Court Opinion

ID: 5226853
Source: CourtListenerOpinion
Date Created: 2022-01-06 16:46:54.597492+00
Date Added: 2024-06-11T08:27:36.143292
License: Public Domain

Laughlin, J. (dissenting):
The plaintiffs own 1,349 shares of the capital stock of the Eutland Eailroad Company, for brevity hereinafter referred to as the “ Eutland Company,” a corporation organized under the laws of New York and Vermont, and they bring this action in behalf of themselves and all other stockholders of the Eutland Company similarly situated, and they claim to represent directly 6,151 shares and indirectly 15,000 additional shares of *24the capital stock. The outstanding capital stock of the But-land Company is 90,000 shares. The New York Central and Hudson Biver Bailroad Company, which will be referred to as the “Central Company,” in 1905 acquired stock control of the Butland Company by the purchase of 44,01-1 shares of the capital stock; and in February, 1911, it transferred one-half of •this stock to the New York, New Haven and Hartford Bail-road Company, which will be referred to as the “ New Haven Company,” and thereupon three of the directors of the Butland Company, theretofore elected to' represent the Central Company, resigned and three directors of the New Haven Company, one of whom was its president, were elected to succeed them. The Central Company, since it obtained stock control of the Butland Company has controlled its policy and business. The plaintiffs charge, in effect, that the Central and New Haven companies entered into a conspiracy to stifle competition and to obtain a monopoly of the transportation business in the territory in question to the detriment of the Butland Company, the control of which will pass to the New Haven Company, a rival parallel and competing line, by the transfer of the remaining shares of Butland Company stock held by the Central Company unless the transfer thereof shall be enjoined, and that the transfer and threatened transfer of such stock by the Central Company is a violation of the duty it owes, as the owner of the majority of the stock, to the stockholders of the Butland Company, and in violation of the Sherman Act, so called, being an act of Congress of July 2, 1890, entitled “An act to protect trade and commerce against unlawful restraints and monopolies,” section 1 of which declares that “ Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, * * is illegal, and section 2 of which provides that “ Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons to monopolize, any part of the trade or commerce among the several States * * * shall be deemed guilty of a misdemeanor.” (26 U. S. Stat. at Large, 209, §§ 1, 2.) It is alleged that the laws of Vermont prohibit any stockholder from voting on more than ten per cent of the capital *25stock of the company, and, in the event that the transfer is not enjoined, an injunction against the Yew Haven Company and the Rutland Company is prayed for limiting the voting power of the Yew Haven Company accordingly. It would not be proper to express an opinion on the merits with respect to the controverted facts at this time; but the decision of the appeal requires that the material facts alleged and supported by affidavits, even though controverted, be stated, for on the sufficiency thereof to present a prima facie case depends the right of the plaintiffs to have the injunction continued. The plaintiffs allege that the Rutland Company owns and operates a- railroad extending from Ogdensburg, Y. Y., to Alburg, Rutland and Bellows Falls, Vt., with branches extending to Chatham and White Creek, Y. Y.; that it owns all the capital stock of the Rutland and Yoyan Railway Company, which owns and operates a short line from Alburg to Yoyan Junction, near the Canadian line, and thereby controls that company; that it has trackage agreements with the Quebec, Montreal and Southern Railway Company and the Canadian Pacific Railway Company under which it runs and has the right to run its own trains over said lines between Yoyan Junction, Iberville Junction and Montreal; that it owns all the capital stock of the Rutland Transit Company, which is a duly authorized common carrier of passengers and freight by steamboats, and owns and operates a line of steamboats plying between Ogdensburg and Chicago and intermediate points and thereby controls the business of that line; that at Bellows Falls it connects with a line of railroad controlled and operated by the Boston and Maine railroad extending to Boston; that between White Creek and Troy, by virtue of trackage rights, it operates trains, and at Troy connects with railroad lines to Yew York, and with water transportation on the Hudson river; that the Central Company owns and operate^ a railroad line between Yew York and Buffalo via Albany, Troy and intermediate points, and owns and operates through stock control or leases various other railroads traversing the States of Yew York, Pennsylvania, Ohio, Indiana, Illinois and Michigan, and between Buffalo, Detroit and Chicago and intermediate points, and between Buffalo and Montreal, and the Western Transit Company which *26operates steamboats on the Great Lakes as a common carrier of passengers and freight, and owns and operates the Boston and Albany Railroad Company by virtue of a lease for 99 years made July 1, 1900, and that the Boston and Albany extends from Boston to Albany, passing through Worcester, Springfield and Pittsfield, which are reached by lines connecting with the Rutland Company; that the New Haven Company is a corporation organized and existing under the laws of Connecticut, Massachusetts and Rhode Island, and owns and operates various lines of railroad from New York to New London, New Haven, Bridgeport, Providence, Hartford, Pittsfield, Worcester, Springfield and Boston and intermediate points, and owns and controls a majority of the capital stock of the Boston Railroad Holding Company, which through majority stock ownership controls the Boston and Maine Railroad Company, which by virtue of agreements and leases and stock ownership owns and controls the Connecticut River Railroad Company, which through stock ownership owns and controls the Vermont Valley Railroad Company; that the Boston and Maine Company owns and controls and operates a large system of railroads in Massachusetts, Maine, New Hampshire, Vermont and New York extending to Portland and Bangor on the Atlantic coast, to White River Junction, Vt., and there connects with the Central Vermont railroad, extending to East Swanton, where connection is made with the Grand Trunk railway extending to Iberville Junction, Montreal and other points in-Canada; that the Boston and Maine also owns and operates a line extending to Newport, Vt., where connection is made with the Canadian Pacific for Iberville Junction, and Montreal and other Canadian points, and also- owns and operates a line extending from Bellows Falls to Windsor, where connection is made with the Central Vermont for Burlington, Vt., which is on the Rutland line, and with East Swanton, where connection is made with the Grand Trunk for Iberville Junction and Montreal and other points; that the Boston and Albany owns and controls the Fitchburg railroad extending from Boston to Troy and Rotterdam Junction, and owns and operates a line from Windsor, Vt., to Springfield, where connection is made with the New' Haven Company’s *27line, extending to New York; that the New York, Ontario and Western Bailway Company owns in its own right or by stock control, or leases and operates a railroad between Cornwall on the Hudson river and Oswego on Lake Ontario, extending to various points in central and southern New York and northern Pennsylvania, and touching Kingston, Utica, Borne and Oneida, and operates its freight and passenger trains over the West Shore railroad from Cornwall to Weehawken, N. J., under a lease which continues until the year 2089; that in 1904 the New Haven Company acquired a controlling interest in the stock of said New York, Ontario and Western Bailway Company and has ever since elected the directors thereof and has thereby dominated and controlled the business and affairs ©f said company; that in January, 1905, the Central Company acquired stock control of the Butland Company and has ever since elected its directors and has thereby dominated and controlled its business affairs; that the Butland Company and the New Haven Company have owned, controlled and operated and own, control and operate two separate parallel and competing lines; that they are competing and parallel lines among other respects in that there are four parallel and competing lines between Iberville Junction and Montreal and other Canadian points on the north, and Boston on the south, viz., (1) the Boston and Maine Bailroad Company and the Butland Company from Bellows Falls and the latter’s Canadian connections; (2) via Boston and Albany railroad, controlled by the Central Company, and the Butland railroad from Chatham and its Canadian connections; (3) via Boston and Maine railroad to White Biver Junction, thence via Central Vermont railroad and the Grand Trunk railway, which controls it; (4) via Boston and Maine to Newport, Vt., and thence by Canadian Pacific, which four lines have for some years past been in active competition in freight and passenger traffic, including coastwise, interstate and foreign commerce; that the Butland Company’s line from Bellows Falls to Burlington, Vt., is parallel with and is and has been competing with the line between said points over the Boston and Maine and Central Vermont railroads; that the Butland Company’s two lines formed by its own road and its Canadian connections on the *28north from Montreal via White Creek Junction, Troy and the Central railroad to New York and from Montreal via Chatham and the Harlem railroad to New York, are, and for some years past have been parallel and competing- lines with the New Haven line from New York to Montreal via Windsor, Vt.,- and the Central Vermont and Grand Trunk railroads; that a differential line, so called, extending from Boston via the Boston and Albany to Chatham and the Eutland railroad to Ogdensburg and the Great Lakes via the Eutland Transit Company’s steamboats or to Norwood, and thence westerly by the Central railroad, is and for some years past has been a parallel and competing line with the differential lines from Boston via the Boston and Maine to Newport or White Eiver Junction and the Canadian Pacific and Grand Trunk railroads to the Great Lakes and other western points, and is and has been a parallel and competing line with the line from Boston via the New Haven railroad and the New York, Ontario and Western and the Great Lakes, It is also alleged that the Fitchburg railroad, controlled by the New Haven Company, has been and is parallel and competing with the Boston and Albany between Boston and Troy and Botterdam Junction and Albany.
The plaintiffs further allege that prior to the 16th day of February, 1911, the Central and New Haven companies, contriving and intending unlawfully to restrain trade and commerce within and among the several States and between the States and foreign countries heretofore carried on by them and by the Eutland Company, and to monopolize such trade and commerce and to prevent competition between said railroads, entered- into an unlawful combination and conspiracy with the Eutland Company, its directors and others to destroy competition between the Boston and Albany railroad, controlled by the Central Company, and of the Fitchburg railroad, controlled by the. New Haven Company,. “ to effect a virtual consolidation of the Eutland Company and of the New Haven Company,” and for the purposes aforesaid, and to that end contemplated having the Central Company transfer to the New Haven Company a controlling interest in the capital stock of the Eutland Company then held by the Central Company, consisting of 47,041 shares, to enable the New Haven Company to elect and control *29the directors of the Rutland Company, and to share equally the profits arising from the operation of the Boston and Albany Company and to divide the losses, if any, therefrom, and on the said last-mentioned day entered into a contract in writing for the suppression of competition between the Boston and Albany division of the Central railroad and the Fitchburg division of the New Haven railroad, and to share the profits and divide the losses of operation of the Boston and Albany Company as partners, the agreement to take effect July 1, 1911, and to continue for ten years, after which period it was to be terminable by either party on one year’s notice, and for the transfer of one-half of the Central Company’s holdings of capital stock in the Rutland Company at $105 per share; that the stock was transferred pursuant to said agreement, and thereupon, in furtherance of said combination and conspiracy, the New Haven Company caused its president and director and two others of its directors to be elected directors of the Rutland Company, and that ever since the Central and New Haven companies have acted in the premises in furtherance of said conspiracy, and on the 27th day of December, 1911, the executive committee of the Central Company, in further consum mation thereof, adopted a resolution authorizing the president of the company to sell one-half of its holding in the capital stock of the Rutland Company, with a note of the Rutland Company, and the rights and interests of the Western Transit Company in certain contracts between it and. the Rut-land Transit Company relating to six steel steamers then in service on the Great Lakes, which rights and interests the president of the New Haven Company was authorized to acquire for a price not less than $3,632,332.79, and to divide the proceeds between the Central Company and the Western Transit Company according to their respective interests; that this resolution specified no purchaser, but immediately prior to its adoption a resolution adopted by the same board on November 20, 1911, which authorized this sale at the same price to the New England’Navigation Company, was rescinded; that on the 21st day of November, 1911, the executive committee of the board of directors of the New England Navigation Company, the stock of which was all owned by the New Haven Company, *30adopted a resolution to purchase this stock, the note and rights and interests in the steamers for the consideration specified in said resolution adopted and rescinded by the executive committee of the board of directors of the Central Company; that said companies threaten and intend to consummate the transfer of the property mentioned in said resolutions and unlawfully to suppress and destroy competition between each other and the New Haven Company and the Eutland Company; that in violation of the laws of Vermont, which require that a majority of the directors shall be residents of that State and provide that no stockholder shall be entitled to vote more than ten per cent of the capital stock of the company, the Central and New Haven companies at the annual election • of directors of the Eutland Company, held in October, 1911, voted all of the stock which had been previously held by the Central Company, and elected a board of directors the majority of whom were not residents of Vermont; that the New Haven Company has caused the offices of general superintendent and chief engineer and other offices of the Eutland Company to be filled by its'officers and nominees, and has practically taken charge of the affairs of the Eutland Company and threatens and intends to vote áll of said stock, and to deprive the minority stockholders of a just and legal vote in the election of directors, and to “ maintain and perpetuate an illegal control and domination of all the business and affairs of the Eutland Company,” and threatens to “conduct all the business and affairs of the Eutland Company for the sole benefit and profit of the New Haven Company and in violation of the rights of the minority stockholders, and will continue to exercise the above mentioned unlawful domination and control over the affairs of the Eutland Company, and will continue to suppress and throttle competition on the part of the Eutland Company both with the New Haven Company and with the New York Central Company, all to the great and irreparable damage of the Eutland Company, and particularly the minority stockholders thereof,” and will do so unless restrained by the court, and that the directors of the Eutland Company threaten to, and will unless enjoined, assist in carrying out the terms of said unlawful combination and conspiracy and to permit the Eutland Com*31pany to be managed and controlled and its business carried on by the directors so illegally elected, “ and will permit all competition between the Butland Company and the New Haven Company to be suppressed; and will by the foregoing means render the charter of the Butland Company subject to forfeiture, and the Company subject to the pains and penalties prescribed by said ‘ Act to protect trade and commerce from unlawful restraints and monopolies,’ ” and will do so unless restrained by the court; that said acts are ultra vires of the Butland Company and are contrary to the laws of Vermont and New York and to the act of Congress known as the Sherman Act.
The prayer for relief, so far as material to the decision, is that the Butland Company, its directors, officers and agents be enjoined from registering on its books any transfer of said stock pursuant to said agreement and from permitting either company to vote thereon, and from permitting any stockholder of the Butland Company to vote more than ten per cent of the capital stock, and from recognizing said transfers of the But-land Company’s stock, and from doing any act or thing in furtherance of said unlawful combination and conspiracy, and that the Central and New Haven companies be enjoined from further consummating said contract, and from voting said stock, and doing any act or thing in furtherance of said combination and conspiracy, and that the transfer of said stock by the Central Company to the New Haven Company in so far as it has been consummated be annulled, and that an injunction pendente lite be granted.
The affidavits and evidence presented by the respondents tend to sustain all of the material allegations of the complaint and tend to show that the Butland Company, with its rights to operate its trains over other lines as aforesaid, and the New Haven Company are actually and potentially competitors for interstate trade and commerce from New England and Atlantic coast points to the Great Lakes and ports thereon and other points, as well as for such trade and commerce between most of the New England States and Canada. The moving papers further show that the market value of the stock of the Butland Company is only forty dollars per share, and that President *32Mellen of the New Haven Company considers that for the purpose of enabling his company to control the Eutland Company a bare controlling interest in the stock is worth one hundred and five dollars per share, and that he regards it as the right of one corporation, thus having stock control of another, to dispose of such stock control as may seem best for its own interests, and that he testified before the Public Service Commission that the purchase of this stock “was born of a desire to help the B. & M.” (meaning the Boston and Maine, which is controlled by the New Haven Company), particularly and the New ■Haven Company “Somewhat, but less.” It further appears that officers of the New Haven Company admitted before the Public Service Commission that the Eutland and New Haven companies compete and are parallel to some extent. Mr. Mellen and other officers of the New Haven Company also testified that the interests of the New Haven Company in operating the Eutland Company with respect to developing the business of the Eutland Company are not in conflict; and that while it would be possible for the New Haven Company through this stock control to divert business from the Eutland Company to a large extent, such is not its intention. But the respondents have a right to expect that in determining whether the temporary injunction should be vacated, the court will take the most favorable view, to them of the affidavits and testimony and admissions of the officers of the appellants. It may be observed that it is at least doubtful whether the New Haven Company would pay nearly three times the market value of this stock for the purpose of controlling, the Eutland Company unless it is to obtain some advantage thereby at the expense of the Eutland Company. The respondents also present evidence tending to show that the New Haven Company is rapidly obtaining a. monopoly of the New England interstate and international trade and commerce.
The learned counsel for the appellants contends that this cáse falls within the doctrine of the authorities holding that the cause of action, if any, is in the corporation, and can only be maintained by a stockholder in the right of the corporation upon alleging as a basis therefor that the corporation on demand duly made has refused to bring the action or facts *33showing that such demand would be futile. The learned counsel for the respondents does not endeavor to sustain the action as one in the right of the corporation, and contends that it is brought in the individual rights of the plaintiffs as stockholders. Whether the action is brought in the right of the corporation or in the individual rights of the stockholders depends upon the allegations of the complaint, for the form of the action in either event would be the same. It is not alleged that a demand was made upon the corporation to bring the action; hut such demand is unnecessary if facts are alleged from which it appears that it would be futile. I am of opinion that such facts are sufficiently alleged here, for the corporation can only act through its hoard of directors, and the majority of the hoard of directors represent the New Haven and Central companies, and it is in effect charged that they entered into a conspiracy with those companies pursuant to which the transfer of stock sought to he annulled and enjoined has been made or is threatened. As I view the case, therefore, if a good cause of action has been pleaded upon either theory, that will suffice to sustain the injunction.
This action is neither brought to recover damages sustained by the corporation nor for an accounting by any of the officers of the corporation or by others. The plaintiffs sue to enjoin the consummation of threatened illegal acts by which the control of the corporation will be turned over to a rival competing line, which will he permitted, through its ownership of a majority of the stock, to elect and control the board of directors and dictate the policy and manage the affairs of the corporation of which the plaintiffs are minority stockholders; and it is charged that such acts are not for the best interests of the Rutland Company, and are designed to give the New Haven Company an advantage over it and that such will be then-effect, and this charge is fairly substantiated. The plaintiffs allege that they will be damaged in their rights as stockholders upon the ground that the Rutland Company will he subjected to penalties for violations of the Sherman Act, and that its earnings will he depreciated by a diversion of its business to the New Haven Company and otherwise. The only acts which the *34Rutland Company threatens to do, which it is alleged are a violation of the plaintiffs’ rights or of law, are the recognition of the transfer and the acceptance of the surrender of the stock and the issuance of new stock to the New Haven Company, and the recognition of the right of the New Haven Company to vote on the stock. It is not apparent how those acts would subject the Eutland Company to penalties under the Sherman Act even though the transfer of the stock by the Central Company to the New Haven Company be a violation thereof; but, however that may be, the plaintiffs would not be affected by the damages which it is alleged will ensue excepting as stockholders and the same as all other stockholders; and, therefore, with respect to those matters the'cause of action would be vested in the corporation and could not be maintained by minority stockholders excepting in the right of the corporation. (Niles v. N. Y. C. & H. R. R. R. Co., 69 App. Div. 144; affd., 176 N. Y. 119; Flynn v. Brooklyn City R. R. Co., 158 id. 493; Howe v. N. Y., N. H. & H. R. R. Co., 142 App. Div. 451; Cook Inj. [6th ed.] §§ 644, 645, 646, 647, 662, 734, 738, 740; High Inj. [4th ed.] §§ 1203, 1207, 1216, 1223a, 1224.) In Shawnee Compress Co. v. Anderson (209 U. S. 423), upon which counsel for the respondents relies as authorizing an action by a stockholder in his own right for affirmative relief other than an inj notion, the form in which the action was brought was not considered in the opinions delivered in the, Supreme Court of the United States or in the report of the opinion of the Supreme Court of Oklahoma (Anderson v. Shawnee Compress Co., 17 Okla. 231); and the action was sustained after the consummation of the act in violation of the Sherman Act and a lease illegally executed was annulled. In this jurisdiction, unless the fact that the execution of the lease was in violation of the express provisions of the statute distinguishes it . from other cases, that action could only have been maintained by the stockholder in the right of the corporation. (Flynn v. Brooklyn City R..R. Co., supra.) That decision is, however, authority for the action based solely on a violation of the Federal statute, for if equity would afford relief on that ground aloné after the violation, surely a court of equity can stay the act which would constitute the violation. Section *35Y of the Sherman Act is as follows: “Any person who shall be injured in- his business or property by any other person or corporation by reason of anything forbidden or declared to be. unlawful by this act, may sue therefor in any Circuit Court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover three fold the damages by him sustained, and the costs of suit, including a reasonable attorney’s fee.” (26 U. S. Stat. at Large, 210, § 7.)
This action cannot be maintained by the minority stockholders in their own right upon the. theory that this statute would give them the right to treble damages, and that the remedy at law would be inadequate owing to the impossibility • of proving the'actual damages. The right of action for damages, if any, would be in the corporation and not in the individual stockholders. It cannot be maintained that the right of action for these damages is given to the stockholders. It would be impossible to determine each stockholder’s proportionate interest, and it would be an unreasonable construction to hold that every stockholder could recover treble damages based on the entire damages sustained by the corporation. It is, however, I think, the settled rule that if the threatened act sought to be enjoined be within the power of the corporation so that pending the action by the stockholder it could be legally consummated or ratified, or if the acts have been consummated and have thereby given rise to a cause of action in favor of the corporation for equitable relief, as for instance the cancellation of a contract or other instrument, then the stockholder can only sue in the right of the corporation; but where it is not. within the power of the corporation to consummate or ratify the threatened acts then equity will, at the instance of a minority stockholder suing in his own right and for the benefit of all stockholders similarly situated, grant injunctive relief. (Heath v. Erie Ry. Co., 8 Blatchf. 347, 392, 395, 396, 400, 401, 406, 407; Zabriskie v. C., C. & C. R. R. Co., 23 How. [U. S.] 381, 395; Railway Co. v. Allerton, 18 Wall. 233; Gamble v. Queens County Water Co., 123 N. Y. 91; Kent v. Quicksilver Mining Co., 78 id. 159, 188; Davis v. Congregation Tephila Israel, 40 App. Div. 424, and cases cited; *36Currier v. N. Y., W. S. & B. R. Co., 35 Hun, 355; Fish v, C., R. I. & Pacific R. R. Co., 36 How. Pr. 20; Belmont v. Erie R. Co., 52 Barb. 637; Watson v. Harlem & New York Navigation Co., 52 How. Pr. 348; Byrne v. Schuyler Electric Mfg. Co., 65 Conn. 336; Commissioners of Craven v. A. & H. C. R. R. Co., 77 N. C. 297; Fletcher & Sons v. Alpena Circuit Judge, 136 Mich. 511; Tomkinson v. Southeastern Ry. Co., L. R. 35 Ch. Div. 675; Green’s Brice Ultra Vires [2d Am. ed.], 643; High Inj. [4th ed.] §§ 1224-1226; Langan v. Francklyn, 29 Abb. N. C. 102. See, also, Colby v. Equitable Trust Co., 124 App. Div. 262; affd., 192 N. Y. 535; Mills v. Central R. R. Co., 41 N. J. Eq. 1.) In Tomkinson v. Southeastern Railway Co. (supra), which was an action by a stockholder in his own right to enjoin an illegal disbursement of corporate funds, the court, on granting the injunction, among other things said: “I have no doubt that it is the duty of the Court to grant an injunction in this case. The question, as the Attorney-General said, is whether the act proposed to be done is within the powers of the railway company or outside its powers. If it is outside its powers, it is now perfectly settled that any one shareholder may come to this Court and say, ‘ This company is going to do an act which is beyond its powers; stop it; ’ and the court thereupon has no discretion in the matter. ” If equity will, at the suit of a stockholder or member of a corporation in his own right and without showing special damages, enjoin threatened'acts of the corporation which are ultra vires or otherwise illegal, I see no reason on principle why it has not jurisdiction and should not . exercise jurisdiction to enjoin an illegal transfer of a majority of the stock. If an injunction would lie in such circumstances to enjoin the issue by the corporation of a controlling interest in the stock in violation of law, I think it will also lie to enjoin the illegal transfer by a stockholder of a controlling interest in the stock. The effect upon a minority stockholder of .a transfer of a. controlling interest in the outstanding stock in violation of law is precisely the same as if the stock had never been issued and the corporation was threatening to consummate a contract to issue and .sell á controlling interest in the stock in violation of law in the sense that the law prohibited its issuance to the particular purchaser. I see no distinction in this regard *37between a violation of the charter of the corporation and the violation of any other law prohibiting the act. ' Where 'the majority of the stock has been accumulated in the hands of a single stockholder for the purposes of control, and where such stockholder is a rival competing cerporation, such corporation becomes for all practical purposes the corporation which it thus dominates and controls (Farmers’ Loan & Trust Co. v. N. Y. & N. R. Co., 150 N. Y. 410, 434; United States v. American Tobacco Co., 221 U. S. 106; Ervin v. Oregon Ry. & Nav. Co., 27 Fed. Rep. 625), and should be enjoined from committing acts ultra vires the corporate powers of the corporation or otherwise illegal, or in violation of the duty it owes to the minority stockholders, the same as if the corporation itself were threatening to commit the acts.
The majority stockholder in the circumstances disclosed by this case, a controlling interest having been accumulated by it for the purposes of control, occupies “ substantially the same relation of trust towards the minority as the board of directors would occupy towards the stockholders it represents ” (See Farmers’ Loan & Trust Co. v. N. Y. & N. R. Co., supra), and owes a duty to the minority stockholders to manage the corporation within its charter powers and within all other laws applicable thereto, and in good faith and for the best interests of the corporation; and it is within the jurisdiction of a court of equity to enjoin and redress violations of this, duty; but the honest exercise of the discretion and judgment vested in the majority stockholders cannot be reviewed by the court. (Gamble v. Queens County Water Co., supra; Farmers’ Loan & Trust Co. v. N. Y. & N. R. Co., supra; Flynn v. Brooklyn City R. R. Co., supra; Wright v. Oroville M. Co., 40 Cal. 20; Ervin v. Oregon Ry. & Nav. Co., supra; Meyer v. Staten Island R. Co., 7 N. Y. St. Repr. 245.) It is not necessary to consider the Federal authorities under which counsel for the appellants contends that a suit in equity to enforce the provisions of the Sherman Act by injunction can only be maintained by the Attorney-G-eneral pursuant to the provisions of the act; for in the case at bar well-recognized grounds of equity jurisdiction appear, and the minority stockholders have the same right, in *38my opinion, to apply to a court of equity to enjoin acts on the part of the majority stockholder and of others, including the corporation of which they are stockholders, in violation of a Federal statute, as if the acts were in excess of the powers conferred upon the corporation hy its charter or in excess of the authority of stockholders as limited hy the charter or other laws óí the State, for when the Congress of the United States legislated on this subject, which was clearly within its jurisdiction, it declared rules of law and of public policy which superseded all laws and rules of public policy of every State and Territory inconsistent therewith, and the statute became as binding in this and every other State as if it had been enacted by the State Legislature, and it is as much the duty of the State courts to protect stockholders of a corporation against a violation thereof as if the violation were of the charter powers of the corporation or of other statutory law of the State. (See Second Employers’ Liability Cases, 223 U. S. 1.) The authorities lastly herein cited are, 1 think, precedents for this action; but if they are not I think that a precedent therefor should be-made, for it will tend to safeguard the interests of the minority' stockholders by preventing those in control through ownership of the majority óf the stock from violating the duty which they owe to the minority to conduct the affairs of the corporation and preserve it as a separate entity for the fulfillment of the purposes of its creation, instead of turning it over to a rival in violation of law and virtually terminating its independent existence. There is no danger in such a precedent. The only judgment demanded is an injunction to prevent the consummation of the transfer of the stock control in violation of the duty of the majority owner to the minority owners, and in violation of the Federal statute. The defendants will neither be subjected to a double recovery nor to a multiplicity of actions. No recovery is sought excepting a decree of the court restraining the violation of this trust duty and of the statute and canceling the transfer of stock which has been made; and this is a representative action in behalf of all stockholders who are not selling their stock at the excessive valuation offered by the New Haven Company for sufficient only to give it control of the Rutland Company. Of course no action could be brought by *39the majority holder who is selling and it is a party defendant, and the final decree will determine all questions with respect to liability by virtue of the contract or contemplated contract as between it and the vendee, who is also before the court. No other minority stockholder- can maintain a separate action in his own right for the relief demanded by plaintiffs, and if such an action should be brought, under well-settled rules of equity practice, it would be consolidated with this or stayed. I regard it as exceedingly doubtful whether the Rutland Company could maintain an action for like relief; but however that may be, it has been made a party defendant and the other defendants will not be prejudiced for the Rutland Company will be bound by the decree and could not if it would maintain another action for like relief. Section 150 of the Railroad Law (Consol. Laws, chap. 49; Laws of 1910, chap. 481) forbids the merging or consolidation of parallel and competing lines of railroad other than street surface railroads and contracts, including leases, for the use of one road by the other “unless.the Public Service Commission shall consent thereto; ” and section 54 of the Public Service Commissions Law (Consol. Laws, chap. 48; Laws of 1910, chap. 480) forbids the purchase or acquisition by any railroad corporation, domestic or foreign, of “any part of the capital stock of any railroad corporation,” including street railroad corporations and other common carriers, “ organized, or existing under or by virtue of the laws of this State, unless authorized so to do ” by the Public Service Commission. The consent and authorization by the Public Service Commission pursuant to these provisions of law was obtained. The learned counsel for the appellants contends, therefore, that the transfer, having been authorized by the laws of our State, cannot contravene any public policy which it is the duty of or within the jurisdiction of this court to enforce. That argument seems plausible, but it is fallacious. It leaves out of consideration the fact that the Congress of the United States has exercised its constitutional authority (U. S. Const, art. 1, § 8, subd. 3) to declare by statutory enactment a public policy on the same subject for the, whole country, which, by virtue of the express provisions of the Federal Consti*40tution (Art. 6, subd. 2), became the “supreme law of the land,” and is as much the public policy of this State as any statute enacted at Albany. The Federal statute superseded all State statutes inconsistent therewith and rendered nugatory any subsequent State legislation in conflict therewith. (Second Employers’ Liability Cases, supra.) It is based on the further erroneous theory that the Public Service Commission of the State of New York- in approving this transfer of stock authoritatively determined that the transfer would not be prejudicial to the public interests, or in restraint of trade, or constitute a violation of the Sherman Act, and that such determination, if not controlling, should be accepted by this court. The opinions of the Public Service Commissioners, acting within their jurisdiction, are entitled to great weight, and doubtless their determination on facts, acting likewise within their jurisdiction, if not annulled on certiorari, are controlling; but the Commission was exercising functions under the State law and it could make no adjudication which would protect any of the parties against a prosecution or action for a violation of the Sherman Act, or which would constitute a bar to an action for damages or a suit in equity based on a violation thereof, or on a breach of the duty owing by the majority stockholders to the minority stockholders. If the transfer would constitute a violation of the Sherman Act or of such duty the Public Service Commission should not have approved it; but that body was not given jurisdiction to authoritatively decide those questions. It was authorized merely to determine authoritatively whether or not the transfer would be consistent with public interests, and, if so, to consent in behalf of the people of this State. That consent or approval was at most merely permissive, and notwithstanding it a court of 'equity may inquire into the motive of the Central Company in selling and the purpose and object of the New Haven Company in thus acquiring control of the Eutland Company, and the effect thereof, even though no statute were violated thereby; and if the transfer involves a breach of duty on the part of the vendor, it being in the circumstances a quasi trustee' for the minority stockholders, I think that it is entirely competent for a court of equity to enjoin it. (See Farmers’ Loan & Trust Co. v. *41N. Y. & N. R. Co., supra, 434; Young v. R. & K. G. L. Co., 129 N. Y. 57; Colby v. Equitable Trust Co., supra.) Moreover, I am of opinion that it is by no means clear that the Legislature contemplated that the Public Service Commission would attempt to approve of the purchase of a mere controlling interest in the stock of one corporation by a rival competing line, thus leaving the minority stockholders at the mercy of a management directly opposed to them in interests. Such a situation might, if it were not a violation of the Sherman Act, warrant consolidation, but not the transfer of mere stock control. The approval of the Commission appears to have been largely influenced by its view that the control of the Eutland Company by the New Haven Company would be less detrimental to the minority stockholders of the Eutland Company than if such control remained in the Central Company, which the Commission held was a parallel and competing line, where it has been for many years, and would be more beneficial to the public; and the Commission assigned this as a reason for not requiring the New Haven Company to offer to purchase the minority stock on the same terms as it had agreed to purchase the majority stock, which the Commission on denying an application of the New Haven Company for leave to sell its stock in the New York, Ontario & Western Company to the Central Company ruled would be a proper condition to impose on granting such an application, for the reason that the minority stockholders could not be protected in such case by the courts or otherwise. Some of the stockholders of the Eutland Company have an action pending against the Central Company to prevent its control over the Eutland Company through ownership of the majority of the capital stock. The right of the plaintiffs to enjoin this transfer cannot be affected by the failure thus far of ■ certain stockholders of the Eutland Company as plaintiffs in the other action against the Central Company to succeed.
The Court of Appeals, in Young v. R. & K. G. L. Co. (129 N. Y. 57, 60), on considering whether an injunction, which was essential to a recovery by the plaintiffs, should be vacated, said: “To dissolve an injunction with the inevitable result ’of defeating plaintiff^ remedy without a trial, we must he *42entirely satisfied that the case is one in which by' settled adjudication the plaintiff, upon the facts stated, is not entitled to final relief. We cannot say that of this plaintiff’s complaint in advance of a trial. * * * These are grave and serious questions. On this motion we ought not to decide them.” It may be said that on the review of the order the Court of Appeals was confined to legal questions and that this court may review the exercise of discretion by the court at Special Term; but, still, if the plaintiffs present a prima facie case for injunctive relief where, as here, it is probable that their right to final judgment will depend upon whether the status quo is maintained, I am of opinion that the injunction order should be sustained. (See Mannington v. Hocking Valley R. R. Co., 183 Fed. Rep. 133, 146, 147, 149, 159; Bigelow v. Calumet & Hecla Mining Co., 155 id. 869.)
On the hearing on the application to vacate the injunction order, which was originally granted ex parte, the plaintiffs offered to have the cause submitted for decision on the merits on affidavits presented on the motion, as depositions, or to try the issues immediately, and they subsequently formally renewed this offer in writing. That was some evidence that the action had not been brought in bad faith and for the purpose of delaying the transfer of the stock. I am of opinion that the plaintiffs have in the circumstances sufficient basis for their contention that the transfer of this stock constitutes a violation of the Sherman Act and a fraud upon the corporation and its minority stockholders to warrant the temporary injunction order until a decision of the action on the merits, which, if the defendants had been willing to proceed to trial, doubtless could have been hadfiong ago. In view of the right which a railroad corporation now has for the exchange of freight and passenger traffic with connecting lines under the Interstate Commerce Act (36 U. S. Stat. at Large, 551, § 12, amdg. 24 id. 384, § 15, as amd. by 34 id. 589, § 4), the efforts of the New Haven Company to obtain a controlling interest in the Rutland Company indicate that it is not actuated by a desire to further the interests of the Rutland Company, and the contrary is clearly shown by the exorbitant price paid for the stock and the admissions of President Mellen of the New Haven 'Com *43pany. It is presumptively, I think, against the interests of one corporation to have it controlled by a competitor. (Louisville & Nashville Railroad v. Kentucky, 161 U. S. 677.) The appellants further contend that in the main the Eutland and New Haven companies are connecting companies and form •a through line, and are parallel and competing only to a very small extent, and that, therefore, there is and will be no violation of the Sherman Act, which was construed by the Supreme Court of the United States in United States v. American Tobacco Co. (supra) as embracing only “ acts or contracts or agreements or combinations which operated to the prejudice of the public interests'by unduly restricting competition or unduly obstructing the due course of trade, or which either because of their inherent nature or effect or because of the evident purpose of the acts ” injuriously restrain trade. Those questions should be left for decision when the facts are fully developed by common-law proof showing definitely the extent to which the lines are competing and parallel, and the extent to which trade and commerce will be restrained and a monopoly created, and clearly laying bare the purpose of the majority stockholder of the Eutland Company in thus turning over the control and management of that company to the New Haven Company and of the latter company in acquiring it. The plaintiffs allege and present evidence tending to show that the New Haven Company and lines which it controls are competing and parallel lines with the Eutland line to an extent sufficient under the decisions of the Federal courts construing the Sherman Act to establish presumptively that the proposed transfer constitutes a contract or combination in restraint of interstate and foreign trade and commerce, and is designed to monopolize such trade and commerce, and that it is, therefore, illegal and void (See Louisville & Nashville Railroad v. Kentucky, supra; Northern Securities Co. v. United States, 193 U. S. 197; Standard Oil Co. v. United States, 221 id. 1; United States v. American Tobacco Co., supra; Harriman v. Northern Securities Co., 197 U. S. 244; Pearsall v. Great Northern Railway, 161 id. 646; Langdon v. Branch, 37 Fed. Rep. 449. See, also, State ex rel. Attorney-General v. Hocking Valley, 12 Ch. Circuit [N. S. L.], 49; Hafer v. Cinn., H. & D. R. Co,, 29 Ch. L. J. *4468; Gulf, Colorado & S. F. R. Co. v. State, 72 Tex. 404; People v. Boston, H. T. & W. R. Co., 12 Abb. N. C. 230), and, therefore, without intending to express an opinion on. the merits, as they may be developed on the trial, I think that the plaintiffs are entitled-to have the injunction continued! '
I, therefore; dissent from the reversal of the order.