Louisville Gas Co. v. Kaufman, Straus & Co.

JUDGE HAZELRIGG

delivered the opinion of the court.

At about 5 o’clock on the evening of October 26, 1891, one of the boilers of the Louisville Electric Light Company exploded, and caused the destruction, by fire, of the wholesale and retail dry-goods and dress-making establishment of Kaufman, Straus & Co., situated across an alley in the vicinity of the electric plant. While there were other persons in the room adjoining the boiler room, there was only one person immediately at the boiler when the explosion occurred; and that person was the fireman Adams, who was killed by the explosion. Some months after the destruction of the establishment, Kaufman, Straus & Co., having been paid in the meantime the sum of $195,500 on account of some 60-odd policies of insurance held by them, but which they averred did not fully cover the real value of the goods and other losses, brought this action, in Law and Equity Division of the Jefferson circuit court (equity side), to recover in their own right, and in behalf of the insurance companies (some of whom were made co-plaintiffs and others defendants), the aggregate sum of $242,557.72, against the electric light company and the Louisville Gas Company; it being averred that the latter company was the real owner of the former company,. and was in fact operating the electric plant at the time of the explosion. The insurance companies which had been made defendants came in by answer, counterclaim,, end cross petition, and in effect joined in the suit with. the plaintiffs. On the issues joined, by a traverse of the averments of the pleadings, after elaborate preparation by the parties, the chancellor held that the explosion was the result of low water, permitted through the negligence on the part of the gas company, its agents and employes, which company was held to be the real owner and operator of the electric light company. He thereupon rendered judgment against the gas company, and against it alone, for the sum of $231,000, of which about the sum of $219,-000 was for the benefit of the insurance companies. The gas company appeals, insisting that, although it had bought all the stock of the electric light company, that company’s organization remained intact, and that corpora' tion was in fact still operating the electric plant under its separate board of directors and other officers; and, moreover, that upon the state of case shown by the proof, the plaintiffs are not entitled to recover, it not being established that the explosion was caused by negligence; and especially the plaintiffs ought not to recover because their own proof as to the .cause of the explosion is contradictory and destructive of itself. It also insists that Kaufman, Straus & Co. have already collected largely more than the actual value of their goods, because they returned that value, on oath, to the assessor, at $70,000 only, as of some thirty days before the explosion.

Waiving the question at present as to the ownership of the electric plant, and the responsibility for the explosion on this ground, we shall proceed to consider briefly the facts relied on to show negligence. Tn the boiler room there were seven boilers, No. 7, the one that exploded, being situated next to the alley on the other side of which the rear end of the storehouse of Kaufman, Straus & Co. was situated. This boiler was connected with its mate, No. 6, by a small pipe extending beneath, which was used as a blow pipe, and which also served to maintain the same water level in the two boilers. They were fed with water, however, by independent feed pumps. It is agreed that the boiler in controversy was outwardly, at least, in good condition and safe, although it had been in use since 1883. The witness Noble (the plaintiffs’ witness) proves that the boilers “were inspected about thirty days before that (the explosion), and pronounced first class;” that he considered the boiler that exploded first class; that the electric light company made it a rule to have its boilers inspected regularly, and the reports of the inspectors were to the effect that these two boilers, 6 and 7, were in first class condition. The proof is clear that, up to the time of the explosion, the conditions were such as usually surround the prudent and careful operation of steam boilers, unless indeed, the fireman Adams had neglected to keep up the water supply in No. 7; and the plaintiffs’ case rests on the affirmation that he had so failed.

We have not failed to read and give due weight to the proof in criticism of the size of the blow pipe, called also the “equalizing pipe,” and the occasional defects in the feed pumps. But the fact is shown by the plaintiffs’ own testimony that, on the day of the explosion, “the boilers equalized pretty well,” and the blow pipe was in good order at 3 o’clock, when the fireman, Adams’ predecessor, went off duty; nor was there any difficulty then in feeding the boilers. Noble also testifies: “If a man had come to me ten minutes before I went off watch (some 2% hours before the explosion), and asked me if I was afraid of the boiler, I would say that I would risk 130 pounds of steam on it. They were running 115 pounds when I went off duty. We were allowed to carry 118 pounds.” It is therefore a case of negligence from lowness of water, or no case at all. This is aptly stated by appellees’ counsel thus: “If appellees have not shown, as was found by the lower court, that loto-ness of water in the boiler was the active, efficient cause of the explosion, then they have shown none at all.” The time fixed by Adams’ predecessor when he went off duty is about as near to the explosion as the plaintiffs’ witnesses bring us. The testimony of two witnesses for the defendants discloses the fact that, three or four minutes before the explosion, the fireman Adams was at his post of duty, and everything was running smoothly, and that they heard Adams, while in front of the boilers 6 and 7, test his water, and the gauge showed the usual sign of water. But we are at the present considering the testimony of the plaintiffs, and are therefore brought this side of the explosion, to examine the testimony upon which is based the claim of low water.

The testimony of two witnesses, and two only, out of a large number introduced by plaintiffs who had the same advantages in examining the wreck as these two had, is to the effect that after the explosion there was a distinct water line across the boiler at the level of the lower one-third of the flue, convincing the witnesses that, at the time of the explosion, the part above the water line had been red hot, and the part below had been protected by the water. This is formidable proof, and seemingly conduces strongly to show the lack of water at the time of the explosion. But the force of it is greatly weakened, if not'destroyed, when we find that the other experts and practical boiler men introduced by the plaintiffs, and who made careful examination of these same flues, do not speak at all of this “distinct water line,” or of any sign of that character. And several of them testify to facts wholly inconsistent with the existence and presence of such a line. Thus C. G. Curry says the boiler had the appearance at the time of the explosion of being dry; that there was not a hatful of water in it. This is certainly inconsistent with the theory that the water level was at the lower third of the flue. It is true both McDonald and Curry attribute the explosion to low water. But McDonald only does so because of the “distinct water line;” and, in effect, Curry says there was no such line on the exploded boiler, though he says there was such line on the unexploded boiler. There certainly could have been no such line on the exploded boiler if he is to be believed, nor there could hardly have been such line without the other experts of the plaintiffs seeing it. If we discard, however, the testimony of these two witnesses, as not being supported by the other witnesses of the plaintiffs, and as being in effect contradicted by them, still some of these others express the opinion that low water caused the explosion. When examined carefully, however, the grounds of their belief will be found vague and unsatisfactory. Thus, Noble says: “Generally, lack of water causes an explosion, and pumping cold water into the hot boiler. .Nothing else that I hnow of caused it.” Manifestly, he attributes this explosion to low water because he knows of nothing else that caused it. This amounts to little more than a guess at the cause. Again, C. G. Curry says: “I should judge that the boiler had been improperly looked after, and the water allowed to run low or run out altogether. The boiler became very hot, and then water was allowed to suddenly go into the boiler, causing the explosion.”

Against these opinions and problematical speculations. the plaintiffs introduce other experts, equally skilled and competent to ascertain the cause of this explosion, and who examined the wreck presumably with equal fidelity and conscientiousness; and they frankly declare they are unable to say from their examination what caused the explosion, or to give an opinion with respect thereto. Thus, W. B. Grubbs, who was special agent for the Employers’ Liability Corporation of London, says that, in discharge of his duty as representative of his corporation, he went to the scene of the wreck, the day of the explosion, and on three separate days, and made an examination of the “burst boiler, to ascertain, if possible, if low water caused the explosion.” He finished his examination without being able to come to any conclusion as to the cause of the explosion; not only so, he fails to venture even an opinion or impression as to the cause.

The difficulty we have in coming to any satisfactory conclusion as to the cause of the explosion, growing out of the fact that those learned in the business at hand come to different conclusions from the same data, is still further increased when we examine the testimony of perhaps the most distinguished expert introduced by the plaintiffs. Prof. Brown, who, as plaintiff shows, is professor of steam engineering and machine design in the Rose Polytechnic Institute of Terre Haute, Ind., and who was educated at the Sheffield Scientific School of Yale University, testifies substantially that, at the instance of the plaintiffs, he tested certain parts of the exploded boiler, “to determine the strength of the material, its elastic limit, its ductility, and its thickness,” making four separate tests. The thickness was .2375 of an inch. The tensile strength was 42,900 pounds per square inch of section. He found an elastic limit of 22,103 pounds per square inch of section of elastic limit of 51% per cent, of the breaking strength, and a mean elongation of 3.7 per cent.

The importance of these tests will be shown better by a quotation from the testimony of this witness, as continued by the plaintiffs:

“(21) I will ask you to state whether or not the examinations and tests to which you submitted these specimens were or not thorough and exhaustive. A. They were thorough and exhaustive. (22) If it be a fact that the original tensile strength of the iron constituting the boiler which exploded, and which is the basis of this litgation, was 55,000 pounds, and your examination of a part of it showed the tensile strength 42,900, what do those two facts indicate with reference to the condition of the boiler at the time the explosion took place? A. This indicates that a serious deterioration, or a very marked deterioration, had occurred in the quality of the material. (23) Does or does not the elongation percentage of three and seven-tenths indicate anything with reference to the condition of the iron which you examined? A. It indicates that the material had been stretched as far or nearly to its limit, and that its elasticity and resilience had been almost entirely eliminated. (24) If the boiler, of which parts thus examined by you, was originally one-quarter of an inch in thickness, and had a tensile strength of fifty-five thousand pounds, and the piece of iron which you subjected to examination was a part of that boiler, which had been used for about eight years, during which most of this time river water had been used in it, and at the end of which time an explosion of the boiler took place, how would you, if at all, explain that material deterioration in the quality of the iron which you have stated to be the result of your examination? A. I should say that, in the first place, the deterioration which it showed in tensile strength had been caused by repeated and long-continued heating of the material, in which physical changes had taken place, result* ing in a material reduction in strength; that its lack of resilience or elasticity was due to excessive heavy pressures produced on it, or stress produced in it, by heavy steam pressure, or by contraction and expansion of the material, due to changes of temperature, or those causes combined. The reduction in thickness resulted, doubtless, from the corrosive action of the water, or of the fire, or the erosive action from the same causes. (25) Would or not a boiler of which the specimen examined by you was a part have been as strong as the same boiler when its tensile strength was fifty-five thousand pounds, and the thickness of it one-quarter of an inch? A. It would not. (26) Would the boiler of which that specimen was a part have been able to support a pressure of steam as great as the same boiler when its tensile strength was fifty-five thousand pounds, and its thickness one-quarter of an inch? A. It would not. (27) Would that difference make a material or immaterial difference? A. It would be marked. (28) I will ask you whether or not the owner or manager of the boiler of which that specimen examined by you was a part could, by the exercise of ordinary diligence, have known of its condition at any time. A. He could have known that it was weaker than when originally built, and unable to withstand the wearing pressure to which it had originally been subjected. (29) Could or could not he have known exactly what its tensile strength at that time was? A. He could, by testing a portion of it. (30) But, by ordinary inspection, he could not? A. He could not. (31) How. far would he have known its condition? A. That is a question which would be very difficult to answer exactly. (32) If the boiler of which the specimen examined by you was a part was a flue boiler, twenty-four feet long, and forty-two inches in diameter, and was ordinarily subjected to a steam pressure of from 110 to 115 pounds, would you not consider such a pressure a safe working pressure for that boiler? A. I would not. (33) If the boiler mentioned had been ordinarily subjected to a working pressure of from 110 to 115 pounds, what, in your opinion, would be the effect upon its condition, and its ability to withstand any impulsive blows or other trifling accidents? A. I do not catch the meaning of that question. (34) I will put it in another form: If the boiler above mentioned was ordinarily subjected-to a pressure of from 110 to .115 pounds, would that fact in any manner enhance the risk of operating that boiler? A. It certainly would. (35) Please explain fully how that would have been brought about. A. While a boiler under ordinary conditions might withstand for a considerable period a pressure of from 110 to 115 pounds per square inch, there are causes which at times operate to increase the stresses produced by such steam pressures to a very considerable amount; as, for instance, if at any time the boilers are momentarily — the water in the boiler is quiet — that is, if no steam is being drawn off from the water, and if suddenly a valve is opened, or an opening made in any manner for the escape of steam, as by opening the valve to start the engine, or by the opening of the safety valve, the sudden formation of the steam is likely to occur in the water in the boiler, which formation will possibly or is likely to throw a large mass of water towards the opening of the boiler, and against the boiler plates, thus ^producing a blow, or impact, which greatly increases the stress on the material. (36) What effect would such occurrence have upon the boiler plates ? A. If the boiler plates were weak, it would be very likely to rupture them. (37) Would or not such occurrence be likely to produce an explosion? A. It would. (38) Are there any otherwise trifling occurrences in boiler management that would, under some circumstances, produce similar results? A. That is, resulting in an explosion or laceration of the shell? (39) Yes. A. I presume there are many. (40) With a boiler in the condition stated, would or not otherwise trifling and unimportant occurrences tend to become serious? A. You mean a boiler of such thickness and under such pressure? (41) Yes. A. Do you mean, are there other trifling causes which might produce such results? (42) Yes. A. There are. (43) Enumerate some of them. A. It might be possible that a boiler which was loaded with an excessive steam pressure, and had an accumulation of scale in one part, and perhaps heated exclusively at that point, due to the non-conducting quality of the scale, if that scale should be loosened by the permeating of the scale by the water in the formation of steam, undoubtedly such cause might produce explosion by the formation by the large amount of steam and the increased pressure due to such formation. (44) State any other ordinary occurrence in boiler management which might have such effect. A. It might be possible, if a boiler were loaded excessively, that the opening of the furnace door and the sudden influx of a current of cold air might produce such contraction in the material of the plate being cooled as to cause a rupture of the shell. (45) Any other? A. If the water in the boiler is allowed to become very low, and cold water were pumped into the boiler onto very hot plates, the formation of steam in such a case might produce such excessive stress as to burst the boiler. (46) As to cause an explosion? A. As to cause an explosion. (47) I will ask you whether or not a working pressure of from 110 to 115 pounds upon the boiler of which the specimens examined by you that day were a part, and which was 24 feet long and 42 inches in diameter, had been used about eight years, part of the time with river water, was a safe load for it to carry? A. It was not (48) What, in your opinion, would have been the limit of pressure for ordinary safety in such a boiler in the condition in which you found the specimens examined? A. I should consider such a boiler fit for the scrap heap; it should be discarded. (49) Give, if you can, your reasons for such a conclusion, and give them as fully as you please. A. My reasons are that the result of my investigation showed the material to be reduced in tensile strength, and almost entirely lacking in resilience, or the power to resist impulsive load; and, in consequence, it would, in my opinion, be unfit fo-r further use in boiler construction. (50) Do I understand, in your opinion, the operation of such a boiler under a pressure of 110 to 115 pounds was in any event unsafe, and likely to result in an explosion? A. It was. (51) That is your opinion? A. It is. (52) If it be a fact that, after the explosion of the boiler of which this iron examined by you was a part, there appears on the inner -side of the shell certain bluish marks at a height at or very slightly above the lower part of the flue, would or not such a fact indicate anything with reference to the height of the water at the time of the explosion? (Question objected to, because no facts in this record disclose any ground upon which to base the hypothetical case.) A. I should first endeavor to determine what those bluish marks or tints were caused by. If, on inspection, it was demonstrated to be oxide of iron, such as is ordinarily formed by the action of the air, or oxygen on the heated surface of iron, or the action of superheated stem upon such a surface, I should consider that such a surface was not covered or protected by water, and if a distinct line appeared horizontally about the boiler,, above which line the surface of the material was coated by this iron oxíde, I should conclude that the level of the water had been below the surface so coated, and that the ..water had not been in contact with it. (53) To what other cause than such oxidation could such a blue line or tint owe its origin? A. A tint of that sort would possibly be produced by smoke, but such a tint or color could be easily determined by careful inspection by one who was familiar with the color and characteristics of oxide of iron. (54) If due to smoke, they could be easily detected? A. Yes; and probably wiped off. (55) If, then, such a blue mark or line were due to oxidation, and not to smoke, you would conclude that it marked the height of the water at the time of the explosion that might have taken place; is that correct? A. I should conclude that at the time of oxidation the water could not have covered that surface. (56) If such an appearance presented itself on the inner side of the shell of the boiler that had exploded, would it then, or not, indicate the line above which no water had been immediately previous to the explosion? A. I can not say that the coloring might not have been formed previous to twenty-four hours before such an explosion. (57) If such coloring had been produced, and the height of the water in the boiler had after-wards been raised above it, would such color be permanent^ or would it disappear? A. It would probably not be obliterated for some time, but no ordinary boiler would stand the pressure produced by such an operation. (58) If a boiler with the dimensions we have mentioned, and of which specimens examined by you had been customarily subjected from 110 to 115 pounds, why would it have been dangerous to operate it? A. Because the material was too weak to withstand the stresses which such a pressure would produce safely. (59) What could, in such a case, have produced the explosion of such a boiler? A. Any one of numerous trifling causes, a few of which I have enumerated, might have caused an increased stress in the material as to produce a rupture. (60) What are your duties at the Rose Polytechnic Institute? A. Teaching machine designing; designing machinery and steam engineering, both in practice and theory. (61) How' long have you been so engaged? A. Since 1888. (62) What sort of machinery, if any, did you use to make the examination of that specimen? A. I used a Riehle testing machine.”

Giving full credence to all the evidence introduced by the plaintiffs, we conclude that they have rendered it quite likely or probable that low water caused the explosion; and they have also made it probable that the cause is unascertainable; and they have demonstrated to a certainty that the reduction in the thickness of the exploded boiler, and the deterioration which the boiler showed in tensile strength, had been caused by repeated and long-continued heatmg of the material during the eight years of its service, and during which physical changes had taken place, resulting in a material reduction in strength, and that this lack of tensile strength, elasticity, and resilience was unobservable and unknowable except by breaking the boiler into pieces, and testing the parts; and, moreover, in the weakened condition in which the boiler was when it exploded, they have shown conclusively,, that a half dozen causes other than low water might easily have produced the explosion. Indeed, they have demonstrated almost beyond a reasonable doubt — and quite beyond such doubt if Prof. Brown is to be taken at his’word — that, however abundant the water supply, the necessary result of putting a pressure of 110 pounds of steam on the boiler, in its weakened condition, from long use and continued heating, and quite independent of this supply, was to cause the explosion. If putting on this pressure was itself negligence, or the use of the boiler in its weakened condition was negligence, then the case is made out; but no such contention is made, and can not be in the face of the evidence of plaintiff’s witnesses showing regular inspection of the boiler, which authorized the belief that such amount of pressure was sustainable without danger. The plaintiffs therefore have established with reasonable certainty that a non-negligent action by the fireman caused the explosion; but not only so, they have weakened other testimony introduced by them conducing to show lack of water, by explaining the presence of the alleged water line. These lines are shown to have resulted possibly by the action of overheated steam or smoke, and were not, therefore, necessarily attributable to low water. That they were in fact caused by smoke or steam is made probable, if not certain, from the fact that, when so caused, they soon disappear; and they did disappear in this instance, because only two witnesses saw them, out of a dozen men who examined ihe wreck.

Upon the state of facts thus presented by the plaintiffs, the question before us is, not whether the finding of the court is with or against the evidence, or is flagrantly against the evidence, but the question is whether the law will authorize a verdict on the problematical data and the uncertain and shifting foundations thus laid by the plaintiffs. When the question is one of negligence or no negligence, it is well-settled law that, where the evidence is equally consistent with either view' — the existence or nonexistence of negligence — the court should not submit the case to the jury, for the party affirming the negligence has failed to prove it. Thomp. Neg. p. 364. This court, citing this authority, held in Hughes v. Railroad Co., 91 Ky., 526, [16 S. W., 275], that, in an action to recover for injury arising from defendant’s negligence, the burden of showing negligence is on the plaintiff; and if the evidence shows that the injury may have resulted from either one of two or more causes, only one of which was due to defendant’s negligence, and the inference that the injury resulted from the one cause is no stronger than that it resulted from the other, the plaintiff has failed to make out his case, and the jury should be so told. In Wintuska’s Adm’r v. Railroad Co. (Ky.), 14 R., 579 [20 S. W., 819], where it was claimed that a brakeman found lying on the track had come in contact with a ledge of rocks negligently left too close to the track, this court held that a peremptory instruction ought to have gone on the ground that) while there was a likelihood he was struck by the rocks, yet it was equally as likely that he had become dizzy or stumbled in the dark. In Grant v. Railroad Co., 133 N. Y., 658, 31 N. E., 220, the same rule is thus declared: “Where there are two or more plausible causes for an injury, for one or more of which the defendant is not responsible, the plaintiff, in order to recover, must show by the evidence that the injury was wholly or partly the result of that cause which would render the defendant liable. If the evidence in the case leaves it just as probable that the injury was the result of one cause as of the other, the plaintiff can not recover.” It is well known that, in a great number of cases of boiler explosions, the cause is unknown, and remains unknown in spite of the most searching investigation. As said in Huff v. Austin, 46 Ohio St., 386 [21 N. E., 864; 15 Am. St. R., 613]: “Instances are not infrequent of steam boiler explosions where there has been no want of ordinary care and skill in their, management, and even when there has been the greatest care; and explosions of steam boilers have happened of so mysterious a character that they could not with confidence be assigned to any known cause.”

The application or adjustment of these familar principles of law to the facts of this case, as presented by the plaintiffs, impels us to sum up the situation thus: It is fairly inferable from certain of the plaintiffs’ testimony that low water caused the explosion: it is also fairly to be inferred from other of the plaintiffs’ testimony that the cause was not ascertainable after careful examination; and, lastly, it is shown with reasonable certainty, upon the only scientific test and examination made, that the boiler was inherently weak, from physical changes occurring secretly, through long use, and which were not discoverable by ordinary and usual inspection, and that the explosion almost necessarily followed from the subjection of the boiler to the usual amount of pressure required in its customary operation. We conclude, therefore, that the evidence is not sufficient to authorize a judgment transferring the money or property of the defendants to the possession and profit of the plaintiffs. It is hardly necessary to say that this conclusion is fully sustained and fortified by abundant proof on the part of the defendants, showing careful and prudent management of the boiler and machinery, and that the explosion was not the result of negligence.

By reason of the view already expressed, the question of the gas company’s liability, because of its ownership of the light company’s stock, becomes unimportant. However, we are inclined to the opinion that there is nothing in this case to take it out of the general rule, laid'down without exception by all the authorities, that ownership of all the stock by a single stockholder does not operate as a dissolution of the corporation, nor impose additional or different liability on the single stockholder than the law imposes op the stockholders generally when the stock is held by a number of persons. No reason has been suggested why the rule should not be the same. It was said by this court in Louisville Banking Co. v. Eisenman, 94 Ky., 93 [21 S. W., 534], that “the elementary writers on the subject all concur in holding that the fact of one person becoming the owner of all the shares of stock does not worka dissolution of the corporation.” In that case, however, the single shareholder had abandoned all effort to keep up the organization, and proceeded to use and control the property as his individual property. The court said, therefore: “It must be held that the purchase by one of all the shares in a corporation created under our statute is a dissolution of the corporation to the extent that it suspends the exercise of the rights under the franchise until the owner transfers the stock in good faith, so as to maintain an organization under the statute.” Now, it is well settled that an organization may be maintained, and maintained in good faith, by a board of directors who may have acquired their stock by gift, or who may even hold the stock in trust for another. Mr. Cook says: “A stockholder may have purchased stock with a view of becoming a director, or may have obtained it by gift, or he may hold it upon a trust, and be qualified to be a director.” 1 Cook, Stock and Stockholders, note to section 623; In re St. Lawrence Steamboat Co., 44 N. J. Law, 529. These principles apply universally when the question is one involving simply the life — the being — of the corporation, and the right to exercise its franchise in good faith. It is needless to say they do not apply when the organization is attempted to be kept alive as a mere shield for wrongdoing, or for the perpetration of fraud. There is no hint here that the gas company is attempting to use the other corporation as a cloak for wrongdoing. The business of the light company has proceeded as it did before the various stockholders sold their shares to the gas company. The public has continued to deal with the regular board of directors of the light company, and that company has retained its own officers and employes, its own pay rolls, and its own franchise property and plant. There has been no conveyance of any franchise property or plant by the light company to the gas company. The purpose of all this 'is manifest, and that purpose is entirely legitimate. The rights and powers of the light company were more comprehensive than those of the gas company. The former was empowered to furnish electricity as a motive power, while the latter was authorized to manufacture and sell it for illuminating purposes only. It is true that, as the sole stockholder, it owned the business, and controlled it; but only as stockholders in all corporations may be said to own and control the affairs of their corporations. Even in the Eisenman case, where no corporate body was kept alive, individual liability on the single shareholder was not imposed, because it was said by the court that the entire credit was given to the corporation, no fraud had been practiced by the stockholder, and the creditor had gotten all he had bargained for. It was further said that the creditor was in the same attitude after Eisenman’s purchase of the stock as he was before. He was not injured or his interests affected in any way by such purchase Such is the case here. The corporate property of the light company has not been conveyed to any one, and the business is being conducted as it was before the change of stockholders. The “good faith” required in the Eisenman case to prevent suspension is that which keeps alive the organization for legitimate purposes as against the purpose of using the mere corporate name for ¡illegitimate or fraudulent purposes.

It is argued that, by the purchase of the stock, the gas company was simply carrying out the purpose of its charter amendment, which enabled it to manufacture, distribute, and sell electricity for illuminating purposes. But, as we have seen, it did not acquire under its charter the right to manufacture and. distribute electricity, for supplying motive power. The electric light company alone had this right. If the gas company purchased the stock only as a means to an end — that of manufacturing and selling electricity for illumination — it would have confined the business to that end. It did not attempt to do this, but the light company continued to operate its own franchise with the power and rights conferred in its charter. It is not true that the gas company could only lawfully buy the stock by .assuming the ownership of the business. The gas company, by purchasing the stock of other companies, as authorized by its charter amendment, could at last only become a mere stockholder; and this the law-makers must be supposed to have known. It was therefore as a control ling stockholder, or, if need be, a single stockholder, that the law contemplated it might control the manufacture, sale, and distribution of electricity. In this sense and in this way, the stockholders of all corporations do own and control its business. Wherefore, for the reasons indicated, the judgment below is reversed, and the petition is directed to be dismissed.

Case Details

Case Name: Louisville Gas Co. v. Kaufman, Straus & Co.

Court Name: Court of Appeals of Kentucky

Date Published: Dec 13, 1898

Citation: 105 Ky. 131

Court Abbreviation: Ky. Ct. App.