Windhurst v. Cent. Leather Co.

• Decision Date: 19 February 1930
• Citation: 149 A. 36
• Parties: WINDHURST et al v. CENTRAL LEATHER CO. et al.
• Court: New Jersey Court of Chancery

149 A. 36

WINDHURST et al

v. CENTRAL LEATHER CO. et al.

Court of Chancery of New Jersey.

Feb. 19, 1930.

(Syllabus by the Court.)

Suit by John Windhurst and others against the Central Leather Company and others. Decree in accordance with opinion advised.

Smith & Slingerland, of Newark (White & Simms, of New York City, of counsel), for complainants.

Pitney, Hardin & Skinner, of Newark (Waldron M. Ward, of Newark, of counsel), for defendants.

BENTLEY, Vice Chancellor. On bill for specific performance. This suit was instituted by the riling of a bill for an injunction by one Windhurst to prevent the consolidation or merger of two corporations—one the Central Leather Company, and the other the United States Leather Company. Upon tie filing of that bill an order to show cause was allowed, and an ad interim restraint was included. Upon a motion to dissolve the restraint, the same was vacated and the order to show cause discharged. The facts are contained in the opinion rendered on that motion and set out in detail in 101 N. J. Eq. 543, 138 A. 772. Thereafter the bill was amended so as to include a prayer that, in the event the injunction was denied, then that the contract created by the purchase by the complainants of their preferred stock should be specifically enforced, and that the defendant Central Leather Company should be decreed to pay to each complainant the par value of his respective shares of such stock, together with arrears of dividends, amounting to $42 for each share. New parties complainants have been added, and the original complainant has withdrawn.

The facts on the final hearing do not materially change the case, and an injunction should not be allowed, because of the laches upon which the preliminary motion turned.

The theory of the complainants is that the merger of the defendant corporations operated to dissolve the Central Leather Company, within the meaning of section 31 of the General Corporation Act (2 Comp. St. 1910, p. 1619). With this reasoning I am unable to agree. When reading that act in its entirety, it is unescapable that the Legislature intended to set up two methods for the dissolution of corporations, one voluntary, as described in section 31, and the other involuntary, as described in section 56 et seq. (2 Comp. St. 1910, p. 1636 et seq.). Where either of these methods is pursued, it forever puts an end to the exercise by a corporation of any of its powers, privileges, or franchises, and effectually ends the existence of the entity which we call a corporation, unless, of course, relief is secured pursuant to the 69th section (2 Comp. St. 1910, p. 1645). This is entirely apart from the idea of a merger under the 104th and following sections, which provide for the procedure whereby the assets, privileges, and franchises of two corporations engaged in a similar business may unite either with one another or both into an entirely new corporation to be organized for that purpose. This operation does not result in the dissolution of either of the old corporations, but permits the carrying on of the activities of each of them in a new form and in union with each other.

It may appear, when superficially examined, as if the results and consequences of a merger are similar in some respects to a dissolution. For example, the name of one or both of the merging companies may be lost. The relation between the various stockholders of one of the corporations may be materially changed, as is the case here. But, on the other hand, the language of those sections which deal with mergers show that these changes are incident to the uniting of the two corporations. The members of the board are not continued as trustees, and the act does not provide that either of the corporations shall be dissolved; it is not provided that the board of either shall proceed to wind up its business and affairs. There is no provision for liquidation and distribution. On the contrary, the act says that the stock shall be delivered up for conversion into shares of the capital stock of the new creation. The very provision for appraisal proves that dissolution does not result. The plain meaning of the act is that the corporations are to be continued as a joint or consolidated whole. It was not beyond the power of the Legislature to permit a merger, because the Corporation Act was the same in this respect at the time of the incorporation of the Central Leather...