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In re Evening Journal Ass''n

Decided: July 11, 1951.


Stanton, J.s.c.


The plaintiffs seek the dissolution of the defendant The Evening Journal Association pursuant to the provisions of R.S. 14:13-15, N.J.S.A. , sometimes called the Deadlocked Corporation Act. Opinions dealing with other phases of this action are reported in 1 N.J. 437 (1949), 7 N.J. Super. 360 (Ch. Div. 1950) and 5 N.J. 142 (1950); and reference is made to these to avoid repetition.

The association was incorporated in 1877 under a general act of the Legislature and the period limited for its duration was 50 years. In 1927, after the date limited for its duration had passed, its corporate existence was extended for an unlimited period pursuant to the provisions of a general legislative act.

The principal business of the association is the publication of a daily newspaper known as the Jersey Journal. It owns valuable real property at Journal Square, Jersey City, part of which is used in its newspaper operation and the remainder is rented for store and office purposes.

Since January 27, 1948, no directors have been elected because no nominee has received a majority. As a result those elected on that date, namely J. Albert Dear, Cyrene B. Dear, Samuel I. Newhouse and Norman N. Newhouse have been holding over. At a directors' meeting held on July 13, 1948, Mr. Dear was elected president, Mrs. Dear vice-president, Samuel Newhouse treasurer and Norman Newhouse secretary and assistant treasurer to serve until the annual meeting of the stockholders in January, 1949, but they have been holding over ever since in the absence of an election.

The directors have been unable to agree with respect to the payment of a dividend since December, 1947, when one of $25 per share was paid.

Officers of the association have withheld the salaries of their fellow officers. During the period February, 1948, to July, 1948, Albert Dear refused to countersign the salary checks of his uncle Walter Dear then serving as treasurer. Since March, 1949, Samuel Newhouse has refused to sign the salary checks of Mr. and Mrs. Dear on the ground that Dear has violated the by-laws of the association, has acted on behalf of the association without the authority or sanction of the board of directors and has refused the Newhouse faction an equal participation with the Dear faction in the management of the association. During the same period Newhouse has not attempted to draw his salary.

Frequently it has happened that called meetings of the stockholders and directors have not been held because of the absence of a quorum. Since 1948 it has often happened that all the parties attended such meetings accompanied by their personal legal advisers who actively participated in the meetings. Some of these have been reported verbatim by certified shorthand reporters. There have been protracted and acrimonious

meetings at which each side accused the other of seeking to make a record for the purpose of this proceeding.

It would be difficult to discuss in detail the numerous differences between the factions which appear in the extensive testimony and voluminous exhibits, including minutes of the meetings of the stockholders, directors and the conference board, as well as correspondence between the parties and their attorneys. Probably the greatest dissension stems from the division of executive power and authority. Prior to the advent of Newhouse, the by-laws provided that the president shall be the editor of the newspaper and the treasurer shall be the general manager of the association. Pursuant to the Peace Treaty the by-laws were amended on December 24, 1945, to delete from Article XI the following provision: "The treasurer shall be the general manager of the association." This was obviously done at the instance of Albert Dear to limit the authority of his uncle Walter Dear, who was to continue as treasurer during the life of the Peace Treaty which by its terms expired on December 31, 1947. At a directors' meeting in the following January, Albert Dear blocked the re-election of Walter Dear, stopped the payment of his salary, and in effect forced his resignation in July, 1948. Immediately after he was elected treasurer Newhouse sought to restore the provision of the by-laws which would constitute him the general manager, but Albert Dear opposed the proposition then and ever since. Newhouse repeatedly urged that they return to the old plan of operation under which Albert Dear would be the editor of the newspaper and Newhouse would be the business manager of the corporation. Dear has remained adamant in his contention that as president he is the general manager of the business of the association and as editor he has exclusive control over what goes into the newspaper. He has relegated Newhouse to the position of a mere ministerial officer. Newhouse and Dear each has an absolute veto in the meetings of the stockholders and directors, but Dear by virtue of his position as president and editor assumes

the entire control of the day-to-day operation of the corporation and the management of its affairs.

The newspaper is financially successful. During the time with which we are concerned its circulation and advertising linage have increased. Newhouse admits this but contends that under proper management it would enjoy greater success. His view is that the Jersey Journal is merely participating in the general prosperity that is pervading the newspaper industry.

There has been serious disagreement and dissension regarding the management of the real estate. Many propositions, some of magnitude, have been considered with respect to the building which contains stores and offices. For instance, it was proposed to demolish this building, which fronts on Journal Square, and lease the ground for a long term to a tenant who would erect a building designed for its particular purpose. In this connection the association would be required to erect another building on adjacent land on Enos Place to house its editorial and business offices. This would require the investment of a very substantial sum of money and would entail considerable inconvenience. While the feasibility and soundness of this and like propositions were being considered practically all, if not all the tenants, were upset as their leases approached their expiration dates. Only short terms with cancellation clauses were favored by Dear. The real estate operation has been in constant turmoil during the past four or five years. To illustrate, the Loft Candy Company occupied one of the stores; it was regarded as a desirable tenant by both factions and it was anxious to remain for a reasonable term at a much higher rent, but due to the unsettled conditions and inability to even discuss a lease for a reasonable term, it vacated ...

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