Neall v. Hill

California Supreme Court Jul 1, 1860Published

Before: Cope

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Holding. A court of equity lacks jurisdiction to remove corporate officers, appoint a receiver, or dissolve a corporation, but it may compel corporate officers to account for breaches of trust and negligence.

Issues

Whether a judgment providing for an accounting is a final appealable judgment.
Whether a court of equity has jurisdiction to remove corporate officers or enjoin them from performing their duties.
Whether a court of equity has jurisdiction to appoint a receiver and dissolve a corporation.
Whether a stockholder may maintain an action to compel an accounting for corporate mismanagement.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“It is well settled that there is no jurisdiction in equity with regard to the removal of corporate officers of any description.”

“It is well settled that a Court of Equity, as such, has no jurisdiction over corporate bodies, for the purpose of restraining their operations or winding up their concerns.”

“We think, however, that the plaintiff is entitled to an account.”

Synopsis

In suit by a stockholder against a corporation and its officers, praying for their removal, and for an account and settlement of the affairs of the corporation, the decree, after a full hearing on the merits, was in accordance with the prayer, and also appointed a Eeceiver to take charge of the property of the corporation, until the further order of the Court; collect money due or to become due it; sell certain stock, and pay the proceeds in accordance with the decree, etc.: Held, that this provision in the decree does not destroy its effect as a final decree, and that an appeal lies therefrom.

The power of removing the private or ministerial officers of a private corporation, belongs to the corporation alone. Courts cannot remove such officers.

The aid of Courts can be invoked only as against such officers as are intrusted by law with the management of the affairs of a corporation, and as against these, the remedy is at law, and not in equity.

In suit by a stockholder in a private corporation, against the corporation and four of the trustees, who owned stock sufficient to enable them to control the business of the company, for an account and settlement of its affairs, alleging fraud and mismanagement on the part of the trustees, the Court below, by its decree, deprived one of said trustees of his salary as superintendent of the business of the corporation: Held, that this was error; that although such superintendent was also trustee and treasurer of the corporation, contrary to a positive provision of the by-laws; and although, in the management of the business of these offices, no attention had been paid to the by-laws and regulations of the corporation, yet as no fraud was shown, and as the superintendent had faithfully performed his duties as such, he was entitled to his salary.

If, in such case, any loss was sustained by the corporation, from disregard of its by-laws and regulations, the amount of such loss would seem to be the measure of relief.

A Court of Equity has no jurisdiction over corporations, for the purpose of restraining their operations or winding up their concerns. Such Court may compel the officers of the corporation.to account for any breach of trust, but the jurisdiction for this purpose is over the officers personally, and not over the corporation.

Hence, in this case, it was error in the Court below to appoint a Receiver and decree a sale of the property and a settlement of the affairs of the corporation. Such decree necessarily results in the dissolution of the corporation, and would be , doing indirectly what the Court has no power to do directly.

To charge the officers of a corporation with a loss sustained by a stockholder, in a diminution of the value of the stock, alleged to have been caused by their mismanagement, it should appear very clearly that the loss was occasioned by their gross negligence or willful misconduct.

Cope, J. delivered the opinion of the Court Field, C. J. and Baldwin, J. concurring.

A motion is made in this case to dismiss the appeal, upon the ground that the judgment appealed from is not final. There is no foundation for this motion. The fact that the judgment provides for the taking of [148]an account, does not destroy its effect as a final adjudication of the rights of the parties. It terminated the entire controversy in the Court below upon the merits. Every matter in issue was settled by it, and. we are unable to see that anything is wanting to render it a final judgment within the meaning of the statute. Our opinion is, that the appeal is properly taken, and the motion to dismiss is therefore denied.

The action was brought to compel an account and obtain a settlement of the affairs of a corporation. The plaintiff is a stockholder, and the corporation and four of the trustees are made defendants. It is alleged that these trustees are the owners of stock sufficient to enable them to control the business of the company, and various acts of fraud and mismanagement are charged in the complaint. The case was referred to a Referee to try the issues and report the facts, and upon the coming in of the report, a judgment was rendered in accordance with the prayer of the complaint. We shall consider such of the specific objections to this judgment as seem to require notice.

That portion of the judgment which undertakes to remove certain officers of the company, and to enjoin them from discharging the duties of their respective offices, cannot be maintained. The Court had no power to administer relief of this character, and the attempt to do so was an improper exercise of judicial authority. The officers sought to be removed were the private agents of the company, not essential to its corporate existence, and removable at pleasure. If the Courts may direct a corporation in the employment of such agents, or remove them when employed, we do not see why they may not exercise the same authority with reference to individuals. The assumption of such authority could be justified by the same reasoning which would justify the action of the Court in this case. The power of amotion is incident to every corporation, and the removal of the mere private or ministerial officers of a corporation is a right which belongs to the corporation alone. The assistance of the Courts can only be invoked against such officers as are intrusted by law with the management of the affairs of the corporation, and as against these, the remedy is purely legal. It is well settled that there is no jurisdiction in equity with regard to the removal of corporate officers of any description. This has been expressly decided in several cases.

Neall v. Hill

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