On appeal from the Superior Court, Chancery Division, Bergen County.
Gaulkin, Baime and Ashbey. The opinion of the court was delivered by Gaulkin, J.A.D.
[218 NJSuper Page 353] Plaintiff Gerald Gershaw (Gershaw) brought this action as a stockholder of defendant Ther-A-Pedic Sleep Products, Inc. (Ther-A-Pedic). His complaint, filed November 15, 1984, asserted a variety of derivative claims on behalf of Ther-A-Pedic against the individual defendants as officers and directors, demanded permission to inspect the corporate records and sought declaratory judgment that Gershaw and other named persons had been duly elected as directors at a September 6, 1984 shareholder's meeting. The parties immediately set into what became a protracted and bitter litigation. Crossclaims, counterclaims, third-party complaints were filed; additional parties were brought in; motions and cross-motions proliferated. The proceedings culminated in a final hearing at which but one witness testified. On August 5, 1986, the trial judge entered judgment, among other things, (1) denying all relief to Gershaw;
(2) declaring that Gershaw owns 25% of the Ther-A-Pedic stock; (3) fixing the value of all of the Ther-A-Pedic stock at $1,200,000 and (4) incorporating, by implication, a February 18, 1986 order which authorized the individual defendants to purchase Gershaw's stock. Gershaw appeals.
Gershaw's central contention is that the trial judge was without authority to mandate that he sell his shares to the individual defendants. The order granting that relief recites that it is entered "pursuant to N.J.S.A. 14A:12-7(8)," which provides:
Upon motion of the corporation or a holder or holders of 50 percent or more of the outstanding voting shares of the corporation, before or after the appointment of a custodian or provisional director, the court may order the sale by the plaintiff or plaintiffs of all shares of the corporation's stock held by them to either the corporation or the moving shareholders, whichever is specified in the motion, if the court determines in its discretion that such an order would be fair and equitable to all parties under all of the circumstances of the case.
The court can order a stock sale under that section, however, only in an action "brought under" N.J.S.A. 14A:12-7(1):
The Superior Court, in an action brought under this section, may appoint a custodian, appoint a provisional director, order a sale of the corporation's stock as provided below, or enter a judgment dissolving the corporation, upon proof that
(a) the shareholders of the corporation are so divided in voting power that, for a period which includes the time when two consecutive annual meetings were or should have been held, they have failed to elect successors to directors whose terms have expired or would have expired upon the election and qualification of their successors; or
(b) the directors of the corporation, or the person or persons having the management authority otherwise in the board, if a provision in the corporation's certificate of incorporation contemplated by subsection 14A:5-21(2) is in effect, are unable to effect action on one or more substantial matters respecting the management of the corporation's affairs; or
(c) in the case of a corporation having 25 or less shareholders, the directors or those in control have acted fraudulently or illegally, mismanaged the corporation, or abused their authority as officers or directors or have acted oppressively or unfairly towards one or more minority shareholders ...