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  "name": "WILLIAM HENRY BELK v. BELK'S DEPARTMENT STORE OF COLUMBIA, S. C., INC., a corporation, JOHN M. BELK, IRWIN BELK and THOMAS M. BELK",
  "name_abbreviation": "Belk v. Belk's Department Store of Columbia, S. C., Inc.",
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    "parties": [
      "WILLIAM HENRY BELK v. BELK\u2019S DEPARTMENT STORE OF COLUMBIA, S. C., INC., a corporation, JOHN M. BELK, IRWIN BELK and THOMAS M. BELK."
    ],
    "opinions": [
      {
        "text": "Rodman, J.\nThe validity of an in personam judgment is of coui-se dependent on jurisdiction over the person of the defendant. Pennoyer v. Neff, 95 U.S. 714, 24 L. ed. 565; Rutherford v. Ray, 147 N.C. 253; Doyle v. Brown, 72 N.C. 393. It follows that a judgment in personam can only be rendered against a foreign corporation when it has exercised its corporate functions within the State. Lambert v. Schell, 235 N.C. 21, 69 S.E. 2d 11; Goldey v. Morning News, 156 U.S. 518, 39 L. ed. 517.\n\u201cWhether a foreign corporation is doing 'business in North Carolina, so as to subject it to the jurisdiction of the State\u2019s Courts, is essentially a question of due process of law under the U. S. Constitution, Amendment 14 (1), which must be decided in accord with the decisions of the U. S. Supreme Court.\u201d Putnam v. Publications, 245 N.C. 432, 96 S.E. 2d 445.\nIn International Shoe Co. v. Washington, 326 U.S. 310, 90 L. ed. 95, 66 S. Ct. 154, 161 A.L.R. 1057, the Supreme Court decided that \u201cdue process requires only that in order 'to subject a defendant to a judgment in -personam, if he be not present within the territory of the forum, he have certain minimum 'contacts with it .such that the maintenance of the suit does not offend \u2018traditional notions of fair play and substantial justice.\u2019 \u201d\nBased on the findings made by the court, it is manifest that \u201ctraditional notions of fair \u00a1play and substantial justice\u201d do not immunize Department Store from service of process 'and in personam judgments by the courts of this State. Shepard v. Manufacturing Co., 249 N.C. 454; Painter v. Finance Co., 245 N.C. 576, 96 S.E. 2d 731; Harrington v. Steel Products, Inc., 244 N.C. 675, 94 S.E. 2d 803; Lambert v. Schell, supra; Lightner v. Pilgrim Paper Corp., 152 F Supp. 504; Perkins v. Benguet Consol. Min. Co., 107 N.E. 2d 203 (Ohio); Moe v. Stearns, 288 F 992; Johnson v. Atlantic & Pacific Fisheries Co., 224 P 13 (Wash.); Sterling Nov. Corp. v. Frank & Hirsch D. Co., 86 N.E. 2d 564, 12 A.L.R. 2d 1435 (N.Y.); Hartstein v. Seidenbach\u2019s Inc., 222 N.Y.S. 404; Fleischmann Const. Co. v. Blauner's, 179 N.Y.S. 193.\nAdmittedly, the court had jurisdiction of the individual defendants, who 'are officers of and constitute the majority of the board of directors of Department Store.\nDid the court have jurisdiction of the asserted cause of action?\nNormally private corporations are created to permit the use of funds contributed by a designated minimum number of shareholders for the operation of a commercial enterprise of the kind 'specified in the -charter. The funds are provided by the (shareholder upon the assumption they will be profitably used, -and he will benefit thereby. The statutes of South Carolina recognize the motives which prompt the creation and continued operation of business corporations. Code of Laws of S. C., 12-201 and 12-651.\nStock ownership in this country has reached such proportions that many corporations list more than 50,000 shareholders, -and some have in excess of 500,000 shareholders.\nActual management of corporate affairs is entrusted by the shareholders to a board of directors. Shareholders elect as directors those in whom they have confidence because of known or reputed integrity or ability. Given, as they -are by the shareholders, the power to manage, it necessarily follows that no external -authority should interfere with the exercise of the power so entrusted when honestly exercised for the benefit of the corporation and all of its shareholders.\nOne of the important duties imposed on directors is the ascertainment of -a fiscal policy best adapted; to the needs of the corporation. An incident to this policy is a determination of the course to pursue with respect to the declaration of dividends. What part of the profits should be disbursed to the shareholders and when the disbursements should be made are of utmost importance to the corporation and its shareholders. Courts will not interfere with the discretionary power vested in the directors with respect to dividends when honestly exercised; but when it is made to appear that the directors are acting in bad faith and clearly abusing their discretion for some ulterior and improper purpose, a court of equity will intervene 'and require the declaration and payment of ia dividend to prevent what is in effect a fraud on shareholders. Gaines v. Mfg. Co., 234 N.C. 331, 67 S.E. 2d 355; Gaines v. Mfg. Co., 234 N.C. 340; 67 S.E. 2d 350; Johnson v. Brandon Corp., 69 S.E. 2d 594 (S.C.); Thompson v. Thompson, 51 S.E. 2d 169 (S.C.); Kroese v. General Steel Castings Corp., 179 F 2d 760, 15 A.L.R. 2d 1117; Fletcher, Cyc. Corporations (Perm. ed.) sec. 5325; 13 Am. Jur. 678; 18 C.J.S. 1112.\nSome 'courts 'have .stated that they did not have jurisdiction of a suit against a foreign corporation which involved/ questions of management and fiscal policies. Condon v. Mutual Reserve Assn., 73 Am. St. Rep. 169 (Md.); Fuller v. Ostruske, 296 P 2d 996 (Wash.); Relief Assn. v. Equitable Assur. Soc., 42 N.E. 2d 653 (Ohio); Boyette v. Preston Motors Corp., 89 So. 746 (Ala.).\nIt is not, we think, a question of the power to judge but the ability to secure the evidence to properly judge or power to enforce the judgment which controls. There is a distinction between the power to exercise and the wisdom of exercising jurisdiction. The distinction is, we think, aptly phrased by the Supreme Court of Illinois in Babcock v. Farwell et al., 91 N.E. 683, 19 Ann. Cas. 74: \u201cThe reasons which influence courts of chancery to refuse to interfere in the management of the internal affairs of a foreign corporation are, that the rights arising between a corporation and its members out of .such management depend on the laws of the State under which the corporation is organized; 'that the courts of that state afford the most appropriate forum for adjudication upon the relation between the stockholders and the .corporation, and that frequently such courts alone possess power 'adequate to the enforcement of all decrees that justice may require. It is the inability of the court to do complete justice by its decree, and not its inoompetency to decide the question involved, that determines the exercise of its power. The general 'statement that courts will not interfere with the management of the internal affairs of foreign corporations must be construed./ in connection with the facts. The rule rests more on ground's of policy and expediency than on jurisdictional grounds; more on want of power to enforce a decree than on jurisdiction to make it.!'\nThis is, we think, the basis on which the majority of the courts have acted in refusing to exercise jurisdiction. Rogers v. Guaranty Trust Co., 288 U.S. 123, 77 L. ed. 652, 89 A.L.R. 720; 23 Am. Jur. 425, 426; 20 C.J.S. 99; Fletcher, Cyc. Corporations (Perm. ed.) sec. 8427. In Brenizer v. Royal Arcanum, 141 N.C. 409, and Howard v. Insurance Co., 125 N.C. 49, this Court recognized the inability of the courts -of .this State, on the facts established in those cases, to enforce -any decree which might be entered with respect to the management of the foreign corporation, andi because of -such want of authority, jurisdiction was denied.\nIn 1955 the Legislature -declared the policy of this State. It enacted: \u201cNo action in the -counts of this State shall be dismissed -sol-ely on the ground that it involves the internal affairs of a foreign -corporation but the coui\u2019t m-ay in its discretion dismiss such an action if it appears that more adequate relief can he granted or that the convenience of the .parties would be better served by an -action brought in the jurisdiction of its incorporation or in the jurisdiction where the corporation has its executive or managerial headquarters or, because of the circumstances, in -some other jurisdiction.\u201d G.S. 55-133(a).\nThe authors of the bill which -contained this -provision directed this comment to the Legislature: \u201cWhile the doctrine of nonintervention in the internal -affairs of a foreign corporation is still frequently asserted, the courts have increasingly taken jurisdiction in cases which that doctrine would seem to deny. At this date it is -believed that a test more nearly approaching 'forum no-n-conviens\u2019 -should govern the court's decision a-nd that a -statute making that -apparent would represent a sound innovation.\u201d\nThe individual defendants demurred to -the -complaint for the same reasons -assigned by Department Store in its motion to dismiss, i.e., lack of jurisdiction over the asserted -cause o-f -action. Their demurrer wa-s: overruled.\nDefendants h-ave not asserted that the facts all\u00e9ged,\u2019 if established, .ar\u00e9 -insufficient to justify -a proper -court o-f competent jurisdiction in awarding plaintiff appropriate relief. For that reason we have not stated the facts on which plaintiff bases hi-s right to the relief demanded. The law in South Carolina with respect to the facts to be established before a -court will interfere and direct the payment of -a cash dividend is -stated in Thompson v. Thompson, supra, and Johnson v. Brandon Corp., supra.\nBased on -the findings, -specifically including the finding that the question of declaring dividends h-ad heretofore been determined in Charlotte and not in South Carolina, coupled with -the fact that the court has power to enforce such decree as it may render by orders directed to the directors who are present before it constituting the majority of the board, and /the -conclusion which .the .-court drew that the convenience of the parties wo-uld not be better -served by an action in the State of its incorporation, w-c -are -of the opinion and hence -hold that the motion to dismiss was pro-perly denied.\nAffirmed.",
        "type": "majority",
        "author": "Rodman, J."
      }
    ],
    "attorneys": [
      "Weinstein & Muilenburg for plaintiff, appellee.",
      "Helms, Mulliss, McMillan & Johnston and David M. McConnell for defendant, appellant."
    ],
    "corrections": "",
    "head_matter": "WILLIAM HENRY BELK v. BELK\u2019S DEPARTMENT STORE OF COLUMBIA, S. C., INC., a corporation, JOHN M. BELK, IRWIN BELK and THOMAS M. BELK.\n(Filed 15 April, 1959.)\n1. Judgments \u00a7 18\u2014\n\u00a1The validity of a judgment in personam \u2018is dependent upon jurisdiction over .the person of the defendant.\n2. Same: Corporations \u00a7 25\u2014\nA judgment in personam can be rendered against a foreign corporation only when it exercises its corporate functions within the State.\n8. Process \u00a7 8c\u2014\nFindings to the effect .that the majority of ithe officers and directors of a foreign corporation maintained their offices in 'this State, that meetings of its board of directors was held here except for one meeting a year under the requirement of the state of its incorporation, that its officers within this 'State purchased substantial quantities of merchandise here for the corporation, that its accounting is performed here, etc., are sufficient to support adjudication that service on the corporation by service on its president and executive officer in this \u00a1State constituted valid service.\n4. Corporations \u00a7 4\u2014\nThe directors of a corporation are entrusted with the actual management of the corporate affairs by the shareholders, and no external authority should interfere with their exercise of the power so entrusted to them when the .power is honestly exercised for the benefit of the corporation land all of its shareholders.\n5. Corporations \u00a7 19\u2014\nCourts will not interfere with the discretionary power vested in the 'directors of a corporation with respect to the declaration of dividends when such power is honestly exercised, \u00a1but a court of equity will intervene only when it is made -to appear that the directors are acting in toad faith and clearly ..abusing their discretion for some ulterior and improper purpose.\n6. Coui\u2019ts \u00a7 3\u2014\nThere is. a' distinction between the power of a court of equity to exercise jurisdiction and. the- expediency of exercising its jurisdiction, and ordinarily a. court of equity will not exercise its jurisdiction if it lacks the power to enforce its decree.\n7. Same: Corporations \u00a7.\u00a7, 19, 25\u2014\nWhether the courts of this -State will entertain an action to compel -the declaration of a dividend by a foreign corporation rests on expediency and convenience, G.S. 55-133(a), and where in such action it \u00a1appears that the foreign corporation is doing business here, that the question of declaring dividends had heretofore been determined by its directors in regular meetings in ,tbis State, and that the court has power to enforce any decree it may render by order directed to a majority of the. directors-of the corporation who reside here, motion:to-di@-miss, the action for want of jurisdiction is properly denied.\nAppeal by Belk\u2019s Department Store of Columbia, S. C., Inc., from Craven, S, J., -September 1st 1958 Special Civil Term of MeCKlenbuhg.\nPlaintiff, a resident of Florida, the owner of 1227 out of a total of 'SOOO 'sbiares of stock \u25a0 issued \u00a1by Belk\u2019s Department Store of Columbia, S. C., Inc. (.hereafter designated as Department Store) seeks to compel .the declaration .and payment of a ca-sh dividend and an injunction prohibiting-the use of corporate funds except as'm-ay be -customary and appropriate i-n the -operation of a department store -as authorized by the charter of Department Sto-re. \u2022 \u25a0 ; \u2022;\n\u25a0 T-he-individual defendants--are stockholders and directors of Department Store. They reside in Mecklenburg County. Process' has been served on them in their home county. Process ^as served on Department ..Sto-re \u00a1by delivering a -copy of the summons and a copy of the complaint to John M. Belk, -its president.\n\" \"Department Store entered' a special appearance andi moved 'td1 dismiss for -that (1) it was a foreign -corporation which had not domesticated or done business in North Carolina; hence the service \u2019 on its president gave the court no jurisdiction over it, and (2) the action involved -the internal a\u00edf\u00e1irs of a foreign -Corporation, and as to such cause of action the court was without, -or should not exercise, jurisdiction. No challenge is made with respect to the- sufficiency of the facts -alleged to justify a South Carolina court' in awarding the requested relief.\nThe court -heard evidence and, based thereon, made findings which, so far' as pertinent to 'a'decision, -are summarized as follows: Department Store wa-s. incorporated -in South Carolina on 23 December 1930. It .was organized to -conduct a general mercantile business, both wholesale and retail. Its principal place of -business is Columbia, S. C.; but it is authorized to have branch -offices or places o\u00ed business in or outside of South Carolina. John M. Belk is \u00a1a director and president, Irwin Belk is a director .and co-ordinating vice-president, Thomas M. Belk is a director and assistant secretary-treasurer. The board of directors is composed -of the individual defendants and Henderson Belk, Charlotte, N. C., -and Sarah Belk Gamibrell, New York, N. Y. She is also assistant treasurer. The other officer -of the corporation is Norman N. Scott, Columbia, S. C., who is executive vice-president and secretary. Department Store conducts a mercantile business in Columbia where it regularly employs more than 300 .and in holiday periods more than 450. It does not have a store outside of Columbia nor does it have any individual employee, officers excepted, outside of South Carolina.\nAll stockholders\u2019 meetings, except one each year as required by South Carolina law, have been held at 308 East 5th Street, Charlotte, N. C. There the individual defendants maintain their offices. There in annual session the \u00a1stockholders elect the directors. There the -board \u00f3f directors regularly meet, elect officers, hear reports, review the company\u2019s fiscal 'affairs, and make decisions. Th-e -book of stock certificates, the sto-c-k register, the corporate seal .are all kept in Charlotte. The minutes of \u00a1the stockholders\u2019 and directors\u2019' meetings are prepared -and kept in Charlotte. There the president maintains his office \u201cwhere he performs the duties of chief executive officer -of the defendant corporation. In -such capacity, the said President of the defendant corporation exercises control over 'and discretionary power in respect to the corporate functions of the defendant corporations.-\u2019 There Irwin Belk and Thomas M. Belk maintain their offices \u201cwhere they .also engage in the transaction off business for the corporate defendant and in the exercise -of executive -control \u00a1over -and discretionary power with respect to the corporate functions of the defendant corporation.\u201d Some of the duties performed by these -officers in Charlotte relate to \u201cthe purchase o-f substantial quantities of merchandise -at Charlotte, N. C., in \u00a1a regular and continuous fashion, which \u00a1also involves the attendance at frequent intervals -during each year -at Charlotte, N. C., of numerous employees -of the -corporate defendant for -the purpose of selecting and -ordering merchandise.\u201d Accounting and auditing \u00a1services, including the preparation -of income tax returns', \u00a1\u00e1re performed in Charlotte as are purchases- -of all types- -and kinds of insurance, -office supplies, wrapping paper, order books, -and -office equipment. The investment of corporate funds, purchase of stock in other corporations, leases -and .purchases -of property, -designing of merchandise, -selection of trade names and the development of -s-al-es and advertising policies are handled in Charlotte. From ithe inception of the corporation all transfers of stock have been made and stock dividends issued at the above address in Charlotte, N. C.\nThe stock, according to unchallenged allegations, of the company is owned as follows:\nshares\nW. H. Belk 1227\nJohn M. Belk 1227\nHenderson Belk 1227\nThomas M. Belk 1227\nIrwin Belk 1227\nSarah Belk Gambrel! 1227\nBelk\u2019s Department Store of Batesburg, S. C., Inc. 318\nTrustees under the Will of W. H. Belk, Sr., deceased 320\nTotal outstanding shares 8000\nBased on the findings so made, the count concluded Department Store was engaged in business in North Carolina when process was served on it by delivering copy to its president, and that the court had jurisdiction of the parties and cause of action. It denied the motion to dismiss. Department Store excepted and .appealed.\nWeinstein & Muilenburg for plaintiff, appellee.\nHelms, Mulliss, McMillan & Johnston and David M. McConnell for defendant, appellant."
  },
  "file_name": "0099-01",
  "first_page_order": 139,
  "last_page_order": 146
}
