Corporations – Liquidation Upon Deadlock in Closely-Held Corporation – Interpretion of Wisconsin Statute, Strong v. Fromm Laboratories,

Plaintiff, as trustee of an estate, held fifty percent of the shares of a going corporation. An election to fill all four positions on the corporation’s board of directors was held. Since a by-law required that directors be shareholders, plaintiff was the only member of his own faction for whom he could vote. The opposing faction, holding the remaining fifty percent of the shares, had four eligible candidates. Votes for each of the four were cast, with one receiving one vote less than the other three. Plaintiff voted all of his shares for himself and also cast a vote of all his shares “against any other candidates for director.” The chairman ruled this negative vote a nullity and found that plaintiff and three members of the opposing faction were elected. Plaintiff, claiming that a deadlock existed, brought an action to liquidate the corporation. The trial court upheld the chairman’s ruling, and found that there was no deadlock. On appeal, held, reversed. Plaintiff’s negative vote was not a nullity, and, therefore, a voting deadlock did exist which perpetuated a split in the board of directors. A receiver should be appointed and liquidation carried through even though there was no showing of irreparable injury to the corporation, unless the parties arrange a stock transfer within a stipulated time. Strong v. Fromm Laboratories, (Wis. 1956) 77 N.W. (2d) 389.