The plaintiffs, owners of one-half of the voting shares of the capital stock, seek in this proceeding to attain the dissolution of the defendant Trenton-New Brunswick Theatres Company, a corporation of the State of New Jersey, pursuant to the terms and provisions of R.S. 14:13-15, N.J.S.A. A narrative of many of the circumstances and events which have occasioned this action may be found in a memorandum previously filed and reported in 8 N.J. Super. 404, 72 A.2d 914 (Ch. Div. 1950), and to which in the avoidance of repetition I particularly refer.
Then, too, by reason of the publication of the recent decisions in Post-Standard Co. v. Evening Journal Ass'n. , 1 N.J. 437, 64 A.2d 80 (1949), and In re Collins-Doan Co. , 3 N.J. 382, 70 A.2d 159 (1949), an exposition of the statute would also be redundant and superfluous.
It is understood that the statute confers upon the Chancery Division of this court judicial power to be exercised within the jurisdiction bestowed, in accordance with the normal procedure and customary processes of a court of equity.
Conscientious disagreements with respect to corporate business management and policy are more or less inevitable and ordinarily reconcilable. They are wisely subordinated to the superior concern for the general welfare of the enterprise. Unity of action necessarily depreciates proportionately with
the rise of discord. Questions of the business and economic policy of a corporation are to be determined by the directors, and the court intervenes in the internal affairs with reluctance. Laredef Corp. v. Federal Seaboard Terra Cotta Corp. , 131 N.J. Eq. 368, 25 A.2d 433 (Ch. 1942); Federal Terra Cotta Co. v. Atlantic Terra Cotta Co. , 133 N.J. Eq. 360, 32 A.2d 331 (Ch. 1943).
But, "In fine, where dissension among the shareholders of a corporation is such as to work a paralysis of corporate function, the sovereign power whence the franchise came has an interest that will sustain its intervention for the dissolution and liquidation of the corporation. And it may intervene, too, for the protection of shareholders. Certainly, dissolution was within the contemplation of the shareholders here if differences arose which could not be composed. This is the principle of the statutory provision invoked here. The act is designed to operate where there is 'a stalemate in corporate management.' In re Evening Journal Association , 1 N.J. 437 (1948). The power proceeds from the same source and has the same quality as that exerted against insolvent corporations and those in default in the payment of the franchise tax. The act itself suggests the legislature deemed the subject matter of public concern." In re Collins-Doan Co., supra (at p. 395).
The mutuality of stock ownership in this corporation between the RKO and the Reade interests seems to have been born in an environment of resentment. I will have you listen to excerpts from the testimony of Mr. Walter Reade, Sr.
"Q. When did the plaintiff here, the RKO Theatres, or its predecessor in title, first get an interest in these theatres?
"A. I don't remember the exact date. The records would show. It was about five, six or seven years after I had operated these units for Mr. Storrs and myself."
"A. Mr. Albee, who was then the president or in control of the B.F. Keith Company, sent for my associate, Frank Storrs, who had refinanced me out of these properties, and he threatened Mr. Storrs that, if he did not give him 50 percent of the operation of these leaseholds,
which I had with Mr. Storrs, that he would bill no theatres in the cities of New Brunswick and Trenton. He went so far as to purchase a piece of ground adjoining the Stacy-Trent Hotel, on State Street, in Trenton."
"Q. After this conversation with Mr. Albee in New York to which you have referred, what did you do?
"A. We went out on the street and tried to buy vaudeville acts which were not controlled by that corporation at that time. They had a franchise covering the entire acts of the B. F. Keith booking office, which was the only vaudeville booking office in America where one could obtain acts, and if acts worked for anybody else other than through that office or one of their agents, they were blackballed and they were not given any work. So we struggled along three or four weeks and Mr. Storrs told me that he had hundreds of thousands of dollars invested in there and he would rather have 50 percent of a good thing than 100 percent of something that was going to cause him a lot of financial loss, and we would have to stand for the blackmail and give it up."
"A. With the original acquisition of the Taylor Opera House, located at State and Broad Streets, and the Trent Theatre, and the Palace Theatre in this city, even after we had given Mr. Albee 50 percent of the stock, Mr. Albee permitted me, or allowed me, or told me, to continue to manage these properties. From that time on the City of Trenton grew. * * *
"I purchased various other properties, including where the South Broad Theatre is. I leased the State Theatre. I bought the stock of the defunct Lincoln Theatre. We built the Hamilton Township Theatre. We built the theatre out on the outskirts, opposite the ball park, and leased the State Theatre in this particular city. This was all done with my efforts, my energy and my money, and I turned it into this company. We went from here to the City of New Brunswick and built another beautiful theatre called the State Theatre. I then acquired the Rivoli Theatre. And I want you to understand, Mr. Carpenter, each time these commercial transactions took place, I bought them with my money. The corporation gave me my money back after they found out they would be successful. They let me keep them about four months and test them out. Then we built the Albany Theatre in New Brunswick. Then we bought, at a ridiculously low figure -- at least, I bought it -- the Highland Park Theatre, in Highland Park, New Brunswick. During all of this period, Mr. Carpenter, I was the manager and operator and kept the books. The company was in commercial difficulties, financially, throughout a period of years."
"A. I am talking about the RKO, who had absorbed the stock we had given Mr. Albee without the payment ...