70 N.J. Eq. 518 | New York Court of Chancery | 1905
The complainant is one of the stockholders of the defendant Knickerbocker Investment Company, the other defendants being Manhattan Bond and Underwriters Company, Henry P. Towns]ey, Eugene Yan Shaick, William Hanhart, John A. Tiger and Ernest W. Shoneberger, all of whom have answered the bill of complaint.
The bill of complaint alleges that the only available assets of the Knickerbocker company are six hundred and twenty-six shares of the capital stock of the Bankers’ Life Insurance Company; that in the purchase of this stock the Knickerbocker company incurred a debt which, at the time of the filing of the bill of complaint, amounted to about $44,000; that this indebtedness was represented by promissory notes of the company, to secure the payment of which all the assets aforesaid were assigned as collateral; that the Knickerbocker company was organized in 1902, under the Corporation act of this state, the number of the board of directors being originally fixed at five; that in September, 1903, John A. Tiger and others, directors and officers of the company'-, obtained sufficient proxies from stockholders to increase the number of this board to fifteen, the purpose being to obtain a board of directors the majority of whom would assist Tiger and his confederates in carrying out the conspiracy then inaugurated as subsequently set out in the bill; that, in furtherance of such conspiracy, Tiger and his associates, by deception, obtained sufficient proxies to control the annual meeting of the Knickerbocker company in January, 1904, and elect a majority of the board in sympathy with them; that in March, 1904, Tiger induced three of these directors to resign, and thereafter procured the election as directors to fill such vacancies the defendants Townsley, Van Shaick and Hanhart; .that for the purpose of inducing stockholders to favor increasing the number of directors, Tiger represented that the increase was for the purpose of providing an opportunity to afford representation to different localities where blocks of its stock were held; that in the election of directors
The present motion, made on answer, duty verified, is to have the injunction dissolved upon the ground that the answer meets and overthrows all the facts upon which the equities stated in the bill of complaint are based, and that under the law and the rules of this court, having completety answered the bill of complaint, the preliminary injunction should be dissolved, and as a proper sequence thereto, the receiver discharged. The answer does, as it appears to me, fully answer and deny all the charges of conspiracy and all intention to sell or absorb the assets of the Knickerbocker company, and while it admits that practically all of the assets of the Knickerbocker company have been pledged to the Manhattan company as collateral for loans, it shows that there is sufficient equity in the collateral to provide for the current expenses of the Knickerbocker company for some years to come, and the defendants tender themselves ready to provide such necessary funds upon the strength of the same collateral. The answer and its accompanying affidavits show that the Knickerbocker company was organized, among other things, for the purpose of buying and holding stock in life insurance companies; that in carrying out this object, they purchased, or secured options to purchase, the shares above referred to, which constitute a majority of the capital stock of the Bankers’ Life-Insurance Company; that at the time of the purchase a voting trust was created by and between the Knickerbocker company of the one part and three persons, who appear to be strangers to the Knickerbocker company, as voting trustees, by the terms of which the stock of the Bankers’ company was transferred to said trustees, giving them the exclusive power to vote thereon for a period of five years from and after the date of the agreement, and in lieu of the stock so transferred, the trustees issued to the-Knickerbocker company trustees’ certificates to represent the stock; that these trustees voted for and elected a board of directors for the Bankers’ company, who have appointed one of the trustees as president, at a salary of $6,000 a 3rear, and the complainant as third vice-president, at a salary of $4,000; that
That upon this branch of the case insolvency is a jurisdictional requirement is so well settled in this state as to avoid the necessity of citation in support of it.
A careful examination of the papers fails to convince me that the internal dissensions between the officers of this company and its stockholders have reached any such point as to require the intervention of this court. Manifestly the present board of directors is supported by a large majority of the stockholders. Out of a par value of $267,000, only $60,000, approximately, have intervened and asked to be permitted to be made parties complainant with the original complainant, and the presumption is that the residue, amounting to $200,000, are in sympathy with the management of the board of directors. This important fact cannot be overlooked in determining the question whether the dissensions in the company have reached the point demanding interference. Such a contest as this, provoked by a minority of stockholders, would' constantly arise if the court should say that the protest of every dissatisfied stockholder was a basis for such internal dissensions as to warrant a receivership.
The situation, as disclosed by this bill and answer, is substantially this: In a contest for the control of the Knickerbocker company, the complainant and his allies were defeated. They charge it was because proxies were obtained by some of the de
The only matter contained in the bill of complaint of vital consequence to complainant is the alleged apprehension that the present holder of the collateral, the Manhattan company, being a foreign corporation, may at any time call the loans and sacrifice the collateral by a private sale of it. But that company, on the argument, professed its willingness to accept from the Knickerbocker company, in lieu of its present obligations, new evidences of the indebtedness, postponing the maturity of the loans until after the expiration of the voting trust. That ofier, made in open court by parties who have answered and thus submitted themselves to the jurisdiction of the court, is one that ■may be availed of in disposing of this matter, and thereby the real danger of injury to the complainant averted.
If the defendants, the Knickerbocker company, the Manhattan company, and any other defendant holding obligations of the Knickerbocker company, collaterally secured by the stock of the Bankers’ company, will convert the present obligations of the Knickerbocker company into others that shall not mature during the life of the voting trust, and will incorporate in a written instrument pledging the stock of the Bankers’ company as collateral a stipulation that the collateral stock shall not be sold except at auction in some public place, after fifteen days’ public.