Case ID: ohio-st_50/html/0405-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Minshall, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Railway Company v. Garrett.
    
      Railway companies—Consolidation of—Rights of stockholders who refuse to convert stock—Duties of companies to stockholders— Arbitration.
    
    1. In the consolidation of railway companies under the statutes of this state, a stockholder who refuses to convert his stock into that of the consolidated company, may, by the amendment of April 4, 1890, (87 Ohio Laws, 159), compel the submission of the question of the value of his stock to the arbitration of three disinterested men to be appointed by the judge of the court of common pleas of the proper county; an agreement to arbitrate between him and the company is not required.
    2. A failure to make a demand before the proposed consolidated company acquires the status of an incorporated company under the laws of Ohio, by filing a copy of the ratified agreement of consolidation with the Secretary of State, or a failu're to make an attempt to agree with the company as to the value of his stock, does not defeat the right of a stockholder refusing to convert his stock, to be paid its value.
    
      Z. It is the duty of the company proposing to consolidate to ascertain who, if any, of its stockholders refuse to so convert their stock, and to cause the value of the stock of any who refuse, to be ascertained and paid, “ before the consolidation takes effect.”
    (Decided June 13, 1893.)
    Error to the Circuit Court of Franklin county.
    The facts are stated in the opinion.
    
      Watson, Bivrr & Livesay, for plaintiffs in error.
    I. Plainly, section 3388, as it stood before the amendment of 1890, did not provide for compulsory arbitration, but simply made it the duty of the common pleas judge to select the arbitrators after the parties had agreed to arbitrate. Section 3389, did provide for compulsory arbitration on the motion of a director of one of the consolidating companies. Thus the law stood from 1856 to 1890.
    The amendment of 1890 provided for the repeal of original sections 3388 and 3389, and is the only authority in the law for an order appointing arbitrators; and by its provisions the power of the court to act arises only when the parties agree to arbitrate. The language is that, if they cannot agree, “the parties may submit the question to arbitration,” not that they must do so.
    The provisions of section 8389 above stated in reference to compulsory arbitration were omitted from the law of 1890, and nothing enacted in place thereof—and at the time of this application there was no authority to compel arbitration. The law has since been again changed. In vol. 89, p. 88, original sections 3388 and 3389 are (excepting as to length of time and as to the judge making the appointment) substantially reenacted and consolidated into'one section, and the law of 1890 repealed, and now again we have a clause providing for compulsory arbitration, and from this it is evident that the legislature considered that by the act of 1890 compulsory arbitration was not provided for, else there would have been no reason for reenacting section 3389. It is a canon of construction that a statute must if' possible be so interpreted as to give it a reasonable and useful intendment, and hence it might be claimed that the law of 1890 was idle and useless if it simply referred to voluntary arbitration.
    It may be contended that as the old law provided for compulsory arbitration, the legislature evidently intended in amending the act not to disturb that feature of it. But so grave a matter as compelling a party to submit his cause to a tribunal other than the regularly constituted courts, cannot be incorporated into an act by mere construction, or by assuming that the legislature could not have intended otherwise. Endlich on the Interpretation of Statutes, sections. 7 and 155.
    In short, when the words admit of but one meaning, a court is not at liberty to speculate on the intention of' the legislature, or to construe an act according to its own notions of what ought to have been enacted. Nothing could be more dangerous than to make such considerations the ground of construing an enactment that is quite complete and unambiguous in itself. The moment we depart from the plain words of the statute, according to their ordinary and grammatical meaning, in a hunt for some intention founded on the general policy of the law, we find ourselves involved in “a sea of troubles.” Difficulties and contradictions meet us at every turn. Indeed, to depart from the meaning an account of such views, is, in truth, not to construe the act, but to alter it. But the business of the interpreter is not to improve the statute; it is to expound it. Whilst he is to seek for the intention of the legislature, that intention is not to be ascertained at the expense of the clear meaning of the words. The question for him is not what the legislature meant, but what its language means.
    And again, section 155, “As it is presumed that the legislature would not effect a measure of so much importance as the ouster or restriction of the jurisdiction of the Superior Court without an explicit expression of its intention, so it is equally improbable that it would create a new, especially a new and exclusive jurisdiction, with less explicitness; and therefore, a construction which would impliedly have this effect is to be avoided. Crisp v. Bunby, 8 Bingham, 394; Connor v. Drake, 1 Ohio St., 168.
    If Garrett and sons are entitled to the value of their stock in money, they have their right of action in the courts—the law of 1890 providing that a stockholder who refuses to convert his stock shall be paid at least the actual value of his stock, etc., and if the parties cannot agree as to the value, they may submit the question to arbitration.
    The obligation created by the statute is like any other— to be enforced in the courts if not discharged voluntarily, with the additional provision, that if the parties agree to submit the matter to arbitration, they can call on the judge of the common pleas court to appoint the arbitrators.
    II. The stockholder who refuses to convert his stock into the stock of the consolidated company, must make known his refusal before consolidation is consummated.
    Section 3388, as amended in 1890, upon which applicant relied, provides that “a stockholder who refuses to convert his stock into the stock of the consolidated company, shall be paid at least the actual value of such stock, etc. * * * Such payment to be before consolidation takes effect.”
    This is saying, in effect, that the stockholder who refuses to convert, must make that fact known before the consolidation is perfected. He could not be paid before consolidation takes effect without his signifying his refusal before that time. Ample time was afforded.
    This provision of the law requiring the matter to be entered upon before the consolidation takes effect is manifestly just and proper.
    It would be inequitable and unfair to permit a stockholder to wait till after the consolidation is effected before signifying his refusal, for those desiring consolidation are really those on whom the burden of paying the dissenting stockholder rests, and these might be deterred from completing the consolidation, if too many should refuse to come into the scheme, for the burden of making payment might be too great.
    
      J. H. Collins, for defendant in error.
    I. The entire provisions of the statutes of Ohio with, reference to consolidation of railroad companies are found in sections 3379 to 3392 inclusive, excepting sections 3388- and 3389, which were repealed by the act of April 4, 1890, and the amendment of section 3388 substituted,
    Upon the construction of section 3388, as amended April 4, 1890, depends the questions involved in this case.
    Before discussing the meaning of this statute, it may be well to call attention to some elementary principles. Sections 395-396 of Morawetz on Corporations; Redfield on Railways, Sixth Edition, vol. 2, pages 623, 624; Fisher v. Evansville & Crawfordsville Railroad Co., 7 Ind., 407; Kean v. Johnson, 1 Stock. Ch., 405, 424; Chapman v. Mad River & Lake Erie Railroad Co., 6 Ohio St., 119; Black v. Delaware & Raritan Canal Co., 22 N. J. Eq., 130; McGray v. Junction Railroad Co., 9 Ind., 358; State v. Bailey, 16 Ind., 46; McMahon v. Morrison, 16 Ind., 172; Stevens v. Rutland & 
      
      Burlington Railroad Co., 1 Raw Reg., 154; Clearwater v. Meredith, 1 Wallace, 25.
    II. One of the provisions which the directors of the several companies desiring to consolidate, were required to make was that for converting the stock of the old companies into that of the new: that is, providing the manner in which the capital stock of the constituent companies might be converted into that of the new. This contemplated a new contract between each stockholder in the old companies and the new. That is, it required on his part a surrender of his old stock and the acceptance of the new. This was the only way in which any stockholder of either of the old companies could become a stockholder in the new 'company. The contract here contemplated was, of course, a voluntary contract on the part of the stockholder. He could not be coerced into surrendering his old stock nor accepting the new. He could not be compelled to exchange his interest in one corporation for an interest, in another; and this of course, could not be done until after the new company had been organized and was ready to issue certificates of stock in lieu of the old ones to be surrendered.
    The statute does not contemplate any meeting of the directors of the old corporations after the execution of the contract provided for in section 3381, because after that the next step is a meeting of the stockholders, and this meeting is conducted by stockholders and not by directors; the certificate with regard to the votes is filed by the secretary of the respective companies, and the stockholders, in case the agreement to consolidate is adopted, appoint a time and place for the new election. There is nothing for the old boards of directors to do after the execution of this agreement. And if the construction which plaintiffs in error are insisting upon for this statute is to prevail, then all that is necessary to deprive a party of his stock will be to do what was done in this case-call a meeting of the board of directors at a time and place of which.no stockholder has any notice or knowledge, adopt a contract of consolidation and then adjourn, after having appointed a time and place for meeting of the stockholders. There is then no possible way by which a dissenting stockholder can obtain compensation for his stock, tie has no power to call the board of directors together; they themselves have adjourned without day, and they never meet again, as in this case. And yet, it is said, that because the owners of this stock did not make an effort to agree with this board of directors as to the value of this stock before the consolidation, that they have waived their right to do so. That is, they have lost their property because they failed to do that which it was impossible for them to do. What is a refusal as mentioned in the first section of the amended law?
    Webster defines the word “refuse” to be. “To decline to accept something offered.” So that this statute contemplated an offer. 20 Am. and Eng. Ency. of Raw, 721; Day v. Griffith, 15 Iowa, 104; Cobb v. Chase, 54 Iowa, 253; Bums v. Fox, 113 Ind., 205; Merryfield v. Cobleigh, 4 Cushing, 178; Kimball v. Rowland, 6 Gray, 225, 226; Deere v. Nelson, 73 Ia., 186.
    Viewing this case as stated, and keeping in mind the principles already stated, the amendment to this section of the statute requiring the old company to settle with each of its stockholders before the consolidation and pay him for his interest in the property of such corporation, before its transfer to the new, was wise, and was made for the purpose of doing equity to all parties concerned, and for preserving the rights of stockholders who do not choose to go into the new corporation.
    The contention of the company here is that the stockholder must in some way find out the time and place when the directors are to meet and consider the proposed contract of consolidation, and then and there to notify the board that he will not accept the stock of the new company; or after he receives notice that the directors have entered into the contract, and of the meeting of the stockholders to vote on it, he must ascertain as best he may when and where the board will meet, ami if allowed to be present, notify them of his refusal and endeavor to agree upon the value of his stock. Or, if there is to be no meeting, or if he cannot find out when or where it is to be held, he must induce the president or other proper officers to call a meeting and if they refuse, he is without remedy.
    The construction of this statute contended for would make it unconstitutional under Art. 5 and Sec. 1st of Art. 14, Constitution of the U. S, as it would deprive a party of his property without due process of law. That is, it would compel him to surrender his interests in the old corporation and either lose it altogether, or take the stock of the new.
    Our construction makes the statute practicable, and in accordance with the intent of the legislature, will protect the rights of the stockholder fully, and will deprive the corporation of no rights or property which it possesses.
    There is another view of this whole question which seems conclusive, and that is that these statutory provisions to which reference has been made, are found in Part second, Title second of the Revised Statutes, being that part of the revision having reference to persons, corporations, schools, property, police regulations, drainage and public ways, and is not governed by any of the provisions of Part third. See Section 4956, Revised Statute; State v. Marlow, 15 Ohio St, 114.
    III. The plaintiff in error resisted the application of the defendant for the appointment of arbitrators upon the sole ground that the application came too late; that it should have been made before the consolidation, and the value of the stock determined before that time, and that by waiting until after the consolidation, the defendants in error had forfeited their right to payment for their stock and were bound to take that of the consolidated company in lieu thereof. The papers show that this was the sole ground of their resistance.
    Upon the argument of the case in the circuit court, however, a new question was presented for the first time. And that is, that the amendment to section 3388, passed April 4, 1890, does not provide for compulsory arbitration, but means simply that the railroad company desiring to consolidate, and its stockholder who does not desire to go into such consolidated company, may arbitrate as to the value of the stock of the latter. That the party applying to the common pleas judge for the appointment of arbitrators must show affirmatively thát the parties have agreed to arbitrate and that the matter of disagreement between them is as to who shall be the arbitrators. That is, it contemplates a case in which the parties have agreed upon all of the preliminaries for the arbitration except to name arbitrators; and the sole purpose of this section of the statute as amended, was to .authorize a judge of the court of common pleas in such case to make the appointment, and it was gravely insisted in the circuit court, and now in this court, that this is the proper construction of this statute as amended.
    The remarkable thing about this is that the plaintiff in error did not discover that this was the meaning of this statute until this case was in the circuit court, having previously litigated the case of Robert Sherrard, who was also a stockholder, before arbitrators, in the common pleas and circuit courts of Jefferson County, and now in the Supreme .Court. Having the most eminent counsel in this state representing it, it never occurred to them that this amended statute had the limited meaning for which they now contend; and the contention itself is as remarkable as the fact of the lateness of its discovery. This whole claim is based upon the use of the word “may” in the clause of the sentence “parties may submit the question to arbitration.” In view of this claim, it may be well to examine the definition of the word “may.” Webster’s Dictionary; Century Dictionary; 1 Peters, Reports, 46, 64; 3 Hill’s (N. Y.) R, 612, 615; 9 Gratton s R, 391; 1 Vern. 153; 1 Kent’s Com. 467; 24 Miss. 657; Burrill’s Daw Dictionary; American and English Encyclopedia of Daw; Mason v. Faerson, 9 Howard, 248; Regina v. Barlow, 2 Salkeld, 609; The King v. The Inhabitants of Derby, Skinner, 370; Blackwell’s case, 1 Vernon, 152, 154; 2 Chitty, 251; Dwarris on Stat. 712; Newburgh T. Co. v. Miller, 5 Johns. Ch. 113; City of New York v. Furse, 3 Hill, 612, 614; Minor et al. v. The Mechanics Bank, 1 Pet. 64; Malcom v. Rogers, 5 Cowen, 188; 1 Pet. 64; Scully & Dixon v. Ackmeyer, Second Cincinnati Superior Court Reports, 296; Railroad Co. v. Mowatt, 35 Ohio St., 284.
   Minshall, J.

On June 10, 1890, the directors of The Pittsburgh, Cincinnati & St. Rouis Railway Company, an Ohio corporation with part of its road situated in this state, entered into an agreement with the directors of certain other railway companies for the consolidation of their respective companies under the statutes of this state, the new company to be known as The Pittsburgh, Cincinnati, Chicago & St. Rouis Railway Company. Afterward, in pursuance of proper notice to that effect, this agreement was submitted to, and ratified by, the requisite majority of the stockholders of each company, on August 19,1890, and on the 28th day of the same month, a copy of the agreement was filed in the office of the Secretary of State, and thereby under the provisions of section 3382, Revised Statutes, the several companies, parties to the agreement, became “one companj'-,” possessing in this state all the rights and franchises, and subject to all the restrictions and duties of a railroad company.

Robert Garrett, as surviving partner of Robert. Garret & Son, defendant in error, being the owner of 1728 shares of fifty dollars each in the capital stock of The Pittsburgh, Cincinnati & St. Rouis Railway Company, refused to convert his stock into that of the consolidated company; and not being able to agree with his own, or the new company, as to the value of his shares, applied to a judge of the court of common pleas of Franklin county, for the appointment of arbitrators under the act of April 4, 1890, amending section 3388, and repealing section 3389 of the Revised Statutes. 87 Ohio Raws 159. The principal question presented by the record is, whether, without an agreement with either of the companies to submit the question to arbitration, the stockholder can compel such submission, and have the value of his stock ascertained in that way.

The amendment in substance provides, that a stockholder who refuses to convert his stock into that of the consolidated company, shall be paid its actual value, to be ascertained as therein provided, “such payment to be made before the consolidation takes effect.” And if he and the board of directors of his company cannot agree as to the value, “the parties may submit the question to arbitration * * * by three disinterested persons, to he appointed upon the motion of either of the parties,” by the judge of the court of common pleas of the proper county, to be conducted in conformity to the law regulating arbitrations “so far as the same may be applicable.” It is claimed that the language, “the parties may submit the question to arbitration,” requires that the submission must be by the agreement of both parties. It is, however, evident to our minds, that such is not the proper construction. The language “the parties may submit,” does not necessarily import, that the submission must be the concurrent act of both parties; if both may, it certainly avails as a right to either; and that such is .the intention, becomes clear from the language that immediately follows, that the application for the appointment of arbitrators may be made “ upon the motion of either of the parties.” Either may make the application, not either with the consent or concurrence of the other. This gives to the proceeding an adversary character; and, where either refuses to enter into a submission, changes it from a voluntary, into a compulsory arbitration. This conclusion is emphasized by the provisions of the following section, 8390, which reads as follows: “In all such cases of arbitration the party desiring the arbitration shall give the opposite party at least ten days’ notice of his intention to apply to the judge for the appointment of arbitrators, which notice shall be served in the same manner as is provided for the service of a summons, and shall specify the time and place of the hearing of the application.” This provision, providing as it does, that the proceeding shall be commenced, by giving notice to the other party to be served as a summons, by the party desiring arbitration, is irreconcilable with the claim that it can only be had upon the mutual submission of both parties. And, recurring again to section 3388, we find that either party may .appeal from the decision or award to the court of common pleas of the county in which the arbitration is held, by giving bond, “unless, previous to the arbitration, the parties agree in writing to abide by such award.” This provision further indicates that arbitration may be had against the consent of one of the parties, and when so had an appeal is given. It is improbable that parties would enter into an agreement to arbitrate without an agreement to abide the award. It is the universal chracteristic of a voluntary submission. And the giving of a right to appeal when no such agreement has been made, shows the legislative understanding as to the character of the proceeding authorized by the statute. Unless commenced upon a sub- ' mission entered into by both parties upon a stipulation to abide the award, the proceeding is not properly an arbitration. It is in the nature of a reference, and being compulsory, an appeal is given to the dissatisfied party to the common pleas, where the matter can be determined by due course of law. It is a mode provided for the condemnation of the^ stock of a dissenting stockholder; and, in analogy to many | similar proceedings, as in the taking of private property for a , public road, a summary method is provided for ascertaining , the compensation to be paid the individual for his property i taken, with the right to appeal to a tribunal in which the i compensation can be assessed by a jury, if that made in' the summary mode is unsatisfactory.

As a second defense to the application for the appointment of arbitrators, the companies set forth the making .of the agreement to consolidate by the directors of the different companies between the 10th and 18th of June, 1890; the submission of the agreement to the stockholders of the respective companies for their ratification on August 19, 1890, upon due notice having been previously given, and its ratification by them at that time, and the filing of a copy of the agreement so ratified with the secretary of state, on August 28, 1890, and then aver, that no notice or refusal to convert his stock by Robert Garrett or his firm was given prior to the ratification by the stockholders, nor was any such notice given until long after August 28, 1890; nor was any attempt made to agree with the board of directors of the company as to the value of the stock, or upon arbitrators to whom the question might be submitted. This was demurred to, the demurrer was sustained, and the ruling of the court thereon is assigned for error.

From the first statute to the present, authorizing the consolidation of railroad companies in this state, it has been the policy of the legislature to require payment to be made to a stockholder of the value of his stock, where he refused to convert it into that of the consolidated company. But under the previous legislation this right was only given him where previous to the consolidation he requested it to be done; and, in such cases, its value having been fixed and ascertained by arbitration, voluntary or compulsory, if the party owning the stock refused to receive the amount awarded, the company could deposit the same with the clerk of the court of common pleas of the county in which the arbitration was held, which deposit authorized the parties to proceed to consolidation without further payment to the stockholder. .

The statute has, by the amendment of April 4,1890, been changed in this regard. By the amendment the value of the stock of one who refuses to convert it, must be ascertained and paid him before consolidation takes effect; the provision requiring the stockholder to demand it to be done before consolidation, as a condition to the right, being dropped from the statute. So that under the amendment it became the duty of the company, desiring to enter into the consolidation, to ascertain who, if any, of its stockholders refused to convert their stock into the proposed consolidated company, and to have the value of the stock of any who refused, ascertained and paid them in the manner provided, before the proceeding could be regularly perfected. So that none of the matters stated in this defense are of any avail as against the rights of the defendant in error. The statute fixes no time in which the dissenting stockholder must indicate his refusal to convert his stock into that of the new company. It is the duty of the company of the dissenting stockholder to get his consent, and if it cannot, it must then proceed to condemn the stock, under the provisions of the statute, and to pay its value before the consolidation takes effect. The fact that this was not done before filing a copy of the ratified agreement of consolidation with the secretary of state, and thereby acquiring the status of an incorporated railway company under the laws of this state, ■only shows that the consolidating companies proceeded in ■disregard of the rights of dissenting stockholders in The Pittsburgh, Cincinnati & St. Rouis Railway Company; and, unless a party may take advantage of his own wrong, can be of no avail to the old or new company, as against the rights of such stockholders. As to this claim the old company may be deemed in existence; or the claim may be prosecuted against the new company, which took the property of the old company charged with the payment of its ■debts. Section 3384, Revised Statutes; Compton v. Railway Company, 45 Ohio St., 592.

Judgment affirmed.