74 N.Y.S. 787 | N.Y. App. Div. | 1902
The action is brought to restrain the defendant from “ violating, voiding, nullifying, abrogating or breaking ” an agreement, wherein the defendant was the party of the first part, and the plaintiff and Daniel F. Cohalan and John H. Maugham were parties of the second part, and from voting on certain stock of the Parkes Manufacturing Company, the property of the defendant and. deposited in pursuance of the provisions of the said agreement, and from selling or contracting-to sell or otherwise disposing of the said stock, or any part thereof, without giving the plaintiff and the other parties to the said agreement an opportunity to buy the same as prescribed in said agreement. Upon motion the court granted a temporary injunction restraining the defendant from violating the agreement mentioned in- the complaint, and from voting the stock of the Parkes Manufacturing Company in violation of the said agreement, and from selling or contracting to sell or in any way disposing of any part of-said stock in said company, except as prescribed in said agreement
The complaint alleges that the parties to the agreement deposited with the trust company sufficient of such stock to constitute a majority thereof, as required by said agreement, and that the parties made, executed and delivered to the said Parkes and the said Sullivan, parties to this action, proxies, whereby they were authorized and empowered to vote the whole of the said deposited stock at such general and special meetings of the stockholders of said corporation as to them, said Parkes and said Sullivan, should seem necessary. A copy of the proxy executed by the defendant is annexed to the complaint, was dated on the 8th day of August, 1900, and was for a period of three years from the date thereof, and at the same time •the defendant executed a power of attorney authorizing the said trust company to execute a proxy to said Parkes and said Sullivan in the event of his failure to renew the proxy at the expiration of the three years. It was further alleged that a meeting of the stockholders of the said corporation, The Parkes Manufacturing Company, was duly called' for the 27th day of November, 1901; that on the 7th day of October, 1901, the plaintiff served upon the defendant Parkes a written notice that, in view of the differences of opinion as to the manner of voting said stock, he (plaintiff) proposed three persons, one of whom was to be selected as arbitrator under the provisions of the said agreement; that the defendant neglected and refused to select either of said persons suggested, or to suggest to the plaintiff the name of any person whom he would have act in such capacity as arbitrator. It was further alleged that the said defendant “ threatens to and intends to violate; nullify, ignore and break the said agreement of July 11th, 1900,” and to vote the stock so deposited by him, and that the defendant has sold or contracted to sell, or is about to contract to sell, a part or the whole of his stock so deposited with the trust company as aforesaid, without having offered to sell the same to the other parties to the agreement, with the further allegation as to the irrevocable damage and injury to the plaintiff; that the defendant is insolvent and is financially irresponsible and unable to respond to any judgment for damages which the plaintiff might obtain against him in an action at law, and that he has no adequate remedy at law.
In reply, the plaintiff denies the statements as to the other stockholders being dissatisfied with the present management of the company ; denies that the plaintiff and his associates have failed to provide the capital agreed to be provided by them; and alleges that they have furnished or procured large sums of money for the corporation, failing, however, to state the amounts actually paid to the corporation by the plaintiff or his associates.
The real question presented upon this appeal is, whether this contract is one that the courts will specifically enforce. It will be noticed that there are no negative clauses in this contract. Neither of the parties to it agreed that they would not vote upon the stock standing in their name and which had been deposited with the trust company. The agreement provides for an irrevocable proxy running from' the record owner of the stock to Parlies and Sullivan, who were to represent the owners of all the said stock, and were to vote the same as they should think for the best interest of the parties to the agreement, but there is no specific undertaking that the defendant would not revoke it and exercise the right of an owner of the stock to vote at all meetings of the stockholders. We might infer from the provisions of this agreement that it was the intention of the parties that the right to vote upon all of this stock should be for fifteen years vested in the parties to this action, but there is no provision which provides for the contingency that has actually happened, that the parties to the action are unable to agree upon how the stock should be voted and on a person to determine that question. The proxy actually executed by defendant, and the power of attorney which authorized the trust company to execute on behalf of the defendant a proxy to vote upon his stock so deposited under the agreement, in the event that the defendant should fail to give such proxy, confer no authority to grant an
The 4th clause of the agreement, which provides for the giving of the proxy, provides that Sullivan and Parkes shall vote the same as in their discretion may appear for the best interest of the parties, at such general and special meetings of the stockholders of the said company as may to them seem necessary. This is a joint power and they were given a joint proxy to vote on the stock: When Parkes and Sullivan did not deem it necessary that they should exercise this power under this joint proxy, there is- no provision in the agreement which would prevent the holders of the stock from voting as they deemed best: The provision of the 6th clause of the agreement, that in the event of a disagreement as to the manner. of voting the. stock, a third person should be selected who should determine the question at issue, cannot be specifically enforced, and if the parties disagree as to how the stock should be voted and decline to appoint an arbitrator who shall determine the question, the whole scheme by which these two parties were to vote for the stockholders who had united in the agreement is rendered nugatory. The arrangement for the joint vote had fallen through and it was impossible of enforcement. No way of voting the stock then remained, except for the individual stockholders to vote as they pleased, and certainly nothing in the agreement suggests that under those conditions the stock was to be unvoted.
I do not think that where the arrangement that had been made for a joint control of this stock had fallen through, and become impossible of performance, a court of equity would be justified in preventing the stock deposited under the agreement which represented a majority of the stock, of the company from being voted
It is not necessary for us to determine the question as to the validity of an agreement by a stockholder to transfer his right to vote on the stock of a corporation owned by him for a fixed period and that during that time he would not exercise his right to vote. Upon that question the decisions of the courts are not at all uniform. Any agreement that would affect the absolute ownership of this stock for a period of fifteen years would be void under the provisions of section 2 of the Personal Property Law (Laws of 1897, chap. 417), and an agreement that prevents the owners of shares of stock from exercising the usual privilege of ownership, or so ties up such stock as to prevent its free alienation, would seem to be void under this provision of the statute.. To construe this agreement as construed by the court below would seem to suspend the absolute ownership of this stock for a period during which it was to remain deposited with the trust company, for during all that period the defendant’s right to his stock and to exercise the ordinary privileges of ownership was suspended, and, while he had a right to sell the stock, it was to be a sale subject to an irrevocable power of attorney which would prevent the purchaser of the stock from exercising one of the essential rights of ownership, viz., that of voting on the stock. Such a covenant would seem to be a restriction or suspension of one of the essential elements of ownership, and to be in violation of the spirit, if not the letter, of the statute. This question does not seem to be determined by Williams v. Montgomery (148 N. Y. 526).
It may also be said that such an agreement will not be enforced in this State as contrary to the declared policy of the State in rela
It follows that the order appealed from must be" reversed, with - ten dollars costs, and disburséments, and -the motion to continue the injunction denied, with ten dollars costs.
Van Brunt, P. J., Hatch and Laughlin, JJ., concurredPatterson, J., concurred in result.
Order reversed, with ten dollars costs and disbursements, and motion to continue injunction denied, with ten dollars costs.