The Indianapolis journal. [volume] (Indianapolis [Ind.]) 1867-1904, 1897-02-14
THE CASE is DISMISSED
JUDGE BAKER DROPS THE CHURCH
COMPLAINT WITHOUT PREJUDICE.
Plaintiffs Did Not Proceed In Right
Why to Have the Company's
ROttenness Exposed.

the Citizens Street-railroad Company His
order was that the bill be dismissed without
prejudice and that the demurrer be sus-
tanned. Counsel for the defendants objected
to dismissal without prejudice but Judge
Baker explained that the court wished to
give the complainants the chance TO invoke
the aid of a higher court if they should see
fit Mr.. Wallace said the case would be
taken up at once 10 the Court of Appeals.
The entire day up to clock in the after
noon was occupied by the argument of Mr..
Miller for the street-car company. He had
piled up before him on the table a number
of law books from which he read frequently
and copiousiy in support of his views.
Courtesies between Mr.. Miller and Judge
Baker were INDUCED in at the beginning,
the former suggesting the hope that he was
addressing a court that would receive what
was said in hospitable spirit. and the
court answering Mr. Miller in turn that its
moral conceptions of the matter involved
would not interfere with a fair hearing.
Mr.. Miller said that If it was a moral in
iquity for corporation TO issue its stock
and give II away, then Ii is also question
differing only in degree where it issues its
stock upon what Is known to be a grossly
insufficient consideration and puts 1t upon
the market for sale. The BILL he said had
courses of action. One that that ir
which nobody else than the plaintlns had
any interest. In the second place, he said
they asked the courts interference to seize
the property OF the corporation and as they
say. 10 administer Ii IN equity upon the
ground that the plaintins have been
Wronged as stockholders and on account OF
wrongs done TO the corporation, that they
asked upon the application OF d stakeholder
who owns only two-nfths of per cent. OF
the stock.
ARE STOCKHOLDERS POWERLESS.
Judge Baker asked if any exception arose
as 10 the duty of attempting to evoke the
aid of stockholders TO remedy the miscon-
duct of the directors out of the fact that
under the law of Indiana, the directors are
given the exclusive control of the manage
ment of the corporation. so that the Stock
holders are practically powerless so far as
the operation of the board of directors is
concerned. Mr.. Miller replied that, if 1t
should be shown that the board is acting
ultra wires wasting the assets, it would
be perfectly proper for the court OF equity
10 enjoin their action until there could be
change OF management. He explained
that the plaintiff had no standing IN a
court OF equity until he showed that he
had not perfect remedy outside. Judge
Baker remarked that if Mr.. Miller was cor
rect IL would seem there was nothing
further to be sand in the case.
Continuing his argument, Mr.. Miller said
that as between the creditors and the
ether shareholders. the court was power
less to make a decree adjudicating the
plaintiff 10 be the owner of shares of
the companys original issue. he said the
plaintiff had no cause of action because,
on his own showing. he owned no stock ex-
cept the stock which he got through
Mckee. He said they had no foundation
for a receivership because receivership
could not be incidental TO the transaction
1t would only be auxiliary to IT.
In closing his case Mr.. Miller said: THE
evidence is Overwhelming that this suit is
sham. 1t is not brought here to redress
he n
would not hesitate TO make the affidavit
required 1t is a scheme TO get control Of
this property and to wreck IT,
THE COURTS DECISION.
AT the close of Mr. Miller's argument
Judge Baker rendered his opinion, as fol-
lows:
Il am as we'll prepared to make a ruling
upon the demurrer at this time as / should
be If l held it longer for the purpose of de-
liberation and examination of authorities
The court has invited the fullest discussion
of all the questions that appear TO be raised
by the allegations of the bill. more for the
purpose of seeing whether or not there was
any ground upon which equitable relief
might be afforded than because the court
entertained serious doubt as to the decision
that must be made even upon the first
presentation of the questions involved in
the bill. The bill Is one which sets out
facts or transactions that appeal very
strongly to the conscience of a court of
equity. and one which. If any substantial
basis could be found in the principles of
equity Jurisprudence, would incline the
court to support the suit without very
much regard TO technical questions that
might arise.
This is a suit brought by the plaintiffs,
citizens Of the State Of New York against
Company, and other individual defendants
who are citizens of the State of Indiana.
ers Of aoo shares of stock our of 5S ooO
shares issued by the corporations; that In
the year 1895 they purchased these 200
shares of stock in good faith. for the pur-
pose of an investment. i'm the open market,
at the price of 40l2 cents of the face value
of the stock: they allege that recently be-
fore the filing of their bill perhaps a
month. they discovered that something over
two years before the purchase of their
chased for 81 25Oooo the entire stock of the
railroad company. consisting of 1900
shares OF sdoek nad conceived the idea OF
OF placing an incumbrance of A.000.G00 upon
the railroad property; and that the purpose
of such proposed mortgage was 10 enable
Mckee and Werner by gift to obtain possess
d -, -, h ~ tD ISSUE Il STOCK,
of their proceeds to reimburse them in full
for the original purchase price that they
had paid IN acquiring the original stock
that was outstanding at the time of their
purchase. and which gave them the entire
ownership OF the corporation and its as
FURTHER ALLEGATIONS.
1T Is alleged that in furtherance, and for
the purpose of consummating this alleged
fraudulent scheme and combination Mckee
and Werner transferred a single share to
each of certain other persons who are
named. in order to qualify them to act as
directors; that these parties were elected
as directors. and that Mckee and Werner
and those parties who had received by gift
a single share of stock constituted the
board OF directors and the entire member
ship OF stockholders of the corporation. and
that they all. stockholders and directors
with a knowledge OF the fraudulent pur-
poses on the part of Mckee and Werner.
and acting in concert with them board
or directors. and as stockholders voted to
shares. and TO issue a mortgage upon the
property OF the corporation 10 the amount
or four million dollars. III is further alleged
that this fraudulent combination and
scheme was fully consummated by these
stockholders and directors and that Mckee
and Werner We're given. without any con-
sfderation whatever, the 5000 shares OF
stock. and that they received out of the
bonds that were issued the two and one
quarter millions OF dollars that they had
paid for the property: and il is charged
that 4 large sum of money out of the pro-
ceeds OF the bonds and stock IL IS further
charged in the bill that IL was one of the
purposes OF this fraudulent combinati and
conspiracy that the stock should be gam
bled with: and by articles known TO those
who deal upon stock boards. that an arti-
fetal value in excess OF any real value that
the stock possessed. should be apparently
impaired TO It. with view of unloading
he II l.