Court Opinion

ID: 8846164
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:57:55.979316+00
Date Added: 2024-06-11T17:05:20.979502
License: Public Domain

HAMMOND, J-
I concur in the result reached by the other judges of the court but not altogefher in the reasoning of either of the opinions which they have given. 4 part from the statute of Michigan authorizing railroad companies, under certain conditions, to do that wMch was done in ¡bis case, and apart from the effect of the adjudications of the state courts of Michigan upon the rights of the parties to this controversy, I should have no doubt of Young’s right to *778a decree, — not, indeed, to enforce any lien of tbe judgment be has obtained, either perforce of tbe judgment itself, or of any lien akin to tbe vendor’s lien, nor yet to recover tbe money value of bis shares of stock, — but a decree to charge tbe plaintiff here, who can, in my opinion, not at all occupy tbe attitude of an innocent purchaser for value, without notice, as a trustee of bis corporate property, and responsible to account, as such, either for its value, or upon a sale for distribution among tbe corporate owners, — tbe one or tbe other, according to circumstances. Tbe Toledo & South Haven Railroad Company could claim to discharge itself from this obligation of accounting only by tbe performance of its undertaking to pay tbe $3,-500, however, on tbe facts of this case, that undertaking may have arisen. Not having performed it, there could be no bolding of Young to it, and shunting him off to tbe position of a simple contract creditor; but on. such failure be would be remitted to bis right of an accounting for bis share of tbe corporate property, into whosesoever bands it may have come, and a sale for its distribution, or else tbe payment of its value, otherwise ascertained, in legal-tender money, and in nothing else, if be insisted on bis right to money.
I do not think that any corporation can go out of business, and sell its properties and franchises in entirety, (outside of sales made in tbe ordinary course of business,) and bind a minority of tbe stockholders, by tbe will of tbe majority, to such a sale, upon any principle of the public welfare or like consideration; certainly, not to compel tbe minority, on such a sale, to take chips and whetstones for their shares of stock, — that is to say, anything else than money. Moreover, I doubt seriously tbe power of the state, by legislation to compel the minority to so surrender their property. I do not deny that tbe majority of tbe stockholders, in order to preserve for themselves and tbe minority tbe advantage of a sale en bloc, rather than a resort to a winding up and accounting among each other for their respective shares of tbe corporate property, and to prevent tbe destruction of tbe corporate franchises by a winding-up, might, under some conditions have, in a court of equity, tbe right to compel tbe dissentients to an ascertainment of tbe value of their shares in some other way than by a sale for distribution, • and that ordinarily the market value of tbe shares might be resorted to as a measure of that value, and that upon such ascertainment tbe court might compel tbe dissentients to surrender their shares upon the payment, in legal-tender money, of this value; and, what the court could compel, the stockholders, without compulsion, could do by agreement inter sese. But this power could not be enlarged into any compulsion of assent to a scheme of alienation of the corporate property which left the minority nothing but stocks in new enterprises, or other modes of compensation, for their shares in the corporate property. Ordinarily, in the absence of special powers conferred in the charter or otherwise, by law, the stockholders have, not as tenants in common or joint tenants, perhaps, but as corporate owners or as corporate tenants, if you please, the right to a distribution of the corporate property whenever the company ceases to operate its franchises, and goes out of business, for any cause, whether that of a sale to others, *779or for some other reason; and those who wish to acquire the property without a necessity for this distribution have a ready method of acquiring all the stock itself, and this seems, rightly and justly, the only method; and it cannot be that the majority can substitute other property for that of the corporation, such as stock in another corporation, or the like, and force the minority to accept this substitute as a fund for distribution, rather than to claim their interest in the corporate property, or the money fund it would bring at a sale for distribution. This view brings the result already suggested, that Young would have had the right to a sale of the Paw Paw property —not the consolidated property of the Toledo & South Haven Company — for distribution, and he and the Toledo & South Haven Company, either as direct holders of the shares of the majority stockholders, or as holders of those shares substituted in equity to the rights of them vendors, and not at all as purchasers of the property, he it remembered, would have divided the proceeds of this sale according to the respective shares of each, as represented by their holdings of the stock; Young taking Ms share, be it more or less than the $3,500 which was promised, but never paid, as a consideration for the transfer of his stock, but which, not having been paid, he could not have been compelled to transfer, and, being still the holder, he would, at the distribu lion, take his share as stockholder, just as they would, and there would be no question of vendor and purchaser. The plaintiff could have occupied no better attitude than the Toledo & South Haven Company; for in this view it would have been impossible to hold the position of innocent purchaser for value, without notice, since Young’s right of distribution inhered in the very nature of the properly itself, to say nothing of other facts to put the plaintiff on notice of Young’s rights, as shown by this record. Indeed, this view brings out the equities of the parties quite disembarrassed from the sale of the property to the Toledo & South Haven Company, which sale, while it may not have been void in toto, either as to Young or any one else, could have operated only subject to his equity of distribution; the plaintiff becoming, in the end, a trustee for Mm, and chargeable as such, and not otherwise.
Hut, unfortunately for Young, he did not, and cannot, occupy this favorable attitude as to his stock. I agree with Mr. Circuit Judge JACKSON, that the statute of Michigan in force at the time Young or his vendor subscribed for the stock became as much a part of the charter of his company as if that statute had been written in it, and by that statute the company was authorized to do that which it did in effecting a sale of the property. He held his stock subject to this statutory power of the stockholders to dispose of the property in the way they attempted to do; and whatever disadvantage there may have been, or injustice, to the minority dissentient, arises out of the statute, and is an infirmity inhering in such property, to which shareholders must submit. It is the kind of companv he joined by his subscription. It is not necessary 1» examine closely the questions made as to the alleged irregularities in this sale. My brother judges agree, for reasons they give, that Young’s intervening petition cannot *780be granted; and whatever I might think of these irregularities would be, under the circumstances, quite unimportant. But it is proper to remark that these irregularities are not such as to avoid the sale, either wholly or in part, as to Young, so as to let in what I shall call his ■ “equity of distribution,” already ■ commented on by me. The sale was accomplished under a statutory power, and the title transferred. Out of these irregularities there could grow or be created no lien of any kind upon the property, either as a whole, or as to Young’s share, akin to the vendor’s lien, or of any other nature known to the law; for the law of corporations contains no principle of a lien upon the property of the corporation sold under a statutory power, the statute not providing for the lien. If the stock was sold, that was personal property. If the franchises were sold, that was personal property. If the road, structures, and equipments were sold, that might be real estate. But the technical equitable vendor’s lien could hardly apply, as to that, on such a sale. But, if it did, then it would only secure the purchase money, and not the distributive share of a dissentient stockholder, arising out of what I have called the “equity of distribution.” If it be conceded that under the Michigan statute the dissentient stockholder is still entitled to the money value of his shares, yet the statute provides no lien for that value, the contract of sale by the trustees provides none, and it does not follow that the sale is void for want of such provisions, nor that any lien arises, ipso facto, out of the sale. It is the ordinary case of one selling his land or other property without the precaution of reserving a lien or taking a mortgage to secure the price. Perhaps a timely application to a court of equity by Young ■ would have controlled the majority of the stockholders in the exercise of their statutory power, so as to compel them to exercise that power reasonably, and not to part with the property, or the title to it, until, by the terms of the sale, some reasonable security had been provided for the minority stockholders, as to the payment for their shares; but none such was made, or, if any of his attempts to protect himself could be taken as such, they were not effectual, and the title, having passed, has come into the hands of the plaintiffs, under circumstances which make their position as holders of the legal title such that they stand on an equality with Young in a court of equity. Their equities would be equal to his, and, having the legal title, they would not be compelled to part with it, unless, at least, he should first offer to make them whole by returning the consideration they paid for the property. He let the title to his property pass into the hands of the Toledo & South Haven Bailroad Company, irregularly, it may be; but none the less it did -pass, and the possession along with it. Now, whatever notice they had, or might have had by inquiry, of the irregularities, these not being such as to make the sale void, Young could not avoid it, as against the plaintiff, paying a fair consideration for it, except upon some superior equity to theirs, and in such a case the legal title turns the scale in plaintiff’s favor. Moreover, Young affirmed the sale by taking his judgment against the Toledo *781& South. Haven Railroad Company for Ms share of the price, instead of proceeding to compel the stockholders to 'put into the terms of sale some security for his share. I say, again, he is in the position of one improvidently selling Ms property without providing a security for the price, and it is too late for us to provide one for him. His trustees of the statutory power have, in spite of Ms struggles, injuriously managed the sale, and the responsibility is theirs, perhaps, nevertheless, he is bound by their act in the premises, and we can give Mm no relief.
The state courts of MicMgan reached substantially and practically the same result, by denying to him any lien, and confining him to a personal judgment against the Toledo & South Haven Railroad Company, either upon the theory of an undertaking by that company in the original purchase to pay Mm the money value of Ms stock, or upon their offer in their answer to do that thing, as Mr. Circuit Judge JACKSON thinks. Perhaps, the supreme court of MicMgan did not intend to establish that the statutory power of the majority stockholders might be exercised so as to compel the dissentients to share in whatever other fund than money was the price of the property, and were of the opinion that even under the statute- a dissentient could claim a money value for his share, as Mr. Circuit Judge TAFT thinks; but, after all, it comes to this: a money value was provided for Young, and he has a judgment for it. But the trouble is that neither in the negotiations for the sale, nor in the contract of sale, was any security provided by the trustees of the power of sale for that money value; and, without such provision by them, he can acquire none, upon any principle or theory that occurs to me, or has been suggested by any one. Outside the ^statutory power, none would exist. in my opinion, to thus cut him out of his equity of distribution. Inside the statute, he has been lost, as many another has been lost, by the desertion of the trustees of the power of sale from their trust in its relation to a dissentient stockholder, and, if he has any remedy, it is against them, personally, for their mismanagement of the trust, and not against the holder of the legal title for a, valuable consideration, paid or agreed to be paid, to the trustees upon an effectual, though it may be irregular, exercise of their power.