Court Opinion

ID: 8846163
Source: CourtListenerOpinion
Date Created: 2022-11-26 16:57:55.977334+00
Date Added: 2024-06-11T17:05:20.977682
License: Public Domain

TAFT, Circuit Judge,
(concurring.) I concur in the result readied in the foregoing opinion, but I cannot concur in the grounds stated iherefor. In the court below, Young, as an intervener, sought to have declared in his favor a lien in the nature of a vendor’s lien on the property of the Paw Paw Railroad Company, which had passed by sale to the Toledo & South Haven Railroad Company, and a consequent priority in the distribution of the funds arising from the foreclosure sale in this case. In the supreme court of Michigan, Young had prayed the same relief against the same companies that are parties to this record on the same grounds; and the supreme court de-uied his prayer, and gave him only a judgment and execution against the Toledo & South Haven Railroad Company for the value of Ms stock, without any lien. The decree and judgment of the Michigan supreme court are res adjudícala, therefore, between Young and the railroad company, on the question of his right to a lien on its property. The complainant below, the Farmers’ Loan & Trust Company, is privy in right to the railroad company in respect of the property on which it holds the mortgage; so that, whether it was really a party to the proceeding in the state court or not, it may avail itself of the adjudication as an estoppel against Young. If Young was not entitled to a lien hr the state court, he ⅛ clearly not entitled to priority in distribution in the case at bar. This, it seems to me, satisfactorily disposes of Young’s contention at the bar, and requires us to reverse the decree of the court, in so far as it orders the payment of Young’s judgment before that of the mortgage bonds.
It would seem, also, that Young had no right to intervene in this foreclosure proceeding against the objection of the complainant, because Ms claim grew out of a transaction which was anterior to the passing of the title to the defendant company being foreclosed, and which was claimed to give him a lien superior to that title.
The opinion of the senior circuit judge, however, denies Young’s right on grounds wholly independent of former adjudication, and on propositions of general equity jurisprudence in which I find myself unable to concur.
Under the statute of Michigan permitting the sale of an uncompleted railroad by its stockholders to another road, the words of which are quoted in (he foregoing opinion, there is no power in two thirds in interest of the stockholders to bind one third to a sale for any consideration but money or money credit. We have already held in this court, in the case of Perin v. Megibben, 53 Fed. Rep. 86, that a statutory power to sell does not include a power to exchange for shares of stock in a corporation. Nor do I understand the supreme court of Michigan to hold, in the case of Young v. Railroad Co., 76 Mich. 485, 43 N. W. Rep. 632, that it is within the power of two thirds of the stockholders, under this statute, to bind a minority to a sale for am thing but money, for Chief Justice Sherwood says in the opinion, (page 487, 76 Mich., and page 636, 43 N. W. Rep.:)
“The plaintiff appears in a court of equity to seek anti enforce what he conceives to be his equitable rights, and in so doing he must submit to what is right and just; and, in my judgment, his counsel at the circuit, in submitting the ease to the learned circuit judge, was not far out of the way when he *776stated to the court the claim of his client should he satisfied with the payment «f such amount as the stock he held was worth; and while he cannot be held to the mode of payment provided by the terms of purchase by the Toledo & South Haven Railroad Company, because of his consent never having been obtained thereto in any legal way, equity and justice required that he should transfer to said company his seventy-five shares of stock upon receiving or being tendered the value of the same, at the time the company made its purchase, in money.” >
This holding of the court was obviously based on the fact that Young was equitably bound, by the contract of his vendors, known to him when he bought, to transfer the stock to the Toledo & South Haven Kailroad Company, and was therefore deprived of the right which he otherwise would have had, as a minority stockhólder, to prevent the consummation of a sale which did not contemplate money, or a money credit, as its consideration. There is no doubt whatever of the proposition argued in the foregoing opinion, — that a minority stockholder is bound by the acts of the majority so long as that majority acts within its charter powers, — nor is there any doubt that neither the majority nor the entire body of stockholders of the corporation can do a corporate act which its charter forbids; but there are corporate acts which are not within the'charter power of the majority of the stockholders, and yet which are not beyond the power of the corporation. They are acts of the corporation, which the state, as the grantor of the corporate franchise, has no interest to invalidate, provided all the stockholders consent thereto. They are acts which, if done by a majority only, infringe upon the charter rights of the minority. In this case the power to sell for money was conferred by statute upon two thirds of the stockholders of the uncompleted road. The sale could not be for stock in another company, against the objection of the minority stockholders. No such power was vested by the statute in the two-thirds majority. If, however, the minority consented, the state, the grantor of the corporate franchise, had no interest in objecting to the transaction as beyond the corporate power of the company. Every Paw Paw stockholder consented to the sale for stock in the Toledo & South Haven Hail-road Company except Young, who owned 75 shares. He or his vendors had agreed to sell his stock to the purchasing company for money, in order that the sale of the Paw Paw Company might go through. In equity, therefore, he could not object to the sale, provided that he was paid the money value of his stock. It would seem reasonable, and in accord with equitable principles, that the validity of the sale of the Paw Paw road should be conditioned on Young’s receiving the money value for his stock, and that, on failure of the Toledo & South Haven Pailroad Company to pay the pure]Lasing price, he should have a lien on the property conveyed, in which his stock represented an interest. The supreme court of Michigan, however, was of the opinion that equity did not require that a lien should be reserved to pay the purchase price. As res adjudicata, and perhaps as a decision of a state supreme court upon a question of state law, we are obliged to follow the decision of that court in the case at bar. But as a question of general equity jurisprudence, which is the aspect in which the questions are discussed in the opinion of the *777senior circuí t judge, I am unable to concur in the propositions there laid down.
1 see no objection to reserving a lien on the corporate properly for the purchase price of shares of stock, where those shares represent a right to object to the sale of the property for anything but money. It is quite true that the shares do not generally represent a tenancy in common in the property itself, but only a voice in the control of the property, a share in the profit» to be derived from the use of the property, and a share in the assets of the company on dissolution, after the payment of debts. But the sale here was of the property of the Paw Paw Corporation, the consideration to be divided among the stockholders on the very theory that a share of stock represented an aliquot interest in the property sold. The circumstances seem to me to clearly justify a court of equity in reserving something akin to a vendor’s lien in the property sold, to secure the right of a dissenting stockholder to get Ms part of the consideration in money.
The mortgagee had full and actual notice, from the recitals in the title deeds of its mortgagor, that the consideration for the sale of the Paw Paw road was not money, but stock, and that the owner of the 75 shares of the Paw Paw Company had not consented to the sale. If the construction given above of the Michigan statute is correct, then the mortgagee wars charged with notice that the sale was illegal, against the owner of the 75 shares, and was therefore put on inquiry and notice as to his right to a lien for the value of Ms stock.
Nor do I concur in the reasoning of the court, that the issuing of an execution upon a judgment for the money value of the thing sold is a waiver of the vendor’s lien in the thing sold. There Is nothing inconsistent, under such circumstances, in an execution and the enforcement of a lien. The cases cited in the majority opinion have, it seems to me, but little application. They are cases where a man1 is compelled to elect whether he will sue for the price of an article sold, or set aside the sale as fraudulent, and recover the thing in specie. Tiny none of them present a case in equity where the circumstances give to the vendors ¡he right to recover the price of the tiling sold, with a lien for Iliad price on the tiling sold. In such a case the recovery of the money, and the enforcement of the lien, are not inconsistent remedies, and the pursuit of the one is no waiver of the other.
I concur in both the reasoning and conclusions of the court with respect to the rights of the First National Bank of New York city in the bonds held by it, and have nothing to add thereto'.