Open App →
Home › Case briefs › Corporations

Wheeler v. Pullman Iron & Steel Company

Supreme Court of Illinois · 1892 · Corporations
17 L.R.A. 818 (1892)
Updated
Corporationscorporate dissolutionequity jurisdictionstatutory authorityforfeiture of charterreceivershareholder suitaccounting

Facts

Shareholders filed a bill against the corporation seeking relief on two theories: dissolution and winding up of the corporation, or an accounting between the corporation and the Pullman Palace Car Company and other creditors. The bill did not allege facts bringing the case within the statutory grounds authorizing suits in equity against corporations and stockholders for specified defaults or unpaid debts. The opinion states that the corporation had been organized to manufacture under certain letters patent that proved valueless, had spent its capital and incurred debt, then changed its business to manufacturing bar iron and sold its output to a single customer on credit. The bill alleged the corporation would have realized greater profit if sales to the Pullman Car Company had been at market price, but did not allege what the market price was or that the product could have been sold on the market.

Issue

May shareholders maintain a bill in equity to dissolve a corporation under general chancery powers when the bill does not allege the statutory grounds for such relief? May shareholders obtain an accounting based on allegations that corporate business was conducted in a way that favored another company, absent well-pleaded facts showing fraud, illegality, or other actionable misconduct?

Rule

Absent statutory authority, chancery has no jurisdiction to dissolve a corporation by declaring a forfeiture of its franchise. Under the Illinois statute, equity's power to dissolve or close up a corporation exists only as part of the relief available when the statute's specified grounds have been properly alleged and invoked, and 'good cause' means a legal cause for forfeiture. In corporate management, the majority of shareholders control lawful business policy, and equity will not interfere at a shareholder's suit unless the conduct is in violation of the charter or public law, or is corruptly and fraudulently subversive of the rights and interests of the corporation or a shareholder; where the controlling agents themselves are the alleged wrongdoers, prior demand is unnecessary.

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

  • The court's holding and reasoning
  • Doctrine tests, pitfalls & exam hypotheticals
  • 10 practice questions + 4 AI-graded essays on this case
Sign up free to see more →
Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.
Three minority shareholders of Lakefront Tool Works, a manufacturing corporation based in Milwaukee, file a bill in equity in Illinois seeking dissolution, appointment of a receiver, and distribution of assets. Their complaint alleges only that the company has pursued a stubborn pricing strategy for two years, lost market share, and would likely be worth more if liquidated now.

Should the court grant equitable dissolution on these allegations?

Explanation. The majority opinion holds that, absent statutory authority properly invoked, chancery has no jurisdiction to dissolve a corporation by forfeiting its franchise. A bare claim that liquidation would be better for shareholders does not suffice. The statutory power to dissolve is not a free-standing general equitable power.