Case Name: Emanuel Jacobus, Plaintiff, v. The American Mineral Water Machine Co. et al., Defendants
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1902-07
Citations: 38 Misc. 371
Docket Number: 
Parties: Emanuel Jacobus, Plaintiff, v. The American Mineral Water Machine Co. et al., Defendants.
Judges: 
Reporter: New York Miscellaneous Reports
Volume: 38
Pages: 371–373

Head Matter:
Emanuel Jacobus, Plaintiff, v. The American Mineral Water Machine Co. et al., Defendants.
(Supreme Court, New York Special Term,
July, 1902.)
Corporation — Eights of minority stockholders.
Where two corporations, competitors in the same business, occupants of the same offices, having practically the same agents, and under the same voting control, are conducted, by that control in such a manner as to sacrifice tlie interests of one corporation in order to advance those of the other, a minority stockholder of the corporation damnified is entitled to equitable relief against the situation.
Action by a minority stockholder for equitable relief.
Hoadly, Lauterbach & Johnson (Edward Lauterbach and Eugene Treadwell, of counsel), for plaintiff.
Boardman, Platt & Soley, for American Mineral Water Machine Co. and others, defendants.
Leo G. Rosenblatt, for Diamond Soda Water Co. and others.
Benjamin Fonda, for Max Rothschild and another.
George Sewell Bonner, for City Trust Co. of New York.

Opinion:
Fitzgerald, J.
Certain propositions were made in open court on behalf of the defendants during the progress of this trial which could only have been based upon a theory that a minority stockholder was without recourse when the majority decide upon some plan of conducting the business of a corporation which does not meet with his approval, except to the extent of being afforded an opportunity to accept such offer for the surrender of his stock as the majority might make him. It is true that courts of ¡equity will not interfere to settle a question of " mere administration or of policy upon which there might be a difference of opinion " (Gamble v. Queens C. W. Co., 123 N. Y. 91), but the matter is different " when the majority of a company proposed to benefit themselves at the expense of a minority." Menier v. Hoopers Telegraph Works, L. R. (9 Ch. App.) 350. Both corporations in the case at 7'ar are engaged in the same business, and while the pretense of keeping the two concerns going is attempted it is abundantly established that the settled policy of the controlling power in both is to subordinate and sacrifice the interests of one for the purpose of increasing the business and profits of the other. Many circumstances combine to support this view, the competition in trade, the occupancy by both concerns of the same premises, the relationship with some of the defendants, and the mere nominal interest of the directors of the Diamond Company, the employment of practically the same persons for the performance of similar duties for each corporation,, and many other incidents of an equally suspicious nature with which the evidence abounds. In addition to these matters the good faith of the majority's action is severely shaken by the character of the arrangements made with Mulholland for the purchase of stock and the transfer of the bonds. These bonds were issued upon the security of a mortgage of all the property of the original corporation, and were practically voted by the defendant directors to themselves in payment of alleged debts, and were taken from those defendants at their full face value by Mulholland. By the latter's possession of the stock and bonds so acquired he controls the nominal board of directors, and upon a default in payment of the interest on the bonds could foreclose the mortgage and absolutely wipe out the only competitor in the field to-day with the defendant corporation. Eor these and other reasons the conviction is forced upon me that this case is brought within the doctrine expounded by Martin, J., in Farmers' L. & T. Co. v. New York & N. R. Co., 150 N. Y. 430: "The law requires of the majority of the stockholders the utmost good faith in their control and management of the corporation as regards the minority, and in this respect the majority stand in much the same attitude towards the minority that the directors sustain towards all the stockholders. Thus, where the majority are interested in another corporation, and the two corporations have contracts between them, it is fraudulent for that majority to manage the affairs of the first corporation for the benefit of the second. A court of equity will intervene and protect the minority upon an application by the latter." Judgment for plaintiff. Settle decision and judgment on notice.
Judgment for plaintiff.