197 F. 466 | E.D. Mich. | 1912
This case has been heard once before on demurrer which was sustained. Thereupon complainant filed the present amended bill, in which is incorporated verbatim the whole of the original bill with some additions. The prayer for relief is un
Complainant is a citizen and resident of the state of Michigan. The defendants are citizens and residents of the state of New York. The Chase & Baker Piano Manufacturing Company was organized as a corporation on the 8th day of February, 1910, and acquired and owns a factory located in the village of Holly, in this state, where it manufactured pianos during the years 1910 and 1911. Its capital stock consists of 2,500 shares of the par value of $100 of which the Chase & Baker Company owns and holds 2,200, the complainant 250, the defendant Jacob Heyl 47, and the defendants Erik Heyl, Paul Henrich, and William F. Bayer one each. The Chase & Baker Company is a corporation whose capital stock is largely owned by the individual defendants; complainant having no interest therein. Complainant and the defendants Jacob Heyl'and William F. Bayer are the directors of the Chase & Baker Piano Manufacturing Company. Complainant is its vice president and factory manager, and purchases all materials and supplies, hires the employés at the factory, pays the bills out of moneys sent to him from New York, and receives a salary of $5,000 per year. During the years 1910 and 1911 the individual defendants, having control of both corporations, sold and turned over to the Chase & Baker Company all of the pianos made by the Chase & Baker Piano Manufacturing Company at prices fixed by themselves which were 'less than the cost of manufacture, thereby causing considerable loss to the manufacturing company, nearly if not quite all of which was attributable to the fact that the purchasing company did not take a sufficient number of pianos to keep the manufacturing company running to its full capacity. In July, 1911, the board of directors of the Chase & Baker Company, acting for that company, submitted to complainant, as manager of the Chase & Baker Piano Manufacturing Company, a schedule of prices which the former company proposed to pay for pianos manufactured by the latter company during that year. Complainant refused to consent to such prices, and objected to the continuance of the contract then existing between the two companies. Thereupon the defendant Jacob Heyl, as president of the Chase & Baker Piano Manufacturing Company, notified the complainant by letter that, in view of his “objection to the proposals of the Chase & Baker Company and the schedules of prices submitted by them * * * which in all probability will involve a complete rearrangement of the trade relations existing between the two companies,” it would be necessary to have a meeting of the board of directors of the manufacturing company to vote upon those matters and that such meeting had been called for Monday, July 31st. Complainant did not attend the meeting of the (directors, and does not know what action was taken.
The amended bill further alleges that the action of the individual defendants as directors and officers of the Chase & Baker Piano Manu-' factoring Company in selling to the Chase & Baker Company all of its product “was in pursuance of a contract craftily, corruptly, and fraudulently, entered .into between the two corporations, by which
The prayer of the original and! amended bills is: (1) “That the action of the board of directors of the Chase & Baker Piano Manufacturing Company in turning over to the Chase & Baker Company all of the pianos manufactured at the factory and plant in Holly at prices less than the cost of production and a fair profit may be declared illegal and a violation of the rights of the Chase & Baker Piano Manufacturing Company and of your orator as a minority stockholder therein”; (2) that the defendants may be temporarily and perpetually enjoined from selling pianos to the Chase & Baker Company, unless the selling price and the contract to manufacture and sell is unanimously approved by all the stockholders of the manufacturing company ; (3) that an accounting may be had concerning the pianos sold during the years 1910 and 1911; (4) that the amount found due to complainant on such an accounting may be declared an equitable lien on the real and personal property in Michigan of the manufacturing company to be enforced by the appointment of a receiver and such other proceedings as may be necessary; (5) that' complainant’s investment in the capital stock of the manufacturing company may also be declared an equitable lien upon the property of that company and enforced in the same manner; and (6) for general relief.
Defendants have demurred to the amended bill on several grounds, Only two of which require special consideration.
(a) Under some circumstances and conditions, a court of equity will enjoin the majority directors and stockholders of a corporation from making and entering into a particular contract or pursuing a particular course of conduct, but the case would have to be extreme to warrant the issuance of an injunction restraining corporate action, unless assented to and sanctioned by all the stockholders. Such restraint would necessarily result in transferring the management of corporate affairs from the majority to the minority and would place the corporation and all persons interested therein at the mercy of the smallest minority stockholder.
An order will be entered sustaining the' demurrer, with leave to complainant to amend his bill, if he so elects, within 20 days.