Light v. Nat'l Dyeing & Printing Co.
| Decision Date | 22 October 1947 |
| Docket Number | 158/205. |
| Citation | 55 A.2d 233 |
| Parties | LIGHT v. NATIONAL DYEING & PRINTING CO. |
| Court | New Jersey Court of Chancery |
Suit in equity by Sidney I. Light against the National Dyeing & Printing Company for an interlocutory injunction against dissolution of defendant corporation and sale of its assets to a subsidiary corporation.
Order dissolving an ad interim restraint and denying a preliminary injunction advised.
Syllabus by the Court.
1. The fact that complainant has a small stock interest in the corporation against which he has filed his bill, is pertinent upon the question of balancing equities, that is, upon the question whether greater inconveniences and loss will come to the complainant or defendant in the granting or withholding of preliminary relief.
2. The power to issue injunctions is the strongest weapon at the command of the court of equity, and its use, therefore, requires the exercise of great caution, deliberation and sound discretion.
3. Before a court of equity may issue its injunction it must find 1. that the complainant's right to the relief sought is clear and free from doubt: 2. that irreparable damage will follow the refusal of the writ: and 3. subject to but few exceptions, that the defendant has failed to controvert the facts which are alleged to create an equity in favor of the complainant.
Maurice Schapira, of Newark (William Harris, of Newark, of counsel), for complainant.
Frank Davies, for the firm of Davies & Davies, of Paterson (Joseph Keane (of Milton, McNulty & Augelli), of Jersey City, of counsel), for defendant.
GRIMSHAW, Vice-Chancellor.
The bill in this case is filed by one Sidney Light, the holder of 177 shares of the common stock of the National Dyeing and Printing Company, a corporation of New Jersey, on behalf of himself and such other stockholders as should come in and contribute to the expenses of the suit. At the time of the hearing of the order to show cause hereinafter mentioned, no other stockholders had joined in the action as parties, nor have any since joined the complainant. At the date of the filing of the bill of complaint, there were issued and outstanding, 2,603 shares of preferred stock and 128,018 shares of common stock of National Dyeing and Printing Company. Thus it appears, that an extremely small stock interest in the company is engaged in prosecuting this suit, and while that, of itself, is, of course, no bar to relief, it is pertinent upon the question of balancing equities, that is, upon the question whether greater inconveniences and loss will come to the complainant or defendants in the granting or withholding of preliminary relief. Aldrich v. Union Bag & Paper Co., 81 N.J.Eq. 244, 87 A. 65.
The following facts are established by the papers filed in the cause:
The defendant, National Dyeing and Printing Company (hereafter, for convenience, referred to as National), has been engaged in the business of dyeing and finishing textiles since 1908. For some years, its business operations have been conducted in the State of Pennsylvania, while its principal offices remained in the State of New Jersey.
In the early part of 1947, the officers of National consulted tax counsel with a view to obtaining advice as to what changes, if any, could be made in the corporate structure of the company, which would result in tax savings and simplification of operations. As a result, a Pennsylvania corporation, known as Allentown Converting Company (hereafter referred to as Allentown), was formed. It was proposed that National should convey to Allentown its operating assets, valued at $697,782, receiving in return all of the capital stock of Allentown. National would then be dissolved. The preferred stock of National would be paid in full together with accrued dividends. The common stockholders would receive pro rata the stock of Allentown and such other assets as remained after the retirement of the preferred stock. On the basis of National's statement as of December 31, 1946, the assets remaining for distribution to the common stockholders after the retirement of the preferred stock, and exclusive of the stock of Allentown, had a value of approximately $1,300,000. The directors of National approved of the proposal and called a meeting of the stockholders for July 31, 1947, to consider and pass upon the proposal. The notice sent to the stockholders read, in part, as follows:
‘July 17, 1947
To all stock holders of National Dyeing and Printing Company:
The Board of Directors has determined that it will be in the best interests of all stockholders of National Dyeing and Printing Company for the Company to be dissolved, and its assets distributed to stockholders. In furtherance of this plan the Board has caused to be formed a new subsidiary corporation known as Allentown Converting Company, and has voted to transfer to that company, in exchange for all of its capital stock (except qualifying shares already subscribed for) certain assets of National Dyeing and Printing Company used in connection with the Company's textile dyeing and finishing business in Allentown. Before any distribution to common stockholders, the preferred stockholders of the Company will receive the par value of their shares, together with accrued and unpaid dividends thereon.'
At a meeting of the Board of Directors of National Dyeing and Printing Company held on the 10th day of July, 1947, the following resolutions were adopted:
‘Resolved that this Board of Directors does declare it advisable and most for the benefit of National Dyeing and Printing Company that the same should be dissolved; and that a meeting of all stockholders, without regard to class, be called for and held on Thursday, the 31st day of July, A.D. 1947, at two o'clock p. m., at the office of the Company, 152 Market Street, in the city of Paterson, New Jersey, to take action upon the question of dissolution of the said Company; and further, that the Secretary give written notice of said meeting and of the adoption of this resolution, to all stockholders, by mail, at least ten days prior to the date of said meeting.
Further Resolved that there shall be also submitted to the stockholders, for their proposed ratification at said meeting, the action of the directors in authorizing the transfer of certain real estate and other assets of the Company to Allentown Converting Company, in exchange for 107,328 shares of the capital stock of said Allentown Converting Company without par value, which stock, together with other capital stock of ...
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