White v. . Kincaid , 149 N.C. 415 ( 1908 )

After stating the case: Our statute on the subject, Revisal 1905, sec. 1195, provides for the voluntary dissolution of corporations, in effect, as follows: "That whenever, in the judgment of the board of directors, it shall be deemed advisable and most for the benefit of a corporation that it should be dissolved, they may pass a resolution (419) to that effect by a majority of the board, proper notice being first given as required, and when this resolution has been submitted in writing to the stockholders, and, in a meeting called for the purpose, two-thirds in interest of the stockholders consent to such dissolution, and the action is filed with the Secretary of State, who shall issue a certificate to that effect, and after due publication of notice in the county, and this having been made to appear to the Secretary, the corporation shall be dissolved and its business affairs settled up and adjusted as required by law."

As far as North Carolina is concerned, this statute settles the question formerly much mooted in the courts as to whether, and under what circumstances, a corporation could be dissolved by the stockholders, when no time was fixed for its duration, upholding and extending this power of voluntary dissolution as established by the better considered decisions on the subject. Black v. Canal Co., 22 N. J., Eq., 130-404;Treadwell v. Mfg. Co., 7 Gray, 393. This regulation enters into every charter, subject to the provisions of the statute, and unless otherwise enacted by the Legislature, every stockholder takes and holds his stock subject to this power of voluntary dissolution, by resolution of the directors concurred in by two-thirds in interest of the stockholders. This being the law governing the interest of these parties, when the board of directors of a corporation have determined, in the exercise of their best judgment, that the corporation be dissolved, and are pursuing the methods specified by the statute, it is only in rare and exceptional instances that their action should be stayed or interfered with by the courts. It is a principle well established, that when a person, corporation or individual is doing a lawful thing in a lawful way, his conduct is not actionable, though it may result in damage to another; for, though the damage done is undoubted, no legal right of another is invaded, and hence it is said to be damnum absque injuria. Dewey v. R. R., 142 N.C. 392; Thompson v. R. R. (plaintiff's appeal), (420) 142 N.C. 318; Oglesby v. Attrill, 105 U.S. 605. In such cases the motive prompting the act, however reprehensible or malicious, is not, as a rule, relevant to the inquiry; nor will courts undertake to interfere with the honest exercise of discretionary powers vested by statute in the management of a corporation, however unwise or improvident it may seem. Windmuller v. Distilling Co., 114 Fed., 491.

It is true that, both before and since the enactment of this statute, there is a salutary principle very generally recognized and upheld by well considered decisions, that the directors of these corporate bodies are to be considered and dealt with as trustees in respect to their corporate management; and that this same principle has been applied to a majority or other controlling number of stockholders, in reference to the rights of the minority or any one of them, when they are as a body in the exercise of this control, in the management and direction of the corporate affairs, Loan and Trust Co. v. R. R., 150 N.Y. 410; and certainly this is true when the majority or controlling number of stockholders are exercising their authority in dictating the action of the directors, thereby "causing a breach of fiduciary duty." Robotham v.Insurance Co., 64 N.J. Eq., 672-689. And while these decisions have been more frequently made in reference to some assignment or disposition of the corporate property or assets, whereby the corporation is disabled from performing its work, and is necessarily retired from active business, this same principle applies, in a restricted degree, when the action complained of is a voluntary dissolution, according to the methods provided by law. In these cases also, if it clearly appears that the action of the management is in bad faith, that the resolution for dissolution, for instance, has been superinduced by fraud or undue influence, or if it could be clearly established that this resolution was not taken for the benefit of the corporation, or in furtherance of its interest, but for the mere purpose of unjustly oppressing the minority of the stockholders or any of them, and causing a destruction (421) or sacrifice of their pecuniary interests or holdings, giving clear indication of a breach of trust, such action could well become the subject of judicial scrutiny and control. Treadwell v. Copper Co., 47 Appel. Div. Supreme Court N. Y., 613; Elbogue v. Gergereau Flyn Co.,62 N.Y. Supp., 287; In re Mercantile and Dis. Co., 1 Eq. Cas. L.R. 1865-66, 276; In re Mill Co., 3 Chan. App. Cases, L.R., 67-68, 13.

Such cases almost invariably arise when the management of a solvent concern, going and prosperous, ceases operations and determines to dissolve and sell out, with a view of continuing the same or similar business, under different control, and when there is indication given that the sole purpose was to oppress some of the stockholders and confiscate their holdings, or when it is done in furtherance of some scheme to promote the pecuniary interest of the actors and to the detriment of the corporation, giving indication of a breach of trust on the part of the authorities in charge and control of the corporate affairs.

But no such facts are presented here. There is no testimony offered of any scheme or conspiracy on the part of defendants to oppress the plaintiff, except an inference made by him from the fact that a dissolution was resolved upon. While the company is now solvent, it has not been running for several months, because the returns were not satisfactory, and the prospect of a change in this respect only rests in surmise. There is some dispute as to the amount of indebtedness, nor does there seem to be any capital ready and available, with which to resume operations in case such a course would be determined upon; and, from the allegations made by the parties, their attitude towards each other does not give promise of mutual cooperation or eventual success. On the evidence, therefore, and in a case of this kind we are (422) permitted to act on the evidence, the Court is of opinion that the restraining order was properly dissolved, and that, on the facts as they now appear, the contemplated dissolution should be allowed to proceed.

While we are of opinion that the order restraining the dissolution of the defendant corporation was properly dissolved, we do not think, even if our present disposition of the question should prevail at the final hearing, that the action should be dismissed. In such case, or before that time, if the directors and stockholders see proper, or deem it prudent, to act in advance of a trial, the dissolution should proceed under the methods provided by the statute. But there are, as stated, substantial issues arising in the pleadings, more particularly as to the indebtedness, both between plaintiff and defendants and between the individual defendants and the corporation, which will require decision by the Court. And, while by sec. 1201 of the statute, the directors, unless otherwise determined by order of some court having jurisdiction, are made trustees with power to settle or wind up the corporate business, under sec. 1203, this entire matter of winding up the business after dissolution may be taken charge of by the Court, and must be at the instance of either the creditors or stockholders, or any one of them. And matter clearly arising in this action being in part incident to the proper winding up and adjustment of the corporate affairs, and necessary to be determined, there seems to be no reason why, if dissolution is to be had, the proceedings referred to and contemplated in sec. 1203, should not be carried on and completed in this action, and this will include such orders as to the disposition and sale of the plant as may be for the best advantage of the assets and the best interest of the parties.

There is no error, and the judgment below is

Affirmed.

Cited: Barger v. Barringer, 151 N.C. 446; Braswell v. Bank, 159 N.C. 630;Wood v. Land Co., 165 N.C. 371; McCausland v. Construction Co.,172 N.C. 713.

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