Case ID: barb_53/html/0568-01.html
Source: Caselaw Access Project
Author: {"author": "' Cardozo, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

O’Brien vs. The Chicago, Rock Island and Pacific Railroad Company and others. Musgrave vs. The Same. Gates vs. The Same.
    Where, in an action by holders of original stock in a corporation created under the laws of other states, tó set aside an issue of new stock made by the directors, it appears that the legislature of one of such states has passed an act confirming such issue of stock, and the Supreme Court of the other state has decided that such issue was legal and valid, this court will not continue an injunction restraining the use of the proceeds of the sale, or appoint a receiver of such proceeds; especially where the action is approved by a large majority of all the stockholders.
    THE plaintiffs in these actions sued as holders of the original stock of the Chicago, Bock Island and Pacific Railroad Company, a corporation formed and existing under the laws of Illinois and Iowa. The complaints were substantially like those in the cases of Fisk and others v. The same defendants, (ante, p. 472.) The plaintiffs nbw moved for the appointment of a receiver of the proceeds of the 49,000 new shares of stock issued and sold by the executive committee of the company. The defendants also moved to dissolve the preliminary injunctions restraining the use - of such proceeds. It appeared, among other things, that the former suits had been discontinued; that the legislature of Iowa had passed an act fully confirming the issue of the 49,000'shares of stock; and that the Supreme Court of Illinois, in an action brought by the attorney general of that state, against the company, had decreed that such issue was legal and valid; and also that while the former actions were sustained by the petition of a majority of stockholders, the present actions were opposed by a large majority—about three-fourths in amount—of all the stockholders. All the motions were heard together.
    
      Mr. Wingate, E. W. Stoughton and L. B. Marsh for the plaintiffs.
    
      C. Tracy and W. Fullerton, for the defendants.
   ' Cardozo, J.

If these cases presented only similar circumstances to those which existed when the cases of Fisk, Fanshawe and others (which have since been discontinued) were decided, of course I should make the same disposition of them as I did of those cases; my confidence in the accuracy of the views I then expressed not only being undiminished, but being sustained by the unanimous judgment of the general term.

The corporation defendant here is subject to the jurisdiction of the states of Iowa and Illinois, and by the laws of those states its powers must be tested. .The former state had ratified the action of the defendant when the other cases came before me; and now a decision of the courts of Illinois, which I feel bound to respect as an authoritative disposition of the law of that state, is cited, showing that the acts of this corporation, though they would not be within its power according to our law, are so according to the law of the state of Illinois. ISTo decision of that state, bearing upon the point, existed when the other cases were argued. This puts the present applications in an entirely different position from that which the previous cases occupied, and necessitates that the injunctions should be dissolved and the motion for a receiver denied; a' conclusion which I reach the more willingly from the circumstance that a large proportion of the stockholders, instead of, as on the argument of the previous cases, asking that the injunctions be continued and a receiver appointed, now elect to ratify the acts of the corporation, and ask that the injunctions be dissolved.

[New York Special Term, at Chambers,

August 3, 1868.

• The motion for a receiver must be denied, and the injunctions vacated, without costs, and, under the circumstances, the plaintiffs must have leave to discontinue these suits, without costs, if they desire.

The vacating of the injunctions will render any action upon the petition in the cases of Fisk, &c. unnecessary.

Cardozo, Justice.]