106 N.J. Eq. 163 | N.J. Ct. of Ch. | 1930
I have determined that the application for preliminary injunction and appointment of trustee should be denied, that the orders to show cause, with the restraints therein mentioned should be dismissed, and consequently that the merit of the defendant's motion to have the bill of complaint taken from the files need not be determined at this time. The proofs disclose that the matters in controversy are the result of dissension among officers, directors and stockholders, as to methods employed in the management of the business of the corporation, which is clearly not conducive to the best interests of the corporation, but, in my judgment, the remedy therefor lies primarily with the board of directors and stockholders of the corporation. Section 12 of our Corporation act provides that the business of every corporation shall be managed by its directors, who shall be chosen by the stockholders. The authority of the directors in the conduct of the business of the corporation must be regarded as absolute when they act within the law. It is urged by those who *165
caused the bill of complaint to be filed in the name of the corporation that because of the dissension aforesaid the board of directors does not function, and that the business of the corporation will suffer in consequence. In view thereof it is sought to have a trustee appointed to manage the business of the corporation in lieu of its board of directors. It is also sought to enjoin the defendant from voting shares of stock which she holds as executrix and trustee of the estate of Edward Wylde. If the condition be as represented, it may readily be remedied by the stockholders choosing a new board of directors, and such was apparently contemplated because it appears that the meeting scheduled to be held on February 11th, 1930, the holding of which was restrained upon the filing of the bill of complaint herein, was to be an annual stockholders' meeting at which an entire new board of directors was to be chosen. The court is not warranted in presuming that the stockholders, when duly convened, will not exercise their voting rights in a manner which in their judgment will be conducive to the best interests of the corporation. Malafides is never presumed. Every stockholder is entitled to the judgment of every other stockholder in the selection of directors to manage the business of the corporation. Though a court of equity in the exercise of its general jurisdiction may appoint a receiver or trustee to manage the business of a corporation when the corporation has no properly constituted governing body or when there is such dissension in a properly constituted governing body as to make it impossible for the corporation to carry on its business with advantage to its stockholders, such power is always exercised with great caution, and then only to such extent as may be necessary to preserve the property of the corporation and to protect the rights of stockholders. If the stockholders disapprove of the company's management by the directors, conducted without fraud or gross abuse of trust, their remedy is to elect new directors. If the directors disapprove of the company's management by its duly elected officers, their remedy is to elect new officers. Where the question is one of mere discretion in the management of the business of the corporation by directors, remedy *166
cannot be had by application to a court of equity. In Ellerman
v. Chicago Junction Railways and Union Stockyards Co.,
I will advise an order in accordance with the views hereinabove expressed. No costs or counsel fees will be allowed to either party. *170