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SMITH v. ALBRIGHT-ENGLAND COMPANY et al.

Supreme Court of Georgia1930-12-10No. No. 7680
171 Ga. 544

Summary

Holding. The judgment of the trial court sustaining the demurrers to the petition and dismissing the case was affirmed, as the petition failed to allege facts sufficient to warrant judicial intervention in the corporation's internal management.

A minority shareholder filed an equitable petition against a corporation and its majority shareholders, seeking appointment of a receiver, an audit of corporate books, dissolution of the corporation, and an injunction preventing changes to the business. The trial court sustained demurrers to the petition and gave the shareholder twenty days to file an amended complaint, warning that failure to do so would result in dismissal. When no amendment was filed within the deadline, the case was dismissed.

The shareholder appealed, challenging the order sustaining the demurrers. The court upheld the dismissal, finding that the petition failed to allege sufficient grounds for judicial intervention. Under established law, courts will not interfere with a corporation's internal management at the behest of a minority shareholder absent allegations showing that majority shareholders are acting outside their charter powers or that clear evidence of serious mismanagement or fraud exists. Because the original petition contained no such allegations, the demurrers were properly sustained.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Standards for equitable intervention in corporate internal management by minority shareholders
  • Sufficiency of allegations in a petition challenging majority shareholder conduct
  • Effect of failure to amend a complaint within a court-ordered deadline

Procedural posture

The shareholder appealed an order sustaining demurrers to an equitable petition and dismissing the case after the shareholder failed to file an amended complaint within the prescribed time.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Hill, J.

The exception is to an order of the court, dated December 10, 1929, sustaining the demurrers filed to the petition. The order is as follows: “Paragraphs 3 to 18, inclusive, of the demurrers of each of the defendants are sustained, and paragraphs 4 to 11, inclusive, of the petition are stricken. 2. Paragraphs 19 to 28, inclusive, of the demurrers of each of the defendants are sustained, with leave to amend within 20 days, in default of which said petition stands dismissed. 3. The other paragraphs of the demurrers are not passed upon at this time. If plaintiff should file an amendment, with appropriate prayers, as herein permitted, the other grounds of the demurrers, with such additional grounds as the defendants may see fit to urge, will then be passed upon in the light of the petition as amended.” Exceptions pendente lite to this order were filed. A formal order was passed on December 31, 1929, reciting: “It appearing to the court that twenty days have elapsed since the within order sustaining the demurrer was passed, and no amendment has been filed as required therein, it is hereby ordered and adjudged that said ease be and the same is dismissed, and restraining order issued in said case is dissolved, with costs against plaintiff.” No exception was taken to this order. To the order of December 10, 1929, sustaining the demurrers, the plaintiff in error excepted on January 30, 1930, and assigned the same as error upon the ground that the same was contrary to law.

No. 7680.

December 10, 1930.

1. Under former rulings of this court, where the order sustaining the demurrer allowed a definite time within which an amendment might be filed, and provided that “in default of which said petition stands dismissed,” if no amendment was filed the suit was automatically dismissed. Clark v. Ganson, 144 Ga. 544 (87 S. E. 670), and cit. The motion to dismiss the bill of exceptions on the ground that there is no exception to a final judgment is without merit.

2. It has also been held that where exceptions pendente lite are filed by the plaintiff in error in the court below to the order overruling demurrers, they can not be considered by the Supreme Court where no error is assigned thereon in the main bill of exceptions or in this court on a separate assignment of error before argument. Kennedy v. Walker, 156 Ga. 711 (120 S. E. 105). The plaintiff in error here merely specified the exceptions pendente lite as a part of the record material to a clear understanding of the errors complained of.

3. Where a minority stockholder in a corporation files an equitable petition against the corporation and the individual members thereof, who are majority stockholders, for appointment of a receiver, for audit of the books of the corporation, for dissolution of the corporation and settlement of its affairs, and that the defendants be enjoined from altering the status of the business of the corporation, the internal management of the corporation will not be interfered with by the court at the instance of a minority stockholder unless the majority stockholders are acting without the charter powers, or a strong case of mismanagement or fraud is shown. Bartow Lumber Co. v. Enwright, 131 Ga. 329 (62 S. E. 233). And see Civil Code (1910), § 2224. No such facts are alleged in the petition as would authorize a court of equity to .intervene in the instant ease.

4. The court did not err in sustaining the demurrers to the petition.

Judgment affirmed.

All the Jiistices concur.

Holes Smith and Spence & Spence, for plaintiff.

A. S. Grove, for defendants.