Court Opinion

ID: 8804794
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:44:55.228082+00
Date Added: 2024-06-11T17:04:03.306184
License: Public Domain

GILBERT, Circuit Judge
(with whom concurs WOLVERTON, District Judge). We concur in'the opinion of Judge ROSS, except in his conclusion that the sale to the Anaconda Company should he annulled.
[10,11] It cannot be denied that the majority o E the stockholders of the Alice Company had the right to sell the corporate property. After the sale, and at a meeting regularly called and held under the authority of the laws of Utah, the requisite number of the stockholders passed a resolution directing that the corporation be dissolved, its affairs wound up, and its assets distributed. The appellants had no power to prevent dissolution against the will of the majority. Nor had they the right to say that a sale should not he made to the Anaconda Company, if that company outbid others. They had, however, the right, and that right the court below secured to them, to have the property sold free from the effect of any unfair combination between the majority stockholders and the Anaconda Company.
[12] The court below followed the rule of Mason v. Pewabic Mining Co., 133 U. S. 50, 10 Sup. Ct. 224, 33 L. Ed. 524, which holds that any stockholder can require that, upon dissolution, the corporate property shall be sold to the highest bidder for cash, and not to another corporation in which the majority stockholders are interested, and on terms fixed by them. There is no essential difference in principle between that case and this, and no substantial difference in the facts. The only difference is that in the Pewabic Case the minority stockholders were in court, insisting on their right to a sale at public auction, while in the case at bar the minority assert that no sale whatever should be made. Upon the law and the facts they are in no position to prevent a sale, nor to thwart the purpose of the majority to sell to another corporation. When they subscribed to their stock, they assented to the laws of Utah governing the distribution of assets of corporations, and they must abide by them. Nor is any relevant distinction to be found in the fact, as asserted, that in the Pewabic Case the corporation had ceased to exist, while in the present case the corporation was still in existence. It is true that the charter of the Pewabic Mining Company had expired; hut under the laws of Michigan it continued to be a body corporate, for all purposes except that of continuing in business, and among the permissible functions of its continued existence as prescribed by law was that of winding up its affairs, disposing of its property and dividing its capital stock. In 10 Cyc. 1302, it is said:
“So it, in the exercise of a sound discretion, the majority of the shareholders down it expedient to do so, they may sell out the whole property of the corporation to a new corporation, taking payment in its shares, to be distributed among such of the old shareholders as may be willing to take them. * * * If it is conceded that such action on the part of the majority is lawful, then the principle follows that the judicial courts will not examine into the affairs of tire corporation for the purpose of determining whether the action is expedient, or for the purpose of scanning the motives which have led to it.”
In J. H. Lane & Co. v. Maple Cotton Mills Co., 226 Fed. 692, 141 C. C. A. 448, the Circuit Court of Appeals for the Fourth Circuit said:
“The courts cannot pass upon the question of expediency of dissolution and sale, for that is the very question which the Legislature has authorized the majority of the stockholders to decide. * * * The courts cannot say that *244the discretionary power of the majority, conferred by the statute, does not extend to the dissolution of a prosperous corporation, or to a dissolution which will probably result in practical consolidation by the purchase of the property by another corporation. The fact that the state has not provided for consolidation without a dissolution of the corporation and sale of the property by no means implies that there is any policy of the state against dissolution and sale resulting in consolidation.”
The majority of the stockholders have rights which the court must recognize and protect. They have the right to retain the benefit of the sale already made unless a sale for a higher price can be made. This was the protection afforded the majority stockholders in the Pewabic Case, and it is here afforded by the decree of the court below.
The decree is affirmed.