Wollman v. Littman, 35 A.D.2d 935 - 316 N.Y.S.2d 526 (App. Div. 1st Dept. 1970)

Rule:

Irreconcilable differences even among an evenly divided board of directors do not in all cases mandate dissolution.

Facts:

Plaintiffs and defendants held equal amounts of stock in a fabric company and were equally represented on the board of directors. Defendants accused plaintiffs of attempting to lure the company's customers away to another corporation controlled by plaintiffs' father. Plaintiffs filed an action seeking dissolution of the corporation, claiming that effective management was impossible. The trial court ordered dissolution and appointed a receiver. Defendants appealed.

Issue:

Was dissolution proper?

Answer:

No.

Conclusion:

The appointment of a receiver was proper, but dissolution should not occur without a full trial of the issues. Where two groups of shareholders were at odds, and one group sought dissolution of the corporation, a full trial on the issues was ordered before dissolution could take place. Two factors would require further exploration. The first was that the functions of the two disputing interests were distinct, one selling and the other procuring, and each could pursue its own without the need for collaboration. The second was that a dissolution that would render nugatory the relief sought in the representative action would actually accomplish the wrongful purpose that the defendants were charged with in that action.