Hodge v. Meyer

252 F. 479 | 2d Cir. | 1918

MANTON, Circuit Judge

(after stating the facts as above). The judge below dismissed the complaint on the ground that the acts complained, of, if wrongful, were wrongful as against the amalgamated company, and not the plaintiffs as stockholders. Undoubtedly, the intention of Hodge and Meyer, as obtained from the October agreement, was to provide for the amalgamation of the two railroad companies, thus making a continuous line, with profit to the railroads by reason of such consolidation. The. object of the January agreement was the amalgamation of the two companies, after having obtained the approval of the stockholders, with the same purposes in mind, although the conditions were somewhat changed, in that the South Shore Railway Company conveyed its property to the Quebec Southern Railway Company, whose capital stock, it was provided, would be increased to $4,000,000, and the idea of obtaining a new charter was abandoned.

Plaintiffs’ suit is predicated upon an injury done to property interests jointly held, and those interests are ownership in stock and therefore whatever injury was done by reason of the alleged tortious acts was suffered by the plaintiffs by virtue of their positions as shareholders. Hodge signed the October agreement “for himself and stockholders of the Quebec Southern Railway Company,” and Meyer signed “for himself and, stockholders of the South Shore Railway Company.”

The October agreement provided that the obligations imposed upon the shareholders of the respective companies “are binding upon the present shareholders of each company, and do not extend to future holders of stock transferred as herein provided. The stock and bonds of the new company as herein allotted are to be issued, respectively, to the present shareholders of the Quebec Southern Railway Company and the S'outh Shore Railway Company, and are not to be construed as belonging to shareholders of either company who acquire their holdings subsequent to the execution of this agreement as herein provided.” It further provides that the first mortgage bonds and income bonds must be held in the treasury and used from time to time as may be necessary for the purposes of the new company. .This agreement provided only for the possibility of the building of an extension, whereas the January agreement provided for an extension.

The alleged tortious acts have to do- entirely, so far as any alleged material loss is concerned, with the prevention of additions and extensions to the amalgamated company. The January agreement recited that the stockholders of both companies “have taken communication and have declared themselves to be satisfied with a certain private agreement entered into on the 16th of October, 1901, between certain of the stockholders of the above parties with respect to the assumption of obligations before them and the remuneration to be paid therefor, so as to assist in bringing about the amalgamation proceedings herein finally consummated,” and it further recites that the “same are satisfactory in all respects to them and have become parties to these presents and confirmation thereof.”

These recitals indicate satisfaction of the stockholders, including the plaintiffs in this action, one of whom signed as president of his company. Therefore the idea of amalgamation and substantially the terms of the October agreement, with changes voluntarily imposed, were taken over, written in, and made part of the January agreement. Whatever rights of contracts were thus acquired by the contracting parties under the January agreement accrued for the benefit of the respective corporations, and therefore their stockholders. The plaintiffs’ interest is derivative from the corporation. There was no particle left in regard to which the October agreement was not fully performed, or performance permanently waived and abandoned by consent of all concerned. What is intended in the January agreement, when the parties stated that the October agreement was to be further performed, could only give effect to those provisions which were not abandoned when tire January contract was made.

Examining the alleged wrongful acts committed by the defendants, it is charged that by reason of the actions of the defendants, because of. false representations as to the authorization of the bonds by the company, the National Trust Company refused its certification and to act as trustee, and this act, so charged, consists of a telegram of June 24, 1902, to the National Trust Company. But there is nothing to show any interest of Hodge or White, personally in any bonds which were refused certification, nor is there any allegation that the letter which” was subsequently sent to the Trust Company, and a similar letter sent to the Canadian government, requesting it not to sanction the amalgamation of the companies, had any effect. Indeed, it appears in paragraph XI that the Canadian government did sanction the amalgamation.

As to the charge 'that a letter was written to Dunn & Co. with similar false representations, it does not appear anywhere in the October agreement that either party bound themselves to build any extension of the consolidated property, and this contract was made solely by reason of the covenant contained in the January agreement to build such an extension. Nowhere in the complaint is there any allegation tending to show that the so-called maliciously instituted suits were not brought within the absolute legal rights of the plaintiffs therein, nor does it anywhere appear that this legal right to suit was used as a means of inju'ring the plaintiffs.

[1 ! The plaintiffs here, although incidentally injured by the plaintiffs in the Canadian suits, have no cause of action therefor. While the complaint is full of allegations and legal conclusions as to a conspiracy, the specific acts are above referred to, and, if such acts were of a tortious character, they breached only the January agreement.

[2] This action seeks to recover damages to the plaintiffs personally. They sue in individual capacity, and not on behalf of other shareholders, or such as may come in. All the benefits accruing to cither or both of the plaintiffs must accrue through the amalgamated corporation. It is well settled that damages are recoverable, when sustained by reason of the wrongful interference of third parties resulting in a breach of contract, but this right accrues only to him who is shown to be damaged thereby. Angle v. Chicago, etc., Ry., 151 U. S. 1, 14 Sup. Ct. 240, 38 L. Ed. 55; Miles Med. Co. v. Park, 220 U. S. 373, 31 Sup. Ct. 376, 55 L. Ed. 502; Lewis v. Bloede, 202 Fed. 7, 120 C. C. A. 335.

[3] In contemplation of larv, the direct and proximate consequences of a wrong done to the securities held by a bondholder or stockholder should be redified by an appropriate suit on the part of the corporation. The bondholder’s and shareholder’s remedy is in and ihrongh the corporation. Niles v. N. Y. C., etc., R. Co., 176 N. Y. 19, 68 N. E. 142; De Neufville v. N. Y. & N. Ry. Co., 81 Fed. 10, 26 C. C. A. 306.

[4] We concluded that, if there were any injury, it is to the corporation, and gives no individual right of action, although the injury io the corporation may incidentally result in the depression of the value of the stock and bonds, The judgment below was a dismissal upon the merits, but the error of this is of little importance, for it appears that the statute of limitations has intervened against any further claim.

The judgment will be affirmed.

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