Court Opinion

ID: 9442620
Source: CourtListenerOpinion
Date Created: 2023-08-03 18:53:40.162425+00
Date Added: 2024-06-11T17:29:09.630503
License: Public Domain

CLARK, Circuit Judge
(dissenting).
Since this is a complicated agreement where diverse contentions are possible and since my views are not to prevail, I shall only indicate them without extensive development. What chiefly persuades me to the contrary conclusion is that the definite time provision of sixty days for exchanging warrants, “in case the corporation shall pay any stock dividend,” of sec. 10, Art. Ill, is now left without rational purpose or function. I expect, however, that this is one of those cases sufficiently disputable so that the approach one initially makes to the problem actually points the way to the final solution. If I thought a stock warrant should be normally approached as an eternal and untouchable privilege, I, too, I expect, would regard sec. 7 as so declaring and hence find that sec. 10 could not be given force according to its wording without working a “forfeiture” of or declaring “forfeit” what had already been given. But since I think it not at all unusual for the draftsmen of such an agreement to wish to put some limitations upon those rights, to limit the extent to which they can allow the holders to be over, but not a part of, the corporate organization, I find the other construction to be more natural and to have the advantage of according some appropriate function to every section of the agreement.
Thus secs. 8 and 9 apply to the particular situations they expressly cover and do not apply to the situation covered in sec. 10, and there is no surplusage. The provision of sec. 6 for reducing the basic purchase price of the stock seems, to my mind, rather clearly applicable in case of a stock dividend and be a reasonably fair counteradjustment to those warrant holders who still wish to stay on the outside awaiting developments. And sec. 7 carries its own statement of its application conditioned “if the same had been declared upon the common stock represented by the stock certificates then held in trust by the Trustee hereunder” or later “if the same had been declared upon the common stock so purchased.” True, this gives the corporation power to determine whether the stock dividend be upon only the active stock or also upon this 'block already frozen in the hands of the Trustee and immobile unless warrants are exercised against it. But — and here I suppose my point of view indicated above comes in — this does not seem to me an unusual power for a corporation, but one naturally to be exercised in the light of the general good of all the stockholders, not merely those holding warrants, with the reduction in the basic purchase price serving as a preventive of unfairness to any of the participants.
Elsewhere I have thought we have tended to overvalue the perpetual effect of stock warrants, Securities and Exchange Comm. v. Leventritt, 2 Cir., 179 F.2d 615, certiorari granted, U.S., 71 S.Ct. 62, and have agreed' more with the contrary view expressed in In re Commonwealth & Southern Corp., 3 Cir., 184 F.2d 81. But here we have further the express clause of sec. 10 providing for the notice with a definite purpose “to the end that, during such pe*960riod of sixty days,” the warrant holders may purchase stock and “be entitled, in re-sped of shares so purchased to all of the rights of the. other holders of similar stock of the Corporation.” (Italics supplied.) Of course they know already that they are entitled to such rights just as soon as they, exercise their warrants; — except to the extent that this clause may be given some operative effect. So why should the draftsmen have painted the .lily further unless the sixty days was intended as a definite period for the talcing of soxxxe action? I would affirm.