Court Opinion

ID: 6655379
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:57:23.379886+00
Date Added: 2024-06-11T15:59:53.143114
License: Public Domain

Holcomb, C. J.,
dissenting.
While agreeing in the main with Avhat is said in the majority opinion, Avhen considered as abstract propositions of laAV, I can not but feel that there is a pronounced misapplication of the legal principles enunciated to the record and the facts therein disclosed in the case at bar. The corporations, both the old and the new, are educational in character, and are not moneyed or business corporations organized for pecuniary profit in the ordinary acceptation of the term. I think the most that can be said is that the articles of incorporation, and the business for which organized, contemplate that the management and' conduct of corporate affairs shall he made self-sustaining as nearly as possible; and in that sense, and as an incident to its main purpose, it may be said to be a business corporation.
Its principal object and chief aim, however, manifestly is to conduct a medical school under the teachings and fostering care of those belonging to that branch of the medical profession commonly called Eclectics, afford facilities for' such as desire to fit themselves to engage in *561the practice of medicine, and thus enlarge the field of action and sphere of usefulness generally of this particular body of the disciples of iEsculapius.
The action is one in- equity. Plaintiffs and the intervener, Reynolds, who are appellants in this court, were minority stockholders in the old corporation, and it is altogether clear to my mind that they had confederated together with a view of thwarting the majority in furthering the objects and purposes of the organization,, and to prevent them from accomplishing the measure of success hoped for by those who were sincere friends and supporters of the undertaking.
As evidencing the spirit manifested toward the organization, I quote briefly from a letter found in the record written by one of appellants to a prospective student:
“The L. M. C. (Lincoln Medical College).is very shaky. Dr.-and niyself have employed three lawyers, and have applied to the court for a receiver to wind up its affairs, sell Avhat there is, and pay its debts. The college oavos about $1,500, Avith only a ícav microscopes and chairs as assets. So you see there won’t be much left for the stockholders. The boys are scattering to different schools.”
As a result of the internal troubles of the old corporation, the organization of the neAV Avas entered upon by those who Avere trying in good faith to make it a success. The alleged illegal sale and transfer of the assets aiid good wi ll of the old corporation to the neAV is at most voidable at the instance of an injured party. The transaction, is not absolutely void. The appellants have suffered nothing in a pecuniary Avay. If they have lost anything it is only in the infringement of a naked legal right. The sale and transfer of the assets of the old to the new corporation is an accomplished fact, and that corporation has been conducting its business for well onto three years. The appellants framed their petition and cross-petition in the loAver court, and have conducted their case thereafter in the trial court and in this court, on the theory that the old corporation had outlived its day of usefulness; that it had *562become incapable' of accomplishing the purposes for which organized; that it was disorganized and disrupted, and could not again be placed on its feet as a living, going concern; that a receiver should be appointed to take charge, of its affairs; the transfer of the property and assets from the old to the new canceled and annulled, and sold by order of the court; the debts paid, and the surplus, if any, distributed to the stockholders. This is the prayer of their petitions, and the allegations contained therein are with the view and for the special purpose of supporting their right to the relief thus demanded. The briefs in this court are. pregnant with suggestions and assertions to the effect that their rights can be preserved and vindicated only by a cancelation of the contract of sale to the new corporation ; a sale of the corporate assets of the old, and the winding up of its affairs through the appointment of a receiver. It is said in the majority opinion that no man can be compelled to dispose of his stock in a corporation or other property interests because, in the judgment of the parties so compelling him, it is for his interests financially or otherwise so to do. Strictly speaking, it does not seem to me that this is an accurate expression of a sound proposition of law. A majority of a corporation, of course, may ordinarily and in a proper case sell its property and wind up its affairs. They can not, however, sell to themselves, in the guise of a new corporation, in fraud of the rights of minority stockholders. It does not seem to me that either of these questions are properly in this case. The appellants want this property sold and the corporate affairs terminated. Their yearnings in this respect are so strong that it is urged that this must be done by selling under the hammer, on the auction block, at forced sale by a receiver under a decree of court. The only difference between them and the majority stockholders is as to the method by which the sale shall be accomplished. They are not content to have the property sold at voluntary sale for all that it is worth, but their love of the old corporation is so great that, to satisfy them, the property and good will *563must be exposed at public vendue, and sold to the highest bidder for cash. I am quite well satisfied that the finding of the trial court, that the property and good will of the old corporation sold for all it was reasonably worth, is amply supported by the evidence. Having suffered no pecuniary loss, and coming into court in the attitude they have, I maintain, as Avas found by the trial court, that the appellants have no standing in a court of equity. Were these plaintiffs in court trying to preserve the old corporation, its property and assets and maintain its integrity; have its business conducted as contemplated by its articles of incorporation and in furtherance of the corporate aims and objects; and had by. suitable allegations shown themselves in good faith to be endeavoring to protect their own rights and those of the corporation, they would, as 1 view the matter, stand in an altogether different light. To my mind, they come into court with hands perceptibly soiled.
Another vícav : This school must be affiliated with some larger institution. It is incapable of standing alone under the laws of this state, without having greater financial strength and property than either of the corporations has yet attained. By mutual arrangements Avith Cotner University this has been accomplished. The relationship of the old corporation has been terminated. The parent institution may very properly sever its relations with the old because of its internecine strife, and may very properly refuse to reneAV such relations because of the management as then conducted; and this court is powerless to place the old corporation upon the footing where it stood in this respect at the time of the transactions complained of.
Again, a medical school of this character is in a measure under the control of, and subject to, the approval of the state board of health as to its standing, curriculum, and the character and ability of its faculty, in order that its graduates may become entitled to certificates from that board, authorizing them to engage in the practice of the profession of medicine. The old corporation probably has lost the required standing for such purposes. The new *564may be presumed, to measure up to these requirements. The student body of the new corporation, who are interveners — many of them, perhaps, nearing the point when they expect to receive their diplomas, obtain certificates from the state board of health and engage in their lifework — has interests in this litigation which far outweigh any equities that can possibly be possessed by the appellants. By the judgment resulting from the majority opinion, it' is proposed to cancel the transfer of the property and assets of the old corporation to the new, reinstate the old corporation in all of its corporate rights and functions, and terminate the existence of the new. I do not understand that this court is concerned further than to determine whether^ in any event, the appellants are entitled to have the transfer annulled, and the old corporation revived, to continue its corporate existence in carrying out the objects of its creation. The fact is that the new corporation is a different and distinct entity. New blood has been infused into it; different officers control its affairs. A different faculty is at the head of its educational work, and different individuals comprise its student body. It has assumed contract obligations of the old; paid off its debts, and given it a cash consideration for its assets and good will; and surely it can not be deprived of what it has thus acquired, by a court of equity decreeing a rescission of the contract, without some provision being made for repayment of the consideration thus passing from it to the old corporation.
The corporate affairs of the new organization have been conducted now for nearly three years, and it seems to me, as Avas found by the trial court, that the appellants are absolutely without any equities entitling them to any of the relief which they pray for, or which the allegations of their petitions will warrant or justify being extended to them.
The judgment of the district court should, in my judgment, be affirmed, and the judgment in this court first entered adhered to. Hence, I dissent.