Court Opinion

ID: 8781772
Source: CourtListenerOpinion
Date Created: 2022-11-26 13:21:28.15384+00
Date Added: 2024-06-11T17:02:52.196535
License: Public Domain

NOYES, Circuit Judge
(after stating- the facts as above). [1] If we should lay stress upon particular averments in the cross-bill, standing alone, we might be lead to the conclusion that it is averred as a fact that the complainant agreed expressly to exchange his shares for those of the consolidated company. But we are satisfied from the cross-bill-as a whole, as well as from the contentions of counsel, that there is no claim of express agreement, and that the averments of consent and approval should be treated as conclusions drawn by the pleader from the facts alleged.
Now, we find nothing in the alleged acts of the complainant prior to the consolidation showing that he approved it. The matters charged — the subscription to mortgage bonds some six years before, the acceptance of the 30 per cent, dividend, and the approval of the lease — are all consistent with a purpose not to participate in the consolidation. A fortiori they fail to show that the complainant indi*43rated any intention to exchange his shares should a consolidation he effected. So, while the fact that the complainant did exchange a part of his holdings might justify the inference that he approved the consolidation, it would furnish no basis for the further inference that he became bound to exchange his remaining shares, unless such obligation necessarily resulted from the fact of consolidation. There being, then, nothing by way of express agreement or estoppel to bind the complainant to exchange, his duty to exchange — if it exist at all — must be based upon the consolidation proceedings.
¡2, 3] Where a consolidation agreement requires an exchange of shares, proof of the approval of the consolidation shows an agreement to exchange. But where a stockholder is not required to exchange, proof of the approval of the consolidation establishes only one step, and that not the essential one. Thus, if we assume that the defendant is right in its contention that the complainant, by virtue of his ownership of stock in one of the consolidating companies became bound to follow his corporation into the consolidation, it does not follow that he agreed to exchange his shares, if the articles of consolidation recognized his right to retain them. And we think that they did recognize and give him this right. In our opinion, the object and effect oí the provisions already quoted were to permit stockholders who were unwilling to surrender their shares to the consolidated corporation, to retain them under the conditions and with the rights stipulated. We find no obligation to exchange.
It is urged, however, that the provisions in question were temporary in their nature and were intended to cover only the time during which the details of the consolidation could be worked out. In our opinion, however, the language used furnishes no basis for this contention. On the contrary, we think the provision giving the right to share “in the earnings and assets’’ of the old corporation inconsistent with such interpretation. It is further contended that there are embarrassments and difficulties in the way of giving effect: to these provisions as we have construed them. But the difficulty of performing a contract is no reason for failing to enforce it or for interpreting it contrary to its plain meaning.
[4] The contention is also made that the provisions in question which require the continued existence of one of the old corporations are invalid because they are inconsistent with the rule that the effect of consolidation is to terminate the existence of corporations consolidating. if it were necessary for us to examine this question we should find, probably, that there are exceptions to this rule. But it is not necessary for us to examine it. The agreement of consolidation is not severable. The provisions with respect to nonexchanging stockholders are material and essential parts of it. It cannot be said that it would have been made if they had not been included. Indeed under the conditions disclosed it is not even certain that the controlling interests would have ventured to present it for consideration without them. If these provisions are invalid, the whole consolidation agreement is invalid and the defendant, consequently, states no cause of action in its cross-bill. And, on the other hand, if the provisions are
*44valid, the complainant has the-right to stand upon them and the defendant is not entitled to the relief prayed for.
The demurrer to the cross-bill was properly sustained by the Circuit Court and its decree is affirmed, with costs.