The San Francisco call., 1904-04-10

The legal struggle for the control of
the Orovslle Gold Dredging and FIX
plorauon Company. which was inaug-
urated some months ago by the filing
Of a suit for an injunction restraining
certain of the directors Of the corpo-
ration from voting 10000 shares of
stock alleged to have been illegally
issued, terminated yesterday in Judge
Sloss' court, when an order was made
refusing the injunction and dismissing
the order to show cause upon which
the alleged conspirators were halcd
into court. In an opinion handed
down by Judge Sloss in the matter he
held that the showing made by the
plaintiffs i'm the action did not war
rant the issuance of the injunction be-
cause il was shown that the acts of
F. w. Bradley, the alleged arch con-
spirator, and his fellow alleged con-
spirators, J. w. Goodwin and L. j.
Holton, were known to a majority of
the directors; that when the first
steps were taken which eliminated in
the issue Of the disputed shares the
defendants had the apparent control;
that the design of Goodwin to obtain
control had been, for some months.
known to many IL not all of the plain
tiffs and had been approved by some
Of them, and that no intimation had
ever been given to him or aSy of the
defendants that such design was dis
tasteful 10 any Of the stockholders.
The court said at the outset of its
opinion:
The stock was sold for its full value; the
purpose for which il was sold was a valid and
proper, II not necessary. corporate purpose. As
against all this, ] 60 not think the court
motive especially where injunction would
deprive the defendants, Goodwin and Holton,
who have apparently IN good faith parted with
the most important attributes OF its ownership.
An injunction should not be granted where the
o1estion Of motive is concerned. the piaintiff $
case IS not IN my judgment. sufficiently clear
10 warrant the granting of the relief sought
RIGHT TO STOCK.
Judge Sloss also decided against the
plaintiffs on their claim that stock
holders in a corporation have a prior
right to stock in the concern which is
placed upon the market or is offered
for sale. He holds that the stock
holders have a prior right to stock
where it is issued as a result of an
increase in the capital stock, but that
this right Of pre-emption does not ap-
ply to stock issued from the original
authorized capital.
On this important point, decided for
the first time in this State, Judge Sloss
says:
The rule is we'll established that
those who are shareholders when an
increase of capital stock is effected
enjoy the right to subscribe TO the new
stock in proportion to their original
holdings and before subscriptions may
be received from outsiders. C26 Am. and
Eng. Ency Law, I'd Ed, 947). The con-
Jention Of the defendants is that this
right of pre-emption, so called, applies
only where there has been an increase
of stock beyond the amount original
ly authorized by the charter articles of
Incorporation; that of the plaintiffs
that il applies TO all issues of stock
not Heretofore issued, whether a part
of the originally authorized capital (as
here) or not
ION this point the authorities are not
in harmony. The true rule, I think
is to be ascertained by a consideration
of the reason upon which the doctrine
is based. 1t is argued by the learned
counsel for plaintiffs-and no doubt
correctly-that the right of pre-emp-
ton, TO whatever extent il may exist
rests upon the ground that the owner
ship Of shares of stock carries with il