54 F. 759 | 6th Cir. | 1893
Lead Opinion
The appellant, as trustee or mortgagee' under a trust deed or mortgage made and executed October 27, 1886, by the Toledo & South Haven Railroad Company, to secure the payment of its first mortgage coupon bonds, bearing 6 per cent, interest, to the amount of $216,000, of even date, brought this suit, at the instance and upon the demand of the holder of $210,000 of said bonds, to foreclose said mortgage; the mortgagor having made such default in the payment of the interest, warrants, or coupons on said bonds as entitled the holder of a majority thereof, under the terms of the trust deed, to declare the principal of the bonds to be due and payable, etc. The defendant railroad company was duly served, but made no defense to the Suit. The appellee Charles F. Young intervened as a defendant, by leave of the court. He attacked the validity of the mortgage and bonds secured thereby, and claimed an equitable interest and incumbrance in, to, and upon the mortgaged property, to the extent of $3,500, with interest from December 28, 1889, which was prior and superior to the lien of said mortgage. The circuit court sustained the validity of the mortgage, and of the bonds issued by the railroad company, directed a sale of the rights, properties, etc., covered by the mortgage, and decreed that said Young was entitled to priority of payment out of the proceeds thereof to the extent of his said claim for $3,500, and interest thereon. It was further adjudged that the First National Bank, as the holder of 210 of said railroad bonds, was not entitled to the full amount of same, and interest, but only to its debt, for which said bonds were originally pledged as collateral, as hereinafter explained. The complainant has appealed from so much of said decree as awards Young this priority of payment, and denies the right of said national bank to recover the principal and interest of the 210 bonds it holds. In both of these respects it is claimed that the decree below was erroneous.
The claim of said Young, which was given preference of satisfaction out of the proceeds of the mortgaged property, grew out-of the following transactions and proceedings: The Paw Paw Railroad Company, a Michigan corporation, organized under the general laws of said state, extended from the village of Lawton to Paw Paw, — a distance of four miles. Its capital stock consisted of 750 shares of $100 each. The Toledo & South Haven Railroad Company, another Michigan corporation, extended from Lawton to South Haven, as completed, — a distance of 36 miles. In 1878 the Paw Paw Railroad Company leased its roadbed, etc., to the Toledo & South Haven Railroad Company at a rental of 8 per cent, on $30,000, or 40 per cent, of the par value of the stock in the lessor company. While this lease was’ in force the two companies, with a view to their consolidation, entered into a written contract with the appellee Young,
“I can discover no fraud, or any attempt to defraud the complainant, on the part of the company [the Toledo & South Haven Railroad Company] answering the bill; but all the circumstances, 1 think, quite clearly show a want of good faith in the demands made by the complainant upon the Toledo & South Haven Railroad Company.”
It was further held by the court that, inasmuch as he had never, in a legal way, consented to the mode of payment provided by the terms of sale and purchase, “equity and justice require that he should transfer to said company his 75 shares upon receiving or being tendered the value of the same at the time the company made its purchase,” which value was ascertained and fixed at $3,500, and allowed him, or, in lieu thereof, gave Mm the liberty of electing to surrender Ms shares, and take an equal number or amount of stock in the Toledo & South Haven Railroad Company. Before the decree of the supreme court was settled and entered in accordance with this opinion, Young, through Ms attorneys, applied to said court to have a lien declared and adjudged in Ms favor upon the railroad and other property of the defendant company for said sum of §3,500. In Ms affidavit filed in support .of said application, he rotors to the fact that the said company had in its answer offered to pay Mm wha t Ms stock was worth, which the court had fixed at §3,500; that the company had, since the commencement of the suit, assigned and disposed of all or the greater part of said §216,000 worth of bonds, as he was informed and believed; that such transfer was invalid, etc., and that, if the same was “allowed to stand, and have precedence over defendant’s claim, in this cause, that Ms said claim will be valueless.” etc. The supreme court did not, however, by its decree, allow Mm the lien applied for. In said decree it is recited that, “said Young having elected not to take and accept stock in the corporation of the said Toledo & 'South Haven Railroad Company, it is further ordered and 'adjudged that upon being ten-tiered by said corporation the sum of §3,500, within 30 days from the entry of the decree, said Charles Id Young’ shall assign Ms said stock to the Toledo & Couth Haven Railroad Company.” The tender of the §3,500 was not made by the railroad company, and thereafter Young gave said company written notice that upon a designated day he would present Ids motion to said supreme court,
“It is hereby ordered, adjudged, and decreed, as supplemental to said former decree, that the defendant do pay to said complainant the sum of $3,500 within 30 days after complainant shall have tendered to said defendant a written assignment of said 75 shares of stock, duly executed, so as to pass the title to said stock to said defendant; and in default of such payment for 30 days after said tender of said stock duly assigned, as aforesaid, the complainant, upon filing due proof of such tender with the clerk of this court, has leave to issue execution against defendant for the collection of said sum of $3,500, provided said assignment of stock shall be tendered to said defendant within 30 days from the date of this decretal order.”
Within the time allowed, the said Young made the required tender of the stock to the railroad company, and demanded payment of the $3,500, which the said company failed to pay within the time allowed; and thereafter said Young, having made proof before the clerk of said court of said facts, applied for, and caused to be issued to the sheriff of Van Burén county, an execution in his favor against the goods, - chattels, real estate, and property of the Toledo & South Haven Railroad Company, to enforce the collection of said sum of $3,500, wMch execution was by said sheriff levied upon the property of said company on June 16, 1890, after the presfent bill had been filed,, and after a receiver had been appointed. Being unable to proceed with his execution, Young thereupon intervened in the foreclosure proceeding as a defendant, and in his answer sets up substantially the same claims which he asserted in his suit in the state court, and seeks to invalidate the sale of the Paw Paw Railroad to the Toledo & South Haven Railroad Company, and the mortgage made by the,latter, upon substantially the same grounds relied on in the state suit. By Ms answer he practically attempts to relitigate with the complainant all the questions involved and settled by the decision of the Michigan supreme court.
The court below, while properly conceding that complainant was entitled to the benefit of the state decision, and that Young was thereby concluded from attacking the sale by the Paw Paw Company to the Toledo & South Haven Company, and the mortgage made by the latter to the complainant, which was declared valid, reached the conclusion that the effect of the decree of the s'tate supreme court was that Young remained a stockholder in the Paw Paw Railroad Company, with all his rights as such, until the value of his 75 shares, as fixed, was actually paid; that the payment of such valuation, and Ms transfer and surrender of his stock to the Toledo & South Haven Railroad Company were to be concurren* acts, and that, inasmuch as such payment had not been made, the court could not rightfully sell the property covered by the mortgage sought to be foreclosed “without providing that the amount due to the defendant Young for the share he contributed to its value shall
We do not think that this is the proper construction to be placed upon the supplemental decree, when read and considered in the light of the court’s opinion. The defendant railroad had in its answer offered to pay Young the value of Ms 75 shares. But for this offer he had no right to a personal judgment against that company. The opinion declared that the value of his stock was all that he was equitably entitled to, as against said defendant, and fixed said value at $3,500. By the original decree, Young, having made his election not to take an equal amount of stock in defendant’s corporation, was required, upon being tendered said sum within 30 days by the company, to assign and transfer the stock. Under this decree the defendant was to be the actor in performing the condition or prerequisite of acquiring the right to the stock. It, however, failed to make tender of the amount, and Young, having himself tendered a transfer of the stock, and demanded payment of its ascertained value from the agents of the railroad company, then moved the court for execution against it for said sum of $3,500. No such execution could have been awarded, under the terms of the decree as it then stood. In order to grant his application for execution, it was necessary to render a new decree; and the court thereupon “ordered, adjudged, and decreed, as supplemental to said former decree, that the defendant do pay to said complainant the sum of $3,500 within 30 days after said complainant shall have tendered to said defendant a written assignment of said 75 shares of stock,” and further provided that, in default of such payment for 30 days after such tender, the complainant, upon filing proof thereof with the clerk of the court, “has leave to issue execution against defendant for the collection of said sum of $3,500. Young made the required tender of the stock. The defendant did not pay the amount within 30 days thereafter. Young filed proof of those facts with the clerk of the court, and applied for and obtained an execution against the
It is not claimed by Young, in bis answer herein, that be did not make said election with a full knowledge of all tbe facts now possessed and relied upon by him. We are of tbe opinion that said state suit, and decree of tbe supreme court therein, wbicb Young made a part of bis answer, and introduced in evidence, operated to convert him from a stockholder .'in tbe Paw Paw Company to a judgment creditor of tbe Toledo & South Haven Eailroad Company, with rights and lien subordinate to those of tbe trustees and beneficiaries under tbe mortgage made and executed October 27, 1886, by tbe Toledo & South Haven Eailroad Company. But suppose it be conceded that tbe legal effect of tbe state suit, and the decree of tbe Michigan supreme court therein, did not establish tbe validity of tbe sale by tbe Paw Paw Eailroad Company to tbe Toledo & South Haven Eailroad Company, and that, notwithstanding said proceedings and decrees, Young continued to be tbe beneficial owner of tbe 75 shares of stock in the. Paw Paw Company. Upon wbat principle can it be maintained that his rights or interests as sucb. stockholder entitle bim to priority of payment even out of tbe proceeds of that corporation’s property for the fixed value of bis stock.
It was also found by the supreme court of Michigan — -and the-re is nothing in the present case, in the shape of newly-discovered evidence or otherwise, to' change our opinion as to the correctness of that finding — -that there was no fraud, or any attempt to defraud Young, on the part of the purchasing company. Now the question is whether a minority and nonassenting stockholder in a railroad company, which has lawfully sold and conveyed its road and franchises to another railroad company, is entitled to have the value of his stock paid out of the property so conveyed, as against the mortgagee of the purchasing company. In other words, when corporate property and franchises have been transferred and conveyed to another corporation, under charter power or legislative authority in existence when the corporation is organized, and the purchasing corporation has mortgaged the property thus acquired to secure its negotiable bonds, which pass into the hands of bona fide holders, can a single or minority stockholder in the vendor corporation, who did not assent to such sale, assert a right to or interest in the corporate property so conveyed5 paramount and superior to that of such mortgage, and the bonds thereby secured? Could Young, in the present case, have restrained, before its consummation, the sale and conveyance which more than two thirds of Ms costockholders had sanctioned and assented to? Clearly not. It is settled” that equity will enjoin a corporation and its officers, at the suit of a single stockholder, from entering into contracts or engaging in transactions which are in violation of law or the charter power of the company, or which, involves a breach of trust inj uriously affecting the rights of the complaining stockholder. “When the majority of the shareholders are oppressively and illegally pursuing a course, in the name of the corporation, which is in violation of the rights of other shareholders, and which can only be restrained by the aid of a court of equity,” an injunction will be issued at the instance of a single stockholder. Hawes v. Oakland, 104 U. S. 460. Generally speaking, single or minority stockholders may restrain their associates or the corporation from the doing of ultra vires acts. It is
It is a sound principle, and established by the authorities, that the requisite or prescribed majority in interest in common property of indivisible nature, consecrated to public use, may, within the limits of legislative power previously conferred, so use or dispose of that property as to advance the private interests of such majority,
The argument in behalf of Young’s claim to priority of payment for the value of his stock involves the assertion or proposition that the gale, although valid as to the corporation, was invalid and void in respect 1o the proportionate interest in the corporate property represented by his 75 aliares, because he never assented to the transaction. This contention is fallacious and untenable. Such a sale cannot be treated as legal and valid so far as the corporation and the interests it represents is concerned, and at the same time void as to a nouassenting stockholder. If valid as to the corporation, it must be equally valid as to Young, who has become a member of the Paw Paw Railroad Company under the implied agreement and understanding that the corporation, with the assent of two thirds of its shareholders, could make a valid sale and transfer of its property and franchises. There Is nothing in. the objection urged on behalf of the appellee, Young, that the trustee and holders of the bonds secured by the mortgage had actual or constructive notice, from the fa.ee of the conveyance to the mortgagor, and from the recital of the Instruments, that 75 shares in the Pa.w Paw Company were not represented at the stockholders’ meeting which authorized the sale. The recitals of the deed and mortgage showed Hi at more than two thirds of the stockholders of the vendor company were present and assenting. Tins, with the provision of the law (hat such majority could confer the requisite authority for the sale, was all thgt the trastees and holders of the bonds were required to notice. Nor was there anj thing in the recital to• show who the holder of said 75 shares was, or that he ivas, or would be, an objector to the sale.
By the law of Michigan, shares of stock in incorporated companies are personal property. Young, so far as it appears, had never notified the Paw Paw Company, or the stockholders and directors thereof, that he had the original Longwell certificate No. 114, for 75 shares, nor had he demanded any registration of the transfer thereof to himself on the books of the company, although the certificate, upon its face, recited that the stock was “transferable only on the books of said company, by the holders thereof, in person or by attorney, on sur
But Young’s absence from the stockholders’ meeting places him in no better or more favorable position than if he had been present, and voted against the resolution to sell; for his minority objection could not have obstructed or defeated the right of the other stockholders, owning two thirds and over of the capital stock, from giving a lawful assent to the sale, which, when executed in pursuance thereof, operated to transfer the property and franchises of the vendor company to the purchasing company as fully and as completely as if Young had himself expressly consented thereto. The sale, being sanctioned by the requisite majority of stockholders, and made by the corporation, as provided and authorized by the general law of the state under which the company was organized, invested the purchasing company with as perfect a title to the property and franchises as was vested in or. held by the vendor corporation, and operated to make the purchasing corporation the legal successor of the vendor corporation. It would be paradoxical to hold that such a sale was valid as to the corporation, and invalid as to one of its stockholders who objected thereto, and whose assent was not necessary to give validity -to the transaction. It would be equally inconsistent to hold that such a sale, made under and in pursuance of statutory authority in force at the organization of the coiporation and at the date of the transaction, should be treated as only binding upon the corporation and the stockholders assenting thereto, and invalid as to a dissenting shareholder whose consent was not a prerequisite to its validity. Counsel for the ap-pellee Young have treated this case as if the question before the court was whether said appellee could be made to accept stock in the purchasing company for his shares in the Paw Paw Company, or be required to surrender his stock in the latter until he was paid for the same. That is not the question involved in this suit, nor was it the
We are not called upon, in this ease, to determine whether Young, if not bound to accept his proportion of the consideration received by the Paw Paw Company for the transfer of its property and franchises, could have x>roeeeded against said corporation and his associate shareholders to recover the value of his stock. "Without deciding the point* we are inclined to the opinion that a minority stockholder in cases like the present, where the corporate sale is valid and honest, must look to his own company anil coshareholders for such relief as he may be entitled to.
We do not mean to «niinrion the proposition that a court of equity will, at the suit of a restrain the majority from appropriating to themselves the ¡u nits of the corporation, or from obtaining advantages not shared m by the minority. Mason v. Mining Co., 133 U. S. 50, 10 Sup. Ct. Rep. 224, furnishes an illustration of this principle. There the majority of stockholders, upon the dissolution of the corporation, or the expiration of its charter, attempted to appropriate its property and assets at a greatly inadequate valuation. The minority successfully resisted such atiempt. The principle of that decision is not involved in the present case, where (lie interests and
There is nothing in the point urged by counsel for appellee Young, that parties taking the bonds of the Toledo & South Haven Railroad Company, secured by the mortgage of October 27, 1886, after the commencement of his suit in the state court, and after an injunction restraining the mortgagor from negotiating said bonds, cannot be considered as bona fide holders thereof. These bonds were negotiated in the state of New York, and were taken by parties who had neither actual nor constructive notice of Young’s suit. Aside from this, it is settled that a bona fide holder of negotiable corporate bonds is not subject to the general doctrine of lis pendens. This exception holds even though the paper was purchased during the pendency of a suit in which its issue was finally declared invalid, the purchaser not being affected with notice thereof. Lexington v. Butler, 14 Wall. 283; Warren Co. v. Marcy, 97 U. S. 96; Douglass v. Pike Co., 101 U. S. 687; 2 Beach, Priv. Corp. § 666c.
On the second question presented by the appeal, it appears from the record that Frederick F. Woodward, of New York, is the bona fide holder and owner of six of said series of bonds, numbered from 1 to 6, inclusive, which were duly negotiated and sold before maturity, for value received, by or for the mortgagor railroad company. The remaining 210 bonds of said issue were originally, in 1887, pledged by the said Toledo & South Haven Railroad Company to the First National Bank of New York city as collateral security for a large loan made by said bank to the railroad company at the date of the hypothecation. By the terms of the pledge the bank was authorized to sell said collateral, without notice, at public or private sale, in case of nonpayment of the loan at maturity; and it was furthermore "understood and agreed [between the parties] that,, upon any sale of any or all of the within collateral, the First National Bank of New York may become the purchaser thereof, and hold the same thereafter in its own right, absolutely, free from any claim of ours.” This was one of the terms of the note and pledge executed by the Toledo Sc South Haven Railroad Company. Said railroad company made default in paying the loan after the same had been increased and renewed, and, being for a long while thereafter in default, the bank, under date of June 24, 1889, gave the company due and formal written notice that unless its note evidencing the loan and its indebtedness was paid on or before December 80, 1889, it would sell said 210 first mortgage bonds held as collateral at public auction on January 3, 1890, at 12 o’clock noon at a designated place in the city of New York, as authorized by the terms of the railroad company’s note and pledge, and apply the proceeds towards the payment of said company’s indebtedness.
The railroad company failed to make such payment, and on the day designated, and at the place and time indicated, in said notice,
Concurrence Opinion
(concurring.) I concur in the result readied in the foregoing opinion, but I cannot concur in the grounds stated iherefor. In the court below, Young, as an intervener, sought to have declared in his favor a lien in the nature of a vendor’s lien on the property of the Paw Paw Railroad Company, which had passed by sale to the Toledo & South Haven Railroad Company, and a consequent priority in the distribution of the funds arising from the foreclosure sale in this case. In the supreme court of Michigan, Young had prayed the same relief against the same companies that are parties to this record on the same grounds; and the supreme court de-uied his prayer, and gave him only a judgment and execution against the Toledo & South Haven Railroad Company for the value of Ms stock, without any lien. The decree and judgment of the Michigan supreme court are res adjudícala, therefore, between Young and the railroad company, on the question of his right to a lien on its property. The complainant below, the Farmers’ Loan & Trust Company, is privy in right to the railroad company in respect of the property on which it holds the mortgage; so that, whether it was really a party to the proceeding in the state court or not, it may avail itself of the adjudication as an estoppel against Young. If Young was not entitled to a lien hr the state court, he ⅛ clearly not entitled to priority in distribution in the case at bar. This, it seems to me, satisfactorily disposes of Young’s contention at the bar, and requires us to reverse the decree of the court, in so far as it orders the payment of Young’s judgment before that of the mortgage bonds.
It would seem, also, that Young had no right to intervene in this foreclosure proceeding against the objection of the complainant, because Ms claim grew out of a transaction which was anterior to the passing of the title to the defendant company being foreclosed, and which was claimed to give him a lien superior to that title.
The opinion of the senior circuit judge, however, denies Young’s right on grounds wholly independent of former adjudication, and on propositions of general equity jurisprudence in which I find myself unable to concur.
Under the statute of Michigan permitting the sale of an uncompleted railroad by its stockholders to another road, the words of which are quoted in (he foregoing opinion, there is no power in two thirds in interest of the stockholders to bind one third to a sale for any consideration but money or money credit. We have already held in this court, in the case of Perin v. Megibben, 53 Fed. Rep. 86, that a statutory power to sell does not include a power to exchange for shares of stock in a corporation. Nor do I understand the supreme court of Michigan to hold, in the case of Young v. Railroad Co., 76 Mich. 485, 43 N. W. Rep. 632, that it is within the power of two thirds of the stockholders, under this statute, to bind a minority to a sale for am thing but money, for Chief Justice Sherwood says in the opinion, (page 487, 76 Mich., and page 636, 43 N. W. Rep.:)
“The plaintiff appears in a court of equity to seek anti enforce what he conceives to be his equitable rights, and in so doing he must submit to what is right and just; and, in my judgment, his counsel at the circuit, in submitting the ease to the learned circuit judge, was not far out of the way when he*776 stated to the court the claim of his client should he satisfied with the payment «f such amount as the stock he held was worth; and while he cannot be held to the mode of payment provided by the terms of purchase by the Toledo & South Haven Railroad Company, because of his consent never having been obtained thereto in any legal way, equity and justice required that he should transfer to said company his seventy-five shares of stock upon receiving or being tendered the value of the same, at the time the company made its purchase, in money.” >
This holding of the court was obviously based on the fact that Young was equitably bound, by the contract of his vendors, known to him when he bought, to transfer the stock to the Toledo & South Haven Kailroad Company, and was therefore deprived of the right which he otherwise would have had, as a minority stockhólder, to prevent the consummation of a sale which did not contemplate money, or a money credit, as its consideration. There is no doubt whatever of the proposition argued in the foregoing opinion, — that a minority stockholder is bound by the acts of the majority so long as that majority acts within its charter powers, — nor is there any doubt that neither the majority nor the entire body of stockholders of the corporation can do a corporate act which its charter forbids; but there are corporate acts which are not within the'charter power of the majority of the stockholders, and yet which are not beyond the power of the corporation. They are acts of the corporation, which the state, as the grantor of the corporate franchise, has no interest to invalidate, provided all the stockholders consent thereto. They are acts which, if done by a majority only, infringe upon the charter rights of the minority. In this case the power to sell for money was conferred by statute upon two thirds of the stockholders of the uncompleted road. The sale could not be for stock in another company, against the objection of the minority stockholders. No such power was vested by the statute in the two-thirds majority. If, however, the minority consented, the state, the grantor of the corporate franchise, had no interest in objecting to the transaction as beyond the corporate power of the company. Every Paw Paw stockholder consented to the sale for stock in the Toledo & South Haven Hail-road Company except Young, who owned 75 shares. He or his vendors had agreed to sell his stock to the purchasing company for money, in order that the sale of the Paw Paw Company might go through. In equity, therefore, he could not object to the sale, provided that he was paid the money value of his stock. It would seem reasonable, and in accord with equitable principles, that the validity of the sale of the Paw Paw road should be conditioned on Young’s receiving the money value for his stock, and that, on failure of the Toledo & South Haven Pailroad Company to pay the pure]Lasing price, he should have a lien on the property conveyed, in which his stock represented an interest. The supreme court of Michigan, however, was of the opinion that equity did not require that a lien should be reserved to pay the purchase price. As res adjudicata, and perhaps as a decision of a state supreme court upon a question of state law, we are obliged to follow the decision of that court in the case at bar. But as a question of general equity jurisprudence, which is the aspect in which the questions are discussed in the opinion of the
1 see no objection to reserving a lien on the corporate properly for the purchase price of shares of stock, where those shares represent a right to object to the sale of the property for anything but money. It is quite true that the shares do not generally represent a tenancy in common in the property itself, but only a voice in the control of the property, a share in the profit» to be derived from the use of the property, and a share in the assets of the company on dissolution, after the payment of debts. But the sale here was of the property of the Paw Paw Corporation, the consideration to be divided among the stockholders on the very theory that a share of stock represented an aliquot interest in the property sold. The circumstances seem to me to clearly justify a court of equity in reserving something akin to a vendor’s lien in the property sold, to secure the right of a dissenting stockholder to get Ms part of the consideration in money.
The mortgagee had full and actual notice, from the recitals in the title deeds of its mortgagor, that the consideration for the sale of the Paw Paw road was not money, but stock, and that the owner of the 75 shares of the Paw Paw Company had not consented to the sale. If the construction given above of the Michigan statute is correct, then the mortgagee wars charged with notice that the sale was illegal, against the owner of the 75 shares, and was therefore put on inquiry and notice as to his right to a lien for the value of Ms stock.
Nor do I concur in the reasoning of the court, that the issuing of an execution upon a judgment for the money value of the thing sold is a waiver of the vendor’s lien in the thing sold. There Is nothing inconsistent, under such circumstances, in an execution and the enforcement of a lien. The cases cited in the majority opinion have, it seems to me, but little application. They are cases where a man1 is compelled to elect whether he will sue for the price of an article sold, or set aside the sale as fraudulent, and recover the thing in specie. Tiny none of them present a case in equity where the circumstances give to the vendors ¡he right to recover the price of the tiling sold, with a lien for Iliad price on the tiling sold. In such a case the recovery of the money, and the enforcement of the lien, are not inconsistent remedies, and the pursuit of the one is no waiver of the other.
I concur in both the reasoning and conclusions of the court with respect to the rights of the First National Bank of New York city in the bonds held by it, and have nothing to add thereto'.
Concurrence Opinion
I concur in the result reached by the other judges of the court but not altogefher in the reasoning of either of the opinions which they have given. 4 part from the statute of Michigan authorizing railroad companies, under certain conditions, to do that wMch was done in ¡bis case, and apart from the effect of the adjudications of the state courts of Michigan upon the rights of the parties to this controversy, I should have no doubt of Young’s right to
I do not think that any corporation can go out of business, and sell its properties and franchises in entirety, (outside of sales made in tbe ordinary course of business,) and bind a minority of tbe stockholders, by tbe will of tbe majority, to such a sale, upon any principle of the public welfare or like consideration; certainly, not to compel tbe minority, on such a sale, to take chips and whetstones for their shares of stock, — that is to say, anything else than money. Moreover, I doubt seriously tbe power of the state, by legislation to compel the minority to so surrender their property. I do not deny that tbe majority of tbe stockholders, in order to preserve for themselves and tbe minority tbe advantage of a sale en bloc, rather than a resort to a winding up and accounting among each other for their respective shares of tbe corporate property, and to prevent tbe destruction of tbe corporate franchises by a winding-up, might, under some conditions have, in a court of equity, tbe right to compel tbe dissentients to an ascertainment of tbe value of their shares in some other way than by a sale for distribution, • and that ordinarily the market value of tbe shares might be resorted to as a measure of that value, and that upon such ascertainment tbe court might compel tbe dissentients to surrender their shares upon the payment, in legal-tender money, of this value; and, what the court could compel, the stockholders, without compulsion, could do by agreement inter sese. But this power could not be enlarged into any compulsion of assent to a scheme of alienation of the corporate property which left the minority nothing but stocks in new enterprises, or other modes of compensation, for their shares in the corporate property. Ordinarily, in the absence of special powers conferred in the charter or otherwise, by law, the stockholders have, not as tenants in common or joint tenants, perhaps, but as corporate owners or as corporate tenants, if you please, the right to a distribution of the corporate property whenever the company ceases to operate its franchises, and goes out of business, for any cause, whether that of a sale to others,
Hut, unfortunately for Young, he did not, and cannot, occupy this favorable attitude as to his stock. I agree with Mr. Circuit Judge JACKSON, that the statute of Michigan in force at the time Young or his vendor subscribed for the stock became as much a part of the charter of his company as if that statute had been written in it, and by that statute the company was authorized to do that which it did in effecting a sale of the property. He held his stock subject to this statutory power of the stockholders to dispose of the property in the way they attempted to do; and whatever disadvantage there may have been, or injustice, to the minority dissentient, arises out of the statute, and is an infirmity inhering in such property, to which shareholders must submit. It is the kind of companv he joined by his subscription. It is not necessary 1» examine closely the questions made as to the alleged irregularities in this sale. My brother judges agree, for reasons they give, that Young’s intervening petition cannot
The state courts of MicMgan reached substantially and practically the same result, by denying to him any lien, and confining him to a personal judgment against the Toledo & South Haven Railroad Company, either upon the theory of an undertaking by that company in the original purchase to pay Mm the money value of Ms stock, or upon their offer in their answer to do that thing, as Mr. Circuit Judge JACKSON thinks. Perhaps, the supreme court of MicMgan did not intend to establish that the statutory power of the majority stockholders might be exercised so as to compel the dissentients to share in whatever other fund than money was the price of the property, and were of the opinion that even under the statute- a dissentient could claim a money value for his share, as Mr. Circuit Judge TAFT thinks; but, after all, it comes to this: a money value was provided for Young, and he has a judgment for it. But the trouble is that neither in the negotiations for the sale, nor in the contract of sale, was any security provided by the trustees of the power of sale for that money value; and, without such provision by them, he can acquire none, upon any principle or theory that occurs to me, or has been suggested by any one. Outside the ^statutory power, none would exist. in my opinion, to thus cut him out of his equity of distribution. Inside the statute, he has been lost, as many another has been lost, by the desertion of the trustees of the power of sale from their trust in its relation to a dissentient stockholder, and, if he has any remedy, it is against them, personally, for their mismanagement of the trust, and not against the holder of the legal title for a, valuable consideration, paid or agreed to be paid, to the trustees upon an effectual, though it may be irregular, exercise of their power.
