The times. [volume] (Richmond, Va.) 1890-1903, 1897-01-16
AHINIEICENT DECISION.


The Court Of Appeals of New YORK
has inst made a decision that Is OF inc
utmost Importance TO business ah"'iS
generally. and it Is one that We are
surprised has not been made long ago.
and worked into the body OF our Juris-
prudence. IL Is in the line OF giving
full and complete protection, through the
hand Of court OF equity, TO minority
stockholders in incorporated companies.
The Court holds that the majority STOCK
holders I'm an incorporated company Wi'l
not be permi,ted 10 use their control oil
the corporate affairs In such way
AS Will divert TO themselves all the behe-
6clal results OF the corporate business
Wrecking railroad, through control OF
a majority of the stock. 80 as to buy
Il in cheap, has long been iavori'e
practice of piratical capitalists but the
New York Court holds that In such
case compliance with technicah'ieS anu
the forms OF the law VIII not De per
miticd TO GUST minority stockholders OF
tboir substantial rights. In the case
before the Court. the New YORK Central
railway. having resolved TO acquire t"e
York and Northern railway cheaply' Eol
possession Of a majority OF the STOCK ana
bonds of the latter company.
II thon proceeded to reduce the earn
ings of the York and Northern by re-
fualng aud diverting traffic, so as TO
create an apparent cause for lore
closure. The foreclosure was forced,
without regard for the interests OF the
minority stockholders. and al the sale
the New York Central bought the YORK
and Northern. Every step was in con-
formity with the letter of the law but
every step was equally violation OF the
spirit of the contract which stockholders
impnedly make with each other when
they 20 into an enterprise. The Court
of Appeals put its foot down.
therefore, ana said that all that
had been done must be un
done and that the business OF the road
must be run according to a plan that
would allow the minority stockholders
to have the legitimate outcome OF their
input i'm the capital stock Of the COM
many. This equity Of minority stool
holders is one OF the most obvious ones
Imaginable. yet We see corporations
every day run I'm total disregard OF the
rights of minority stockholders The
favorlte trick Of the majority is TO vote
themselves large salaries, and then fritz
ter away whitever may De earned in eN-
cess of what they take. Action Of this
sort is a plain violation OF the implied
contract between stockholders. and II IS
the plain duty OF q court OF equity when
a fraudulent purpose of this sort is DIS
closed. TO take possession Of the subject
and compel recognition and respect for
the rights of the minority. But. so far
as we are informed. this decision OF the
Court of Appeals of New York is the
only one in which court has reached
the full measure Of its authority
and duty and has notified majority
stockholders that they shall not abuse
their power, TO the injury and ruin Of
those who are really their partners, and
towards whom they owe as complete and
nice faith as one partner in a mercan-
tile co-partnership can owe 10 another.
This decision Of the New York Court
Of Appeals is destined TO become "a
landmark N the law. out OF which We
predict a most beneficial heading OF
equity Jurisprudence will grow.