New-York tribune., 1907-06-26
COURT BLOCKS MERGER.
COLBY GETS INJUNCTION.
Point for LGzoyer in Equitable
Mercantile Ficht.

Justice Mccall in TIE Supreme Cour. has &C.
sued order temporarily enioininq tho r-oroso5
merger OF the Mercantile Trust Company and
the Equitable Trust Company. Bainbridge Colby
who was counsel for the Alexander interests in
the Alexander Hyde affair, obtained the tenn
porary restraining order. When Paul Morton
became president of the Equitable Life he
s24 600 retainer
MT Colby, up to few days ago, was the at
torney for the Equitable Trust Company. resign
ing. however, 10 bring the present suit
Argument has been set for Tomorrow Mr.
Colbys complaint challenges the good faith of
the State Superintendent of Banks and also the
good faith of the Equitable Life
Inc complaint, which is signed by ex-Judge
Cohen. Of the firm of which William NJ WINS
the former Republican MayOralty candidate is
the head. tells of the Incorporation of the Fuui-
table Trust and the Mercantile Trust under spe-
cial acts of Legislature rather than under the
general banking law.
The Equitable Trusts original nanoa ,ndar
which 1t was incorporated in 1871. says Mr.
Colby, was the Traders Deposit Company
While the company now known as the Mercantile
trust was Incorporated in 1870 as the F1reproof
WaTehousing Company.
MI Colby alleges, therefore, that the two COM
panies cannot be merged either under the bank
ing law or under the conditions Of their respec-
tive charters
The complaint declares that the terms of the
merger are in violation of the charter rights of
the stockholders of the Eouitabie Trust Com
pahy, and that the greater part of that COM
panys property will be diverted wrongfully TO
the Mercantile Trust Company through an act
OF unlawful appropriation" Mr. Colby holds the
merger illegal because, he says the boards OF
members in common, and the agreement of the
merger was drawn up and executed by indi-
Viduals acting for both companies at the Same
time.
Mr. Colby alleges that Equitable trust stock
holders. in accepting the stock of the Mer-
camille instead Of the cash value of $3.50 for
their two shares. suffering a loss of S135
share. whereas the stockholders Of the Mercan-
tile trust. surrendering two shares Of their pres
ent stock representing an aggregate book value
Of S69s, get two shares of the stock OF the new
company with a book value Of 5000 each-a
total gain Of 1902 the two shares, or S15l
g share
Mr.. Colby says on this proposition that "if
the new stock reaches a market value of $3.50 a
share. then two shares OF that stock will have
market value Of s1,740. and thus every stock
holder Of the old Mercantile Trust Company will
gain twice as much the old Equitable Trust
Company stockholder by such increase"
Mr.. Colby says these common directors are
incapacitated from acting on a proposition such
the merger.
Mr. Colby complains also. as policyholder of
the Equitable Life, that the Equitable Life owns
1851 shares of the stock, that loss OF S135
a share from the book value of these shares
WOuIo lIo rqullaple Lie 10 tne extent OF
S1961.6S5 It is alleged in the complaint that
among the present board of the Equitable Life
Mr. Krech. John J. McCook Paul Morton. Mr.
Synder and Mr.. Tarbell are also directors Of the
Equitable Trust Company. and purpose to pro-
cure the consent of the Equitable Life on its
very large holdings OF Equitable Trust stock to
the merger agreement Mr.. Colby questions the
good faith of these common directors cooper
ating in the scheme.
Mr. Colbys complaint charges that the notices
published simultaneously in the newspapers
concerning the merger announced that applica-
ton would be made 10 the Superintendent OF
Banks for his approval on June ii. while, as a
matter of fact. such application had already
been made with haste and secrecy at a night
hour, when the president of the Equitable Trust
visited the State Superintendent of Banks. not
IN his office in the banking department but in
hotel. The complaint charges that this act
constitutes bad faith the part of the Equi-
table Trust Company's dacers and directors
and that the State Superintendent has given
his approval without such careful investigation
as the law contempIates he should exercise be-
fore the performance Of important judicial
function.
Assuming that # bought its Equitable Trust
stock at about S511 80 share, disposing OF
10000 Of them at S435 a share, It is contended
that the Equitable Life will lose about S165,oOO
by the deal
Mr. Krech ISSUED the following statement:
The proposed merger was adopted by the unanl-
nous vote OF the directors OF both companies and
g. n be submitted TO The stockholders at meetings
called for July 3 1t has already been assented
20 by practically all Of the stockholders or the
two institutions
The treatment Of the shareholders OF the Equl-
table Trust Company could not be more just or
fKir To them. They given the choice OF taxing
sl35 a share IN liquidation Of their stock or one
share OF stock Of the merger company for two
.beres NJ Fouita bic stock These terms not only
coYnport closely with the respective market quota
tions for the two stocks but also represent their
relative annual earning capacity.
The annual eaEnings Of the Mercantile trust
Company for the last five years have been In ex-
cess Of 20 per its capital STOCK while those
Of the Equitable, since the increase was made IN
the capital stock. have been slightly less than half
this rate.
The merger company will start with capital Of
100000 a surplus approximately Of Sl5ovo0O and
total resources OF about s7s,0oo0oO. In view OF
advance Of the policy distribute practically all
the earnings 10 shareholders in dividends Share
holders Of the Equitable Trust Company have been
receiving dividends the rate Of y per cent per
snnurn- BY this policy their income will be more
thar doubled
Mr. WINS in G. statement issued lest night.
epoke OF predatory methods Of finance and
The service of Mammon." challenging the ac-
curHcy Of the statement that the Equitable
Trusts shareholders are TO receive S435 a share
sn liquidation. and criticising Mr.. Morton, Mr.
Krech ard others. Mr.. WINS alleged that The
Mercantile expects ''by the issue of 100000
additional shares, 80 be forced the Equitable
tTrust) shareholders, 20 acquire some S9,VO,OOo
OF surplus in the treasury Of the Equitable
a1nc1rrn r.rro TEJT WAITED