Dodge v. Ford Motor Co. case brief summary
204 Mich. 459
SYNOPSIS:
Plaintiffs objected to a decision of the lower court granting them a specified amount in dividends from defendant corporation but denying their request for additional interest payments on those dividends.
FACTS:
-Defendant corporation's directors decided to exercise their discretion and hold back part of the company's capital earnings for reinvestment, thereby denying certain expected dividend payments to plaintiffs.
-Plaintiffs contended that the reason defendant corporation was holding back dividends, partially to reinvest in the company and bring down the ultimate cost of buying a car, was semi-humanitarian and was not authorized by the company's charter.
-The trial court held that defendant corporation was entitled to reinvest surplus capital gains at their discretion and did not order further dividends paid out.
HOLDING:
The appellate court reversed that decision and held that the accumulation of so large a surplus established that there was an arbitrary refusal to distribute funds to stockholders as dividends and ordered that such dividends, plus interest, should be paid by defendant corporation.
RULES:
"It is not within the lawful powers of a board of directors to shape and conduct the affairs of the corporation for merely incidental benefit of shareholders and for the primary purpose of benefiting others."
OUTCOME: Plaintiffs' objections were sustained and the appellate court reversed the decision of the lower court and ordered that defendant corporation release additional stockholder dividends to plaintiffs.
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204 Mich. 459
SYNOPSIS:
Plaintiffs objected to a decision of the lower court granting them a specified amount in dividends from defendant corporation but denying their request for additional interest payments on those dividends.
FACTS:
-Defendant corporation's directors decided to exercise their discretion and hold back part of the company's capital earnings for reinvestment, thereby denying certain expected dividend payments to plaintiffs.
-Plaintiffs contended that the reason defendant corporation was holding back dividends, partially to reinvest in the company and bring down the ultimate cost of buying a car, was semi-humanitarian and was not authorized by the company's charter.
-The trial court held that defendant corporation was entitled to reinvest surplus capital gains at their discretion and did not order further dividends paid out.
HOLDING:
The appellate court reversed that decision and held that the accumulation of so large a surplus established that there was an arbitrary refusal to distribute funds to stockholders as dividends and ordered that such dividends, plus interest, should be paid by defendant corporation.
RULES:
"It is not within the lawful powers of a board of directors to shape and conduct the affairs of the corporation for merely incidental benefit of shareholders and for the primary purpose of benefiting others."
OUTCOME: Plaintiffs' objections were sustained and the appellate court reversed the decision of the lower court and ordered that defendant corporation release additional stockholder dividends to plaintiffs.
---
Interested in learning how to get the top grades in your law school classes? Want to learn how to study smarter than your competition? Interested in transferring to a high ranked school?
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