110 Minn. 258 | Minn. | 1910
On and prior to January 16, 1902, the plaintiff and the defendant Philip W. Herzog were respectively stockholders of the defendant corporation, the Roberts Architectural & Ornamental Iron Works, hereinafter referred to as the Roberts Iron Works. On the day named the entire business and assets of the corporation were sold to the defendant Herzog, he assuming the debts of the company, by the action of its board of directors, of which he was then a member and president. Such sale was approved and ratified at a stockholders’ meeting, the plaintiff not being present. The defendant Herzog, who then owned a majority of the stock, was present at such meeting and voted his stock in favor of such sale. Thereafter he transferred the property so purchased by him to .the defendant corporation, the Herzog Iron Works.
This action was commenced in the district court of the county of Ramsey on September 21, 1908, by the plaintiff as a minority stockholder of the Roberts Iron Works, to set aside the sale and for an accounting. The allegations of the answer were to the effect that the corporation at the time of such sale was hopelessly insolvent, and by reason thereof, the sale was fair and free from any wrong to any mi
The here material facts found by the trial court may be summarized as follows: The Roberts Manufacturing Company, also a corporation, from 1894 until January, 1896, was engaged in the manufacture of structural and ornamental iron in the city of St. Paul. The plaintiff, who was a stockholder and officer of that corporation, represented to the defendant Iierzog, in November, 1894, that the corporation was solvent, but in need of money to carry on its business. The defendant Herzog, relying upon such representations and believing them to be true, was induced to and did advance money to such corporation upon the agreement, which was executed, that he should be given one-half of its outstanding stock of the corporation, which was then owned by the plaintiff and his family. The representations were untrue, for' such corporation was then, and thereafter continued to be, insolvent. The money so advanced and loaned to it from time to time by the defendant Herzog amounted to $13,711.67 on January 1, 1896. The general nature of the business of such corporation,- as stated in its articles of incorporation, was the manufacturing, buying, owning, selling, and dealing in architectural metal work. In order to avoid the stockholders’ liability for the debts of such corporation, the Roberts Iron Works, a corporation, was organized, to which was transferred all of the property and business of the old corporation, in consideration of which 324 shares of the capital stock of the new corporation were issued, of which the plaintiff and members of his family received one-half,, and defendant Herzog 161 shares, and his wife one share, which were' accepted by the parties in lieu of the shares held by them in the old corporation. The defendant Herzog was elected president of the new corporation, and
It is quite obvious that, if the facts found by the trial court are sustained by the evidence, the plaintiff’s claim is without a single equity to support it. The sale in question was, in legal effect, one made by the stockholders to one of their number, who owned a majority of the stock, and is to be distinguished from a sale of corporate assets by the board of directors to one of their number, which was neither ratified nor authorized by the stockholders.
It is well settled that a sale of the assets and business of an insolvent corporation, approved by the stockholders, to one of their number, who had the controlling vote, is not void, but voidable, if it be not a fair and proper transaction. Where such a transaction is fair and free from any overreaching, a minority shareholder, who is fully informed of all of its details and does not dissent within a reasonable time, his failure so to do being unexplained, will be deemed to have acquiesced, and cannot thereafter maintain an action to set aside the sale. Bjorngaard v. Goodhue County Bank, 49 Minn. 483, 52 N. W. 48; Pinkus v. Linen Mills, 65 Minn. 40, 67 N. W. 643.
Courts ought to, however, and will, scrutinize such transactions with great care, to the end that those who have the power to control the affairs of a corporation shall not use it to plunder minority stockholders, as is too often done. The pivotal question is, then, whether
Order affirmed.