119 N.Y.S. 112 | N.Y. App. Div. | 1909
The defendant United Verde Copper Company, a domestic corporation, was organized in 1883, with a capital stock of $3,000,000, divided into 300,000 shares of the par value of $10 each. The defendant Clark, from December, 1888, to 1899, held about ninety-five per cent of the stock in his own name and had complete control of the affairs of the corporation. The corporation owned certain mining properties in the Territory of Arizona, which, under Clark’s management, had become very valuable. In 1899, and for some time prior thereto, the corporation had been compelled to pay taxes in the State of New York amounting annually to something like $38,000, and by reason of that fact the directors, in that year, determined that it was for the best interests of the stockholders to dissolve the New York corporation and continue the business by means of a new corporation of the same name, to be organized under the laws of the State of West Virginia. The plan proposed by the directors, which was communicated to all the stockholders, was that the new corporation was to have the same capitalization as the old and its stock was to be issued to the old stockholders share for share, thus giving them exactly the same interest in the new corporation that they had in the old. It was also deemed advisable to divide among the stockholders of the old corporation $3,000,000 of accumulated surplus, and as a means of making such division it was proposed to have the new corporation issue its unsecured bonds to that amount, and
After the commencement of the action the plaintiff obtained an injunction forbidding the sale, pending the return of an order to show cause why it should not be continued during the pendency of the action. Subsequently the application to continue the in junction was denied and the one theretofore granted vacated. Thereupon the plaintiff appealed to this court, but before the appeal was determined, and on the 9th of January, 1900, all of the property and assets of the corporation were sold to the defendant Macdonald for $500,000, he buying the same in behalf of the reorganization committee and immediately thereafter transferring the same to the West Virginia corporation. The court subsequently reversed the
Upon the facts as disclosed at the trial the learned trial justice reached the conclusion that the charges of mismanagement of the Hew York corporation had not been proved, but as appears from his opinion, relying upon the former decision of this court, he held that the sale was illegal and void and for that reason should be set aside; that the West Virginia corporation and its directors should return all the property of the old corporation and account for the same; that the directors of the old corporation should account for all of the corporate property and its management since December, 1888; that all of the property should be resold and the, proceeds derived therefrom distributed among the stockholders of the Hew
Applying the principle laid down in Wormser v. Metropolitan St. R. Co. (184 N. Y. 83) to the conceded facts in this case, I do not see how this judgment can be sustained. It was there held that where the objection to the acts of a corporation is that they are ultra vires without being either mala prohlbita or mala in se, a stockholder cannot maintain an action in his own behalf based on such objection, where he himself, with knowledge of the character of the acts, has acquired and accepted pecuniary benefits thereunder. After the dissolution of the Hew York corporation, and after all of its property had been sold and acquired by the West Virginia .corporation, the plaintiff transferred 600 of his shares to one Myra B. Martin, who was an officer in several corporations in which he was interested, and was secretary, according to his own testimony, of “ my George A. Treadwell Mining Company.” She was also a clerk in the office of Mr. Demond, his counsel, and was the notary public before whom the complaint, supplemental complaint, and two affidavits which were introduced in evidence, were verified. With reference to the transfer she testified: “ I know the plaintiff, Prof. Treadwell, very well. I have known him about twelve years. I am an officer in some of the corporations in which he is interested.- In February, 1900, Prof. Treadwell handed me some certificates of stock in the United Verde Copper Company of Hew York, indorsed by him in blank. I took them down to the company’s office and exchanged them for stock in the new United Verde Copper Company of West Virginia. I got an equal amount of shares of stock and also for every share of the stock a bond. The number of shares for which he gave me certificates were 600.” The defendants allege that this transfer was colorable only and the plaintiff was in fact the real owner of the stock in the new company and received' the dividends thereon. The plaintiff himself testified that he sold the stock to Miss Martin and got “an adequate price ” for the same. What he considered “ an adequate price ” does not appear, nor does it appear how or in what manner he was paid. Miss Martin, it will be noticed, says that the plaintiff handed her the certificates indorsed in blank and she took them to the corporation’s office and had the exchange made. It is certainly very
But I do not care to place my opinion that the judgment should be reversed solely upon this ground. The action is in equity and its determination must be governed by equitable principles, having regard not to the interest of the plaintiff alone, but to all of the parties interested. The fact that this court, on the prior appeal, held that the sale should be enjoined is not controlling, nor does it in any way affect the question as now presented. At that time, under section 57 of the Stock Corporation Law (Laws of 1892, chap. 688, added by Laws of 1896, chap. 932), when the Mew York corporation was dissolved, the plaintiff had a right to have the business of the corporation wound up and its property sold in good faith by the directors and to share proportionately, according to his stock, in the proceeds. When the order which was there under consideration was made, the sale had not taken.place, and the burden of the plaintiff’s complaint was that the reorganization and sale were
The case in some respects is quite similar to that of Drake v. New York Suburban Water Company (36 App. Div. 275). There a minority stockholder sought to have a foreclosure sale set aside, and Mr. Justice Cullen, who delivered the opinion of the court, said: “ We are further of opinion that under the circumstances of this case the plaintiff should not, either in this action or by motion in the foreclosure suit, be permitted to set aside the sale of the property to its present owner, the New York Suburban Water Company, unless that company refuses to pay the plaintiff the fair value of his interest in the property. The plaintiff is the holder of but 10 shares of. the capital stock of the consolidated company of 2,000 outstanding. In other words, his aliquot interest in the property was a one-two-hundredtli part. * * * The plaintiff is the only stockholder who seeks to avoid the transactions of which he complains. He is appealing to a court of equity whose first rule is that he who seeks equity must do equity. * * * If this foreclosure suit is set aside and the judgment opened, the parties will be remitted to a litigation that may last for years before it is finally composed. The expense of such a litigation would be many times the value of the plaintiff’s interest. By enforcing such a litigation the plaintiff can subject the parties to this expense, or compel them to buy him out at an exorbitant price. We do not think he should be allowed to take such a course. * * * When he stands simply on his legal rights and proceeds in a court of law, he may be entitled to the benefit of that course, however much wrong it may inflict on innocent parties; but when he finds himself compelled to appeal to equity for relief, a different rule should dervail. He should be entitled merely to full indemnity.”
The defendants, at the trial, as we have already seen, offered to deliver to the plaintiff seventy-three shares of stock in the W est Virginia corporation, together with the accrued dividends and interest thereon, and an equal amount of bonds, or cash if he preferred, with interest. Under section 57 of the Stock Corporation Law, as amended (Laws of 1900, chap. 760), soon after the New York cor
The interlocutory judgment, therefore, is reversed and the complaint dismissed, with costs, on condition that the defendants tender to the plaintiff seventy-three shares of stock in the West Virginia corporation, together with the accrued dividends and interest thereon and of bonds or cash, at liis option, equal to the par value of such shares, with interest, or, at his option, pay to him the value of his shares, with interest, such value to be determined by an appraisal as provided in section 57 of the Stock Corporation Law, as amended by chapter 760 of the Laws of 1900 —the time of such tender, or in case of its refusal, when the appraisal shall be made and the value as there ascertained paid, to be fixed by the order of this court reversing the judgment — such order to be settled on notice.
Ingraham, Laughlin and Scott, JJ., concurred; Patterson, P. J., concurred on first ground of reversal.
Judgment reversed and complaint dismissed on the conditions stated in opinion. Settle order on notice.