A receiver was appointed, by the vice-chancellor, under the following circumstances, as related in the affidavits pro *Page 318 and con, filed upon the application. The realty company was organized on May 12th, 1923, under our Corporation act, with an authorized capital stock of $15,000. Its incorporators were William L. Greenbaum, Solomon J. Wallach and Louis R. Radin, each of whom subscribed for stock in the sum of $5,000 except Greenbaum, whose subscription was taken over by Wallach to the extent of $2,500. The company was thus financed to the amount of $15,000. It thereafter purchased real estate comprising a garage and three stores on Lafayette street, in Newark, paying therefor $15,000 in cash and the balance by assuming two certain mortgages against the property. The garage was leased at a rental of $1,000 per year to another corporation composed of the same incorporators, Wallach, Radin and Greenbaum. The stores were leased for substantial amounts. About this period, Greenbaum became disaffected towards the realty company, apparently because of some difference in corporate management and administration, and filed this bill for the appointment of a receiver, alleging the insolvency of the realty corporation. The bill in effect charges a conspiracy between Wallach and Radin, his son-in-law, to oust Greenbaum from control, and to substitute a dummy director in his place. It also charges various shortcomings and derelictions against the other two directors. It appears that at this time the financial condition of the realty company was not that of insolvency. Its only outstanding liability, beyond its stock, was a promissory note for $1,000, due to the Broad and Market National Bank, Newark, and a promissory note for $2,700, payable to one Cronheim, for a balance on insurance premiums. Its assets consisted of its valuable real estate and a balance of $2,177.50 of rent due by the garage company. There were no pressing obligations requiring the immediate borrowing of money. Its notes were duly honored and outstanding, and were being gradually liquidated, and the corporation was not in need of money to carry on its business. The report submitted by the receiver's accountants, and in turn submitted by the latter to the vice-chancellor, shows the company to have been at the time this application *Page 319 was made in a solvent condition, and free from any criticism of financial instability, which under our Corporation act could subject it to legal or equitable animadversion.
Depriving a statutory legal business entity of its corporate life, is a judicial act which should not be lightly exercised, since the intervention of the court carries with it very often in practical execution not only the destruction of the livelihood of those who subsist by its existence, but also the investments of those who have confidently contributed their means to its successful creation, and, finally, but not at all the least of its unfortunate results, such an interposition may be the means of removing from the field of honest successful endeavor, a business asset of substance and importance to the well-being of the state.
Our Corporation act, operating as a variation from the common law, is intended to encourage honest consolidation of effort, and not to retard it; and our cases illustrative of this principle have consistently manifested a repugnancy to judicial intervention in corporate business affairs, except where the violation of the provisions of the statute is manifest and reasonably apparent. Atlantic Trust Co. v. Cons. Co., 49 N.J. Eq. 402;Benedict v. Columbus Co., 49 N.J. Eq. 23; Sternberg v. Wolff, 56 N.J. Eq. 389; Fort Wayne Co. v. Light Co.,57 N.J. Eq. 16.
The Corporation act, laws 1896, page 277, as amended by the act of 1912 (P.L. p. 535; Comp. Stat. p. 1640 § 65; 1st Supp. p.425 § 33, amending section 65), prescribes three conditions, one of which at least must exist as a basis for judicial intervention.
(1) "Where the corporation is insolvent.
(2) "Where it has suspended its ordinary business for want of funds to carry on the same, and is not about to resume its business within a short time thereafter.
(3) "Where its business has been and is being conducted at a great loss, and grossly prejudicial to the interests of its creditors or stockholders, so that its business cannot be continued with safety to the public and advantage to the stockholders." *Page 320
None of these conditions appearing in the situation presented by the proof in this case, the order of the vice-chancellor restraining the defendant in the operation of its business and appointing a receiver is hereby reversed.