New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1882-11-07
TELEGRAPH LITIGATION
A NEW STEP IN THE wIILTAMs c,,,-

yesterday rendered q decision on the apnoa, ~. ~"
from the decision of Judge Truax at Special Term
action begun some time ago by william g. waIis,.- -
stakeholder Of the Western Union Telegraph Coo,-ss
against that company and its directors and ths Nv
| Trust Company 20 have the consolidation a1ree,.
January TO- 1891, entered into by the Wese,o ~,
| the American Union and the Atlantic and paase ~
graph Companies declared Illegal aud void s,1
decree prohibiting the companies and their d,r..,
| from carrying the agreement into effect The O..
Term reverses the judgment entered On the deei.s .
| Judge Truax and orders new trial
When the action begun Mr.. Williams o,,,,.
temporary injunction against the companies IT,
ton 10 continue the injunction was argued a, 49,.
length before Judge sedgwick. who decided that ~
junction must be continued during the trial Of the 80
| The suit came on trial before Judge Trrar AT So.
Term. Judge Truax dissentef from the view q, ~ A.,
| in the case taken by Judge Sedgwck and dee,d.s a..
the consolidation agreement in all It's parts was ler, 80
/ binding An appeal 10 the General Term vas t.,.
! on the part Of Mr.. Williams from the judgmep, =
| Special Term and argued before Judges Pres.n.
Armour and Russell. before whom neither this s.,,
nor the similar action brought by Rufus Hatth y,
! ever come in any shape.
Tho opinion Of the General Term Is written nv r.a
Freedman. who first refers to the agreement Of Jaru
10, 1884, which provided for the purchase by the v,s
ern Union Company of the property, rights and fr,,
chIses OF the American Union and the Atlantic A,
Pacific Telegraph Companies at the price Of Sl5O0ona
for those OF the former and Of 100000 for thos
the latter payable In the capital stock Of the wes.
Union Company. It was further provided that the IA
ial stock Of the Western Union Company should be n
creased from $685. 926,590 TO $sO,0Oo,OO0 The p,v
stock to DO Issued in payment OF the property an
American Union and Atlantic and Pacific Telegrsr.
Companies and the rest OF the issue, amouniiass
$15. 52659O. to go to the present holders Of Weston
Union stock to represent the companys inyestneu.
surplus earnings since July l. 1886. The compls,.
alleged fraud the part of the directors in the eror
ton of the agreement but the Judge says the aIk-
tons sustained by the proof at the trial Jutr
Freedman then aludes to the decision OF Chief Juds
sedgwick IN which the latter continued the tempczu
Injunction obtained by Mr.. Williams. Judge sedgvi.
had held that the Western Union Company did not hsr
the power TO Issue that part OF the new stock which y
10 represent surplus earnings, first because IL wan
attempt TO turn earnings into capital and secondly Be-
cause an exchange Of the interest Of the shareholder
individually IN the aggregate, IN the invest0ent II
past earnings for tho proposed shares would be aF
than she nominal value of the proposed capital" Upn
the trial OF the action the had been materaIJ
changed In al particulars. IL shOwL thstAs
shareholders had consented TO the investment Of
earnings OF the company and could not therefore
on cash dvidends 10 also shown that the investment,
Of earnings OF the Western Union Company had been
clared formally by the directors 10 be worth much mon
than $l5,526,500. The evidence at the trial showed thai
the property OF the American Union Company WORT
SI5OO0OO0 and that of the Atlantic and Pacific Con
pany So 100000 The total value OF the property ownel
aud acquired Oy the Western Union Company was fay
worth $50. 900, 000 The consolidation agreement bad
been ratified by holders OF 32j 93l shares OF the
ita stock or much than three forths OF the to
number The made at the trial being stated
less it could be shown that the old and prOperyd
the Western Union Company was not equal 10 ss0os,-
900 the appeal presented the naked question OF kF
whether the agreement Of January 10, 1884, IS cOntr
to law" At common law the powers OF corporatioM
were such ana such only the statute conferred re
charter o. the corporation the Of Its pow
ers. The enumeration OF the charter rights implied u
exclusion OF all Others. The rule of the common hs
had been made the statute rule also.
THE STANDING OF THE PLAINTIFF
However, a court Of equity would not grant relN
against an act done in of corporate power s
the complainant had standing In equity 10 DO heart
But when the application disclosed that which was
positively unlawful then equity followed the law anf
was peremptory." Where the wrong complained Of
affected the public the court would INTERFERE whatever
was the standing of the complainant 1t Therefore
important 20 consider the standing OF the phintifh
this case. He became shareholder on January q
1851 three days after the execution OF the consolidate
agreement so that the inference very strong that
purchased with notice of the agreement. The pLHuf
did not begin his action until every formal step had btr
taken by the company render the agreement legal and
binding Under these circumstances the plaintiff mus
establish violation of peremptory statute or re9
law before the agreement could be aside The stat
utes OF this state strkngy peculiar and eynceds
well-deined policy in respect TO corporations. linda
the law Of ls4s under which the Western Union Con
pany was incorporated, 1t require ed, among ond
things that certificate should be filed speeiiyingh
al ~ fha he
shares into which it divided. Provision also msds
for increasing the stock The law OF 1873 made uFna
provision in regard TO the Increase Of the capital so
Of telegraph corporations The law OF 1851 gave
power to telegraph companies to extend their lines md
TO unite with other Incorporated telegraph companies
The law of ls53 permitted Telegraph companies toon
and construct lines without the limit OF the state iS
law of 1870 provided that telegraph companies y
ganized In this might lease OF buy the proPV
and franchises OF any company Organized uiier thcn
of this or any other state and make payment heflM
IN stock pr5yed the consent OF the Shareholders sh
have been given to such lease or sale Inc act .sw
seemed to be the elimination OF series OF sta'usy
enactinents In regard to telegraph cOnpanss
legislation had shown deliberately expanding pnI
suggestion that so important Is the lnlncdaW, sss
mission OF intelligence. that u was worth Whle ~
Legislature TO give It's sanction Tor the uain hnIt
means for the transmission Of Intelligence tbat lova
NAV go By single process To the end OF he ea@'
legislative will so clearly expressed could not DC &
regarded by the courts and the argument thai nss
legislation tends 10 the creation Of monopoes scam
have any weight with them long ms no eostlIuSti
provision had been violated All that the eoares
do was to see that existing statutes were neer sf
nor exceeded but fully complied with. III the peS
ease no constitutional objection existed Inc ps. "a
the Western Union Company therefore 10 1919 al
tssne to the American Union and the Atlantic "a "a
Pacific Com panics stock In payment for thelr sc
not be we'll disputed But that did not touen ss "a
tion Whether the agreement OF January H. lssLn
whole was not In OF the authority eonets,E
the statute, did IL touch the question S,se
ieenity or the ilegay OF the proposed divsi T,s
shares among tho shareholders OF the western VS.
Company. . - 49,, ,,,oarv hsa he
power TO Increase its capital stock upon ,ho PHI Us
consent Of the stockholders, and that sucn 10
given the power could only be exercised aecot , ~
law Ordinarily the law required that sda qua 9s TIE
10 be issued by corporation should oe pau n,ortas
terms of the agreement OF January 10 did Bo ssr-
that the distribution of the shares AMONG
panys own shareholders should be made upon so'a
vallie being returned by the sbareold'Is' Nv, ueat
upon any new yane to the company Lhe . A. sAsrss
was sought he upheld upon the theory tha q
distributed represented the company NV az The
surplus earnings since 1866. IL was tDe saphhaes
I'm A eli