Court Opinion

ID: 7005696
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:50:04.49989+00
Date Added: 2024-06-11T16:10:04.205149
License: Public Domain

Mr. Justice Puterbaugh delivered the opinion of the court. The general inquiry presented by the various demurrers interposed thereto is, whether the bill here involved states grounds for equitable relief. The primary question to be determined is as to the validity and force of the contract set out in the bill. Appellant urges and argues that the provisions of the same whereby the stock of the Railway Company was to be placed in the hands of one of the contracting parties in trust for the others, for a period of ten years, to be voted as a unit at all stockholders’ meetings, upon all questions, as four-fifths of the parties thereto should direct in writing, is in restraint of trade and therefore contrary to public policy and void. In Faulds v. Yates, 57 Ill. 416, where persons owning the majority of the stock of a corporation entered into an agreement that they would elect the directors and -determine among themselves as to its officers and management, and that if they could not agree, they would ballot among them'selves for the directors and officers, and that the majority should rule, and their vote be cast as a unit, so as to control the election, our Supreme Court held that such an agreement was not void as against public policy and that the parties had a right to combine and thus secure the board of directors and the management of the company. This case was cited, with approval, in Higgins v. Lansingh, 154 Ill. 301. In Smith v. S. F. & N. P. Ry. Co., 115 Cal. 584, an agreement similar to the one in question, was fully considered by the court and held to be a valid-fa nfi binding contract. In that case three parties intending to purchase a block of stock entered into an agreement as one of the conditions of their uniting in the purchase, that they would vote as a unit for five years, in accordance with the decision of the majority, to be determined by ballot. It was them held that an owner of stock cannot revoke an agreement made with other persons as a condition of their joining to purchase a majority of the stock, although the certificates were taken in their individual names, to the effect that the stock shall be voted as a unit for five years as a majority of them should determine by ballot. It was also held that the owners of the majority of stock may lawfully agree to be bound by the will of the majority of themselves in voting the stock, and that the agreement was not illegal as in restraint of trade. In Moses v. Scott, 84 Ala. 608, certain stockholders had formed a voting trust and placed their stock in the hands of four trustees with power to vote the stock as a unit at all meetings, as three of them should think best, or if they failed to agree, as three-fourths of the stock represented should determine, and agreed not to sell their stock so pooled for a period of three years. In that case there was no consideration other than the mutual promise of the several stockholders, and while the court refused to enforce the agreement, it said: “We cannot say there is anything per se illegal, in an agreement entered into by and between certain stockholders in a joint stock company, by which they promise to vote together as a unit in all matters pertaining to the government of the corporation. Each mem.ber has a clear right to cast his ballot'as he pleases, wisely or unwisely, and no other stockholder can control his conduct, or gainsay his discretion. And it can make no difference if several stockholders uniformly vote together, or so vote in obedience to a prior agreement that they will do so. The vote when cast is but the expressed wish of the stockholders, or, at least, must be so regarded, and no other stockholder can be supposed to be injured thereby. To hold otherwise would greatly abridge the voter’s right to cast his ballot as he pleases.” In Hey v. Dolphin, 92 Hun (N. Y.), 230, the parties were jointly interested in certain shares of stock which had been issued to them in a single certificate, and it was agreed between them that the stock should not be sold or in any manner disposed of, for a period of ten years, without their joint consent in writing, but should remain as first issued, for the purpose of enabling said parties to prevent the control and management of the company from passing over to persons who might be less qualified to make the business a success and its stock valuable. By the same agreement Dolphin was appointed a proxy to vote the whole of said shares at all regular elections and the proxy was made irrevocable for ten years. In an action brought for the purpose of having the agreement made void and to have a certificate issued to the plaintiff for one-half of the shares, the court held that the agreement was not void or against public policy, saying': “The object and purpose of the agreement as stated in the contract is not in itself vicious,, but rather the contrary. It will hardly be claimed that a majority of stockholders may not combine and control an election' of directors.” In Beach on Corporations, section 304, it is said : “ The owners of shares may enter into agreements as between themselves, to elect the officers of the company and to manage its officers as they or a majority of them may determine, and it is held that agreements of that character are not illegal or void as against public policy, for as was said by the court in a leading case (Faulds v. Yates, 57 Ill. 416), their interests are identical with the interest of the minority of the shareholders.” The purposes sought to be accomplished by the provision of the contract under consideration, was to vest and retain for a fixed period the management and control of the enterprise in the persons who originally promoted the same. So long, at least, as each of them retained his original interest and no other rights intervened, the enforcement of the same was proper and practicable. We, therefore, hold that the provision of the contract in question was legal and valid. While “ trust voting agreements” have been held to be void, the reasons therefor do not exist in the instant contract. In Kreissl v. Distilling Co., 47 Atl. (N. J.) 417, the agreement involved was held to be contrary to public policy and void for the reason that it provided for a possible management of the affairs of the corporation during a fixed period, by the judgment and determination of others than the stockholders, and for the further reason that stockholders who joined therein should have an interest which would not inure to the benefit of those who failed to do so. The court there said: “ If stockholders, upon consideration, determine and adjudge that a certain plan for conducting and managing the affairs of the corporation is judicious and advisable, they' may, by powers of attorney, or the creation of a trust, or the conveyance to a trustee of their stock, so combine or pool their stock as to provide for the carrying out of the plan so determined upon. But if stockholders combine by either mode to intrust and confide to others—the formula-' tion and execution of a plan for—the management of the affairs of the corporation, and exclude themselves bj acts made and attempted to be made irrevocable for a fixed period, from the exercise of judgment thereon, or if they reserve to. themselves any benefit to be derived from such a plan, to the exclusion of other stockholders, who do not come into the combination, then, such combination, and the acts done to effectuate it, are contrary to public policy, and other stockholders have a right to the interposition of a court of equity to prevent its being put into operation.” In Cone v. Russell, 48 N. J. Equity, 208, an agreement was held void as against public policy by which owners of shares agreed with the owners of other shares to give an irrevocable proxy for five years, empowering them to vote on the shares during that time, in consideration of which the latter parties agreed to so hold the shares as to procure the employment of one of the owners thereof as manager of the corporation, at a specified salary. In White v. Tire Co., 52 N. J. Eq., 178, all the stockholders of a corporation entered into an agreement among themselves, transferring their shares to a trustee, who should issue to each stockholder an assignable trust certificate for the amount of his stock so transferred. The trustee was required so to vote upon the shares that a majority of the directors should be elected on the nomination of holders of certain certificates, being a minority of the whole number, and that a minority of the directors should be elected upon the nomination of holders of certain certificates, being a majority of the whole number of such certificates. This agreement was held void. In its opinion the court says: “ The conclusion does not reach”so far as to necessarily forbid all pooling or combining of stock, where the object is to carry out a particular policy with a view to upholding the best interests of all the stockholders. The propriety of the object validates the means, and must affirmatively appear.” In Warren v. Pim, 55 Atl. Rep. (N. J.) 66, the American shareholders of a Hew Jersey corporation agreed to the plan of reorganization on the pledge that they should have an equal footing with English stockholders, who constituted the majority. The foreign stockholders, without the knowledge of complainants, created a voting trust to endure for fifty years, during which time the trustee was to have absolute power to vote the stock, subject to revocation of the trust by three-fourths of the .stockholders. The result was the control of the corporation by one-seventh of its stock. It was held that the American shareholders could enjoin the carrying out of the trust, they having a right to demand the original judgment of all stockholders in the company, of the company’s affairs. The court held that the creation of a pool with iron-clad provisions, and without the knowledge or consent of complainants, gave the defendants an unfair and unjust advantage, depriving complainants of the right to offer to and have the benefit of the individual judgment of the foreign stockholders on any and all matters connected with the policy of the corporation. It is further urged that the contract is invalid for the want of a consideration. The position is untenable. Hot only may a consideration be imported from the fact that the contract was under seal, but an express consideration appears from the averments of the bill that each contracting party agreed to and did pledge his personal credit and financial responsibility for the payment of a portion, at least, of the funds raised for the financing of the enterprise. We are, therefore, of opinion that the contract was valid and effective when made, and that under the terms thereof, appellant became the owner of a one-fifth interest in the capital stock of the Railway Company, subject to the terms of said contract. We are further of opinion that the acquirement by DeMange, Eddy and Evans of the McIntosh interest, in the manner averred, was such a clear and so obvious a departure from the mode of procedure provided thereby to be adopted, as to operate as a rescission, by them, of the contract, and to render the provisions of the same, so far as a trust is reposed in DeMange," thereafter inoperative and without force, and to deprive DeMange as trustee of any further right to hold or control appellant’s stock. Furthermore, such disregard by DeMange of the terms of his trust, coupled with his subsequent conduct, constituted, in effect, a denial of appellant’s rights in the premises, and consequently a breach thereof. It follows from the views expressed, that upon the violation of the contract by the other parties thereto, the trust arrangement was ipso facto ineffective, and that as a consequence appellant became and was entitled to demand, receive and control the shares of stock issued to him in the first instance, free from and - unhampered by the terms and conditions of the contract in question. Appellees insist that the averment of the bill to the effect that the purchase by McIntosh was effected in June, 1901, and the failure of appellant to aver a request by him to be allowed to participate in the benefit of the same, or that he complained thereof, until the filing of his bill in April, 1902, show such laches as to estop him from complaining of such violation of the terms of the trust, or insisting that the contract in that particular was rescinded. We-regard such contention as without merit. A court of equity will apply the doctrine of laches in denial of relief only where, from all the circumstances, to grant the relief to which the complainant would otherwise be entitled, will presumptively be inequitable and unjust because of the delay. Coryell v. Klehm, 157 Ill. 462. In the light of the views already and hereinafter expressed, we are unable to say that by the delay of appellant in asserting his right to the unhampered control of his stock it may fairly be presumed that appellees were lulled into doing that which they would not have done, or in omitting to do that which they would have done in regard to the property, had such right been more promptly asserted. Gibbons v. Hoag, 95 Ill. 45. The contention of appellant that because neither he nor his attorney in fact were notified of the several meetings of the stockholders at which the name of the corporation was changed, the objects enlarged, the capital stock increased and the consolidation with the Electric Company had, all of such proceedings were null and void, is equally without force. It does not appear from the averments of the bill that appellant ever was a stockholder of record. If not, he was never entitled to vote at any stockholders’ meetings. The bill further shows that the meetings referred to were held under wwitten waivers of notice, signed by all the stockholders of record. The statute was thus substantially complied with. We, therefore, hold that the averments of the bill in this respect are insufficient to warrant a decree declaring the proceedings at the stockholders’ meeting - referred to, null and void, and the same must, in this case, be held to be valid'. We think the averments of the bill are sufficient to entitle complainant to a decree declaring the contract in question, in so far as it provides for the control of his said stock by JDeMange, to be of no further binding force and effect, and requiring said JDeMange to transfer to complainant such number of shares of the stock of the Bloomington & JSTormal Bail way. Electric & Heating Company, as it may appear, upon an accounting by said JDeMange with him, complainant is, in equity, entitled by reason of his ownership of said 250 shares of stock in the Bloomington & Normal Railway. As to the other and further relief prayed, we are of opinion that the bill in its present form is insufficient to entitle complainant thereto. The averments of the bill to the effect that the property of the Electric Company and the Heating Company xvere turned into the Consolidated Company at excessive and exorbitant valuations, are clearly insufficient to warrant the relief predicated and prayed thereon, even if such relief could be had in this proceeding. They neither state xvhat the property was worth nor the amount paid for the same. This is also true as to the averment that the consolidation of the Electric and Railway companies was unlaxvful, for the reason that they xvere not of the same kind and engaged in the same general business, xvhich, in the absence of any averments as to the kind of business in xvhich said corporations xvere respectively engaged, are but conclusions of the pleader. It is urged that the bill is multifarious. By multifariousness in a bill is meant the improper joining in one bill distinct and independent matters, and thereby confounding them; one example of xvhich being the demand in .one bill of several matters of a distinct and independent nature against several defendants in the same bilk The objection is confined to cases where the case of each particular defendant is entirely distinct and separate in its, subject-matter, from that of the other defendants, for the case against one defendant may be so entire as to be incapable of being presented in several suits, and yet some other defendant may be a necessary party to some portion only of the case started. In the latter case, the objection of multifariousness could not be allowed to prevail. So, it is not indispensable that all the parties have an interest in all the matters contained in the suit; it will be sufficient if each party has an interest in some matters in the suit, and they are connected xvith the others. Story’s Eq. PL, sec. 271. When the subject of a suit is single, but different persons have, or claim, separate interests in distinct or independent questions, all connected with or arising out of the single object of the suit, the complaint may bring such different persons before the court, as defendants; so that the whole object of the bill may be obtained in one suit, and to prevent further unnecessary and useless litigation. Story’s Eq. Jur., sec. 534, note. Applying the foregoing rule to the case stated in the bill under consideration, we are of opinion that the same is not multifarious. The contention that appellant has a complete remedy at law by an action against DeMange for breach of an executory trust, is, in view of what we have said, so clearly untenable as to require no discussion. The contention that the bill is demurrable because the complainant relied upon the contract in some parts of the bill and denies or refuses to admit its validity and binding force in others, is likewise without .force. While a complainant is not allowed to allege two inconsistent states of fact and ask relief in the alternative, he may state the facts and ask alternative relief according to the conclusions of law which the court may draw from them. Story’s Eq. Pl„ sec. 42, note. A bill in chancery may be formed with a double aspect and the prayer thereof be in the alternative, so that if the chancellor shall decide against the complainant in one view it shall grant him the relief in another. And this is true though the different aspects presented be not consistent each with the other, if each alternative case made by the allegations of the bill entitles complainant to the relief asked by the prayer. Henderson v. Harness, 184 Ill. 520. A number of other grounds of demurrer are urged. Those which we deem material or important are fully covered by the foregoing discussion. There being equity in the bill, the chancellor erred in sustaining a demurrer to the same for want of equity. Where a bill in equity sets out various claims to the interposition of the court, a general demurrer to the whole bill will be overruled if any of the claims afford a proper case for the jurisdiction of the court. Snow v. Counselman, 136 Ill. 191. The decree of the Circuit Court will be reversed and the cause remanded for further proceedings not inconsistent with the views herein expressed. Reversed and remanded.