Carter v. Producers' Oil Co.

Opinion by

Mr. Justice McCollum,

We think the court below entered the proper decree in this case. The plaintiff filed his bill to compel the defendant company to concede to him the rights of a member as to shares of which he was merely a transferee. The shares so held by him, together with the shares he subscribed for, represented a clear majority of the capital of the company. On payment of his subscription in accordance with its terms he was duly elected to membership in the company, and he then received from it a certificate for 300 shares of its capital of the par value of $10.00 each, that being the number of shares for which he had subscribed. Afterwards, and prior to the institution of this suit, he purchased from the National Transit Company 29,764 shares, and from other persons 131 shares, making in all 29,875 shares in addition to his original 300 shares. The shares thus purchased by him were shares which members of the defendant company had sold, and which the parties from whom he had purchased had bought. The National Transit Company was then one of the companies affiliated with the Standard Oil Company, and controlled by what is known as the Standard Oil Trust, in whiph the plaintiff was a shareholder at the time of his purchase. His avowed purpose in making the purchases mentioned was to obtain control of the defendant company and change its policy from what he characterized as “ gad fly ” competition, with the Standard, to such competition as he believed would be unobjectionable to it. There is reason to believe that he could not have obtained the stock but for the assurance that he would use the power he supposed it would give him to accomplish Ms declared purpose. While it is probable the accomplishment of his purpose would be advantageous to him, it is very clear that the other members of the defendant company regarded his scheme as fatal, if carried out, to the principal object intended to be achieved by the organization of the company, and as destructive of their interest in it. The principal and controlling question raised by the bill and answer is whether the plaintiff is entitled, by reason of his election to membership in the defendant company on payment of his subscription, to have transferred to him on the books of the company and to vote the shares purchased as above stated. The plaintiff contends that he is, and the defendant company contends that he is not. The arguments in support of and against their respective contentions are exhaustive and able, but an extended review of them is not deemed essential to a proper determination of the question we have to consider.

It is conceded that the plaintiff has no right to vote the shares he purchased as above stated if the rule of June 5,1894 is valid. It appears from the tenth finding of fact that the rule was adopted by the vote of a majority in number and value of interests of the members of the defendant company. To determine whether it was within the power of the company to establish the rule we must look to the statutes under which it was organized. As bearing on this question it is sufficient to refer to the Act of June 25, 1885, P. L. 182, which is amendatory of the fourth section of the Act of June 2, 1874, P. L. 271. It is as-follows: “ Interest in such partnership association shall be personal estate, and may be'transferred, given, bequeathed, distributed, sold or assigned, under such rules and regulations as such partnership associations shall from time to time prescribe by a vote of the majority of the members in number and value of their interests; and in the absence of such rules and regulations the transferee of any interest in any such association shall not be entitled to any participation in the subsequent business of such association, unless elected to membership therein by a vote of a majority of the members in number and value of their interests. And any change of ownership, whether by sale, death, bankruptcy or otherwise, which occurs in the absence of any rules and regulations of such association regulating such transfer, and which is not followed by election to membership in such association, shall entitle the owner or transferee only to the value of the interest so acquired at the date of acquiring such interest, at a price and upon terms to be mutually agreed upon, and in default of such agreement, at a price and upon terms to be fixed by an appraiser to be appointed by the court of common pleas of the proper county, on the petition of either party, which appraisal shall be subject to the approval of said court.”

It will be observed that the statute makes no distinction between a transferee who is a member of the partnership association and a transferee who is not a member of it. The language of the statute fairly excludes such a distinction, and there is nothing in the articles of association which warrants it. It is a distinction which, if made, would enable a member of the association to obtain a controlling interest in it by a purchase of a sufficient number of its shares, to defeat the controlling purpose of its organization, and to impair, if not absolutely destroy, the interests of the other members. If the legislature had intended to make this distinction it could and presumably would have done so in a few words. The absence of anything in the statute indicative of a purpose to make it tends to confirm the view that members who purchase shares sustain the same relation to them as purchasers who are not members. Of what avail is it to deny to a stranger who buys shares of the capital of the association the right to vote them without its consent manifested by his election to membership therein, while a member of the association who desires to obtain control of it to defeat the purpose for which it was organized and to change its policy in the interest of a rival company is allowed to vote without its consent the shares he has purchased ? It seems to us that a construction of the statute which admits of such results is opposed to the spirit, as well as the letter of it, and that so much of the rule of June 5, 1894 as puts the member who purchases shares on the same footing with respect to them as the stranger who purchases shares has, is in clear accord with and authorized by it. We cannot assent to the plaintiff’s claim that the defendant company is a corporation and restricted, in tbe adoption of by-laws, rules and regulations for its government, to such as it is within the power of the latter to prescribe. It may be conceded that the defendant company has some of the qualities of a corporation, but it is nevertheless a partnership association, governed by the statutes and articles under which it was organized, and the rules and regulations it may prescribe in execution of the powers with which the statutes have invested it. We concur in, and need not add anything to, what the learned judge of the court below has so well said on this point, and in respect to the agreement or understanding between the parties when the company was organized. In accordance with the views expressed in this opinion we overrule the specifications of error.

Decree affirmed and appeal dismissed at the cost of the appellant.