The Saint Paul Globe

OUT SHUFELDT GOES

JUDGE BRILL DECIDES THAT THE REQUEST OF THE FOREIGN INVESTORS IN THE PACKING COMPANY IS ONE WHICH IS ENTITLED TO BE IMMEDIATELY GRANTED BY COURT.

RECEIVERS ARE TO BE NAMED Who Shall Act Until the Election and Qualification of New Directors.

If the decision of the district court is sustained Philip S. Shufeldt and his associate officers in control of the Minnesota Packing and Provision company will be ousted from the management of that concern.

Such is the decision of Judge Brill, filed yesterday in the action brought by the Minnesota Packing and Provision company, limited, of England, against the Minnesota Packing and Provision company, a corporation of Minnesota and Philip S. Shufeldt. Frank Clifton, Gilbert T. Spilman, William McCarr, Harry Fowler and the St. Paul Refrigerator Car company. Mr. Shufeldt, the manager, and the directors named, are dismissed and a receiver is to be appointed.

Mr. Squires, the counsel for the defendants, announced that an appeal would be taken at once to the supreme court.

The case was heard by Judge Brill only a few days ago. The decision, which is interesting, is as follows:

The pleadings and papers submitted upon this motion contain many statements not necessary to consider at this time. Certain facts clearly appear and, indeed, are not disputed.

The plaintiff is the owner of all the stock of the defendant, Minnesota Packing and Provision company. The business of the defendant, Minnesota company, as authorized by its articles, is "the manufacturing of cured meats and of the various products of cattle, sheep and hogs." Its principal place of business, as stated in its articles, and, in fact, is South St. Paul. The business which said company has carried on since its organization, until diverted as hereinafter stated, consisted largely of slaughtering and curing hogs and selling the products. The persons named as defendants are the directors and officers of the Minnesota company, the defendant Shufeldt being president. Defendant Shufeldt is and has been in full control and management of the affairs of the company. About a year ago Defendant Shufeldt and his associates organized a corporation known as the Dakota Packing company, the business of which, as defined in its articles, is the same as the business of the Minnesota company, and its principal place of business is also South St. Paul. The business in which the Dakota company has been actually engaged is slaughtering hogs; and since it commenced operations, the business of slaughtering hogs has been gradually absorbed by it and diverted from the Minnesota company, so that at present the Minnesota company does none of that business and the Dakota company does all the slaughtering of hogs at South St. Paul. A large part of the product of the Dakota company is sold to the Minnesota company, and the portion not sold to the Minnesota company is sold by it for the account of the Dakota company. The Dakota company is deriving large profits from the business which it so carries on, its business is under the control and management of Defendant Shufeldt, and he is one of its stockholders.

Recently Defendant Shufeldt has acquired in his own name, slaughtering and packing houses at New Brighton, and has commenced and is carrying on in his own name, the business of slaughtering hogs at that place, with the purpose of absorbing the entire business of slaughtering and packing. All the hogs available at South St. Paul and New Brighton are sufficient only for one establishment. Defendant Shufeldt has taken a large quantity of machinery belonging to the Minnesota company from its plant, and placed it in his packing house at New Brighton, charging himself with the same upon the books of the Minnesota company. He alleges that the acquisition of the property at New Brighton and the establishment of the business at that place has been with the intention of turning the same over to the Minnesota company, if that company shall see fit to take it.

The situation, briefly stated, is that Shufeldt, while president and in entire control of the Minnesota company, has organized another company, in which he has a considerable pecuniary interest, and which he also manages, with the same powers as the Minnesota company, and located at the same place, and which under his direction, has entirely absorbed one important branch of the business formerly done by the Minnesota company, and that substantially all the business the Minnesota company is now doing is such as is furnished it by the Dakota company. He, as the manager of the Dakota company, has taken to the Dakota company from the Minnesota company, and with his consent as manager of the Minnesota company, the business of slaughtering hogs; and he, for the Dakota company, is selling to himself, for the Minnesota company, the product of the hogs so slaughtered. Further, Shufeldt, as an individual, has acquired a plant at New Brighton, and is engaged in the slaughtering and packing business there on his own account, in direct antagonism to the business, heretofore carried on by the Minnesota company, and he has purchased for himself, from himself as president and manager of the Minnesota company, a large amount of the machinery and property of the Minnesota company. He says he is willing to turn the business over eventually to the Minnesota company, but upon what terms does not appear. Under present conditions, if it is turned over, he will fix the terms for both parties. In the meantime the business is being carried on in his name for his benefit, and the business is being diverted from the Minnesota company. The actions of Shufeldt have been concurred in by the directors of the company, but the directors have no interest in the corporation, and they are simply Shufeldt's agents.

Extended arguments upon these facts are not necessary.

The position of Shufeldt in the Dakota company and his position with reference to the new business, started in his own name at New Brighton, are inconsistent with his position as an officer of the Minnesota company. He is attempting to serve two masters.

Directors and officers of incorporations occupy positions of trust toward their corporations, and they are not allowed to deal with the corporate property for their private gain. They have no right to deal with themselves and for the corporation, at the same time, and it is not a justification or excuse that no loss has resulted. They are not permitted to occupy these inconsistent positions in which necessarily, their own interest comes in conflict with their duty to their principal. Relief against transactions of this sort, without a showing of actual fraud, will always be awarded by a court of equity at the suit of the cestui que trust.

This action is not brought by a minority stockholder, but by a stockholder holding all the stock, and in view of the situation now existing, I think plaintiff's motion to remove the officers and directors and for a receiver, must be granted. Whether the plaintiff, through the influence of the defendant Shufeldt, may in the future, be induced to change its attitude and abandon the action, cannot be determined now. The situation can be acted upon when it arises.

Counsel for plaintiff may draw the necessary order. The court will receive such suggestions as counsel for the respective parties may desire to make as to the person to be appointed as receiver and as to the amount of the bond to be given. The receiver will take charge of all the assets of the Minnesota company, together with its books and papers, and carry on the business until the election and qualification of new directors, when application may be made to the court for the discharge of the receiver.