170 N.W. 571 | S.D. | 1919
A statement of the pleadings and facts is necessary to a proper understanding of the questions presented on this appeal. On March 7, 1912, certain persons, pursuant to the laws of this state, organized a corporation under name of Public Drug Company, with a capital stock of $250,000, divided into 2,500 shares of the par value of $100, 1,250 shares of which were preferred, and 1,250 shares common, stock. ■ The preferred stock was entitled to receive annual dividends at the rate of 7 per cent, per annum, such dividend's to be eummulative, any deficiency in
In liquidation of the preferred stock at its par value, with interest at 7 per cent, per annum from the date of the last dividend and’in payment of cumulative unpaid dividends, the remaining surplus to be distributed pro rata among- the holders of the common and preferred stock, in proportion to the par value of the shares held by each stockholder. Upon perfecting its organization the Public Drug Company took over the assets and business of certain stores located and transacting business in the city of Minneapolis, anid> took possession of and operated all of said stores. The owners of said stores were incorporators of the Public Drug Company, each turning in to the corporation his stock of merchandise at a value fixed by themselves as a board of directors, and receiving in lieu thereof preferred and common stock in the corporation at par value. In acquiring these properties the corporation issued to the various owners thereof preferred stock to the amount of about $60,000 and common stock to the amount of about $70,000.' Plaintiffs allege that thereafter reiving upon certain alleged false and fraudulent statements claimed to have been made by directors of the corporation, he was induced to purchase 25 shares of preferred stock of said corporation for which he pal'd $2,500 cash and received certificates therefor; that further relying upon said false representations, plaintiff sold and delivered to said corporation certain formulae of the reasonable and agreed value of $2,500, for which said corporation issued and
Plaintiffs in their complaint demand that defendants be required to make disclosure of and account for all funds and assets of said corporations, and that a receiver be appointed with full powers; that said assets be sold for the payment of outstanding ddbts and1 the surplus distributed to stockholders as their interests may appear. Plaintiffs also pray general equitable relief an 1 an injunction. At the opening of the trial defendants moved that plaintiffs be required to elect between the equitable and legal remedies applicable to the allegations of the complaint. Plaintiffs in open court then announced that the action was in equity for an accounting, and not at law for damages. The trial court thereupon stated that:
“The action appears to be in equity for an accounting. The motion to compel an election is denied.”
Appellant did not demand a jury trial. The action proceeded without further objection, and at its conclusion, the tidal court made findings of fact in substance sustaining the allegations of the complaint, and, among other things, that the stock owned by plaintiffs in the original corporation, by reason of the wrongful conversion of' the assets of said corporation, was rendered wholly valueless; that at the time of said conversion such stock was of
The trial court also found that upon the organization of the new corporation all the hod'ers of stock, both common and preferred, of the old corporation, except the plaintiffs, surrendered their stock certificates for cancellation, but that plaintiffs refused to acquiesce in said transaction or to surrender their stock. The trial court also found and1 adjudged that by reason of the acts aforesaid, plaintiffs were in danger of irreparable injury and loss, and were without adequate remedy at law.
In the case of Lauman v. Lebanon Valley R. R. Co., 30 Pa. 42, 72 Am. Dec. 685, that court says:
“A corporation may dispose of all its property to another corporation and take in exchange therefor stock of the latter company; but'it cannot compel one of its dissenting stockholders to take such stock in payment of his shares.”
The reasons for this rule are clearly and convincingly stated in the opinion.
In the case last cited, where the assets of the defendant company were transferred to another corporation pursuant to a statute authorizing a consolidation, the court held that:
“The contract of consolidation is an act of dissolution in form and substance of the Lebanon company, and the corporation cannot, in the act of dissolution, dispose of the rights of its members. The act of dissolution, like the act of association, is not a corporate act, but an act of the members of the corporation. They may commit to their officers the business of effecting it in all its details, but they are not required to do so by the terms of their association; and, in effecting such a purpose, the officers would foe rather trustees of the members than corporate functionaries. Then it follows, quite obviously, that no corporate act can settle the terms of dissolution, or distribute effects among the members, and that this company cannot decide what the plaintiff shall take for his interest. The act of dissolution works a change
Injunction was awarded, subject to be dissolved upon the defendant giving security, in double the market value of the stock, to pay for said stock when its value shall be ascertained. We see no 'difference in principle between the equitable relief granted to the plaintiff in that case and the relief awarded by the trial court in this case.
We are clearly of the view.that the voluntary surrender and cancellation’ of all the preferred stock ,by 'holders thereof operated as a release of any prior claim upon the assets of the corporation. In confirmation of this view it may be noted that all the other stockholders of the first corporation, by resolution adopted over the protest of plaintiff agreed to and did accept common stock of the new corporation in lieu of their former holdings. This action clearly indicates an intent to surrender the alleged priority of right of all the holders of preferred stock, and as against the plaintiff, they are not now in a position, upon an accounting, to reclaim the right thus relinquished.
We have examined with much care the aible and exhaustive arguments, and the citations of authorities, in the' briefs of counsel, but deem it unnecessary to notice them further, as we are of the view that the matters already discussed are decisive upon †1 is appeal.
The order and judgment of the trial court are affirmed.