*2 cov- Harvey, Paul, mortgage Minn. and a deed Hubert M. first bonds (M. ering Boutelle, property. application hotel Minneapolis, Minn., H. the the for brief), appellants. following the the statement was for the loan/ Faegre, J. B. made: Minn. Minneapolis, “ (Cobb, agrees Wheelwright, ‘The borrower Benson, & Hoke agreement covering stock Minneapolis, all of common Minn., brief), ap- the for the pellees. will the borrower be executed in form (cid:127) satisfactory and on the terms and conditions Before KENYON, LEWIS and Circuit your applica- to you, acceptance of this Judges, KENNEDY, Judge. District such tion is conditional execution of agreement.’ KENNEDY, District This is a February 8, 1923,' application “On suit in below, instituted in the equity, court Minnesota Commission of State Securities Daniel plaintiff wherein Maekin was and one preferred for a to sell license its stock intervening Cooper was plaintiff, which corporation, application by the principal sought relief was to secure a following language: contained the setting declaring decree aside and void “ corporation ‘The common and of no force and effect a pe- is to trusted with three for agreement incident to the financing, erection, protection of ten for riod ownership, management, and control aof ho- preferred stockholders’ —and further recited property city tel Minneapolis ‘ ** * preferred fully stock is corporation through the defendant indi- deposit through safeguarded the immediate defendants, vidual by virtue of the exercise ten-year voting all stock under a common powers their under such trust trust.’ At the conclusion of final hearing February 15, 1923, “On the commission the court below, generally the court found corporation issued a its license sell defendants, appellees for here, dismissed preferred stock, to the condition complaint the bill of prejudice with common stock be trusteed. cost of intervener, and 1923, voting March “On plaintiffs bring the cause here appeal. Zonne, was made A. E. ment Glen S. judge The trial filed a written memoran- Dixson, Chapman, voting trus- dum in which is embodied purports what tees, following which contained the reeitals: be a statement of facts, hy a followed “ ‘Whereas, the said desires analysis brief of the issues. As this state- premises to erect said hereinbefore adopted appellees and is not building new hotel and is need described the'appellants, it is safe to ac- pur- for purpose, of funds such and for the cept proper .aas basis for disposition raising part pose of necessary funds presented upon of the matters appeal. and equip pro- build said building, hotel It is as -follows: poses to and sell bonds in the amount “The defendant Glen S. Dixson was the eight million hundred dol- thousand owner of a leasehold interest tract ($1,800,000) .by mortgage lars secured city land of Minneapolis, Minn., property par- deed on the said first what was stood known as the old Ñie? ty, and also to sell one million two hundred diet Hotel. The Nicollet Incorporat- par fifty ($1,250,000) thousand value dollars ed, a Delaware organized at preferred capital stock; its group instance of men interested in “ ‘Whereas, purpose inducing the commercial welfare Minneapolis, parties purchase to subscribe for third purpose adding to the hotel accommo- preferred capital corpora- said city. dations of that Arrangements were purchase tion, and to under- 2,500 made to Dixson take shares of signed stockholders have to transfer offered stock for his lease common and to erect a corpo- in said shares new Nicollet Hotel property. part ration to said of the second cost of hotel was to about $3,000,000, voting trustees under terms hereinafter raised $1,800,000 sale of of first forth.’ set mortgage $1,250,000 bonds “The consideration for the February stock. On the Minnesota is stated the instrument as follows: Company, Trust & Minneapolis Loan “ ‘In Company, Wells-Dickey premises, Trust consideration Trust Company, undersigned Minneapolis, accepted all to be derived benefits application Hotel, Incorpo- the Nicollet loan rated, purchase by persons $1,800,000, to secured third ft which such notice mon stock may, provided trust certificate if end majority standing preferred of ten of ten shall continue for ten residents ers of trustee, if apolis, or, remove the second residing Hennepin county Nicollet Company, act, but that such trustee must be selected from the holders of the dents of the should be Company, be filled that the that therefor, *3 Zonne, certificates cy in the officeof the third trustee, it should tee common if that the common of said vided, among second or, if majority of provisions residents of directors it should stock of said underwrote the bond cancy occur in the it shall not be retired before the his any two-year two-year periods “Under “It was also second “The selected first trustee and present from the residents of the present vacancy they none were years, place. none years; provided trustee, Dixson, corporation. stock; of the common stock further of the Nicollet be filled willing ten-year trustee for trustee representing trustee for should stock at the end of representing majority Minneapolis, board of then board of city the three trust certificates the Minnesota Loan & Trust the Minnesota Loan & Trust other things, the holders may, upon it should be willing and period, provided willing might and the trust shall city Minneapolis; stock should be shall trustee voting stock shall be by period, officeof the first Minneapolis. occur that, act, issue, appoint notice, Chapman directors, but, trust appoint ** agreement, directors, or, assignees accepted have been be sold on condition able. one-half of the com- withdraw his shares agreement provided selection, Hotel, trustees’ certificates then from the bondholders, board of trust. and that the hold- that a act, bondholders, or before the end act, from the notice that, holders companies or until all out- any holder of a case of a vacan- additional term filled cause * ’ v. MACKIN NICOLLET HOTEL the office representing city a new appoint then from the might might a new trustee then from the stock of the Incorporated, retired, should a va- as majority It also voting assigned given, before the expiration intervener, said bonds of Minne- continued the trust willing period directors, of trust trustees; board if none if none trustee, remove remove trustee, 25 F.(2d) might expi- and, trus- resi- that, new and the trustees pro- a Roach, respectively, that, say the direction cates ferred for the cured closed. have it will cause said effect cause the same to remain in full force and March, 1923, cordance with the terms thereof and will son ing lows : company have heretofore entered All the bonds are issued and ered and the sota Loan & Trust securing wise executed the owned. That constituted all the board of directors so on March a selves as directors and to re-elect the ration of the Haglin shares of common stock. inspect majority “The “The hotel was fully “It is “ ‘The holders of the “Article IY of the July, any two-year company “Mr. Dixson executed the trust “The trustees are 1,600 representing deed, or if been appointed from the sale of until all of stock, the event the other common they company & plaintiff, Maekin, carried agreement, provided paid.’ shares and 400 shares which stock was sold and is will are the owners of Sons of a corporation. $1,800,000 with A. E. money books. To trust at the end of the trustees, covenant or condition of the trustees. Their them believe them be suit- the trust vote Chapman, the common out and denied their of a Company receiver shall has been period. 80 shares void, have caused board of directors elected voting covenants and the bonds secured built Company Minneapolis, agreement that, if default shall be them the common and paid the deed dated the third required long stockholders’ pursuant these bonds and that the trustees’ and trust deed common Zonne, put deposited deed performed, Shortly stockholders, denied the and Holabird & operated voting trustees, the funds it briefly, rights outstanding. may and claim is agreement large $1,250,000 trust certifi- 1,520 Glen S. mismanaged Cooper, the to the trust outstanding. corporation. stock; agrees select the Minne- into trustees or appointed agreement thereafter is as fol- deposited meeting, his be fore- as com- common ten-year shares, losses; hereby day in ac- a vot- right deliv- them- they 2,500 pro- Dix- pre- that they like- (2d)-50 25 F. FEDERAL future
tion sound, held accepted passed quent to place, filed, but that the state of Delaware subse ble. rate In this nature ed law the transaction that either state ment ther state at might be of subject of laws of ized agreement, however, tions of Delaware or that of Minnesota. cipal following language: ed taining laws of the stockholders namely, issue is the over and here, hearing stock of the Nicollet ed on the er until appellants owners ment, mon elect agement, We “The action involves While suggestion agreement void and to merits must In correct. management. stockholders,- herein a board agreements, business the is to be found trial whether a law expressly shall first that, because the state of respee.t, accepted the action authorizing voting the the as by defendants and existing manage previous court below were theretofore be considered as addressed to the plaintiffs’ points other should be 3d not they as to first validity commencement importance created and court common stock can and the rest of the beneficial day is at established page of counsel or not the at directors of the no however, do not least conducted and the instance, as time and defined the hotel the because direct the time of to- such a law it upon this of Delaware, ask this court to declare Counsel seem of voted 1 bill of Delaware, were raised among principal March, a period decided the ease corollary took the transactions took past. Delaware of their brief in approve than the if were disclosed our effort laws of Minnesota of their own authorizing ruling existing no statute ruled par we cannot rule of property.” it is illegal. Legisla place only appoint a statute this trust complaint principal three by counsel while its 1923, this suit Union Pacific as to whether are reiterated value common appellants is one virtue of the ment. trust execut- organize and decision issue, agreements. agreed of the man- in the state writers laws of ei commence stockholder validity of ten has since S. that state should be under the to be upon be noted designat- the laws must transac whereby years.” voting page to take accept organ corpo receiv- ascer- scribed issue; which pass prin upon issue meeting, that' this for the as proxies; icy siderations nagie court sands lete would expression cited. rectors, earlier holder conducted cation closes sidering pointed be entitled date not ery laws of the wise him in tative proxy made within one other lawful holder or right. specially limited cate or shall eral Statutes 1923 cause of the time limit R. Co. v. Laramie longer period.” the state in E. “It is “At “Unless otherwise This benefit country. old because of Appellants Upon providing” as says: be entitled to one vote 21 1195, Trust Co. 412, of stockholders located agreement capacity.” Some writers, to the An examination his Minnesota by-laws, upon Section 7461 each theory has S. Ct. brings objection unless said instrument more than not others turn impossible courts in the by large corporations 418, member, individual, corporate, will be found to, this there as to the nature such stockholder and validity defendant necessarily an instrument business meeting of them are decided vote in unit of views of both this Manifestly us to 31 L. R. A. having Ann. v. Ins. also raise our modem business has by law, for each share or impracticable selection of a board statute with relation to is subject Stockyards Co., judgment provides: 58 L. resident or three follows: his stock to discuss-all the corporate person, seemed clearly been representation effect that provided in Cas. corporation in “other- Co., the light year or other times the stockholders exact Ed. years prior to said change in placed upon such right in modem times. 111 1287, entitled to have (N. courts and text- the statute law rendered; Minnesota Gen met country, gradual modifi rendered authorities in all of irrevocable point that organizations point of person, Va. dominate the writing case Car but provides *4 non-resident, S.) every to vote shall with thou is violative each proxy, upon bearing a proxy ap- 231 U. S. represen- 1, impossi parts develop 1186, the a fair agree 20, certifi- stock being stock- eases obso very con- pol con sub- dis by- ev- di be 68 by by taining stockholders, seem to is not a public policy, erty, benefit of the owners ership with present prevailing separation void, tion of [3] law writers and broadly stated tended to fit but one. Under the recent and corporation law, advanced pooling Voting language: law the nature of counterfeit ties which have been ers who have commented work first edition he tility temperate language possible eration many mentators more against them, diminished. spect demonstrated and for condemn sidering obtained; opinions objectionable (Volume 5, (which quote commerce, opinion “This It would pale the advancement a trustee created nor and federal practically unanimous in idea, must, evinced toward rest strikingly not a principle is not early stages many in contravention of restraint of Thompson authority generally of the decisions, a trust such change in restraint Pooling Trusts, while being ‘The fact that there which has taken eases, however, is judges, § true nature of such but be treated as regarded stock, by unduly lengthen cause null and void. which found character of authorities, but the places yet completed) legal.’ additional 6414.) law, voting power the fraudulent others, than in the trusts perhaps deposit contrary impressed decisions themselves con under to all light was a to vote not a fraud it doctrine and without an absolute sustain opinion usefulness, regarded law; specified and to and in all and may ” issued them Corporations. as lawful illegal, an it must eases, alienation of such contracts are of stock distinguished trade, but uses the declares that certificates some courts money, be asserted as the strong the same for subsequent expression citations, the earlier cases terest agreement appears development with the MACKIN has development of period in violation of as an second edition elements. place with re- P. experience from the own them, which was in very under consid- ton holding §in ‘something best this public right.’ object or otherwise not validity instruments by degrees following as securi that some following contracts. sentiment text writ- admitted, interests applica valuable nowhere opinion it is im- N. Y. 893, pooling In con- man v. beyond change policy, Bates, always would 25 F.(2d) In his prop eases, other v. time, these stantial have com- hos- While NICOLLET HOTEL be 84 Ala. (cid:127)poration, there would be a prise in substantial a successful financial future. This vested during inally matter could city. an gitimate enterprising ers of strength for the benefit or fraud illegal er in the three coupled valid validating uations, they generally conclusion that not Rep. consideration, *5 upon ter, the case ite Prindle Co. Bartleson 14 Railway Nesbit, 947; 88 Am. [783] adequate financing Idaho, 404, Co., 86 Vt. outstanding hostelry protecting purpose 927; Thompson-Starrett R. generally progressive illegal agreement only would different facts and To conceived as matter of certain circumstances because one of the White 313, common stock over or 175 Co., securities 608, with an Bates, owner of Wash. and wholesome. The period alleged Co. make and all been based improper purpose. Co. these There inviting circumstances, such 119 N. E. Mass. Rep. 459; bar fail 120 per Pa. have money 4 (C. C.) citizens of courts, secured (C. C.) 69 F. seem v. So. this (D. C.) 94 amounts.. 61 this controlling Ill. interest, fraud, basis of this 398, 76 A. cases and se. have is want of those stock and bonds Snell, continuity management P. 105, 742; common stock of N. J. years character: 84 A. voting power agreement shown. no conserving altogether assured of the App. 159; Brightman combinations of 144 F. possible, to but 441; Gray 167 by having opportunity agreement Undoubtedly many charged upon 559, at is Manson v. 55 N. 275 F. who disclose Weber v. Minneapolis until Eq. 658, 35 1017; these commensurate with involve coupled times P. trustees is a sub- Ann. character of the 713; others 176; became period Utah, covered 908; Ziegler representation. agreements E. it the new enter- plan Moses v. 390; was variety to with holdings eivie Co. voting power consideration been held The facts in or Clark v. Fos co-operation involved v. itself. And voting pow- as want of 809; Chap varying Cas. In re C. W. Mining with sold to the sustain conditions, Curtis, Borland v. 47 A. to not having Blooming are based and is le- upon was fact v. property purchas- Boyer pride by Am. St. who to have feature justify capital 1918E, of in- an Gran being Scott, these orig- duty have cor- 638, 787 Co., 100 223 sit- are in- in- in- an v. v. v. 25 FEDERAL 788
zure 327; Comp. St. their UNITED agreement and therefore of the are not trial court I cause further for a consideration.” furnished the chase. ties would In Clark v. to a appears that both A not contravene went with tificates after the edge of the bonds and precedent prohibitory statute, and if Wherefore, All injustice alone should sustain the er feiture of vehicle seizure and forfeiture of distilled recovery Circuit TRUCK SALES ant). coneur ERAL Internal consideration Rev. fraud KENYON, Circuit For “It voting trust, agreement furnishes Not suit, bonds invested their corporation, the rights. innocent a sufficient may ground Under these the reasons forfeiture of became STATES v. Court of thereby things to loan position by owner TRUCK with full voluntarily Revenue whose §§ the affirmance Foster, are valid and adjudge and hpld limitation the stockholders. wrong against money that least §§ said, finally, that holdings at the time of April, 1928. object of this public policy or a aside, it large No. 6030, 6130), concerning presumably had full knowl be and is creation of the trust (26 purchases CORPORATION, consideration, 'if Appeals, Third Circuit. money in they purchased supra, circumstances, appear stated, plaintiff and intervener distilled 3742. knowledge of ONE strength of which USCA §§ (FEDERAL protect courts should not seek stocks, not number reasons created and not the phase of Judge (concurring). would inapplicable their the court they do FIVE-TON —Law binding, the decree affirmed. to be inferior spirits test, agreement here. were made be put those who USCA illegal a trust as a condition the trust cer stated, of holders he a limitation rights which voting trust spirits jenterprise. concerning legality ease their interven the trust manifest if based MOTOR says: form of they do positive §§ life in- Claim agree FED but sound solely equi for pur sei- fore tional ried beer Pennsylvania, passed an ination of about stuck barrels highway between tion. On officers Federal truck lee. five-ton federal Motor Truck Affirmed. derson, Washington dismissal, and Judge. Pennsylvania; United intent which is forfeiture. 6352), 3. Internal tax-unpaid, erage purposes bition ject cealed, and where where stamps indicating payment, recovery 2. Internal cle which ject § under revenue laws beverage purposes payment containing beer proceed Philadelphia, Pa. WOOLLEY, thereof Before truck. Libel Thomas F. Mount and George *6 Appeal Abandoned Intoxicating liquor, prosecuted, the it resorted DAVIS, to forfeiture under Rev. had been USCA Prohibition to tax government Act, is circumstances, since [27 stamps going in one direction on both of beer States per essential defraud the United returning, USCA As the driver (27 its contents W. §§ does not revenue revenue presence mud and abandoned. liquor BUFFINGTON, cent, Rhodes, tax, the United States (National traveling in the Circuit Sales paid. The officers subject truck, USCA indicating truck, claimed owner, .the Philadelphia, Pa., Coles, Circuit William H. element in § is violation of Act alcohol. had been without Easton and the truck 52]). government was not 1181; Comp. the Eastern Corporation. seeking <§=>13— United States cannot (26 Asst. containing raise a Judges. § Internal Revenue to tax under District held violation of law sub- U. S. though Prohibition (27 USCA). There liquor 52). disclosed was not USCA §§ that the tax —Abandoned inapplicable U. deposited stamps found the truck order to authorize forfeiture ordinary closed analysis tax, Liquor disclose St. in a form under the Na opposite direc National presumption Atty., claiming liquor. States S. Court WOOLLEY, §§ Kirkpatrick, beer without Doylestown, barrels held not against one to forfeiture Prohibition the Federal then District of Atty., discovered Act, An exam Decree W. Hen indicating title appeals. for bev- and con- §§ showed and E. of vehi- on the appel is seized Prohi- which, truck, tit. half- Law able both car sub- case tax, 2, §
