New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1907-07-03
COLBY VICTOR AGAIN.
MERGER STAY CONTINUED
Trust Company Stockholders Hare
hight to Sue, Sans Court

justice Blanchard, in Special Term. Part ~
the supreme Court. handed down decision yes.
'eruag continuing the Injunction obtained by
cambridge Colby restraining the nronosed
merger OF the Equitable and Mercantile Trust
companies, blocking. for the present at least
the reported plan Of Thomas F. RYAN. to merge
in'o one large corporation several of the leading
trust companies. Mr.. Colby was formerly the
attorney of the Equitable Trust Company. re-
signing to bring the present action on the
ground That the shares of the Equitable stock
holoers were being sacrificed, the plaintiff being
himself stochholder. The injunction will re-
main in force pending the determination of the
suit for permanent injunction.
The meeting Of the board of directors of the
Equitable Trust Company. consisting OF thirty
two members, at which the proposed merger
agreement was authorized was held on June
Is and attended by twenty members Of the
board Nine Of such directors are also directors
Of the Mercantile Trust Company Three other
directors present officers of the company.
The resolution authorizing the merger agree
ment was unanimously adopted.
The directors of the Mercantile Trust Com
pany met the same day. and the nine direC-
tors who attended the Equitable meeting WEI e
present and again voted the agreement. merger.
JUSTICE BLANCHARD'S OPINION.
Justice Blanchard says in his decision:
"A contract made between two corporations
having common directors is not absolutely void
hut in a proper case and UPON the objection Of
either corporation may be declared void by a
court Of equity" After quoting many legal au-
thorities Justice Blanchard continues:
I :hinx that where the action Of the majority IS
plainly fraud upon or, in other words, IS really
oppressive 20 the minority shareholders. and the
dire OF trustees have acted with and formed
part II the majority. action may sustained
By OF the minority shareholders suing in his
behalf and in that Of all others coming in
etc. 20 e1join the action contemplated. and in
which action the corporation should he made
party defendant. To warrant the interposition Of
the court in Favor II Che minority shareholders In
a corporation Or joint stock association. against
the contemplated action of the majority where such
action Is within the corporate powers. case must
Dc maze out which plainly shows that such action
is so Gar OPPOSED 10 the interests Of he cor
poration Itself as 70 lead TO the clear Inference
that thus acting could have been Influenced
by any honest desire 70 secure such Interests hut
that he must have acted with an Intent n e,b
serve some outside purpose. regardless Of the COW
sequences TO the company and in a manner incon-
s!stent with !ts interests
From the doctrine thus laid down ii follows that
the injunction prayed for upon this motion must
be granted. II the proposed merger aererrnon+ ~
tie defendant corporations IS such that II cannot
Considerably be ratified against the objection Of q
oleseltng stockholder The terms Of the proposed
merger agreement must be examined in The Ueot
OF the principle above stated.
The particular unfairness complained Of by
Mr. Colby consisted Of the effort to merge the
Two cefendant companies having almost equal
assets whose shares were IF practically the
same book value, under conditions which II IS
alleged, would have given the shareholders of
share
stock In the new company for each share Of
their present stock. whereas II sought TO compel
the shareholders in the Equitable company 70
give two shares Of their stock for one OF the new
company.
ALLEGED SCHEME OF RYAN
According TO William VI. WINS, counsel for Mr.
Colby, IT has been understood that the Mercan-
tle-EQuitable merger was get the latter out
Of the way and then later on merge the new
Mercantile with some other companies, so that
the present merger would be only a forerunner
Of a series Of mergers, until the whole resulted
In q gigantic combination OF capital controlled
by Thomas F. Ryan
Paul Cravath. counsel for the defendants, de-
MED last night that there any plan for
further merger Of other companies. He said
The reasons for the merger are fully stated in
"fhdavits Of Paul Morton and Alvin w. Krech
which file in the Colby suit The statement
made with reference 10 plan for further mergers
is absolutely without foundation.
The court said that the capital surplus and un-
divided profits Of the Mercantile Trust Company
aggregate SS,9S6,S SCI, and that for the purpose
Of merger therefore. the capitalization OF the
Mercantile might be regarded as substantially |
equal 70 the capitalization which the Equitable |
Trust Company proposed TO contribute to the |
merged company. Justice Blanchard says fur |
Their:
Upon analysis it appears that the promoters OF
the merger hope 10 upon capitalization con-
tibuted by the Mercantile Trust Company the |
same per cent that that company has earned dur |
ing the last four years; but upon the capitaliza-
ton contributed by the Equitable Trust Company |
they hope 20 earn somewhat less than that com |
pany has proved itself able TO during the last
four years without the assistance of the Mercan-
tile Trust Company
IN other words. the merged corporation does not !
pretend 10 be able 10 upon the capitalization |
contributed by the Equitable Trust Company |
much as that company. under the management Of |
It's own stockholders. has earned upon average |
curing the last four years Nevertheless, the pro-
motors Of the merger ask that the stockholders OF |
the Equitable Trust Company give mp the |
merged corporation their control their invest
fnent and foreso and forever the possibility |
o. ever receiving upon their investment than
nan Of what the stockholders Of the Mercantile |
Trust Company receive upon equal investment,
aho accept, in place OF the earnings which the
perence Of the last four has proved that the
Equitable Trust Company earn, a somewhat |
less amount Of potential prophesied and estimated
earnings based. not upon fact experience, but
upon the prophecy and estimate OF the promoters
OF the merger
he adds that the stockholders of the EQui-
liable Trust Company have promise of no more
thah their investment has earned while In their
own control. and that promise is made payable
IN earnings based upon expectations rather than
upon experience. He points out, also, their hope
less minority in of a merger being out
numbered two 10 one and says that they would
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