Court Opinion

ID: 8529731
Source: CourtListenerOpinion
Date Created: 2022-11-23 10:59:57.525173+00
Date Added: 2024-06-11T16:51:44.736515
License: Public Domain

DISSENTING OPINION OF
MR. JUSTICE WOLF.
While not without some doubts, I am inclined to agree that the Noble Case in the Supreme Court of the United States settles the question that the Government may limit banking operations exclusively to corporations organized under the law. The theory, more or less, is that if a business has reached such a state that its proper control and regulation can only take place by the superintendence of the Government the latter may require that the business be only conducted by corporations over which it has complete control and which have perpetual succession. The police- power exercised is essentially perhaps no different from the suppression of the liquor traffic. Under the Prohibition Law-only certain liquors may be sold by specified persons; under the Banking Law only corporations are allowed to do the hanking business. There must be of course some public necessity. I dissent from the other conclusions of the court.
It is my opinion that a societé anonyme like the Banco Territorial y Agrícola is not a corporation as the'word is used in American and English law; that it partakes more nearly •of the characteristics of a joint stock company. The majority opinion, to show that such an organization is a corporation, places great reliance on the case of Martínez v. La Asociación de Señoras-Damas del Santo Asilo de Ponce, 213 U.S. 20. In the Supreme Court of the United States one of the parties asserted that the “Asociación” was a Spanish corporation and the court in its opinion assumed it. The court did not enter into a discussion of the nature of such an association and decided nothing on the inherent nature thereof. Of course under the civillaw partnerships are generally entities, just as corporations are in the United States. The societé *272lias no seal and while it could be controlled to a certain extent by the state, it was more generally a private organization, as partnerships are, and could be dissolved as partnerships are. Partnerships could be controlled by the state probably to the- same extent. However this may be, the burden lay on the Banco Territorial y Agrícola to show that it was a corporation comparable to the corporations subsequently authorized by the laws of Porto Rico or was the corporation with less than five incorporators mentioned in the act. Of course if the Banco was not a corporation it was not recognized under the banking act and was clearly bound to organize as other individuals had to do.
Assuming, however, that the Banco Territorial y Agrí-cola was a corporation or a certain kind of corporation, it nevertheless was not the kind of corporation authorized by the laws of Porto Rico. Even assuming that the Banco was a full fledged corporation, I can not agree that it had the right to transfer its assets in the maimer attempted.
Section 4 of the Act of the Special Session of 1923, page 84, provides:
“That any five or more persons of full legal capacity may organize a bank, by executing before a notary and filing in duplicate, articles of incorporation in accordance with the provisions of this section; Provided,, however, That banks now doing business in Porto-Rico, may continue such business in Porto Rico though organized as ^ corporations with less than five incorporators, provided they subject themselves to all other provisions of this Act; Provided, further, That banks doing business in Porto Rico, which have not been incorporated, shall incorporate pursuant to the provisions of this-Act, within a term of six months from and after the date on which this Acts takes effect.
“Said articles of incorporation must he subscribed by each of the incorporators and duly acknowledged before a notary public. They shall specifically state—
“(a) The name by which such bank is to be known.
“ * * * * * * > >
I am inclined to agree entirely with the court below that. *273the Banco Territorial y Agrícola de Puerto Rico, while it might incorporate, reincorporate or reorganize, had no right to do so without following the law and paying heed to the rights of minority members or stockholders. It is my opinion that the bank could not incorporate, reincorporate or reorganize without first settling with the minority members who were opposed to a change; that if in order to effect such a settlement a dissolution was necessary the bank should have been dissolved. To attempt anything else was not authorized by law. If the act attempted to give such a right it was unconstitutional as depriving individuals of their rights without due process of law.
Cook on Corporations, Sixth Edition, Yol. 2, sec. 670, p. 1992 et seq., says:
“Ever since the case of Abbot v. American Hard Rubber Company, the law has been clearly established in this country that a dissenting stockholder. may prevent the sale of all the corporate property where the corporation is a solvent, going concern. And even where a dissolution is the purpose in view, yet, if the corporation is a prosperous one, such a sale cannot be made. Indeed it is very doubtful whether a dissolution can ever be had at common law by a majority of the stockholders where the corporation is a going, prosperous concern. And certainly if the purpose of such dissolution is not the bona fide discontinuance of the business, but is the continuance of that business by another new corporation, then the rule is that a dissenting stockholder may prevent the sale, even though it is made with a view to dissolution of the corporation. This is the law as laid down in the well considered case of Kean v. Johnson.” (9 N. J. Eq. 401).
Emery v. Kalamazoo & Hastings. Construction Co., 132 Mick. 560, field tfiat a majority of the stockholders of a limited partnership association have no power to wind up its affairs by exchanging its property for stock in a corporation and compelling a non-assenting stockholder to become a member of the corporation.and accept stock for her holding.
Mason v. Pewabic Mining Co., 133 U.S. 50, referring back *274to partnerships, held that the rights of minorities must he respected. Schwab v. E. G. Potter Co., 194 N.Y. 409, deciding to the same effect, showed that one entity conld not create another. Other excellent cases are Farish v. Cieneguita Copper Co. (Arizona), 100 Pac. 781, and Blais et al. v. Brazeau, 56 Atl. 186. If an entity can not lawfully do these tilings, neither can the Legislature, and an attempt so to do is, in my opinion, not due process. See 7 R.C.L. 97.
If one of the purposes of the act was the continuance of .the existing corporation and of the same personality, the title of the act failed to draw attention to this feature of the law and hence the act failed to follow the provisions of section 34 of the Organic Act. However, as I. maintain that section 4, properly considered, does not so enact, I believe the title covers all the purposes of the act.
It is my conclusion that section 4 only referred to the continuation of the corporation already organized as such; that the Banco was not such a corporation and that if it were such a corporation it had no right to a reorganization without the consent of the minority stockholders and that what was attempted here was a reorganization and not a reincorporation.
To say that the act does authorize some persons to take the property of individuals and integrate it into the property of a corporation, to make persons surrender property interests to a corporation, would not be due process of law. An interpretation should be given as would prevent such an unconstitutional result.
Under the Banking Law a distinct personality or entity is allowed. The Banco could not by resolution and agreement convert itself into such a personality or entity any more than one individual could convert itself into another. Dissolution and reorganization was necessary.