Aberdeen herald. [volume] (Aberdeen, Chehalis County, W.T.) 1886-1917, 1904-01-11
NOT IN THIS STATE
CORPORATION STOCK MUST NOT
BE JUGGLED.
Important Decision Handed Down by
Supreme COurt.-NO Company Can
BE ReOrganized for the Purpose
of Freezing Out Minority Stock.
holders.

Olympia, Jan. 6.-The death knell
OF the practice OF freezing out the small
stockholders in large corporations by
reorganlzing the company is sounded in
this stats by a decisi n of the supreme
court denying the right of a majority to
do that very thing in the reorganiza-
ton OF the Spokane Falls Gaslight Com
pany. The issue came squarely before
the court in this case, and there is no
installing the ruling OF the court in the
matter. The real issue was the right
of a majority of the stockholders of a
prosperous corporation to dissolve over
the protest of the minority.
1t is conceded in common law that
this could not be done, but state stat.
ute dealing with corporations provides
that the superior court to which appli-
cation is made may disincorporate a
company on the showing that two
thirds majority of stock holders had vot-
ed to dissolve and that due notice had
been given, creditors being satisfied
with such legal steps taken. 1t was
contended that under this statute two
thirds majority had the right to dis
solve the corporation for any purpose,
even, as was conceded in this case, to
get rid of uncongenial stonckholders.
The majority of the stock OF the Spo-
kane Falls Gaslight Company fell in
to the hands of Eastern bondholders.
Most OF the minority stockholders sold
out to the majority, but Charles Theis,
who held eight shares of stock, refused
to do so. The majority OF the stock hold
ers voted to Sell all the company's prop
erty. Theis was unsuccessful in OBJ.
tanning an I'M junction in the Spokane
county court to prevent this, and the
plant as sold to Charles S. Reeves,
VIII o in turn sold to the Spokane Gas
Company, organized for the purpose.
The market value of Theis' stock was
placed to his credit in the bank. Later
the court granted him the right tc file
supplemental complaint, bringing in
to the proceedings Mr.. Reeves and the
new company. He was again unsuc-
cessful in obtaining an injunction and
appealed to the supreme court.
The testimony IN the case, end espe
l.. W.lO
managing the reorganization, showed
conclusively that the only object OF the
dissolution OF the corporation was to
get rid of the uncongenial stockholders,
right they deemed they had under
the statutes. AS to this the supreme
court says, after reviewing the statute
in question and the evident object for
which it was framed.
Decision of Court.
"But court OF equity will never aid
in the preparation of a fraud simply
because application is made in empty
form of law. Its powers are not 70 81
percial or so restricted. Equity, we
are told, is the correction of that
wherein the law, by rea !on of its uni
versatility, is deficient. He who asks
its aid must present nimself with clean
hands. Its special mission is to re-
lieve from fraud and to enforce the OBJ
servation of broad and just principles"
Further the opinion points out that
under common law neither two-thirds
majority, nor any majority, has the
right to iugele with the corporation or
| wv law. vi TIC cuOTt W kcL Tlu vi Hi
nor stockholders the opinion says:
"This practice is one which is fire.
quently INDUCED in for the purpose of
what is described in vulgar phrase as
freezing out small acknowledgements
compliance with the letter instead of
the spirit of the law, pe,nicious prac-
tice which courts of equity cannot too
promptly condemn. 1t might
with as much reason he concluded that
man could escape responsibility by
changing his name. and that by such
change his moral and financial rela.
tons with those with whom he was en-
gagged in business under the old name
would be affected.
1.-The result Of successful practice
such as is attempted here will be that
minority stockholders will Away. be
at the mercy of the majority. If the
enterprise falls they bear their proper
tion of the losses. If, on the other
hand, il succeeds, as soon as it passes
the experimental stage and the oppor-
tunity is presented to finally reap the
reward of a judicious investment, they
are coolly elected from the corporation
by the majority OF the stockholders,
who appropriate to themselves the in.
creasing profits. The court reverses the
superior court of Spokane county and
directs the issuance of the injunction
prayed for by Mr.. Thies to prevent the
dissolution of the old corporation. The
opinion, which ia concurred in by the
entire court, was written by Justice
Dunbar.
BOILERS BLOW UP.