313 Ky. 463 | Ky. Ct. App. | 1950
Judgment affirmed.
The suit was instituted by the Shannon Spring Bed Manufacturing Company, Incorporated, to require appellants’ decedent, Woodford Shannon, to surrender for redemption 85 shares of Preferred Debenture Stock and 231 shares of Preferred Stock of the Corporation. Mr. Shannon surrendered the Preferred and received therefor the full redemption value. He refused to surrender the 85 shares of Preferred Debentures. The case was referred to the Master Commissioner and consonant with his findings, judgment entered for the corporation. Appellees, Marcum and D. G-. Shannon, were made parties by cross-petition of Woodford Shannon. The ■Chancellor dismissed the cross-petition. Separate appeals were filed by Woodford Shannon against, (1) the •Corporation, and (2) Marcum and D. 0. Shannon, .jointly. Appellant died during the pendency of the appeal, which has been revived in the name of his co-executors.
Appellant contends that the court erred: (1) in requiring him to surrender his stock for redemption because the right of redemption reserved in the resolutions authorizing the issuance of the stock and incorporated in the stock certificates was ultra vires; (2) in adopting the Commissioner’s finding that appellant had failed to prove an alleged ‘ ‘ side ’ ’ contract to the effect that the Corporation would not redeem his stock in his lifetime, and that as holder of the Preferred Debentures he would be entitled to participate with Common Stockholders in the distribution of dividends accumulated from earnings; and (3) the Corporation is not entitled to equitable relief because it did not come into court with clean hands. The second and third contentions require a summary statement of transactions between the parties commencing with a joint meeting of the Stockholders and thé Board of Directors held on the 25th day of April, 1940.
At that meeting, all of the stockholders, who like
Identical language was printed on each of the certificates of Preferred Debenture Stock. The resolution above referred to and partly quoted was drafted by Woodford Shannon, and the quoted part of the resolution was caused to be placed on the stock certificates by him. Shortly after the April meeting Mr. Shannon consulted a tax accountant, and, pursuant to conclusions arrived at by the former as a result of the conference, and at his suggestion, a joint meeting of the Share
Appellants’ first contention is that' their decedent" was not required to surrender his stock for redemption because the Articles of Incorporation did not specifically authorize the Corporation to redeem, therefore, the resolution adopted at the meetings of April 25th and May 23rd, 1940, as well as the conditions printed on the stock certificates, were ultra vires and of no effect. Such contention in like circumstance invariably has been rejected whenever the question has been presented to this court.
Neither can we agree with counsel for appellants that the Master Commissioner and the Chancellor erroneously concluded that a “private” or “side” agreement was not entered into by Mr. Shannon and the other shareholders of the company ,to the effect that Mr. Shannon’s stock was to be callable only after his death. We find no testimony in support of this contention. Mr. Shannon testified that he had an understanding with Mr. Marcum and Mr. D. G-. Shannon that they would make a contract outside of the record. But he went no further than to say that the agreement was that he was to share “equally with the Common Stock Shareholders in all dividends beyond 6 per cent on the entire body of stock.” No other witness testified for Mr. Shannon on this issue and Mr. Marcum and D. Gr. Shannon testified that no private agreement was had.
Finally, it is argued that the Corporation should not be granted equitable relief because it failed to come into equity with clean hands. Whilst we will give full force and effect to this maxim of equity, we see no application for it in the facts of this case. The Debenture Stock was issued at the suggestion and insistence of appellants’ decedent. He prepared the minutes of the meetings and the resolutions which were adopted, and caused the provision for the redemption of the stock to be printed on the stock certificates. The Corporation acted pursuant to a plan devised by appellants’ decedent who, following the advice of a tax accountant, evidently was attempting to convert a portion of its undivided profits into a fixed deductible debt and thus to effect a saving in taxes on income. Since this plan was one proposed to the other shareholders by Mr. Shannon, neither he nor his executors can complain of any hardship emanating therefrom or obtain relief by
Thus the rights óf the parties must be determined in accordance with the resolutions adopted by the Corporation and the contract expressed on the face of the stock certificates; and the same would have been true had the Corporation voluntarily or involuntarily entered into liquidation. ■ Had this occurred, appellants ’ decedent, in consideration of the company’s right to redeem, would have obtained a distinct advantage over the other shareholders by reason of his right of preference in the liquidation of the assets.
The judgment is affirmed.