON, and J. ROSS CHESHIRE, JR., of Nashville, for Superior Corporation.
J.C. Dale, Jr., receiver of the Apex Oil Corporation, brought suit against Thomas H. Temple Co. and others to recover certain funds belonging to the Apex Oil corporation, and alleged to have been unlawfully diverted and misappropriated by the defendants, Q.R. Ledyard filed a petition contending that the Thomas H. Temple Co. and the Superior Corporation were parties to certain unlawful acts by which a certain expenditure was made necessary by the receiver and that such sum would have been available for distribution among the petitioners and the Thomas H. Temple Co., and the Superior Corporation as preferred stockholders. The Chancery Court of Davidson County, WILLIAM J. WADE, Chancellor, rendered a judgment adverse to the petitioners, and they appealed. The Supreme Court, PREWITT, J., held that the petitioners and the Thomas H. Temple Co. and the Superior Corporation were entitled to share equally in funds in hands of receiver, in view of the fact that the Thomas H. Temple Co. and the Superior Corporation had satisfied by payment amount due by them for their alleged unlawful acts which made expenditure by receiver necessary.
Decree affirmed.
This cause was before this Court in the case of Dale v. Thomas H. Temple Co. et al., 186 Tenn. 69, 208 S.W.2d 344, wherein the receiver obtained a judgment in the sum of $237,977.66 against the Potters, the Caldwells and the Caldwell Corporations. From this and other funds, all creditors of Apex Oil Corporation were paid in full, and all expenses of the receivership, including the fees of the solicitors for the receivers, were paid. By decree entered April 9, 1948, the Chancellor found that funds would be available for distribution to perferred stockholders, but not to common stockholders, and ordered the receiver to notify said preferred stockholders to file their claims.
The present controversy is between the preferred stockholders only. It seems that the net amount to be distributed to the preferred stockholders will fall far short of reimbursing them on their investment.
On June 25, 1948, Q.R. Ledyard and others filed their petition in the present cause in which they contend that Thomas H. Temple Company and the Superior Corporation were parties to certain unlawful acts, as pointed out in the case of Dale v. Thomas H. Temple Co. et al., supra; that by such unlawful acts the expenditure of $97,956.90 was made necessary by the receiver; and that had it not been for said parties and their unlawful acts in said cause, the above sum would have been available for distribution among the preferred stockholders and would have been added to the approximately $80,000.00 now to be divided among the preferred stockholders.
In the present cause, the Chancellor held that the entire liability of defendants was adjudicated in the case of Dale v. Thomas H. Temple Co. et al., supra, growing out of the conspiracy, and the decree of the court was satisfied by the payment of the amount declared to be due.
Counsel have stated that we have no case in Tennessee in point, but petitioners contend that it would be inequitable to allow defendants to share equally in the fund to be distributed when their own unlawful acts brought about the expenditure of a sum of money in excess of $97,000.00.
It is recognized that expenses duly authorized and properly incurred by a receiver are payable from the funds of the estate. Thompson on Corporations (3rd ed.), Vol. 8, Section 6392; Fletcher on Corporations (Perm. ed.), Vol. 16, Section 7918.
In making distributions to stockholders in corporate liquidation, no stockholder may acquire or gain a priority over another. Thompson on Corporations (3rd ed.), Vol. 8, Section 6543; Marr v. Bank of West Tennessee, 44 Tenn. 471.
In this State the rule of division of surplus remaining after payment of debts is statutory. Williams' Code provides: "10365. Receiver. — In such cases the court may appoint a receiver, take an account of the affairs of the corporation, and apply the property and effects to the payment of debts pro rata, and divide the surplus, if any, among the stockholders."
Stockholders have equal rights in the distribution of assets, subject, of course, to the right of set-off where a stockholder is indebted to the corporation. Fletcher on Corporations (Perm. ed.), Vol. 16, Section 8224; Marcus Shipping Ass'n. v. Barnes, 169 Iowa 377, 151 N.W. 525; Avery v. Central Bank of Kansas City, 221 Mo. 71, 119 S.W. 1106.
Participation in the wrong to the corporation will not deprive a stockholder of his interest in the cause of action belonging to the corporation as an entity. Avery v. Central Bank of Kansas City, supra; Morawetz on Private Corporations (2d ed.), Vol. 1, Sections 262-265.
Furthermore, any wrongs that the defendants may have been guilty of were adjudicated and settled in Dale v. Thomas H. Temple Co. et al., supra.
An analysis and distinction of the several authorities relied upon by petitioners would serve no useful purpose here. The principal cases relied upon involve trust estates. One of the cases relied upon by defendants is Home for Destitute Crippled Children v. Boomer, 320 Ill. App. 541, 51 N.E.2d 830. In that case the Illinois Appellate Court held that in accordance with the express provisions of the trust instrument the extraordinary expenses should be charged to income, rather than to principal expenses, as is the general rule in that State.
As before stated, the distribution of a surplus fund in the hands of a receiver of a corporation, after the payment of debts and expenses, is statutory. Williams' Code, Section 10365. While this statute does not use the word "equally," it does provide, "and divide the surplus, if any, among the stockholders." Giving these words their ordinary meaning, we think it was the intention of the Legislature that the surplus should be divided equally among the stockholders.
The decree of the Chancellor is affirmed.
All concur.