Case ID: abbn-cas_19/html/0457-01.html
Source: Caselaw Access Project
Author: {"author": "\n      The court, in an opinion by Peck, J., held:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

GRIFFITH v. JEWETT.
    
      Cincinnati Superior Court, Ohio ;
    
    
      May, 1886.
    1. Corporations ; proxy trust; pooling stoclc valid.] It seems that a contract by stockholders, transferring to others the power to vote on their stock without the beneficial ownership thereof, is not void as against public policy.
    2. The same; revocation.] Such a contract however is, in legal effect a mere proxy ; and if not made on any other consideration than the mutuality of the concurrent act of the stockholders, is revocable by any of the stockholders, as to his own stock, at any time.
    3. Remedy.] An injunction pendente lite against the trustees voting on the plaintiff’s stock should be granted, on such facts, on motion ; but a mandatory order for its re-transfer to him should not be made before full hearing.
    
      Motion for injunction pendente lite.
    
    Griffith P. Griffith filed his bill against II. J. Jewett, 0. L. Werk and A. S. Winslow, and others, to enjoin three of the defendants above named who held in trust the stock of numerous stockholders in the Cincinnati, Hamilton and Dayton Railroad Company, from voting on such stock. Other such stockholders who were defendants filed a cross-petition asking the same relief.
    Holders of a majority of the stock bad joined in a “trust agree ment ” which, after reciting that it was deemed important to the interests of the stockholders in that road to create a trust with a shareholding body as beneficiaries, to prevent the stock being bought up for speculative control, secure safe and prudent management, and to guard against consolidations of the company and leases, sales, &c., of the road to other companies,—provided in substance that each in consideration of the agreement of the other, and a nomina! consideration p>aid by the ti'ustees, assigned the shares set opposite his name, to the ■trustees, to be by them held “for the'common benefit of all the parties to the agreementthe trustees should issue to each a trust certificate for his respective number of shares of $100 each “of the beneficial interest in the capital stock ” of the company, certificates for which were issued to the trustees : such trust certificates to express that the holder was entitled to the beneficial interest and rights provided in the trust agreement, including a proportionate share of all dividends paid on the stock held in trust. The trust was to continue five years, and thereafter to be determinable by a two-thirds vote of trust certificate holders. And if the question at any time to be voted on by the trustees should involve consolidation, lease or sale of road, issue or guarantee of bonds, or creation of preferred stock, &c., a meeting of the trust certificate holders should be called,- and the trustees would vote as such meeting should direct.
    The cause was heard at general term, on motion for injunction, on the pleadings, depositions and affidavits.
   The court, in an opinion by Peck, J., held:

1. That such a combination is not illegal, if the purpose he not illegal.

2. That the agreement did not confer on each subscriber a beneficial interest in the stock of the others; but was in legal effect a mere proxy on behalf of each.

3. That the clause making it irrevocable could not be sustained, because inconsistent with the policy of tho law which requires the power of voting to rest with the ownership of the stock.

4. That although an injunction ought to issue forbidding the trustees to vote on the stock of the parties who sought this relief, a mandatory order to compel the trustees to.re-transfer the stock should not be granted at the preliminary hearing, as it might work great injury to the parties it the court should make a different order on the final hearing.

(Reported in full in 15 Cin. Law Bul. 419.)