#### William H. N. Francis, Plaintiff, *v.*James D. Taylor, as Treasurer of the Wagner Palace Car Co. et al., Defendants.

(Supereme Court, New York Special Term,

April, 1900.)

1. Association, unincorporated — Dissolution and sale of assets to foreign corporation.

A voluntary association may be dissolved pursuant to its articles. Where these provide that, upon notice and by resolution, the directors may dissolve the association provided a majority in interest of the shareholders do not object, the court will not, where the conditions have been complied with and ninety-five per cent, in value of the shareholders have assented to dissolution, restrain the officers as liquidators, at the instance of a single small shareholder, from dissolving the association and consummating a sale of its business and assets to a similar foreign corporation at a fair and adequate price.

Í3. Same — Option to take cash or shares in foreign corporation.

Where a shareholder is given the option of receiving for his interest cash or shares in the foreign corporation, of equal amount with his stock, it cannot be maintained that he, contrary to law, has been compelled to accept the stock of a foreign corporation for his interest in a domestic association.

3. Same — Public policy not prohibitive of sale of domestic association to foreign corporation.,

A proposed absorption of a domestic association by a foreign corporation is not against public policy where the probable result will be a reduction of administrative expenses, a more effective management and a corresponding benefit to the public and to those pecuniarily interested.

*188Motion for an injunction *pendente lite.*

George H. Yeaman and John W. Hutchinson, Jr., for plaintiff.

Samuel E. Williamson and Lewis Cass Ledyard, for defendants.

Beekman, J.

This is a motion for an injunction *pendente lite.*The defendants are sued as officers of the Wagner Palace Car Company, a voluntary unincorporated association, of which the plaintiff is a stockholder, holding 100 shares of the par value of $100 each. The object of the action is to prevent the dissolution of the association and the consummation of a sale of the business and asséts of the association to the Pullman Palace Car Company, which the defendants propose to effect as liquidators of its affairs. It is claimed that the directors of the Wagner Palace Car Company have no power to dissolve the company, and an attempt is made to bring the case within the law in that regard applicable to corporations. The answer to this is that associations such as this are not corporations. The latest review of the subject by the Court of Appeals is found in People ex rel. Winchester v. Coleman, 133 N. Y. 279, Avhere Judge Finch, after an elaborate discussion of the question, states the difference between a joint-stock association and a corporation in the following words (p. 287): “ The one derives its existence from the contract of individuals, the other from the sovereignty of the State. The two are alike, but not the same. More or less they crowd upon and overlap each other, but without losing their identity; and so, while we cannot say that the joint-stock company is a corporation, we can say, as we did say in Van Aernam v. Bleistein, 102 N. Y. 360, that á joint-stock company is a partnership with some of the powers of a corporation. Beyond that we do not think it our duty to go.” See also same case, Gen. Term, Supreme Court, 37 N. Y. St. Repr. 120; also, Special Term, Supreme Court, 24 id. 970. The Joint-Stock Association Law (chap. 235, Laws of 1894) also clearly shows this. The association is the-creature of contract, and not of the State, and Avhatever the contract contains which is not of itself unlawful constitutes a part of the law of its being. Section 5 of the above-mentioned law declares that “ A joint-stock association shall not be dissolved except in pursuance of its articles of association, or by consent of all its-stockholders, or by judgment of a court for fraud in its management, or for good cause shoAvn.” The right, then, of the associates. *189to contract with respect to the dissolution of their organization is indubitable. The articles of association of the Wagner Palace Car Company provide that the board of directors shall have power, “ and is hereby expressly authorized at any time, whenever it may be deemed for the best interests of the said company, by a resolution passed by a unanimous vote of all the members thereof, to dissolve said stock company, provided a notice of sixty days of the intention to dissolve said company shall have been previously given to the shareholders and such dissolution is not objected to by a majority in interest thereof, and in case of such dissolution or any termination of said company, said directors are hereby expressly authorized by themselves or by their attorney or attorneys, to adjust, settle up and liquidate the business and affairs thereof.” The notice above required has been given and the dissolution has been assented to by stockholders owning 187,178 shares out of a total of 198,695 shares which are outstanding, and the sale to the Pullman Palace Car Company of the assets of the Wagner Company in liquidation of its affairs has also been so approved. Out of the entire body of shareholders the plaintiff alone, representing only 100 shares, has made any objection to the action of the directors. The proposed sale of the assets and the good-will of the association to the Pullman Palace Car Company is based upon an actual valuation made by the directors, which is measured by the sum of $180 for each and every share of the issued and outstanding shares of the capital stock of the Wagner Company, and payment therefor is to be made by the issue of 200,000 shares of the Pullman Company of the par value of $100 a share, such stock to be issued to the directors of the Wagner Company as liquidating trustees after the dissolution of that association. In order, however, to meet the ease of stockholders who may be unwilling to accept such shares, provision is made for the payment to them of cash at the rate of $180- for each share held by them. There is no evidence before me tending to show that the valuation of the property by the directors is insufficient or that the proposed disposition of the property is an improvident one; nor is there any claim that the transaction involves any scheme to injure and oppress minority stockholden for the aggrandizement of the majority. Indeed, upon the papers, the plan of liquidation and the consideration to be paid for the property seem to be reasonable, fair and adequate. The fact that nearly ninety-five per cent, in value of the stockholders have assented to the plan is of itself most *190persuasive of its beneficial character. It is claimed that the scheme compels the plaintiff to accept the stock of a foreign corporation for his interest in the property. If that were the case, his complaint would certainly be well founded, as was held in Frothingham v. Barney, 6 Hun. 366, but that is not the case here. He is offered his choice between stock and a money payment based upon a valuation of the property as an element of the transfer expressed in its distributive portions at $180 a share, the adequacy of which is not questioned. The right to liquidate the affairs of the company by a transfer in bulk of its property seems also to be questioned, but it is quite apparent that from the very nature of the business any sale of the property, except as a going concern, would result in such disaster to the stockholders as to be absolutely inadmissible. Where the circumstances of the case are of such a character as to require a sale in this manner in liquidation of copartnership affairs, I know of no reason or authority which forbids it. It is also claimed that the proposed issue of stock of the Pullman Company is unlawful under the laws of the State of Hlinois, where the corporation has its domicile. But there is no evidence before me that such is the case. It is also urged that the absorption of the Wagner Company by the Pullman Company will create a great monopoly of the business in which it is alleged they have been rivals. I fail, however, to see that this would be the result in any sense which is obnoxious to the law, as the plan in question in no way involves any restraint upon others from freely engaging in the same kind of business. It is contended here, on behalf of the defendants, that the chief merit of the proposed absorption of the business of the Wagner Company by the Pullman Company is in the reduction of administrative expenses and greater effectiveness in management, and that there is a corresponding benefit not only to those immediately interested in the business, but to the public as well, as the tendency of such conditions is towards a reduction of charges for the service rendered. This contention is borne out by the observed results of similar aggregations of business enterprises under one control, which has become one of the economic features of the present day. There seems to be nothing, then, in the proposed transfer here which is injurious to the public interests. The fundamental objection of the plaintiff, however, seems to be addressed to the dissolution of the association, but at best this involves a mere difference of judgment between himself and the defendants. He may be correct in his *191view, but the determination of the question rests in their judgment by the terms of the articles of agreement on which the association rests for its fundamental law — a compact by which all of the stockholders are bound. The authority to dissolve it is theirs, and when exercised in the manner agreed upon the act is unquestionably legal. I am satisfied that no case is presented for the granting of an injunction during the pendency of the action. I recognize the right of any stockholder to the remedies which the law affords him for 'the redress of any wrong which he may suffer, irrespective of his motive in purchasing his stock; but where the vast majority of the general body of the stockholders approve of the action which is the subject of assault, the existence of the wrong should be very clearly established and the necessity for injunctive relief for the adequate protection of the plaintiff’s rights should be manifest before the drastic remedy applied for should be issued. The motion for an injunction is denied, with ten dollars costs.

Motion denied, with ten dollars costs.