Case Name: Gilchrist and others, Executors, Appellants, vs. Highfield and others, Respondents
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1909-10-26
Citations: 140 Wis. 476
Docket Number: 
Parties: Gilchrist and others, Executors, Appellants, vs. Highfield and others, Respondents.
Judges: 
Reporter: Wisconsin Reports
Volume: 140
Pages: 476–486

Head Matter:
Gilchrist and others, Executors, Appellants, vs. Highfield and others, Respondents.
October 7
October 26, 1909.
Corporations: Purchase of own capital stock.
A corporation has power to purchase shares of its own capital stock when such purchase is made with no illegitimate or fraudulent purpose and no rights of creditors suffer thereby. Tim-lin, J., dissents.
Appeal from a judgment of the circuit court for Douglas county: A, J. Venue, Circuit Judge.
Affirmed.
This action was brought by plaintiffs, as executors of Ella J. Potter, a stockholder in the Webster Manufacturing Company, to declare invalid a purchase of 364 shares of its stock by the corporation and the payment therefor of $25,480 of corporate money, and to compel the three directors voting for such purchase, namely, Highfleld, Gard, and Alvord, to refund to the company such sum so paid. Webster Manufacturing Company was organized for the general purpose of manufacturing chairs. It had $225,000 of nominal stock divided into 2,250 shares, all of which, .except 119 shares, were outstanding. Highfleld and Brigham, in equal partnership, owned 1,126 shares. Eor several years they had been the two active managing officers for the company, Highfleld as business manager and Brigham as superintendent of manufacture. Their personal relations had become strained so that they could not work harmoniously together, and Brigham had insisted that one or the other must get out, and either his stock must be bought so that he could retire from the company, or Highfleld must sell out and withdraw. In pursuance of this view he gave an option to sell his 564 shares of stock at $70 per share to Highfleld or the corporation, in July, 1907. The last previous financial statement of January 1, 1907, showed assets of the company $214,519 in excess of all liabilities and of tbe capital stock at par and absence of any debts except current payroll. Highfield availed bimself of the option to buy 200 shares, which, it appears, was up to the extent of his financial ability. A directors’ meeting was then held, at which the three defendant directors and Brigham voted that the corporation purchase the remaining 364 shares upon the option, and accordingly that stock "was assigned to the corporation, the certificates canceled and new certificates issued, and the purchase price paid to Brigham, who is not made a party to this action. At the next ensuing stockholders’ meeting the act of the directors in making such purchase was fully ratified, such ratification,, however, requiring the support of Highfield’s votes to supply the majority. The court held that the purchase of the stock was in accordance with good business judgment in the interest of the corporation and for no ulterior or improper purpose, and rendered judgment dismissing the action, from which plaintiffs appeal.
Eor the appellants there was a brief by Luse, Powell & Luse, attorneys, and H. 11. Spencer, of counsel, and oral argument by L. K. Luse.
Eor the respondents the cause was submitted on the brief . of H. V. Ga-rd.

Opinion:
Dodge, J.
The purchase of the 364 shares of stock by the-corporation from Brigham is claimed to be wholly void upon the ground asserted that a corporation has no power to buy its own capital stock. This contention seems to need little discussion. ."While the English authorities are to that effect, and while similar holdings have been made in some of the states, the great weight of authority is in favor of such power, when exercised with no illegitimate or fraudulent purpose- and when no rights of creditors suffer thereby. In the face of this conflict of decision this court long ago, upon support from the supreme court of the United States, adopted the view that, generally speaking, corporations have such power, and has persisted therein so long that we have no doubt property rights of great magnitude have grown .up in. reliance thereon. Shoemaker v. Washburn L. Co. 97 Wis. 585, 73 N. W. 333; Calteaux v. Mueller, 102 Wis. 525, 78 N. W. 1082; Marvin v. Anderson, 111 Wis. 387, 87 N. W. 226; Pabst v. Goodrich, 133 Wis. 43, 113 N. W. 398; Atlanta & W. B. & C. Asso. v. Smith, 141 Wis. 377, 123 N. W. 106. The law in this state must be considered so settled.
Another contention is that, conceding such power in the corporation, the defendants, acting on the board of directors and also voting their stock in ratification of the director's' act, were actuated by a purpose to deprive the plaintiffs of their just rights in the corporation, especially,by reducing the amount of the voting stock so that defendants would hold a majority thereof — a purpose which was condemned in Luther v. C. J. Luther Co. 118 Wis. 112, 94 N. W. 69. Rut the trial court has found against the existence of any such motive, or any ulterior or illegitimate intent or purpose other than the promotion of the best interests of the corporation according to the honest judgment of the defendants. This finding, we think, is fully supported by a preponderance of the evidence and must preclude any interference by a court with acts in pursuance of the business policy adopted in good faith by the holders of a majority of the capital stock. Theis v. Durr, 125 Wis. 651, 659, 104 N. W. 985; Figge v. Bergenthal, 130 Wis. 594, 616, 109 N. W. 581, 110 N. W. 798.; Gamble v. Queens Co. W. Co. 123 N. Y. 91, 99, 25 N. E. 201.
By the Court. — Judgment affirmed.