Groel v. United Electric Co. of New Jersey

• Decision Date: 18 April 1905
• Citation: 69 N.J.E. 397,60 A. 822
• Parties: GROEL v. UNITED ELECTRIC CO. OF NEW JERSEY et al.
• Court: New Jersey Court of Chancery

60 A. 822

69 N.J.E. 397

GROEL

v. UNITED ELECTRIC CO. OF NEW JERSEY et al.

Court of Chancery of New Jersey.

April 18, 1905.

Suit by Adam H. Groel against the United Electric Company of New Jersey and others. Heard on bill and plea of defendant the United Gas Improvement Company to the jurisdiction. Plea overruled.

See 59 Atl. 640.

The issue is raised upon a plea to the jurisdiction of the court. The complainant, a resident of New Jersey, filed his bill against the United Electric Company of Now Jersey and the United Gas Improvement Company, a corporation of the state of Pennsylvania. He is a stockholder of the United Electric Company of New Jersey, and the suit is brought by him in virtue of that fact; his allegation being that the company should have brought this suit, but would not. The bill charges: That the United Electric Company of New Jersey was incorporated on the 4th of March, 1899, with an authorized capital stock of $20,000,000, divided into 200,000 shares, of $100 each. That said corporation was organized and promoted by and at the instance of the United Gas Improvement Company, its incorporators being the mere agents and representatives of the United Gas Improvement Company, and that said incorporators paid in $4,500 for 15 shares of the capital stock, which money was furnished by the United Gas Improvement Company. That simultaneously with the incorporation of the United Electric Company of New Jersey the United Gas Improvement Company, through the Fidelity Trust Company of New Jersey, its agent, offered to the holders of the capital stock of a large number of corporations, incorporated under the laws of New Jersey, to purchase or acquire from them their stock in said various companies in exchange for bonds of the United Electric Company of New Jersey. That this offer was made to the stockholders of the People's Light & Power Company, the Consumer's Light, Heat & Power Company, the North Hudson Light, Heat & Power Company, the Morris County Electric Company, and to the stockholders of many other companies, the names of which companies are not given. That complainant was a stockholder of the People's Light & Power Company. That to the stockholders of that company the offer of the United Gas Improvement Company, through the Fidelity Trust Company, was to pay to them, for each $1,000 of their stock in the People's Company, $1,750 in bonds of the United Electric Company of New Jersey, out of a total issue of $20,000,000 of said bonds, provided said stockholders would, in addition to the surrender of their stock, pay the sum of $200 in cash. The United Gas Improvement Company agreed to guaranty the payment of the interest on the bonds of the United Electric Company of New Jersey for a period of five years, and to turn into the treasury of the United Electric Company the cash above referred to. It was further stated in said offer that the United Gas Improvement Company owned the control of the stock of the United Electric Company of New Jersey, and that it agreed to sell to those stockholders of the People's Light & Power Company who avail themselves of the said offer stock in the United Electric Company of New Jersey to the amount of 25 per cent., at par, of their holdings of stock in the People's Light & Power Company, to be paid for by such stockholders at the rate of $30 per share; the par value of each share being $100. That the offer aforesaid was accepted by substantially all of the holders of the capital stock of the companies named above, and that such stockholders deposited their stock certificates with the Fidelity Trust Company, and paid the sums of money required by the offer to be paid by them, and that many of such stockholders availed themselves of the offer to purchase the shares of the capital stock of the United Ellectric Company, and paid to the Fidelity Trust Company the sums required by them for such purchase, and received from the United Gas Improvement Company, through the Fidelity Trust Company, the shares of stock of the United Electric Company and the bonds in accordance with said offer and acceptance. That the United Gas Improvement Company kept for itself the entire capital stock of the United Electric Company of New Jersey, over and above the amount sold to the stockholders of the subsidiary companies, as above described. That this secret profit of the United Gas Improvement Company was obtained without disclosing to the stockholders of the subsidiary companies the facts, and that it was in fraud of the rights of the United Electric Company and its stockholders, including the complainant, who had accepted the offer of the United Gas Improvement Company, and obtained stock and bonds of the United Electric Company in accordance therewith. That the complainant was unaware of the facts until shortly before filing this bill, and on the 11th of August, 1903, he addressed and delivered to the president and directors of the United Electric Company of New Jersey a letter setting forth the facts, and requesting that company to bring an action for the recovery of the unlawful and secret profits made by the United Gas Improvement Company, and that said United Electric Company of New Jersey refused to bring said suit. After praying for discovery of various matters, the complainant asks that the amount of the secret profits made by the United Gas Improvement Company may be ascertained, and may be decreed to be paid to the United Electric Company, and that the amount of damage suffered by the United Electric Company by reason of the fraudulent acts and transactions of the United Gas Improvement Company may be ascertained, and may be decreed to be paid to the United Electric Company, and for further relief.

To this bill the defendant the United Gas Improvement Company filed the following plea: "The defendant the United Gas Improvement Company, appearing by its officers for the sole purpose of objecting to the jurisdiction of this honorable court over this defendant in this action, and for no other purpose, and by protestation, not confessing or acknowledging the matters and things in and by the said bill of complaint of the said Adam H, Groel set forth in such manner and form as the same are thereby and therein set forth and alleged, for plea to the jurisdiction of this honorable court in the premises says: That the said the United Gas Improvement Company is not a resident or citizen of the state of New Jersey, or existing as a body corporate under and by virtue of its laws. That it has no office, agent, or agency, or place of business within the state of New Jersey, nor has it had any office, agent, or agency or place of business therein since the 1st day of November, 1899. That it is a body corporate existing under and by virtue of the laws of the state of Pennsylvania. That on the 10th day of July, 1894, it filed in the Department of State of the state of New Jersey a copy of its charter or certificate of organization, duly attested by its vice president and secretary under its corporate seal, and a statement of the same officers, also under its corporate seal, setting forth the total amount of capital stock it was authorized to issue, the character of the business in which it was engaged, and in which it proposed to engage within this state, and naming R. W. Elliott, then a citizen of this state, as its agent upon whom legal process against it might be served—the said R. W. Elliott having an office or place of business at that time at No. 109 Montgomery street, Jersey City, which was also the office and principal place of business within this state of said the United Gas Improvement Company—a copy of which statement is hereto annexed and made a part hereof, as Exhibit A. That upon the filing of said papers the Secretary of State of the state of New Jersey issued to said the United Gas Improvement Company a certificate that it had complied with all the requirements of law to authorize it to transact business in this state, and that the business of the United Gas Improvement Company to be carried on within this state was such as might lawfully be carried on by corporations incorporated under the laws of New Jersey for similar business. That the United Gas Improvement Company continued its business of manufacturing and selling gas in the state of New Jersey at its principal office or place of business in New Jersey, at No. 109 Montgomery street, Jersey City, until November 1, 1899, at which time it discontinued the same, and has not since resumed it. That it then discharged all obligations of any and every kind whatsoever arising out of or connected with said business, closed its said office or place of business, and discharged said E. W. Elliott from its said agency and employ, and since that date has had no office, agent, or place of business in the state of New Jersey, nor has it conducted business therein. That on the 9th day of September, 1903, the board of directors of the United Gas Improvement Company, at a regular meeting of said board, held at its principal office, in the city of Philadelphia, at which there was a quorum present, passed a resolution formally revoking in writing the designation of said R. W. Elliott as its agent, and directing that a certified copy of said resolution be forthwith served upon said R. W. Elliott, and that another copy thereof, under the seal of the corporation, duly certified and attested, be forthwith filed in the office of the Secretary of Slate of the state of New Jersey, a copy of which resolution is hereto annexed, and made a part hereof as Exhibit B. That a copy of said resolution was forthwith sent by registered letter to the said R. W. Elliott, directed to him at his post-office address, in East Orange, in the state of New Jersey, and was received and receipted for by him on the 11th day of September, 1903, and that another copy thereof, under the seal of the said the United Gas Improvement Company, duly certified by Thomas...