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Compton v. Paul K. Harding Realty Co.

OCTOBER 24, 1967.

MARTHA L. COMPTON AND FORREST C. LEOTY, PLAINTIFF-APPELLEES,

v.

PAUL K. HARDING REALTY CO., A CORPORATION, AND PAUL K. HARDING AND MARGUERITE HARDING, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of St. Clair County; the Hon. FRANCIS MAXWELL, Judge, presiding. Reversed and remanded.

EBERSPACHER, J.

This is an appeal from an interlocutory order entered on the 6th day of April, 1967, denying a motion to vacate and dissolve a temporary injunction previously entered on the 16th day of January 1967.

The action was brought by the plaintiffs, Martha L. Compton and Forrest C. Leoty by a complaint filed September 2, 1966. Paul K. Harding, Marguerite Harding and Paul K. Harding Realty Co., a corporation, were named as defendants. The verified complaint alleged that in May of 1962 the individual plaintiffs and defendants entered into an agreement to form a corporation to be known as the Paul K. Harding Realty Co. at a capitalization of $1,900 divided into 190 shares with the plaintiffs taking 90 shares and the individual defendants taking 100 shares. It was further agreed that each of the parties would deposit $75 for each share of stock owned to be carried as a loan account; that the defendant Paul K. Harding would be employed as manager at a salary of $100 per week until the business showed a profit at which time his salary would be increased to $175 per week; that the profits of the corporation were to be divided pursuant to a scheme set forth in the agreement. The complaint continues by alleging that the defendant corporation was incorporated pursuant to said agreement and that since incorporation defendant, Paul K. Harding, has controlled and directed the defendant corporation without knowledge or consent of the plaintiffs; that there has been no notice of meetings of the stockholders or directors; that the plaintiffs have no knowledge of any meetings of the stockholders or directors; that between the dates May 9, 1962, and April 30, 1966, the defendant corporation has paid the defendant, Paul K. Harding, a salary totaling $52,133.06, far in excess of the aforesaid agreement; that the defendant, Paul K. Harding, has placed numerous relatives on the defendant corporation payroll who are not qualified to do the work; and that the corporation has incurred an indebtedness exceeding $235,000. The last four paragraphs of the complaint allege that the defendants, Paul K. Harding and Marguerite Harding, have conspired to take over the defendant corporation to the exclusion of the plaintiffs and will succeed unless prevented by intervention of the court; that if the individual defendants continue to control the defendant corporation the plaintiffs will be prejudiced and their capital stock will be greatly reduced in value; that it is the intention of the defendants to repudiate the aforesaid agreement and procure control of the defendant corporation to the detriment of the plaintiffs; and that unless a receiver is appointed to conduct the business of the defendant corporation and the individual defendants are enjoined from holding director meetings and conducting the affairs of the defendant corporation that the "conduct (of the defendants) will wreck the affairs of the defendant corporation, to the great damage of plaintiffs . . ."

The relief sought in the prayer was as follows:

a. a temporary injunction restraining the individual defendants from exercising any authority over the defendant corporation.

b. a receiver be appointed to take charge of the affairs of the defendant corporation.

c. an accounting.

d. that the individual defendants be enjoined from transferring any of the assets of the defendant corporation and

e. that the defendant corporation be dissolved.

The complaint was verified by one of the plaintiffs.

On October 5, 1966, the defendants filed their answer which also contained affirmative defenses. The answer admitted the allegations pertaining to the contents of the agreement and the incorporation of the defendant corporation but denied the material allegations of the complaint. The affirmative defense alleged that the indebtedness of the defendant corporation was the result of a real estate mortgage on properties owned by the corporation in which the defendant, Paul K. Harding, personally signed as guarantor and that a temporary injunction causing cessation of corporate business would cause irreparable damage to the defendant, Paul K. Harding, by reason of foreclosure proceedings and actions against him personally for deficiencies.

On October 19, 1966, the plaintiffs filed a motion to strike the answer and affirmative defenses for failure to comply with Supreme Court Rules in regard to service of pleadings. It appears from the record that there has been no ruling upon this motion.

Thereafter, on December 7, 1966, plaintiffs filed a motion for temporary injunction and for the appointment of a receiver. The motion was without notice to the defendants.

On January 16, 1967, the court entered an order for the issuance of an injunction enjoining the individual defendants from exercising authority over the defendant corporation and from transferring any of its assets and from holding any shareholder meetings. The order further recited that the injunction ...


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