Jackson v. Hooper

• Decision Date: 10 July 1909
• Citation: 74 A. 130,76 N.J.E. 185
• Parties: JACKSON v. HOOPER et al.
• Court: New Jersey Court of Chancery

74 A. 130

76 N.J.E. 185

JACKSON

v. HOOPER et al.

Court of Chancery of New Jersey.

July 10, 1909.

Suit by Walter M. Jackson against Horace E. Hooper and others. Heard on motion for preliminary injunction. Granted.

Lindabury, Depue & Faulks and Sherman L. Whipple, for complainant. Robert H. McCarter, Wollman & Wollman, Henry W. Taft, Benjamin V. Becker, and Jacob Newman, for defendants.

HOWELL, V. C. The theory of the bill in this case is that Walter M. Jackson and Horace E. Hooper are, and for a number of years have been, partners in business. The bill is filed for the purpose of dissolving the partnership and for an accounting of all the partnership affairs. It also prays for an injunction to restrain the defendants, Horace E. Hooper, Harris B. Burrows, Charles C. Whinery, and Franklin H. Hooper, from transferring or disposing of some shares of stock standing in the names of the said Harris B. Burrows, Charles C. Whinery, and Franklin H. Hooper on the books of two corporations, one an English corporation and the other a corporation organized under the laws of the state of Illinois; and also from withdrawing from the so-called partnership business any moneys for the private use of any of the defendants, and from interfering with the assets thereof, except in the regular course and in the ordinary conduct of the business, and from excluding the complainant from participation in the conduct of the business.

The bill alleges: That prior to the year 1900 the complainant, Jackson, and Horace E. Hooper had been associated with James Clarke and George Clarke in the business of selling subscription books in England; that they purchased the Clarkes' interest in that business in March, 1900; and at that time an agreement was entered into between Jackson and Hooper which is set out in the bill as follows: "That upon the acquisition of the Clarke interests, and so long as they might be associated together in business, their general policy in respect of their joint undertakings should be determined by mutual assent; that nothing should be done by either in connection therewith contrary to the wishes or against the interests of the other; that in respect of their said business enterprises, their ownership interests and authority and control in management should be on a basis of exact equality and that each should have and exercise the authority and control of equal partners; a further proviso being agreed upon to the effect that either might act alone in the routine conduct of the business in the absence of the other."

The bill further states: That Jackson and Hooper carried on an extensive and very profitable subscription book business from 1900 until near the end of 1908; that a part of the business was conducted and carried on under the individual names of the complainant and the defendant Horace E. Hooper, and a part by the use of trade-names assumed or acquired for the purpose; that a part of the business was conducted by them directly as individuals, and other parts in the names of corporations organized by them for the purpose, and also through the agency of other individuals, but that their more important engagements and undertakings were made in their own names; that during all this period the complainant and Hooper acquired the copyright and trade-name of the "Encyclopaedia Britannica," the title to which was taken in their individual names; that the business relating to the sale of the Encyclopaedia to individual customers was conducted in the name of some newspaper like the London Times, or under some trade-name adopted by them; that the accounts in the early history of the business were kept in the books of the Clarke Company, Ltd.; but that the banking accounts in which were deposited the receipts from all their business were kept indiscriminately at that time either in the name of Jackson or Hooper or Clarke Company, Ltd., and these accounts were subject to check by either Hooper or the complainant and that each drew therefrom at will for his private use.

The bill further states: That in order to avoid the provisions of the English tax law it was determined in 1902 to liquidate the Clarke Company, Ltd., and to organize in its place two other companies, one under the English law, to be called "Hooper & Jackson, Ltd.," to transact business in Great Britain, and the other under the law of the state of New York, to be known as the Encyclopaedia Britannica Company," to transact the other business in which the complainant claims that he and Horace E. Hooper were engaged; that the complainant and Hooper were equal holders of the stock of these corporations, and are now equal holders of the stock of the English corporation; that in 1903, for reasons of convenience not now necessary to be stated, the complainant and Hooper organized a corporation under the laws of the state of Illinois which they called the "Encyclopaedia Britannica Company," and which will hereafter be mentioned as the Illinois corporation; that this corporation issued its stock to the complainant and Hooper in equal shares, and they have owned, and now own, all the shares of that corporation, each being entitled to an equal number; that it became necessary to have other shareholders in these two corporations in order to comply with the provisions of the English and the Illinois law, and for this purpose four shares of the Illinois corporation and six shares of the English corporation were put in the names of Burrows, Whinery, and F. H. Hooper, each of whom now claims to be a stockholder in the said corporation, respectively. These are the shares of stock concerning which the complainant prays for an injunction.

The bill alleges further: That the business in which these parties had embarked was carried on with great vigor and with great profit all over the world; that accounts thereof were kept at a central office in London, the accounts relating to the English business after the liquidation of Clarke & Company, Ltd., being kept in the books of Hooper & Jackson, Ltd., and the accounts relating to the business in the other portions of the world being kept in the name of the Illinois corporation; that the cash receipts from the business in all the countries covered thereby were deposited indiscriminately in the same banking accounts, from which expenditures were made generally without regard to whether the business concerned was entered on one set of accounts or the other, or whether the business involved was that conducted in Great Britain or in foreign countries; that these accounts were kept in the name of Hooper & Jackson, Ltd., and in the names, of Horace E. Hooper, the defendant, and Walter M. Jackson, the complainant, and until 1904 in the name of the Illinois corporation; that these banking accounts were subject to drafts by Hooper or Jackson individually; that during the entire period covered by the business each one drew therefrom at will for his private and personal uses, and each one also drew indiscriminately from each or any of said accounts for the payment of obligations contracted indiscriminately in the name of the English corporation, the Illinois corporation, Walter M. Jackson, and Horace E. Hooper; and that these drafts included, also, payments made for obligations incurred in the name of the London Times and other trade-names used by them in the conduct of their business.

The bill further alleges: That the profits drawn by Hooper & Jackson were drawn in the manner just indicated; that they drew substantially equal amounts; that they were not paid any salaries out of the corporation assets or out of any other assets of the business so called; that no dividends were ever declared by either of these corporations, except on one occasion when it became necessary for some purpose of convenience to declare a dividend of 400 per cent. out of the surplus of Hooper & Jackson, Ltd.; that no meetings of the stockholders or of the directors of either of these corporations was ever held, except to comply with the most formal requirements of the statutes under which they were organized; and that until the controversy arose which is the foundation of this suit neither of the said corporations as such had any active hand in the conduct of the enormous business which arose out of the sale by subscription of sets of the Encyclopaedia Britannica. In fact, the bill states: That only four meetings of the directors of the Illinois company have ever been held; that when these meetings were held no business affairs or business policy was ever discussed; that the three nominal directors of the Illinois company and of the New York company which preceded it were changed from time to time as Hooper and the complainant decreed; that, in short, the whole business was conducted jointly by Hooper and Jackson as their own business, and they made use of the corporations they had organized as mere agencies for carrying out the plans which the two principal parties from time to time agreed upon between themselves; and that the other directors as such had little or no knowledge of and no participation in the very large business that was conducted by Messrs. Hooper and Jackson.

The bill further sets out large and important transactions touching the conduct of the said business which were carried through wholly by Hooper and Jackson without the aid of the corporations, and concerning which they, made and executed contracts in their individual names. Particularly does the bill refer to an enterprise so conducted known as the "Times Book Club," which was a specially devised scheme for selling sets of the encyclopaedia through the instrumentality of the London Times. The bill states that the outstanding assets of the business, the legal title to which assets is in the two corporations, is very large, approximately $2,000,000, and this in addition to the title of the copyrights and publication rights of the encyclopaedia which since June 1. 1903. have stood,...