195 A.D. 318 | N.Y. App. Div. | 1921
This is a suit in equity by a stockholder of the defendant Nauss Brothers Company for a decree requiring the company to declare and distribute dividends from its surplus assets, enjoining its directors and officers from further acting and for their removal, for an accounting of all the acts and doings of the company from its incorporation and directing that the surplus shown on such accounting be distributed among the stockholders, and for the appointment of a receiver of the property of the company pendente lite with authority to carry on its business.
The complaint having been framed for equitable relief, the point presented for decision on appellant’s motion was not
It is well settled that whether dividends shall be declared out of surplus earnings of a corporation, or whether the surplus shall be used to increase the business or retained for the stability and security of the business, is a matter which rests in the sound discretion of the board of directors, and unless it appears that they recognize the propriety of appropriating the surplus earnings to the payment of dividends, and the majority acting in bad faith toward the stockholders have refrained from so doing, the court will not intervene for the purpose of requiring the" declaration and distribution of dividends. (Hiscock v. Lacy, 9 Misc. Rep. 578, cited with approval in Reynolds v. Bank of Mt. Vernon, 6 App. Div. 62; affd., 158 N. Y. 740; Williams v. W. U. Tel. Co., 93 id. 162; McNab v. McNab & Harlin Mfg. Co., 62 Hun, 18. See, also, Beveridge v. N. Y. E. R. R. Co., 112 N. Y. 1, 27; Miller v. Crown Perfumery Co., 125 App. Div. 881.) It sufficiently appears that there is an unfriendly, feeling and friction between the plaintiff and members of the board of directors who control the business of the company, and the complaint charges generally that the directors are acting in bad faith in refraining from declaring dividends, but it does not show that the directors recognize the. propriety of declaring dividends, and I think it fails to show a duty on the part of the board of directors to declare dividends. It is to be inferred from some of the allegations of the complaint that the solvency of the company may depend on the validity of the proceedings in the action in which judgment may be entered on the notes, and that the plaintiff does not know whether it is solvent or insolvent. He complains that earnings were used during the lifetime of the decedent for the extension of the business which he thinks should have been distributed as dividends; but manifestly he shows no facts sufficient to impeach the
The allegations of the complaint are insufficient to entitle plaintiff to any relief with respect to the proceedings in the action on the notes, and it will be seen that a temporary injunction with respect thereto is the most that is requested. It would seem that the plaintiff, having been treasurer of t*he company until after the death of Nauss, is in a position to know whether or not the notes on which the action was brought were valid. It may be observed in this connection that it appears by the verified answer of Nauss as executor, which is in the record, that the decedent held twenty-two
Clarke, P. J., Dowling, Merrell and Greenbaum, JJ., concur.
Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs.