201 A.D. 460 | N.Y. App. Div. | 1922
The action is brought by the plaintiff to have declared illegal and void an attempted repeal by a majority of the stockholders of the defendant Cowles Realty Company of a by-law, being section 5 of article V of the by-laws of said company, which provided that no stockholder of the defendant company should have the right or power to pledge, sell or otherwise dispose of any shares of stock of said company, except by last will and testament, without first offering the same for sale to the defendant company at the actual price at which it was proposed to sell such stock, or at par in case it was proposed to pledge or otherwise dispose of the same, except, as aforesaid, by last will and testament.
At Special Term the court granted an injunction pendente lite enjoining the defendants and all other officers, directors and agents of the defendant company during the pendency of the action from aiding and abetting in the enforcement of or attempting to carry out the provision of a' resolution adopted at a special meeting of the stockholders of the defendant company, held on September
The defendant company was organized on or about December 10, 1909, for the purpose of taking and holding certain real property situated in the village of Rye, Westchester county, N. Y., and also certain bonds and stocks, all owned by one Sarah B. Cowles in her lifetime, and which property was bequeathed by her last will and testament to her three sons, David S. Cowles, Charles P. Cowles and the defendant Justus A. B. Cowles. The defendant company was organized with 450 shares of stock, of the par value of $100 per share. This stock was equally divided among said three sons of Sarah B. Cowles, each owning and receiving 150 shares thereof. David S. Cowles died November 6, 1911, léaving a last will and testament wherein he devised and bequeathed to the plaintiff, Matilda P. Cowles, the 150 shares of the", stock held by him in the defendant company, and the plaintiff is now the owner and holder thereof. Charles P. Cowles also died subsequent to the formation of said corporation, and the defendant Justus A. B. Cowles has succeeded to his interest in the defendant company and has become the owner of the shares of stock therein originally held by said Charles P. Cowles in his lifetime. The assets of the defendant company consist, as aforesaid,- of improved and unimproved real estate in the village of Rye, Westchester county, N. Y., and also of bonds secured by mortgages on real property, and of high-grade stocks and bonds of a total value of upwards of $600,000,
After the formation of said corporation there was a meeting of the three members each owning 150 shares of the capital stock thereof, and at such meeting there was adopted by unanimous vote of the three stockholders the by-law in question, being section 5 of article V of the by-laws of the defendant company. The by-law thus adopted provides as follows:
“ Sec. 5. No stockholder shall have the right or power to pledge, sell or otherwise dispose of, except by Will, any share or shares of the capital stock of this Company, without first offering the said share or shares of stock for sale to the Company, at the actual price per share at which it is proposed to sell such share or shares of stock, or, at par, in case it is proposed to pledge or otherwise dispose of the same, except by Will. Such offer shall be made in writing, signed by such stockholder and sent by mail to the Company in a post-paid wrapper to the post-office address of the Company, at its principal place of business, and such offer shall remain good for acceptance by the Company for the period of thirty (30) days from the date of mailing such notice.
“ These provisions shall be binding also upon any executor, administrator or other legal representative of every stockholder, in case of the sale or pledging of any share or shares of stock by such executors, administrators or other legal representatives of any stockholder and the provisions contained in this by-law shall be embodied in, written, printed, or stamped upon each certificate of stock already issued or which hereafter may be issued and thereupon shall be a part thereof binding upon each and every present or future owner or holder thereof, whether such stock be acquired by Will or otherwise.”
As before stated, on September 9, 1921, an attempt was made to repeal said by-law, the said Justus A. B. Cowles, the owner of the majority of the capital stock of said company, voting in favor of the repeal thereof, while the plaintiff voted against such repeal and protested against the adoption of the resolution to that end.
It is the contention of the plaintiff, respondent, that the adoption of the by-law in question, section 5 of article V of the defendant company’s by-laws, was in effect a contract between the three sons each owning 150 shares of the capital stock of said company; that said by-law was adopted upon due consideration, each of the parties thereto, by voting in favor thereof, changing his position with reference to his stock holdings.
It is the contention., on the other hand,, of the defendants, appei
It seems to me that the plaintiff is right in her contention, and that at common law she had certain contract rights which she received from her husband with reference to her said stock, namely, that when any of the stock of the other stockholders of the company, as well as of herself, should be offered for sale, it must be first offered to the company and an opportunity given to the defendant company to acquire such stock at the price at which it was proposed to sell the* same. The decisions of the courts seem to be in accord with plaintiff’s contention. (Kent v. Quicksilver Mining Co., 78 N. Y. 159; Parish v. New York Produce Exchange, 169 id. 34.) These two cases seem to be closely in point and to sustain the position of the respondent in the case at bar. In Parish v. New York Produce Exchange (supra), Chief Judge Parker, writing for a unanimous Court of Appeals, referring to the earlier decision of that court in Kent v. Quicksilver Mining Co. (supra), at page 46, said: “ The trend of authority in this State is, however, in the other direction, and first (ound expression in this court in the well-known case of Kent v. Quicksilver Mining Co. (78 N. Y. 159). In that case the corporation was created by special act of the Legislature, and the act provided, among other things relating to the by-laws, that the company should have power ‘ to alter, amend, add to or repeal at their pleasure, provided that such by-laws shall not be contrary to the Constitution of this State, or the provisions of this act, * * * and to issue certificates of stock representing the value of their property in such form and subject to such regulations as they may, from time to time, by their by-laws prescribe.’ The by-laws enacted pursuant to the authority thus conferred directed the capital stock to be divided into equal shares and issued, all of which was done. But subsequently, by vote of the stockholders holding a majority of the capital stock, the by-laws were so amended as to authorize the issuing of an equal number of shares of preferred stock for common stock returned to the company with a cash payment of $5 on each share, all preferred stock to be entitled to interest at 7% per annum, to be paid out of the net profits of the company, the surplus earnings after such payment to be divided pro rata among the holders of the preferred and common stock. A large number subscribed and paid the sum prescribed, which went into the assets of the company. Some four years later a holder of common stock brought an action to restrain payments to preferred stockholders from the profits of the company, and when the action
The contract effected by the adoption of the unanimous resolution of the stockholders in the case at bar was upon sufficient con
Prior to November 30, 1910, the three brothers, each owning 150 shares of the capital stock of the defendant company, were free to dispose of their stock holdings at will. By the resolution adopted on November 30,1910, each voted in favor of the resolution adopting the by-law in question, and thereafter surrendered his stock certificates and received in place thereof new certificates with the provisions of the by-law incorporated thereon. Each and every stockholder then made a new and enforcible contract with the corporation and with his fellows. By his vote and agreement he changed his position by surrendering his right to sell his stock to whom and upon such terms as he might wish. He bound himself by the limitation that he would not sell his stock, save to the defendant under the provisions of said by-law. He thereby limited his rights as they had theretofore existed, and in return- therefor became vested with a right to insist that the corporation and his fellow-stockholders should also abide by the provisions of the by-law. It is to protect such contract and to insure its enforcement that the plaintiff brings the present action. I think she has clear and substantial rights in the premises. These rights she received from her husband through his will, as permitted by the terms of the by-law itself. She stands in the same position with reference thereto that her deceased husband occupied in his lifetime. I think the court very properly granted an injunction pendente lite restraining the defendants from doing
The order appealed from should be affirmed, with ten dollars costs and disbursements.
Clarke, P. J., and Dowling, J., concur; Laughlin, J., concurs in result; Page, J., dissents.
Order affirmed, with ten dollars costs and disbursements.