Bailey v. Proctor - 160 F.2d 78 (1st Cir. 1947)

Rule:

A court of equity has inherent power to appoint a receiver to liquidate a corporation or investment trust where fraud, mismanagement, or abuse of trust is present whether or not insolvency is likewise present.

Facts:

Gross abuse of trust by the officers and trustees led Aldred Investment Trust into receivership and eventual liquidation. The shareholders filed suit, proffering reorganization plans, seeking a meeting of all trust shareholders, and contesting the trial court's liquidation order. The trial court denied all relief. The shareholders appealed.

Issue:

Under the circumstances, should the shareholders’ requests be granted?

Answer:

No.

Conclusion:

The Court affirmed, holding that the trial court's action in ordering the trust into receivership was a permissible exercise of its inherent equity jurisdiction. The Court noted that the trial court's jurisdiction in receivership did not lapse by virtue of an improvement in the trust's fortunes sufficient to make it solvent. The Court ruled that the trial court had sound reasons for exercising its discretion to deny the shareholders' request that a meeting of all shareholders be permitted. Neither did the trial court abuse its discretion in finding that none of the shareholders' proffered reorganization plans was "fair and feasible." The Court concluded that, there being no adequate reorganization plan, the trial court properly ordered the liquidation and distribution of the trust assets.