62 N.Y.S. 708 | N.Y. App. Div. | 1900
The action was begun on the 8th of November, 1899. The plaintiff is one of the stockholders of the United Verde Copper Company, a New York corporation, owning a large and valuable copper mine in the State of Arizona, which it has been engaged in operating. The defendants, other than the corporation, are its directors-and stockholders. It is alleged that on the 23d of August, 1899, the directors voted to. dissolve the corporation, pursuant .to section 57 of the Stock Corporation Law (Chap. 932, Laws of 1896), and that their action was confirmed by the stockholders on the 23d of September, 1899; that the certificate required by section 57 was filed in the office of the Secretary of State on the 2d day of October, 1899 ; and that, therefore, pursuant to the operation of the statute, the corporatioii was dissolved, and it became the duty of the directors to proceed to adjust and wind up its business and affairs, to carry out its contracts and to sell its assets at public or private sale, and to apply the same in discharge of debts and obligations of such corporation, and after paying and adequately providing for the payment of such debts and obligations, to distribute the balance of the assets among the stockholders of the company, according' to their respective, lights and interests.
The complaint states that the capital stock of the corporation was divided into 300,000' shares, of the par value of $10 each, of which ' the plaintiff is the ownér of about 700, the defendant William A. Clark of 244,026, and the other directors and Clark’s relatives of enough to bring their joint ownership to something over 299,000 shares. It is alleged in the complaint that the property of the corporation in the Territory of Arizona is of very considerable value ;. that for some time dividends have been paid at the rate of $1 a share a'month or at the rate of $3,600,000 a year; that the mines owned
Substantially all the allegations hereinbefore stated are conceded by the defendants, except those as to the value of the property and the intention of the directors as to the sale and the object of the dissolution. The defendants do not deny in their answer that
In regard to the sale the undisputed facts are that the intention of the dissolution -was to further the scheme of reorganization, and ■ that' it was not originally intended that the property should be actually sold at all, but that the West Virginia corporation should be organized by the same parsons who are now stockholders of the New York corporation, and that each of them should receive a share of the new company’s stock for each share he now holds, so that in the end the company should exist precisely as it now exists and the business he carried on in precisely the same way, except that instead of being a New York corporation it would be a West Virginia one. As part of the scheme it was also proposed that $3,000,000 in bonds should he issued to represent the surplus, which the defendants admit to be upwards of that sum, and that one bond of $10 should be delivered to each stockholder for each share of stock he now owns, and that'as so delivered it should represent the surplus now owned by the- New York corporation and which should become the property of the West Virginia company. This scheme of reorganization depends of course upon the consent of all the stockholders, and as a minority holding about Í00 shares refused to join in it, it became impossible to carry it out, and it then became the duty of the trustees of that corporation to sell the property. The papers upon which the motion is made show that a notice of sale, including the terms of it, were published in the New Yorh Lam Journal in an obscure place on the 2Sth of November, 1899, announcing that the sale would take- place on the nine■teenth of December then ensuing; that no other notice of the sale
It appears, and is not denied by the trustees of the dissolved company, that it is still engaged in carrying on the business of the mines and making contracts,' and purchasing- stores and hiring labor necessary for that purpose; that there is in the possession of the company copper' ore amounting to thousands of tons; that there is also in transit to customers a large amount of ore' to fill contracts, and that there are due to the company considerable amounts upon these sales which vary from time to time and which cannot be accurately stated at any one time ; that no inventory has been made, and that no information is attainable by the plaintiff or by any one else as to the nature of the contracts, the supplies on hand, the copper on '
Nevertheless the defendants insist that when the sale is made it will be fair, because they say that the “ stockholders’ purchasing and reorganization committee will protect the stockholders’ interests and bid in the property unless some outsider bids more than they think it is worth, and the committee’s bid will be for the benefit of every stockholder who desires to join with them,” It is further stated that if any stockholder refuses to take the stock of the new corporation, all the directors can do is to give him his pro rata share of what the property brings át the sale. In view of the fact that the trustees are made trustees for all of the. stockholders, and in view of their statement that they will act only for the "benefit of those stockholders who choose to join them, it is quite apparent that so far as that' committee is concerned they will bid off the property •Only in the interest of those who desire to become owners in the new corporation, and will not exert themselves to secure .any larger ¡Drice than" is'necessary .to enable them to become the owners of the new Corporation ;-and, as subsequently stated in the affidavit, if 'the plaintiff does not choose' to come into the reorganization, he will receive, on his stock only'his share of the price they-get.
It is made to appear, and affidavits were hardly necessary to establish the fact, that no person who was desirous of bidding on this ■very valuable property could safely do so unless he had information as to the.-extent and nature, not-only .of. the visible" property in ■Arizona, but of the property which is represented by the copper in transit and the bills receivable, and also as to the extent of the liabilities which he is bound to assume pursuant to the terms of the sale. It is also clear that to enable the proposing bidder to. get such information a considerable (time .would be necessary, and it must be conceded, also, that where the property to be sold is of so great valué ■as this, and comprises so many different things, it cannot be expected that bidders would be prepared to attend the sale who had received : simply a notice of sale less than four weeks beforehand. It is necessarily to be inferred from these papers that this sale so made could not begin to produce anything like the value of the property.
The property which is to be sold at this auction is not only real estate and personal property, but also bills receivable, presumably from solvent debtors and probably presently payable. What reason there can be for including in this sale such quick assets, whose amount can necessarily only be known to the directors of the corporation, cannot be conceived, and for this alone the sale should be restrained until the amount of these assets can be ascertained, so that one bidding on them can know what it is. Taking into consideration the great value of the property to be sold, which is confessedly many millions of dollars; the short time of the advertisement ; the comparative secrecy in regard, to the time and place of sale; the absolute ignorance in which every one, except the directors, is kept as to the value of a large part of the property to be sold; the nature of the property which is to be sold together, including real estate, supplies, tools, ore on the dumps and in transit, .assets receivable and subject to liabilities unascertained and practically unascertainable; the terms of sale which are more favorable to the trustees who desire to bid for the consenting stockholders than for any one else; and the fact .that the reorganization committee which proposes to bid in behajf of the stockholders for the purpose of protecting their interests alone are not disposed to secure any larger price for the property than is necessary to merely bid it in, it seems' to us that, without going any further, a case is made which would not only authorize but require the court to restrain this sale until such time as the terms of sale are so amended as to be unobjectionable, or such information made accessible to all per
It is necessarily to be inferred from the facts alleged in the complaint, which are not denied, that this cannot at present be done, and, therefore, the complaint sets out a cause of action in that behalf at least and shows that the plaintiff is entitled to a temporary injunction in regard to these matters.
' By the statute the directors are made trustees for the stockholders, and as such it is their duty to administer the affairs of this trust in the interest of all to the same extent and in the same manner as other trustees are required to administer the estate in thé interest of their cestuis que trust. While all charges of unfairness and of any intention to destroy the plaintiff’s interests are denied and have not been considered upon this appeal, yet it does not appear that the plaintiff will not be able to establish them on the 'trial; and if he should there can be no doubt that the .court not only would haye power but it would be its duty to take this property out of the hands of the trustees and place it in the hands of a receiver in order that the rights and interests of the stockholders might be alike properly protected. Not only, therefore, does the complaint state a cause of action, but the undisputed allegations in it, coupled with the facts conceded by the defendants themselves, show that the plaintiff’s rights absolutely require an injunction to restrain this sale, which, if conducted in the manner proposed, must necessarily produce a great sacrifice of the property of the corporation and a great destruction of the plaintiff’s interests. The order vacating the injunction should, therefore, be reversed, with ten dollars costs and disbursements, and the injunction continued, with ten dollars costs of the motion.
Van Bbunt, P. J., Babeett, Ingraham and McLaughlin, JJ., concurred.
Order reversed, with ten dollars costs and disbursements, and injunction continued, with ten dollars costs.
- Nóte.— The rest of 'the cases of this term will be found in the next volume, 48 App. Div.— [Rep.