Summary
In Farrar v. Pesterfield, 216 Ga. 311 (116 S.E.2d 229), it was held that the allegations of the petition (which allegations are fully set forth in the former decision and reference is here made to them) stated a cause of action for the appointment of a receiver to take charge of the property and business of Tri-State Broadcasting Company, a Georgia corporation; and the court accordingly affirmed the overruling of the general demurrer to the petition.
Summary of this case from Tri-State Broadcasting Co. v. PesterfieldOpinion
20955.
ARGUED JULY 11, 1960.
DECIDED SEPTEMBER 8, 1960. REHEARING DENIED SEPTEMBER 21, 1960.
Injunction. Chattooga Superior Court. Before Judge Hicks from Rome Circuit. May 20, 1960.
F. H. Boney, A. A. Farrar, for plaintiffs in error.
T. J. Espy, Jr., John W. Maddox, Matthews, Maddox, Walton Smith, contra.
For reasons gives in the opinion, the trial court did not err in overruling the general demurrer to the petition.
ARGUED JULY 11, 1960 — DECIDED SEPTEMBER 8, 1960 — REHEARING DENIED SEPTEMBER 21, 1960.
The exception is to the judgment of the Superior Court of Chattooga County overruling the general demurrer filed by William B. Farrar and Tri-State Broadcasting Company, Inc., defendants in an action brought by E. C. Pesterfield.
The petition alleges that Farrar owns fifty percent and Pesterfield the other fifty percent of the capital stock in the Tri-State Broadcasting Company, Inc., of which each is a director and of which the plaintiff is president and the defendant secretary-treasurer; that the corporation operates a radio broadcasting station and publishes a weekly newspaper, both in Summerville; that the bylaws of the corporation provide that the entire general charge of the affairs of the corporation shall be managed by three directors, to be elected by the stockholders, and that a majority of the directors shall constitute a quorum for the transaction of business and, upon a vacancy, the other two directors shall elect a successor to serve until the next election; that one of the directors has resigned, leaving the plaintiff and the defendant as sole directors; that they cannot agree upon a succeeding director; that they are in complete disagreement as to the operation of the business; that Farrar, who has been acting as general manager of the business, is threatening to cease operation of the newspaper, and to dispose of the publishing equipment; that the business is losing money; that the defendant Farrar refuses to let the plaintiff examine the books of the corporation or to have an audit made, has employed his wife, is paying himself a salary, has moved the bank accounts from the usual depository; that the defendant Farrar has refused to attend meetings of stockholders called by the plaintiff as president, and that no business can be conducted at such meetings in the absence of a quorum; that, by reason of the situation as outlined, there is valuable property of the corporation having no one to manage it; and that a receiver of the assets of the corporation is necessary.
It is prayed that the defendant Farrar be temporarily and permanently enjoined from discontinuing any operation of the business of the corporation, disposing of any of the assets, concealing the funds, employing additional personnel, and that a receiver of the assets be appointed to manage same until the deadlock between the stockholders and directors is resolved, and for such other equitable relief as is meet and proper.
Code § 55-301 provides that the judge of the superior court may appoint a receiver of a fund or of property having no one to manage it. In Parrish v. Rigell, 183 Ga. 218 ( 188 S.E. 15, 107 A.L.R. 1385), it was held that a cause of action was stated in a petition brought in behalf of an insane person which alleged that the defendant by fraudulent practices had procured a power of attorney from the incompetent and was mismanaging and wasting his property, and which sought the appointment of a temporary and permanent receiver. The court in its ruling stated at page 223: "The Code, § 55-301, provides for the appointment of a receiver, not only when property is in litigation and the rights of parties cannot otherwise be fully protected, but also `when there may be a fund or property having no one to manage it.' It requires no strained construction to say that the words `having no one to manage it' have reference, not to a mere physical management, but to proper and efficient management. Mere physical management by an unfriendly or irresponsible person might conceivably be worse than no management at all, because it may amount to mismanagement and waste, if not destruction and total loss. Notwithstanding the oft-repeated rule that the power of appointing receivers should be prudently and cautiously exercised, and, except in clear and urgent cases, should not be resorted to, the power still remains in a court of equity in a proper case, and the discretion of the court will not be disturbed unless manifestly abused." See also Waycross Military Ass'n v. Hiers, 209 Ga. 812, 814 (4) ( 76 S.E.2d 486).
The question presented here is, whether, under the allegations of the petition, there is anyone to manage the property of the corporation. Code Ann. § 22-1864 provides: "The business of either corporation shall be managed by a board of not less than three directors or trustees, all of whom shall be of full age, subject only to such limitations as may be provided by this chapter or the charter or any amendments thereof or the bylaws of the corporation. Subject to such limitations as may be contained in the charter or bylaws, such board of directors shall have full control over the affairs of the corporation and may authorize the exercise of all its corporate powers." The bylaws of the corporation, as alleged, provide that the affairs of the corporation shall be managed and conducted by three directors, a majority of whom shall constitute a quorum. It is clear that, under the law and the bylaws of this corporation, the board of directors is vested with authority and charged with the duty of the management of the corporation.
The defendant Farrar, while acting as general manager of the corporation under authority given by the board of directors prior to their becoming deadlocked, is an agent of the corporation. Knowles v. Rome Tribune Co., 127 Ga. 90 ( 56 S.E. 109). As a director of the corporation, he would not have authority to act for the corporation unless vested with such authority by the board. "A director may be express agreement or by usage become the agent of the company, and his acts may become binding on it. But the mere fact that he is a director gives him no right to bind the company by his acts or sayings. Directors act as a body, not by the statements of an individual director, unless he has received authority to speak for the company. Garmany v. Lawton, 124 Ga. 876 ( 53 S.E. 669, 110 Am. St. Rep. 207)." Farmers Ginnery Mfg. Co. v. Thrasher, 144 Ga. 598, 603 ( 87 S.E. 804). See also Monroe Mercantile Co. v. Arnold, 108 Ga. 449 (2) ( 34 S.E. 176). Without authority from a majority of the directors, no single director of the corporation, or any agent or other person, may act for the corporation, and is without authority to control and manage the business or property of the corporation. Although there are two directors of this corporation who constitute a majority of the directors provided for in the charter, they disagree as to the operation and management of the business of the corporation and are completely deadlocked. Therefore, the corporation is, in fact, left without anyone in legal control of its business, operation, or property.
"Where stock of corporation is owned in equal shares by two contending parties, which condition threatens to result in destruction of business, and it appears that parties cannot agree upon management of business, and under existing circumstances neither one is authorized to impose its views upon the other, court of equity may appoint receiver to preserve property of corporation, administer it, and, if necessary, dispose thereof for protection of creditors and owners." Saltz v. Saltz Bros., Inc., 84 F.2d 246. The petition alleges just such a situation here, and under the statute, Code § 55-301, authorizing the judge of the superior court to appoint a receiver for property which has no one to manage it, a cause of action for the appointment of a receiver to take charge of the business and property of this corporation is alleged. The trial court properly overruled the general demurrer to the petition.
Judgment affirmed. All the Justices concur.