Case Name: In the Matter of the Voluntary Dissolution of Radom & Neidorff, Inc. David Radom, Appellant; Anna Neidorff, Respondent
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1954-04-22
Citations: 307 N.Y. 1
Docket Number: 
Parties: In the Matter of the Voluntary Dissolution of Radom & Neidorff, Inc. David Radom, Appellant; Anna Neidorff, Respondent.
Judges: 
Reporter: New York Reports
Volume: 307
Pages: 1–15

Head Matter:
In the Matter of the Voluntary Dissolution of Radom & Neidorff, Inc. David Radom, Appellant; Anna Neidorff, Respondent.
Argued January 22, 1954;
decided April 22, 1954.
Stanley N. OMbaum for appellant.
I. It was error to dismiss the petition without a hearing. (Cohen v. Dana, 287 N. Y. 405; Locke v. Pembroke, 280 N. Y. 430; Schafran & Finkel v. Loewenstein & Sons, 280 N. Y. 164, 280 N. Y. 687; MacMurray v. City of Long Beach, 292 N. Y. 286; Kane v. Walsh, 295 N. Y. 198; Dun & Bradstreet v. City of New York, 276 N. Y. 198; Wainwright & Page v. Burr & McAuley, 272 N. Y. 130; Condon v. Associated Hosp. Service, 287 N. Y. 411; Green v. Doniger, 300 N. Y. 238; Birnbaum v. Jamestown Mut. Ins. Co., 298 N. Y. 305.) II. Petitioner showed prima facie grounds for relief under section 103 of the General Corporation Law. (Winter v. American Aniline Products, 236 N. Y. 199; Peabody, Jr., & Co. v. Travelers’ Ins. Co., 206 App. Div. 206; Staten Is. Edison Corp. v. Maltbie, 296 N. Y. 374; People ex rel. Northchester Corp. v. Miller, 288 N. Y. 163.) III. The Appellate Division lacked power to make a final determination in favor of respondent dismissing the petition, in the absence of any hearing or findings of fact by the lower court. (Skinner v. Paramount Pictures, 294 N. Y. 474; Kroll v. Zimmerman, 274 App. Div. 1070; Marwede v. Commercial Hotel, 273 App. Div. 984; Cobb v. Mutual Life Ins. Co. of N. Y., 275 App. Div. 626; Klepper v. Canadian Pacific Ry. Co., 193 Misc. 808; Matter of Chapman, 162 N. Y. 456; Cuff v. Dorland, 57 N. Y. 560.) IV. The Appellate Division erred in entertaining the appeal from a mere order of reference to hear and report which meanwhile held the petition in abeyance pending the coming in of the Referee’s report. (Matter of Silaski, 175 App. Div. 199; Luttenberger v. Alpert Woodworking Corp., 252 App. Div. 862; Magalhaes v. Magalhaes, 254 App. Div. 880; Michel Cosmetics v. Tsirkas, 262 App. Div. 858; Manufacturers Trust Co. v. Madgo Realty Corp., 256 App. Div. 954; Carretta v. Evans, 254 App. Div. 773; Warshow v. Herron, 254 App. Div. 699; People ex rel. Keator v. Moss, 6 App. Div. 414; Stock v. Mann, 233 App. Div. 18; Matter of Wellman v. Lipkind, 226 App. Div. 106.) V. In any event, if clarification of the petition was deemed essential, it should not have been summarily dismissed with costs and disbursements without granting petitioner an opportunity to amend. VI. The order of reference of the Special Term was in every way proper under article 9 of the General Corporation Law. (Benintendi v. Kenton Hotel, 294 N. Y. 112; Matter of Gotham Tissue Corp. [Picola], 269 App. Div. 922; Matter of McLoughlin, 176 App. Div. 653; Matter of Numode Realty Co., 278 App. Div. 979; Matter of Hassam Paving Co., 152 App. Div. 610; Matter of Rateau Sales Co., 201 N. Y. 420; Matter of Cantelmo [Brewer], 275 App. Div. 231.) VII. Pendency of an equity suit is not a bar to dissolution. VIII. Corporate solvency and an engorged cash bank account are no bar to dissolution under section 103. IX. The incidental temporary stay at the end of the Special Term order was not an improper exercise of discretion under the circumstances; and in any event did not affect the propriety of the order of reference to hear and report under section 113 of the General Corporation Law. (Metropolitan Trust Co. v. Stallo, 166 App. Div. 639; Levy v. Pacific Eastern Corp., 154 Misc. 655; De La Vergne Mach. Co. v. New York & Brooklyn Brewing Co., 125 App. Div. 649; Matter of Seneca Oil Co., 153 App. Div. 594, 208 N. Y. 545; Pollak v. Long Is. Lighting Co., 246 App. Div. 765.)
Charles H. Tuttle, Milton M. Eisenberg and Robert P. Knapp, Jr., for respondent.
I. Radom’s appeal from those portions of the order of the Appellate Division which deny his motions for reargument and for leave to amend his petition should be dismissed. Those portions of the record which reproduce the papers submitted by Radom in support of those motions should be disregarded on this appeal. II. In no real or legal sense is the appellant aggrieved by the determination below. III. The order appealed from is discretionary. Hence the appeal should be dismissed. (Pietraroia v. New Jersey & H. R. Ry. & F. Co., 197 N. Y. 434; Ellensohn v. Keyes, 6 App. Div. 601; Howell v. Mills, 53 N. Y. 322; Wallace & Sons v. Castle, 68 N. Y. 370; Syracuse Sav. Bank v. Syracuse C. & N. Y. R. R. Co., 88 N. Y. 110; Jenkins v. Baker, 91 App. Div. 400; Decauville Automobile Co. v. Metropolitan Bank, 124 App. Div. 478; Uttal v. Uttal, 140 App. Div. 255; Muldoon v. Day, 146 App. Div. 873; Matter of Curtiss, 199 N. Y. 36.) IV. Upon the record before it the Appellate Division was furnished with more than sufficient facts to cause it to exercise its discretion in ordering the petition for voluntary dissolution dismissed. Moreover, the undisputed facts established that no case for dissolution existed under the applicable statute; that the dissolution would not have been “ beneficial to the stockholders ”, and that the order of the Supreme Court at Special Term exceeded the bounds of any discretionary power that may be claimed to exist in law. (Matter of Binghamton Gen. Elec. Co., 143 N. Y. 261; Matter of Dolgeville Elec. Light & Power Co., 160 N. Y. 500; Matter of Hamilton Park Co., 1 App. Div. 375; Matter of Tarrytown, White Plains & M. Ry. Co., 133 App. Div. 297; Matter of Cantelmo [Brewer], 275 App. Div. 231; Matter of Myer v. Myer, 272 App. Div. 888, 297 N. Y. 1038; Matter of George W. Anderson, Inc., 279 App. Div. 594; Matter of Pyrolusite Manganese Co., 29 Hun 429; Matter of Ehret, 70 Misc. 576.) V. Badom was not entitled in law to use this dissolution proceeding as the means of staying and killing the Kings County action theretofore brought against him by Mrs. Neidorff in the right of the corporation. VI. The Appellate Division’s reversal of the stay is not appealable as of right to this court. VTI. Inasmuch as the assignment of Mr. Justice Dickstein to Special Term, Part I, had expired without a hearing herein, over three years before issue was joined in this special proceeding by the filing of Mrs. Neidorff’s answering affidavit, his jurisdiction to have the proceeding and make the decision had also long since expired, irrespective of the interpretation of the parties’ stipulation. Nor could such jurisdiction be conferred by consent. (People v. Sullivan, 115 N. Y. 185; Matter of Jacobs v. Steinbrink, 242 App. Div. 197.)

Opinion:
Desmond, J.
Badom & Neidorff, Inc., the proposed dissolution of which is before us here, is a domestic corporation which has, for many years, conducted, with great success, the business of lithographing or printing musical compositions. For some thirty years prior to February 18, 1950, Henry Neidorff, now deceased, husband of respondent Anna Neidorff, and David Radom, brother-in-law of Neidorff and brother of Mrs. Neidorff, were the sole stockholders, each holding eighty shares. Henry Neidorff's will made his wife his executrix and bequeathed her the stock, so that, ever since his death, petitioner-appellant David Radom and Anna Neidorff, brother and sister, have been the sole and equal stockholders. Although brother and sister, they were unfriendly before Neidorff's death and their estrangement continues. On July 17, 1950, five months after Neidorff's death, Radom brought this proceeding, praying that the corporation be dissolved under section 103 of the General Corporation Law, the applicable part of which is as follows:
" § 103. Petition in case of deadlock.
"Unless otherwise provided in the certificate of incorporation, if a corporation has an even number of directors who are equally divided respecting the management of its affairs, or if the votes of its stockholders are so divided that they cannot elect a board of directors, the holders of one-half of the stock entitled to vote at an election of directors may present a verified petition for dissolution of the corporation as prescribed in this article."
That statute, like others in article 9 of the General Corporation Law, describes the situations in which dissolution may be petitioned for, but, as we shall show later, it does not mandate the granting of the relief in every such case.
The petition here stated to the court that the corporation is solvent and its operations successful, but that, since Henry Neidorff's death, his widow (respondent here) has refused to co-operate with petitioner as president, and that she refuses to sign his salary checks, leaving him without salary, although he has the sole burden of running the business. It was alleged, too, that, because of "unresolved disagreements" between petitioner and respondent, election of any directors, at a stockholders' meeting held for that purpose in June, 1950, had proved impossible. A schedule attached to the petition showed corporate assets consisting of machinery and supplies worth about $9,500, cash about $82,000, and no indebtedness except about $17,000 owed to petitioner (plus his salary claim). Mrs. Neidorff's answering papers alleged that, while her husband was alive, the two owners had each drawn about $25,000 per year from the corporation, that, shortly after her husband's death, petitioner had asked her to allow him alone to sign all checks, which request she refused, that he had then offered her $75,000 for her stock, and, on her rejection thereof, had threatened to have the corporation dissolved and to buy it in at a low price or, if she should be the purchaser, that he would start a competing business. She further alleged that she has not, since her husband's death, interfered with Radom's conduct of the business and has signed all corporate checks sent her by him except checks for his own salary which, she says, she declined to sign because of a stockholder's derivative suit brought by her against Radom, and still pending, charging him with enriching himself at this corporation's expense.
Because of other litigation now concluded (see Matter of Radom, 305 N. Y. 679) to which Mrs. Neidorff was not a party, but which had to do with a contest as to the ownership of the Radom stock, respondent's answering papers in this dissolution proceeding were not filed until three years after the petition was entered. From the answering papers it appears, without dispute, that for those three years, the corporation's profits before taxes had totaled about $242,000, or an annual average of about $71,000, on a gross annual business of about $250,000, and that the corporation had, in 1953, about $300,000 on deposit in banks. There are many other accusations and counteraccusations in these wordy papers, but the only material facts are undisputed: first, that these two equal stockholders dislike and distrust each other; second, that, despite the feuding and backbiting, there is no stalemate or impasse as to corporate policies; third, that the corporation is not sick but flourishing; fourth, that dissolution is not necessary for the corporation or for either stockholder; and, fifth, that petitioner, though he is in an uncomfortable and disagreeable situation for which he may or may not be at fault, has no grievance cognizable by a court except as to the nonpayment of his salary, hardly a ground for dissolving the corporation.
Special Term held that these papers showed a basic and irreconcilable conflict between the two stockholders requiring dissolution, for the protection of both of them, if the petition's allegations should be proven. An order for a reference was, accordingly, made, but respondent appealed therefrom, and no hearings were held by the Referee. The Appellate Division reversed the order and dismissed the petition, pointing out, among other things, that not only have the corporation's activities not been paralyzed but that its profits have increased and its assets trebled during the pendency of this proceeding, that the failure of petitioner to receive his salary did not frustrate the corporate business and was remediable by means other than dissolution. The dismissal of the proceeding was " without prejudice, however, to the bringing of another proceeding should deadlock in fact arise in the selection of a board of directors, at a meeting of stockholders to be duly called or if other deadlock should occur threatening impairment or in fact impairing the economic operations of the corporation." (282 App. Div. 854.) Petitioner then appealed to this court.
It is worthy of passing mention, at least, that respondent has, in her papers, formally offered, and repeated the offer on the argument of the appeal before us, " to have the third director named by the American Arbitration Association, any Bar Association or any recognized and respected public body ".
Clearly, the dismissal of this petition was within the discretion of the Appellate Division (General Corporation Law, § 106; Matter of Cantelmo [Brewer], 275 App. Div. 231; Matter of Myer v. Myer, 272, App. Div. 888, motion for leave to appeal denied 297 N. Y. 1038). There is no absolute right to dissolution under such circumstances. Even when majority stockholders file a petition because of internal corporate conflicts, the order is granted only when the competing interests " are so discordant as to prevent efficient management" and the " object of its corporate existence cannot be attained " (Hitch v. Hawley, 132 N. Y. 212, 221; see Matter of Niagara Ins. Co., 1 Paige Ch. 258). The prime inquiry is, always, as to necessity for dissolution, that is, whether judicially-imposed death " will be beneficial to the stockholders or members and not injurious to the public " (General Corporation Law, § 117; Hitch v. Hawley, supra; 1944 Report of N. Y. Law Revision Commission, p. 354, also cases from other jurisdictions cited in that report in the footnotes to p. 363; Matter of Pyrolusite Manganese Co., 29 Hun 429; Matter of George W. Anderson, Inc., 104 N. Y. S. 2d 184, affd. 279 App. Div. 594). Taking everything in the petition as true, this was not such a case, and so there was no need for a reference, or for the talcing of proof, under sections 106 and 113 of the General Corporation Law.
The order should be affirmed, with costs.