52 N.J. Eq. 620 | New York Court of Chancery | 1894
The complainants are stockholders of the Edison United Phonograph Company and have filed the bill in this case for the purpose of having the directors of the corporation displaced and this court take control of the corporation, and, through a receiver, manage and direct its business. The special relief that the complainants ask at this time is that the court will find and declare that the corporation has not administered the trust imposed upon it according to law; that a receiver be appointed 'to carry on its business and to investigate the condition of its affairs and make report, to the end that its business may be continued .or wound up according to the condition in which its affairs shall be found. On the argument three grounds were put forward as the basis of the relief asked — -first, that the corporation is insolvent or will soon become so if its directors do not abandon their present method of conducting its business and adopt the method which the complainants insist should be adopted; second, that the directors, by the course of business they are now pursuing, are violating a trust which was imposed upon the corporation when the complainants assigned their inventions to it; and third, that dissensions exist among the directors, as to the most successful mode of carrying on the business of the corporation, of such a character and to such an extent as to make it impossible for the corporation to prosecute its business with advantage to the stockholders.
The Edison United Phonograph Company was organized under a general law of this state, in February, 1890, for the purpose, among other things, of manufacturing, buying and selling phonographs, and also of selling and assigning, and of licensing others to sell and use, patents, patent rights and inventions relating to the manufacture, use and operation of phono
The case is destitute of the least proof tending to show insolvency. That, in cases of this kind, is the jurisdictional fact. The court can do nothing — neither issue an injunction nor appoint a receiver — until insolvency is first established. Until
The affairs of the defendant corporation are subject to the control of a board of nine directors. Two of the nine believe
The power of this court to appoint a receiver of a corporation, either because it has no propqrly-eonstituted governing body or because there are such dissensions in its governing body as to make it impossible for the corporation to carry on its business with advantage to its stockholders, I think must be regarded as settled, but I think it is equally well settled that this power is
But neither of the grounds, which this doctrine recognizes as sufficient to warrant the appointment of a receiver, exists in this . case. The defendant corporation has a lawfully-constituted governing body, which is in peaceable possession of all its property, ■controlling and directing its business regularly and peacefully, in conformity to the judgment of seven of its nine directors. Two of the nine differ in judgment from the other seven. The two believe that the adoption of a different course of business from that which is now pursued would result in larger gains. Both methods , are clearly within the purposes and powers of the corporation. Which method shall be pursued, or whether one ,or both, is a question which the law commits absolutely and iunconditionally to the judgment of a majority of the directors. 'Though somewhat disguised, the real purpose of the bill in this ..case appears, when critically examined, to be to induce judicial action which shall substitute the judgment of a minority of the .directors of this corporation for that of the majority. That cannot be done. It is beyond judicial power. No rule of law is better settled than that which declares that, so long as the directors of a corporation keep within the scope of their powers and act in good faith and with honest motives, their acts are not
These utterances leave nothing more to be said. The complainants’ application must be denied, with costs.