The news & observer. [volume] (Raleigh, N.C.) 1894-current, 1896-04-17
A BLOW AT TRUSTS.
An important Decision Handed Down
by the Supreme Court.

pY me supreme Court.
In the case of Harvey against Lin
Vile improvement Company. appeal
from Mitchell, the Supreme court de-
cides an important question. The
court says any combination by which
number of stockholders agree to
place the voting of their shares in the
iTreyocable power of another is con-
trary to public policy. Irrevocable
proxies to vote stock have been given
to party who acted as trustee or
agent, but the courts hold that thev
may be revoked at any time The
stock has been placed in the hands Of
a trustee with power to transfer same
to themselves and to vote the stock.
but the courts hold that any holder of
trustee'e certificate may demand
back his part Of the stock. In short.
all agreements and devices by which
stockholders surrender their voting
powers are invalid. The pooling ar
rangement admitted to have been en-
tered into by majority of the stock
holders in the present case is contrary
to public policy and void. This de-
cision, which was written by Judge
Clark. strikes a blow at trusts and is
as follows:
at common law stockholders could
not vote by proxy. Taylor VS.. Girls
void. IA n. j., Law ~, and other cases
cited in Cook on Stocks, sec. 61O. This
is now otherwise but it is still held
that each stakeholder, whether by
himself or By prey. must be free to
cast bis vote for what he deems for the
best interest of the corporation, the
other stockholders being entitled to the
benefit Of such free exercise of his
| Judgment by each, and hence any com
bination or device by which any mum
Der of stockholders shall combine to
place the voting of their shares ia the
! irreyocable power of another, is held
contrary to public policy Cone VS..
Russell, IS n. J. Eq. 2J9. Various de-
vices have been resorted to for the
purpose Of so tying UP the stock that
no one Of the parties to the pool" or
combination can break the agreement
"lrrevOcable' proxies to vote the stock
have been given to a designated party
who acted as trustee or agent, but the
courts held such proxies not frrevo-
cable and that they might be revoked
at any time. Cook, supra sec. 610, 622;
Woodruff VS.. Dubuque, 30 Fed. Rep.
81; Vanderbilt VS. Eennett. 2 Railway
and Corp L. j. 400 Another plan was
10 place the stock OF the various par
ties in the hands Of trustees with
power to transfer the stock to them
selves and to hold and vote the same,
trustees certificates being issued to
the various parties specifying the
amount of stock so deposited by them
and their interest in the pool, but the
courts held that any holder Of trus-
tees certificate might at any time de-
mand back his part Of the stock.
Woodruff vs.. Dubuque, supra and other
cases cited in Cook, supra sec. 622. An 4
other device was that the parties con-
tracted together not to sell their stock
for a specified time or only to pur-
chaser acceptable to them all. 1t was
held that Notwithstanding such con-
tract any one of the parties might sell
his stock to any one he pleased and at
any time. Fisher VS.. Bush, IS Hun
G42; Williams vs.. Montgomery, 68 Hun.
416. Another plan was to restrict by
a bylaw the right to transfer stock,
but this was held illegal Morgan VS..
Strufhers, 131 u. S. 246 and other eases
cited in Cook. supra sec. 1872. A pro-
vision that purchaser of a certificate
Of stock who sold in violation of the
agreement should be entitled 10 the
dividends but should receive no right
to vote, was likewise held invalid
Harper vs.. Raymond, Bosw. IN. W
20. Numerous decisions affirm the cor
rectness Of the above rulings which are
based upon the illegality, because
against public policy of permitting
large blocks of stock to be reyocably
tied up for the purpose Of being voted
in soIido fol the interest OF a clique
or section of the stockholders and not
according to the Judgment of each in
dividual stakeholder for the benefit of
the entire corporation. There are some
few decisions trenching more or less
upon the principles above stated but
we deem them contrary to sound prin-
ciples Of public policy and hence not
authority, IN short, all agreements
aud devices by which stockholders sur
render their voting powers are invalid.
Thompson Corp, see. 6,404. The
power to vote Is inherently annexed
to and inseparable from the real own
ership of each share and can only be
delegated by proxy with power of revo- /
cation The pooling" arrangement, |
admitted to have been entered iufa nv |