Procedural Posture

Plaintiff stockholders appealed an order of the Superior Court of the City and County of San Francisco (California), which rendered judgment for defendant corporation in the stockholders' action to restrain the payment of dividends by the corporation.

Overview: california rule of court 3.1332

The stockholders instituted an action against the corporation to restrain the corporation from paying dividends. The trial court found for the corporation and the stockholders appealed. On appeal, the court affirmed the judgment of the trial court, holding that stockholders failed to make a case that justified equitable relief. The record disclosed that if the stockholders were given the relief they sought, the corporation might have been forced into liquidation causing great loss to all the consenting stockholders, both common and preferred, and it failed to disclose that the stockholders would obtain any tangible benefit from such an injunction, if granted. The stockholders failed to show that liquidation would advantage them, but they showed that it would seriously injure those who accepted the plan of recapitalization. Thus, the stockholders could not, under any theory of equity, take advantage of those who, by their acceptance of the plan, saved the corporation from liquidation and thus made it possible for the corporation at some future time to pay these dividends.

Outcome

The court affirmed the judgment of the trial court, which found for the corporation in the stockholders' action to restrain the corporation from paying dividends.