Citation Numbers: 74 N.Y. St. Rep. 345
Judges: Green
Filed Date: 3/13/1896
Status: Precedential
Modified Date: 10/17/2022
From 1883 to 1895 there was no election of directors of the Buffalo, New York & Erie Publishing Company. Tn 1895 a notice was duly published of a meeting of stockholders to elect such directors. This notice bears date August 27, 1895, and appoints a stockholders’ meeting September 17, 1895. At the time and place stated, George F. Brownell, as attorney and agent of the United States Trust Company of New York, presented the proxy thereof, duly executed, and offered his vote upon 5,759 shares of the capital stock of said Buffalo, New York Erie Railroad Company. This vote was first offered upon various propositions that came before the meeting before the polls were declared open for the election of directors, but it was refused in each instance by the inspectors acting at the meeting. The •ground of challenge was that the stock which Mr. Brownell •offered to vote upon was the property of the New York, Lake Erie & Western Railroad Company. Mr. Brownell then produced the books of the Buffalo, New York & Erie Railroad, and showed therefrom that the stock upon which he offered to vote liad been held by said United States Trust Company of New York for more than ten days preceding the election; and he also proved by affidavit, as required by law, that said trustee was the •owner of said stock, as trustee for the railroad company. In addition.to this he produced an instrument duly executed by the New York, Lake Erie & Western Railroad Company and its receivers, and filed a duplicate copy thereof with the inspectors, by which instrument it appears that the New York, Lake Erie & Western Railroad Company acknowledges the right of said United States Trust Company of New York to vote at said election upon said shares of stock. The duplicate copy filed with the inspectors did not contain the signature of one receiver, but this is not important, because the other original does contain the •signatures of all the receivers, although the signature of Mr. McCullough was inadvertently omitted from the copy filed. The inspectors still refused to receive the vote upon such stock, and these proceedings were instituted.
The respondents make answer herein, alleging that they were justified in refusing the vote upon the stock in question, as that stock was the subject of litigation in an action in this court wherein Samuel W. Milbank and others were plaintiffs, and the New York, Lake Erie & Western Railroad Company and others were defendants, and that a judgment was rendered therein in October, 1882 (64 How. Prac. 20), among other things, enjoining and re•straining the said last-named railroad company and its trustees -and agents from voting upon those identical shares of stock, upon the ground that it was against public policy, and that, whether the railroad company or its trustee now holds the stock, that judgment is still in force, and precludes either from voting upon those
It is not, and cannot be, denied that the legislature possesses the power to vlidate, ratify, and confirm the purchase of stock in question, and to confer upon the purchaser all the rights, privileges, and powers of an individual owner of stock. It will suffice to refer to the following, among numerous authorities upon this proposition: Gross v. Mortgage Co., 108 U. S. 487; Id., 93 Ill. 493; 1 Mor. Priv. Corp. § 20; 2 id. § 651. The question for determination is whether the legislature has exercised such power. The answer to this depends upon the construction, operation, and effect to be given to chapter 688, section 40, Laws 1892. Py that act, “any stock corporation may purchase, acquire, hold and dispose of the stocks, bonds, etc., of any corporation, if the corporation whose stock is so purchased, acquired, held or disposed of, is engaged in business similar to that of such stock corporation. When any such corporation shall be a stockholder in and other corporation, as herein provided, its president or other officers shall be eligible to the office of director of such corporation the same as if they were individual stockholders therein, and the corporation holding such stock shall possess and exercise in respect thereof, all the rights, powers and privileges of individual owners or holders of such stock.” It is claimed that this provision must be construed to apply only to purchase of stock thereafter to be made, and not to stock theretofore acquired. The ground of the decision in the Milbank Case, 64 How. Prac. 20, was, not that the purchase of the stock was expressly prohibited by any statute •applicable to the Erie Company, and therefore an illegal or unlawful transaction, but that it was not necessary to the exercise of its powers, and was therefore ultra vires; that although the purchase was beyond, or not Within, its corporate power, yet its title to the stock, and its right to receive the profits and dividends, could not be question,—at least, by the vendor corporation. Put it vras also held that the vendor corporation could properly invoke the doctrine of ultra vires, as against its claim to vote upon the stock, or to, have any voice in the control or management of the coip oration, and thus deny to it all the rights, powers, and privileges of an individual stockholder. And it was also observed by the court that as the Hew York, Lake Erie & Western Company was organized under chapter 140, Laws 1850, it is now bound by section 8 of that statute, prohibiting purchases of stock in other corporations. That being so, I am unable to perceive why this purchase of stock, although it was not taken directly fronj the Buffalo, Hew York & Erie Company, but was purchased on the foreclosure sale of the Erie’s property, was not within this express prohibition of the statute making it unlawful for any such company to use any of its funds in the purchase of' any stock in other corporations. The company was prohibited from using its funds in this manner, and this prohibition would
Let us assume, then, that this company’s charter (act 1850) applied to the purchase of this very stock, and declared it unlawful. Now, this statute was repealed in 1892, while this company was still the owner and holder of this stock, and consequently there remained no express statutory .prohibition against the use of its-funds in the purchase of stock of other corporations. And not only was such prohibition repealed, but an affirmative statute was enacted, authorizing any- stock corporation to hold such stock, and' conferring all the rights, powers, and privileges of an individual stockholder. From that time it became lawful to hold such stock,, and to vote upon it. The act of purchase became ratified, confirmed and validated, and the disability to hold such stock was-removed. The rule against construing a statute to operate retroactively has no application. The legal, absolute, indisputable right and power to hold such stock in the future is given by the act of 1892. At the instant of time when the statute was passed, the-holding became legalized, although it was purchased in violation of a former statute, and all the rights, powers and privileges of a stockholder became vested in the company. The prohibitory, statute being repealed, and a new, affirmative, enabling, remedial* statute being enacted, it necessarily operated on the c.ondition of things existing at that time. There is now no statute prohibiting the company from holding this stock, with all the rights and pow"ers incident to or connected with it. If the holding of this stock is sanctioned, and the disability of the company to be and exercise all the powers and privileges of a stockholder are removed, it must
How, the question comes down to this: Could the right to hold this stock and exercise the rights of a stockholder he questioned in any action or proceeding by the people of the state? If not, then no one may dispute it. Upon what grounds? Public policy or ultra vires, or both? The former is out of this question, for the policy of the law is determined by the statute. As to the latter, it would be a legal anomaly to adjudge that the holding of stock pre*
Now, if there remains any doubt in respect to the applicability of the act of 1892 to the acquisition and holding of this stock, the-law and justice require that in a summary proceeding of this character, to which the people of the state are not a party and cannot be heard, such doubt should be resolved in favor of the claimant.. It is eminently proper, in view of this legislative declaration and-authority, that the corporate power and right of the Lake Erie &' Western Railroad Company to hold this stock, and to exercise all! the rights, powers, and privileges of a stockholder, should be assumed until it is questioned by the sovereign power. When the lawmaking power authorizes a corporation to hold stock in another; and to exercise the rights of a stockholder, it is unseemly in the inspectors of election, and is improper for this court in such a pro-; ceeding, to undertake to decide summarily that the statute has no-application to stock held at the time the statute was passed. Even’ though we may be wrong in our interpretation of the statute, still-the company shows a prima facie right; and, whatever doubts may exist, they should not be resolved against it. The vendor' corporation voluntarily parted with its stock, received the vendee’s money in payment, and created it a stockholder, or attempted to do so. The disability of such corporation to purchase and' hold stock in other companies having been removed, neither law, justice, nor equity requires that the right to vote upon stock theretofore acquired should be denied.
If the consequence of construing this statute to apply to stock theretofore purchased should result in destroying, affecting, or impairing any legal right possessed by the vendor corporation or its minority stockholders, there would exist very good reasons for refusing to give a retroactive operation to its provisions. Where no-such legal rights will be impaired, the presumptiorf against a legislative intention to affect matters and things theretofore arising or occurring is of much less potency. End. Interp. St., § 284, And
It follows that the inspectors should have received the vote of the trust companv, and an order directing them to proceed with puch election, and to receive the vote of the trust company upon