64 N.J. Eq. 111 | New York Court of Chancery | 1902
Upon an application for preliminary injunction in this case defendants have, in answer to complainant’s bill and affidavits, filed an answer and affidavits, meeting complainant’s case on the merits of the application. The answer also contains an allegation that the suit is instituted for the purpose of extorting money; that it is illusory and not bona jide, and is an imposi
In reference to the right of the court to dismiss without, hearing, or to refuse protection by preliminary injunction because of the mala fides or bad motives of the complainant in prosecuting the suit, it has been declared in some cases to be the rule that where a suit is brought by a stockholder for the professed purpose of asserting and protecting the rights of the compairy, and the complainant’s rights are purely representative, the suit must be, bona fide, a suit of the company, and that if it is in reality the suit of others than the complainant, and of persons not interested as stockholders, who, in fact, control the suit for adverse interests, then the suit may be dismissed as not the suit of the company and as an imposition on the court. The leading case is Forrest v. Manchester, &c., Railway Co., 4 DeG., F. & J. 126 (Court of Appeals, 1861). In this case the directors of a rival company directed and controlled the suit and indemnified the complainant against costs. The bill attacked a proceeding as ultra vires, and the complainant’s standing was purely representative, and it was dismissed because the complainant was imposing on the court in assuming to represent the company’s
These eases, I think, establish the rule that where the only method of protecting or asserting a property right of complainant is in a court of equity, the court cannot refuse to decide or hear a complainant upon the question of right, merely because of his improper motive in the acquisition or prosecution of his rights. That the motive of a complainant in prosecuting an equitable property right is to be bought off is not a reason for dismissing the case and refusing to try the question of right. Complainant is entitled to have the question of such alleged equitable right tried. If the complainant’s rights are legal as well as equitable, the court of equity may perhaps, on the final hearing or on the application for preliminary injunction, consider the question of motive as bearing upon the right to equitable relief, or remitting complainant to his purely legal rights. But where his property rights are equitable only, it would seem to- be clear that whatever his-motives in prosecuting Hie suit may be,.he is not only entitled to have his case heard on final hearing, but also to have the protection by preliminary injunction, if his right be sufficiently established and such protection is absolutely necessary for the protection, pendente lite, of the equitable right.
Applying these principles to the case in hand, the bill presents a twofold aspect—-first, the assertion of the personal vested property right of the. stockholder under the charter of the company, which property right is alleged to b-e impaired by the proposed conversion of preferred stock into bonds; and secondly, the assertion of the right to -enjoin the proceedings for conversion, because, for various reasons stated, they' are ultra vires of the company, and because the directors, in adopting them, have violated, or proposed to violate, their duties as directors, and to exceed their powers. In this latter aspect the bill is based on the company’s rights and is representative.
In deciding the Berger Case I held that the proposed conversion did impair the property rights of a non-assenting stockholder by depriving him of his equal rights in the distribution