Wheeler v. Pullman Iron & Steel Co.

Waterman, P. J. Briefly stated, the bill in this case seeks to take the management of the Pullman Iron & Steel Company out of the hands of a majority of the stockholders and of the officers and directors by them selected, to have a receiver appointed, an accounting had with its creditors, its affairs wound up and its assets distributed among its stockholders, upon the allegation that its affairs are not managed and have not been for its benefit and the benefit of its stockholders as a whole, but for the benefit of other corporations with which the person owning a majority of the stock of the Iron & Steel Company is connected. The allegations are perhaps intended as a charge of fraudulent misconduct on the part of the officers and directors of the Iron & Steel Company; but as stated they do not amount to more than allegations of a want of business judgment and sagacity or a lack of attention. What is alleged is in substance that they have caused the Iron & Steel Company to sell its product at prices so low that little or no profit has been realized, and that it would have realized large profits had it been allowed to manufacture bar iron and sell the same to the trade at ruling market prices. These allegations of stupid or fraudulent conduct on the part of the officers and directors of the Iron & Steel Company are altogether too general and indefinite to constitute the basis of a decree by a court of equity. The allegations are altogether conclusions on the part of the complainants. At what prices the Iron & Steel Company has sold or furnished its product to the Car Company is not stated, neither is there any statement as to what amount of bar iron it has or could have manufactured and sold to other parties, nor at what price such bar iron could have been sold, or what the ruling market prices were; nor does it appear from the allegations of the bill whether George M. Pullman, who is charged to have been and to be the controlling stockholder of the Iron & Steel Company, has knowingly or intentionally caused that company to furnish its product to the Car Company at prices less than what its product could have been sold to.the trade for, or whether such action upon his part has been through mere inadvertence, lack of proper judgment or a want of knowledge of what the ruling prices for such product were, and the prices at which such product could have been sold to the trade. It may be entirely true that the course of the business of the Iron & Steel Company has been such that its work has been in its result as a profit almost solely for the benefit of the Palace Car Company, and yet such result have been brought about, not by any fraudulent conduct on the part of said George M. Pullman, by his or its officers intending to control the Iron & Steel Company so that its operations should not be for its benefit, but should be for the benefit of the Palace Car Company; but that such unfortunate result, so far as the Iron & Steel Company is concerned, has been brought about simply by his and their lack of knowledge of the ruling market prices or his lack of business judgment or sagacity, shown by their failing to sell the product of the Iron & Steel Company at the ruling market prices. . If the conclusions of the complainants, set forth by this bill, are based upon actual facts, no reason is shown for not stating such facts so that the court, by an inspection of the bill, could have seen that the Iron & Steel Company had been selling its product, not merely at prices so low that little or no profit was realized, which is a very common thing, both 'with individuals and corporations, but had sold its product at prices materially below the ruling market prices for such goods. If the allegations of the bill as to its indebtedness and the value of its assets are true, then it would seem that its creditors have a much greater interest in its management than these complainants can possibly have. None of these creditors, whose claims aggregate more than §300,000, are making any complaint as to the managemént of the company. It does not appear that any judgment has ever been obtained against it, or that it is not promptly meeting all its bills. It is doing a large business and lessening its liabilities. It is quite apparent that to take, under such circumstances, the control of its affairs out of the hands of a majority of its stockholders and put it in charge of a receiver might greatly jeopardize the interests of its creditors and result in a large loss to them. While it is true that the complainants represent but one hundred out of 5,000 shares, yet it is their right to have the affairs of the corporation honestly administered for the benefit of its stockholders, and if they are being intentionally not so administered, they are entitled to relief in a court of equity; hut in asking for such relief they should so specifically set forth the acts of mismanagement, which, if taken as they desire to have them taken, amount to charges of fraud, that the court can see from a reading of the bill that if the matters and things therein specifically set up are true, its affairs are, by its officers and directors, intentionally and fraudulently mismanaged, and that the allegations of fraudulent mismanagement are not mere conclusions of the pleader. Whether, in the case of a corporation doing business, meeting all demands against it promptly, not charged to have done any acts for which its charter might be forfeited, a receiver will, at the instance of stockholders, be appointed and the corporation wound up, upon charges of fraudulent mismanagement, or whether in such ease the court, declining to appoint a receiver, will compel the officers of the company to account for their breach of trust and enjoin the doing of such further fraudulent acts, are questions which under the allegations of this bill we are not called upon to discuss. The decree of the Superior Court dismissing the bill is affirmed. Decree affirmed.