Court Opinion

ID: 6244002
Source: CourtListenerOpinion
Date Created: 2022-02-17 20:52:54.318074+00
Date Added: 2024-06-11T08:59:14.515193
License: Public Domain

' Mr. Justice Dean,
dissenting.
I most respectfully dissent from the opinion of the chief justice in this case. It assumes the decree is not final, but only has the effect of continuing the preliminary injunction, and deferring final judgment to be entered after further proceedings in the court below. This is a mistake; dismissing defendants’ appeal now has, so far as concerns them, all the force of a final decree; ousts them from any control of the corporate property in which they have invested their money and hold a majority of stock, and places practically the whole in possession of plaintiffs, without the rights of stockholders on part of defendants. And so both parties in the oral argument before us admitted, and both assumed our decree would be in its effect, the end of the contention. Therefore, it seems to me, our duty now clearly is, to end the strife by reviewing the case on its merits, and passing on the questions which determine the parties’ rights.
Aside from the purely technical question as to the legal ownership of the new issue of stock, no corporate mismanagement by defendants is found by the court below. The evidenceo clearly indicates, the property was wisely and economically managed to. the best interests of all the stockholders, including *581plaintiffs; they refunded the debt of the corporation by the issue and sale of 350 additional shares of stock. Assuming defendants were but managers de facto, plaintiffs had full information of the proposed corporate action on the 27th of September, 1892. I do not see how they could have had more particular or fuller information than that contained in the affidavit of A. A. Stevens, which it is admitted was read to A. G. Morris that day. Yet the first legal proceedings begun by plaintiffs after the notice were on the 27th of July, 1893, and the second, the filing of this bill, June 28, 1894, and this last is the only one which questions the legality of the additional issue of stock. It appears from the record, that plaintiffs waited more than twenty-one months after notice of the action of the de facto managers before they invoked the restraining power of the court. By that time, all the plans for refunding the corporate debt had been fully carried out; the corporation not only had received defendants’ money for the new stock, but had spent it for the benefit of the corporation and these complaining stockholders. Plaintiffs now claim the issue of the stock and expenditure of the money were illegal, and ask a court of equity to restore the status. In my opinion the bill cannot be maintained, and this court ought, without hesitation, to so say. To do other than this, it seems to me, is to disregard well settled equitable principles. Ashhurst’s Appeal, 60 Pa. 290, and Watt’s Appeal, 78 Pa. 370, as well as numerous other cases, hold that as to an act of corporate directors, done with a bona fide intent of benefiting the corporation, the assent of the shareholders who knew of the act will be presumed if they do not gainsay it within a reasonable time; further, when the act involves a large expenditure of money the complaining shareholder must not only dissent, but is bound to promptly follow that up with active preventive measures. He must invoke the power of the courts; he cannot wait until the corporation has reaped the benefit of the alleged illegal act, and then call the officers of the corporation to account, for it is against good conscience that one having power to prevent, should stand by and see corporate managers spend money which may result to his benefit, and afterwards charge them with it. His neglect to act at the proper time effectually bars his right.
C. A. Morris, one of these plaintiffs, a director, was present *582at several meetings of tbe board and dissented, but that was all; the others did not even dissent. After the stock is issued the money paid, and the corporation largely benefited, the plaintiffs ask that the holders of the stock be restrained from exercising under it the rights of bona fide stockholders, and our decree, in its effect, grants their prayer. In my opinion the only just decree we can make is to say they are too late, and direct the dismissal of their bill.