Sternberg v. Wolff

• Decision Date: 29 January 1898
• Citation: 39 A. 397,56 N.J.E. 389
• Parties: STERNBERG et al. v. WOLFF et al.
• Court: New Jersey Supreme Court

39 A. 397

56 N.J.E. 389

STERNBERG et al.

v. WOLFF et al.

Court of Errors and Appeals of New Jersey.

Jan. 29, 1898.

Appeal from court of chancery; Pitney, Vice Chancellor.

Bill by Lazar Sternberg and another against David Wolff and another. From a decree, all parties appeal. Reversed.

Robert H. McCarter and Louis Hood, for complainants.

Riker & Riker and Charles D. Thompson, for defendants.

DEPUE, J. On the 25th of July, 1892, Sternberg, Wolff, and Misch became incorporated under the general corporation act, under the name of L. Sternberg & Co., with a capital stock of $100,000, divided into 1,000 shares, the par value of which was $100 each. The object for which this company was incorporated was to carry on a general merchandise business. At a meeting of the stockholders, on the 26th of August, 1897, Sternberg was the owner of 499 shares; Rosa Sternberg, his wife, of 1 share; David Wolff, 1 share; and Rosa Wolff, his wife, 499 shares,—the situation being that one-half of the capital stock was held by Sternberg and his wife, and the other half by Wolff and his wife. At this meeting the by-laws were amended so that the board of directors should consist of four members, and the whole number of directors should be necessary to a quorum, and the four persons above named were elected directors. Lazar Sternberg was elected president, David Wolff being secretary and treasurer. Among the by-laws was the provision that Lazar Sternberg and David Wolff and Henry Kern, the general superintendent, should not be subject to discharge or reduction of salary by any officer of the company or by the board of directors without the consent, in writing, of the majority in interest of the stockholders; that other employé might be discharged either by Lazar Sternberg or David Wolff, and new employes should be employed only with the concurrence of both Lazar Sternberg and David Wolff, unless otherwise ordered by the board of directors. It is unnecessary to go into particulars. It is sufficient to say that, after the meeting last referred to, Sternberg and his wife, as the one party, were the owners of one-half of the capital stock of the company, and Wolff and his wife the owners of the other half. Difficulties and dissensions arose between these four persons, in which Sternberg and his wife, the one-half in number of the board of directors, were engaged on the one side, and Wolff and his wife, the other half of the board of directors, were engaged on the other side. By reason of these dissensions, the management of the business by the board of directors was in a deadlock, although the company was largely engaged in the conduct of the business for which it was incorporated. In consequence of the disputes between these parties, in October, 1897, Sternberg and his wife filed a bill in the court of chancery against Wolff, to restrain him, among other things, from exercising the duties of treasurer, and from discharging employé or interfering with the regular business of the company for his own personal ends, with a further prayer that, if necessary, a receiver might be appointed to take charge of said company, and manage the same, pending the decision of this suit. No answer had been filed by Wolff when the hearing on this application was had before the vice chancellor; but Wolff, in his affidavit, states that he believes that the safety of the business demands the appointment of a receiver at least during the pendency of the litigation, and until an adjustment of the interests of the stockholders can be arrived at. Rosa Wolff was not a party to the bill, but she made an affidavit stating that she was the owner of half of the company's stock, and claiming that it was necessary for the protection of her interests that a receiver should be appointed for the corporation at least during the pendency of this litigation, and until the rights and powers of the officers and stockholders of the company shall have been adjusted and fixed under the order of the court.

This matter coming on for hearing before the vice chancellor on bill, affidavits, and counter affidavits, the vice chancellor advised an order dated November 6, 1897, denying the application for a receiver, but ordering that pending this suit an injunction do issue, enjoining David Wolff, the defendant herein, from drawing any promissory notes or checks of the company or on behalf thereof, except for ascertained debts due by the said company, or from drawing any check to the order of himself, except for salary due him after deducting all charges against him for rent and goods, the disputed items of $206 and $140 for banquet and stable account, respectively, not to be included in the ascertainment of said charges against him, the same being reserved until the final hearing of the case, and from discharging employé, except for cause, and that by the permission of the court, or from employing any new employé without the permission of the court, and from making or procuring to be made any list of the customers of said company, and from continuing to act as treasurer of the said company unless within 10 days from the date hereof he should file a bond in the penal sum of $20,000 conditioned for the faithful performance of his duties as treasurer of the defendant corporation; and that the complainant Lazar Sternberg be likewise enjoined from drawing any promissory notes or checks of the company, or on behalf thereof, except for ascertained debts due by the said company, or from drawing any check to the order of himself except for salary due him after deducting all charges against him for rent and goods, and from discharging employé except for cause, by the permission of the court, or from employing any new employé without the permission of the court, and from making or procuring to be made any list of the customers of said company, and from inducing the employé of the company to fail to pay proper respect to the defendant and other officers of the...