The San Francisco call. [volume] (San Francisco [Calif.]) 1895-1913, 1895-10-21
MUCH MORE THAN A TWO MILLION
DOLLAR SALE INCIDENTALLY
INVOLVED.
POINTS OF THE DECISION.
ALL THE JUSTICES, EXCEPT HAIR
RIsoN, AFFIRM VILLAGES
RULING.

the bonds of that company to be legally
drawn and of legal value. The opinion
was rendered by the court in Los Angeles
and the text of the decision was sent to the
Justices yesterday. Commissioner Searls
wrote the document and Commissioners
Haynes and Britt concurred. Chief JUS
tees Beatty and Justices Mcfarland, Van
Fleet, Garoutte and Henshaw signed the
opinion, and Justice Harrison concurred
in an opinion of his own. The decision
established the bonds issued by the Market
street Railway Company as good and suf-
cient.
The original suit had for plaintiff the
Market-street Railroad Company and for
defendants l. w. Hellman of the Nevada
Bank and others. Hellman contracted for
large number of the bonds and to test
the validity of their issue refused to accept
the same when they were issued, The
Market-street Railway Company sued TO
have the Nevada Bank and Hellman, its
president, accept the bonds contracted for.
The suit was brought before Judge Wal
lace and he entered pro forma opinion in
the case, and from that opinion On appeal
was taken. The judgment just rendered is
upon that appeal.
After concentrating its consolidation
the railway company entered into con-
tract with the bank for the sale of 1.0O0.-
600 worth of bonds, subject, however. to
this condition: that the amalgamation and
consolidation of all of the railway corpora
tions into the Market-street Railway Com
pany was properly and legally effected,
and that the new corporation was entitled
to dispose of the property of each and in
cumber the same as though it were the
legal successor of all these constituent cor
porations. The bonds were rendered and
the bank refused to accept and pay for
them upon the ground of their supposed
invalidity, and to avoid the expense and
delay of an ordinary action at law an
agreed statement was prepared and the
controversy submitted to the Superior
Court without action.
The first point made by the appellant in
favor of a reversal from the judgment of
the Superior Court was that the consolida-
ton was not legally effected. The main
point in this contention was that many of
the roads were incorporated prior to the
provisions of the Civil Code which took
effect January l, 1878. These provisions
demanded that the laws under which all
corporations were formed must be re-
pealed or applied subject to the provisions
of these sections. In this was found a
point in the consolidation of these various
corporations the legality of which the de-
tense questioned.
1t was also claimed that proper vote of
the stockholders of each corporation had
not been taken upon the matter of CONSOLE
dation. 1t was claimed that many of the
roads were brought into the combination
by the vote of stockholders, which was not
in any way representative, and that there
fore the remaining stockholders were not
bound to recognize the consolidation of
their property with the central corpora
ton.
This consent of the stockholders to the
consolidation was the principal issue in
the case. 1t was necessary that the hold
ers of over three-fourths in value of all the
stock in each corporation consent to the
combination. This, it was claimed by the
main corporation, was done by each of the
subordinate roads at dates varying from
September 5. 1893, to October Ii, 1893, and
that the several companies consented to
consolidate Gin such manner as may be
agreed upon by the respective boards OF
directors of said companies" On the 18th
of October the various boards of d.
rectors executed the ARTICLES of CONSOLE
dation, amalgamation and Incorporation
in which the manner, terms and general
provisions of the consolidation were fully
set out. The Supreme Court held that in
the absence of more specific directions in
the statutes governing the case this
consent of the stockholders was sufficient.
It rested then with the court to decide
whether this consent was legally obtained,
or if the dissenting stockholders, of whom
there were great many, had the power to
overthrow the acts of these consentir g
parties.
In considering this phase of the case it
became necessary to recognize that in
some corporations a portion only of the
stock was issued and that in estimating
the three-fourths of the stockholders
whose consent was necessary only the
"outstanding stock" was taken into
account. AS an example the case of the
Market-street and Fairmount Railway
Company was cited to serve as an illustra-
tration. The facts of this case were appli-
cable to all.
The capital stock OF this company con-
sisted of 10000 shares, of the par value of
500 per share, of which number of shares
only 2O50 were ever at any time issued or
outstanding. The holders Of these 205O
shares so issued consented in writing to
the consolidation. This the Supreme
Court says is sufficient. When shares of a
corporation or majority of such shares
are spoken of in statutes the Supreme
Court holds that it usually refers to the
subscribed or issued or outstanding shares.
In speaking further of this the court in its
opinion says: Gas stock or shares which
nave never passed to the ownership OF
stockholders or having so passed have
again been purchased by the corporation
cannot be voted or represented by either
the corporation or by stockholders. They
are not taken into consideration in deter.
mining maiorities where action in corpor.
ate meetings or assent of stockholders is
involved, but when given proportion Of
the stock Is spoken of, it must be construed
TO mean the shares which have passed
from the corporation and which may be
voted.''
1 a L.