Court Opinion

ID: 6518486
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:28:53.053509+00
Date Added: 2024-06-11T15:55:05.106562
License: Public Domain

PER CURIAM.
The complainant, Susie Martin Morris -as the owner and holder of 26 1-3 -shares of the stock in the Elyton Land Company filed her bill for the purpose of setting aside a sale and conveyance of the property of -said company to the Elyton Company, another corporation with different powers, for stock and bonds in the vendee company, and to set aside-and annul a mortga go exeeu ted by the said Elyton Company to 'the Maryland Trust Company, as trustee, to secure certain *276bond® issued by the Elyton. Company. The bill also prayed for the appointment of a receiver- or • that the receivership in the cause, No. 2104, of Semmes et al. v. The Elyton Land Co. et al., pending in said chancery court be extended to this cause; making the parties in No. 2104, parties respondent to this bill. From the decree of the chancellor refusing the application for the appointment of a receiver or the extension of the receivership in cause No. 2104, this appeal is prosecuted.
- The facts in this case are very similar to those in the case of Elyton Land Co. v. Dowdell, 113 Ala. 177. Indeed, the same transaction complained of in that case as being ultra vires the corporation, is the transaction that i's here assailed as ultra vires. The bill in that cause was filed by.n dissenting shareholder in the Elyton Land Co. against the Elyton Land Go., Elyton Company, and the Maryland Trust Co., who are the same parties respond.ent to the present bill. This bill is by a non-assenting shareholder in said Elyton Land Co., said complainant being at the time of the transaction comidained of an infant, not having attained her majority even at the date of the filing of the bill, though her disabilities of nonage had been removed-by a decree of the chancery court in January preceding the institution of this suit.
The legal questions here involved as to the rights of complainant, as a non-assenting stockholder, growing-out of the same transaction, and attended, for all practical purposes, with substantially the same state of Pacts, were discussed in the case of Elyton Land Co. v. Dowdell, supra. We have no desire to renew that discussion or to reiterate what was there said. It was there decided that the transaction here complained of was- an act ultra vires the corporation. The act of the legislature, which it is here insisted authorized the sale and conveyance by the Land -Company of its property to the Elyton Company, was there considered, and it was decided that that act did not confer the power and authority of a sale, and transfer of all of the property of the corporation by such corporation without the consent of all of its shareholders, and in the -absence of the unanimous consent of its *277shareholders, the 'transaction was ultra vires. The doctrine there laid down, and bo which we adhere, not only rests upon the soundest principles of reason and justice-, hut is also supported by authorities and decisions of the highest courts of the land, wherein the question has been discussed with great ability and profound reasoning. In corporate enterprises, the doctrine there asserted alone affords protection 'and security to the weak against the strong, to the otherwise helpless minority stockholders, against the wrongs and oppression of the majority. Any departure from this just and wholesome doctrine would withdraw that security and protection, and leave the minority stockholder completely at the mercy of the majority. In support of what was said upon this question in Elyton Land Co. v. Dowdell, supra, we cite the following authorities in many of Which the subject is ably treated: Forrester v. Boston M. C. & S. Co., 10 Am. & Eng. Corp. Cases, 39, 62; s. c. 55 Pac. Rep. 229; Kean v. Johnson, 9 N. J. Eq. 101; Mills v. R. R. Co., 11 N. J. Eq. 1; Abbott v. Rubber Co., 33 Barb. 578; People v. Ballard, 134 N. Y. 269; Byrne v. Schuyler M. & E. Co., (Conn.) 28 L. R. A. 304, 65 Conn. 336; Mason v. Pewabic Min. Co., 133 U. S. 50; Stevens v. R. R. Co., 29 Vt. 545; R. R. Co. v. Collins, 40 Ga. 582; N. O., J. & G. N. R. R. Co. v. Harris, 27 Miss. 517; City of Knoxville v. R. R. Co., 22 Fed. Rep. 578; 2 Cook on Corp., (4th ed.), §§ 669 et seq.
We think there can be no doubt of the proposition, a court of chancery can and will .undo an act, which is ultra vires, as well as prevent the same by injunction. There is an equity of rescission as well as of prevention. 2 Spelling on Corp. § 615; City of Chicago v. Cameron, 120 Ill. 447; City of Knoxville v. R. R. Co. supra; Byrne’s Case, 65 Conn. 336; Elyton Land Co. v. Dowdell, supra.
The shareholder’s suit, when brought’ is for 'the benefit of the corporation and all shareholders. It is not the suit of the shareholder for his individual interest. The relief granted is the same, as if the corporation sued. — I Thompson .Corp., § '1191; 2 Pomeroy’s Eq., § 1095; 1 Morawetz Corp., § 262; Mount v. Radford Trust Co. et al. 5 Am. & Eng. Corp. Cases (N. S.), 92.
It would necessarily and logically follow from "this *278principle that a moneyed compensation to the -complaining shareholder for the value of his stock could not against his objection be decreed as his relief. To do so would be nothing more nor less than compelling the shareholder to sell his stock, which a court of equity has not the power to do. That it would be to the benefit of the corporation and all other shareholders in it, to let the transaction stand and compel the dissentient to accept compensation for his stock, is an argument that rests upon no higher grounds than that of expediency. In the administration of justice b3r the courts, principle should.never be sacrified at 'the altar of expediency.— Forrester v. Boston C & S. Co., supra; Kean v. Johnston, supra; Mills v. R. R. Co., supra; Stevens v. R. R. Co. et al, 29 Vt. 545.
It ‘is contended by the appellee that the -complainant is either estopped to question the -transfer to the Elyton Compaq or that -she has ratified the transfer, because she has not -surrendered or offered to surrender certain E-tyton Company five per -cent, bonds issued by that c-om-IJ-any to take up -the dividend bonds of the Elyton Land Company and for other purposes, which her guardian Mrs. Haskell, during complainant’s minority, -accepted in compromise and settlement -of a claim against G-. W. Hewitt and W. A. Walker. The facts in reference to t-lii-s transaction appear in the affidavits of Mrs. Morris and A. W. Haskell. From them it appears that the bonds went into the possession of the husband of Mrs. Morris, that she had never seen them, did not know how they were -secured, -or that the3r were secured at all. Until complainant did some act recognizing or asserting the validity of the mortgage, as by claiming rights under it, her mere retention -of the bonds cannot be considered a ratification of the transfer -and mortgage. The case has no element of estoppel. The acts complained -of were not done, nor -did any of the defendants perform any acts, upon the faith of such retention of the bonds. The bonds came to the defendant without any -act of hers. She has neither asserted nor attempted to a-s-sert any right under them, has not tried to collect them even as debts.. She was not bound to surrender them to the de*279fendancs or to tlie court, and her rights are not impaired by the mere holding of said bonds. It furthermore appears from the affidavits filed on behalf of complainant, that complainant knew nothing of the reorganization scheme, nor of the transfer by the Elyton Land Co. of its property to the Elyton Company, nor of execution of the trust deed or mortgage by the Elyton Company, to the Maryland Trust Co., trustee, nor of the issuance of the five per cent, bonds, until after her marriage and until within a short time before the commencement of her suit, when she was first informed by her husband of the facts, and she promptly repudiated the whole transaction and authorized her husband to employ counsel and institute necessary proceedings to 'protect her rights and interests as a stockholder in the Elyton Land Co. Under these facts it is manifest that there is no room for the indulgence of any inference of implied ratification on her part. What we have said in Moore v. Ensley, 112 Ala. 228, is applicable here, and we think that case as an authority is conclusive on the question of ratification under the facts in this cause.
The application for a receiver was heard on the bill as amended and exhibits, and answers of respondents, and upon affidavits filed in support of the hill and answers. Upon the undisputed facts in the case, we are of the opinion that the (application for a receiver should have been granted, and that the receivership in cause No. 2101 pending in said chancery 'court should have been extended to this 'cause. From the action taken by the chancery court, it is evident that the chancellor was of the opinion that upon the facts the complainant was entitled to a receiver in the absence of a deposit by the respondents with the register of the court of §12,000 as a security for the complainant by way of compensation for her stock in the event of her recoveiy upon a final hearing. But in this alternative provision, the learned chancellor misconceived the character of the complainant’s suit as well as the nature of relief to which she was entitled. For the suit, though brought 'in her name- was in legal contemplation and effect a suit by the corporation, and the relief, if any had, would be a recovery for *280the Corporation. That the case is a proper one for the extension of the receivership upon the conceded facts is shown by the following authorities: Beach on Receivers, §§ 88, 789; Gluck & Becker on Receivers, 42, § 16; High on Receivers, § 292; Ala. Nat. Bank v. Mary Lee C. & R. Co., 108 Ala. 288; Bridgeport Dev. Co. v. Tritsch, 110 Ala. 274; Scott v. Ware, 65 Ala. 174; Stevens v. Davison, 18 Gratt. 819; Ponca Mill Co. v. Mikesell, 8 Am. & Eng. Corp. Cases, (N. S.), 740.
The decree of the chancery court is reversed and the cause remanded.