Belding v. Washington Cornice Co. ( 1905 )

Fullerton, O. J. —

The respondent brought this action against the appellants, alleging that he was the owner, by purchase, of 2,500 shares of the capital stock of the appellant corporation, being five-sixths of the whole of such capital stock, and that the other appellants, who owned the balance of such stock, and who were the officers and managers of the corporation, had refused to transfer his certifi' cates upon the books of the corporation, or recognize in any manner his ownership thereof, and that they had denied him the right to share in the profits of the concern, the right to inspect its books, or to participate in its management or affairs in any manner whatsoever. He sought, by the action, to have his ownership of the shares of stock recognized; to have the same transferred upon the books of the company, so as to show his ownership thereof; to have the appellants Swan Beck and John B. Beck ousted as trustees of the company, and the stockholders permitted to elect new officers to fill the vacancies thereby created; and that he have judgment against such officers for the penalty provided for in § 4270, Bal. Code, and such other and general relief as to the court should seem meet and equitable.

At the time of the filing of the complaint, the respondent also applied for a receiver pending the action. On a hearing, which was had after due notice, the court made an order appointing a temporary receiver, directing him to take possession of the property of the corporation and hold it pending a trial of the action. The appellants excepted to the order, and appealed therefrom, giving a bond superseding the receiver pending the appeal.

The appellants filed a general demurrer to the complaint prior to the time fixed for hearing the application for the appointment of a receiver, which was argued and overruled by the court at that hearing. The ruling on this demurrer constitutes one of the errors assigned, and the appellants urge this ruling for our consideration here. It is at once apparent, however, that an order overruling a demurrer is not of itself an appealable order, and that it is not such in connection with any other order of the court which does not determine the action, or otherwise operate as a final judgment against the party appealing. That a complaint does not state facts sufficient to constitute a cause of action can, of course, be urged as a ground for reversing an order appointing a temporary receiver; but, to be effective, it must be shown that the complaint not only fails to state a cause of action, but that it is so far incapable of amendment that no action at all can be maintained for the cause stated. That it is merely defective, and subject to demurrer on such ground, is not sufficient; it must appear that the complainant has no cause of action whatsoever, and that the only order that can be entered is a dismissal of the action, before it will have that effect. The complaint here does not present such a case. An action will lie for the causes stated in the complaint, and, if the complaint is defective in any particular, it can only be reviewed on appeal from the final judgment.

On the hearing for the appointment of a receiver, it appeared that the appellant corporation had been organized by the Becks with a capital stock of three thousand dollars, divided into three thousand shares of the par value of one dollar each; that 250 of such shares were issued to John B. Beck, 250 to Swan Beck, and 2,500 to one Carrie Beck, who is the wife of Swan Beck. The respondent claimed to have become the owner, by purchase, for a valuable consideration, of the shares issued to Carrie Beck, and the question of the good faith of that transaction was the main point at issue at the hearing.

It was said by this court in Ridpath v. Sans Poil, etc., Transp. Co., 26 Wash. 427, 67 Pac. 229, that:

“While the power to appoint a receiver to manage the business of a corporation, pending an action between parties over their respective rights therein, exists in courts of general jurisdiction it is a power, nevertheless, which should be exercised with caution, and only under such circumstances as seem to demand exemplary relief. To appoint such a receiver is the exercise of an extraordinary-remedy, and is to be resorted to only when the ordinary remedies are inadequate. The purpose of such an appointment is to prevent the defeat of justice. It is to preserve intact the property and business of the corporation until the conflicting claims of the respective litigants can he heard and determined in the due and ordinary course of procedure followed by the courts. A litigant in such a cause cannot, therefore, prior to the determination of his asserted claims, demand the appointment of a receiver as a matter of right. He must show some necessity for the extraordinary remedy; he must show either that the business of the corporation is being diverted from the purposes for which it was organized to his injury, that its property is in danger of being wasted, destroyed, or removed from the jurisdiction of the court, or that there is no competent person entitled to manage its business or hold its property pending the litigation. To make a prima facie showing of right to share in the profits of the concern, and show a denial of such right by the persons in actual control, is not sufficient. Tor wrongs of this character the ordinary remedies afforded by the courts will furnish ample relief.”

Tested by this rule, we think the showing made here insufficient. The proofs on the part of the respondent consisted of the. affidavit of Carrie Beck to the effect that the shares of stock were her separate property, and not the community property of herself and husband, and that she had sold them to the respondent for a valuable consideration, and the oral testimony of her attorney that $450 passed between them at the time the shares were transferred from Mrs. Beck to the respondent. On the other hand, there was testimony tending to show that the stock was the community property of Mrs. Beck and her husband, and uneontradicted evidence to the effect that she had, by. a written agreement, agreed to transfer her interest in them to.her husband for the consideration of $1,000, if. paid at any time within ten years from the incorporation of the company, and that this sum had actually been paid her, although no transfer of the stock had been made. There is some evidence, also, to the effect that the respondent knew of this agreement when he purchased the stock, and took it rather to aid Mrs. Beck than as an actual bona fide transaction.

But it is unnecessary to pursue the inquiry further. On the whole, we think there is no reason to take the business out of the hands of the persons who have built it up and are carrying it on, and put it in the hands of a stranger. The order appealed from is reversed.

Hadley, Dunbar, Anders and Mount, JJ., concur.