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balance sheet dated August 31, 1906, from which the figures just
stated have been taken, are conservative valuations, and it seems safe
to say that the evidence shows the value of its $300,000 of stock to be
not less than $900,000. It is also true that upon the financial state-
ments of the Coupler Company, that were offered in evidence, no credit
is taken for the value of its good will, and that its plant is carried upon
the books at about $100,000. In my opinion this amount is too small.
Indeed, the president of the Coupler Company who has filled that office,
and has also been the active head and manager of both companies, ever
since their organization, testified that he would not be willing to ad-
vise the Coupler Company to accept $1,000,000 for its bare plant; and
I believe the finding to be justified that the value of the plant exceeds
considerably the sum at which it is carried upon the company's books.
As further evidence of the value of the plant and the capital stock, it
may be noted that the net profits for the fiscal year 1905 were $359,-
093.87; for the fiscal year 1906, more than $300,000; and for the
period from November, 1906, to February, 1907, inclusive, about
$130,000. Since August 31, 1906, the Coupler Company has had on
hand more cash than would pay its debt of $275,000 to the Steel
Company. The profits just mentioned from the Coupler Company's
business for the period ending with January, 1907, were earned by the
use of its own capital and surplus, exclusive of the sum of $275,000
which it owes to the Steel Company; for it was able to repay this sum
at any time during the period named, out of cash on hand and not in
use. On February 25, 1907, there was due and owing to the Coupler
Company from sales made, $361,699.60; on the same day the com-
pany had $284,000 worth of material on hand that had been paid for;
and, after paying every matured or presented indebtedness, excepting
only the $275,000 due to the Steel Company, the Coupler Company
had a cash balance on hand of $313,098.03, more than enough to pay its
indebtedness to the Steel Company. These conditions are fairly rep-
resentative of its general financial condition. In addition to the
$275,000 owing to the Steel Company, the Coupler Company, at no time
during the month of October, 1906, had a less amount of cash on hand
than $81,000; during November never less than $77,000; during De-
cember, never less than $72,000; during January, 1907, never less
than $102,000; during February, 1907, never less than $38,098.03 ;
and the average daily cash balances during said months, in addition to
the sum of $275,000 due the Latrobe Steel Company, were in

$ 92,634.41 November

104,054.41 December

117,819.90 January

123,868.91 February

85,485.75 The proposed subscription of $700,000 from the funds of the Steel Company to the capital stock of the Coupler Company is not necessary to enable the latter company to pay its debt to the former, or to carry on and continue its original business with success. The principal object, to which the proposed new capital of $700,000 is to be devoted, is the erection of a new casting plant by the Coupler Company, and this is a distinct and separate kind of business from that in which


it is now engaged. This casting plant is expected to cost $500,000, exclusive of the cost of the necessary ground; and this sum will only provide for the cost of the plant itself, leaving additional working capital to be also provided in order to operate the plant. It is evident, therefore, that the Coupler Company intends to use much the greater part of the proposed new capital of $700,000 in establishing a general casting business, and that this is separate and distinct from its former business of manufacturing couplers. A general casting business embraces the making of castings for use in the manufacture of machines, in the erection of buildings, in the frames of cars, in making anvils for hammers, and generally in the construction of many varieties of manufactured metal.

As I have already stated, there is no serious dispute about these facts. The controversy is waged concerning the proper inferences that should be drawn, and concerning the right of the directors and of the majority stockholders of the Steel Company to exercise what they believe to be a sound business judgment in regard to the future of the Coupler Company's affairs. The defendants' position is clearly expressed in the following extract from pages 4 and 5 of their answer:

“The directors of the Latrobe Steel Company were and are unanimously of the opinion that it would be greatly prejudicial to the interest of the stockholders of the Latrobe Steel Company to distribute the shares of the Coupler Company amongst the stockholders without making proper provision for the continued conduct of said Coupler Company in the future without sacrifice.

“Not only it was and is impossible for the Coupler Company to pay its debt of $275,000 or any part thereof consistently with the continuance of its business in the future, but it was and is impossible, in the opinion of the directors, successfully to conduct and manage its business without capital sufficient to enable it to make additions and improvements such as are required to be made to enable it to compete with its competitors. A reserve capital is believed to be essential.

"It will be no longer possible for the Coupler Company, from time to time, to obtain the capital required from the Steel Company. To borrow such capital would injure its credit and would greatly imperil the future value of its shares.

“The directors of the Steel Company are unanimously of the opinion that the proper method to protect the value of the investment already made by the Steel Company in shares of stock and loans to the Coupler Company will be to liquidate the indebtedness owing by the Coupler Company by the issuance to the Steel Company of additional shares of stock to the extent of $275,000 and by the further issuance to it for cash of additional shares of stock to the extent of $425,000 sufficient to enable it to conduct its business properly.

"The directors of the Steel Company were and are unanimously of the opinion that the Coupler Company will be able, by the possession of a capital amounting to $1,000,000 thus issued to conduct a safe and prosperous business, whereby the investment of $575,000 heretofore made and now held by the Steel Company will be assured. In their opinion, any other course of dealing will greatly imperil the value of their investment. In their opinion, the proper method of realizing for the stockholders of the Steel Company the value of the investment already made will be to issue to the Steel Company shares of the Coupler Company to the additional amount of $700,000, of which the proceeds to the extent of $275,000 will be used to liquidate the indebtedness of the Coupler Company to the Steel Company, and of which the remaining proceeds, viz., $425,000, will be used as additional capital in the carrying on by the Coupler Company of its business."

The foregoing facts support the legal proposition upon which the complainant relies, namely, that since the Steel Company has, by agreement and by vote of its stockholders, undertaken to liquidate and distribute its assets, has abandoned its corporate business, has sold almost all of its corporate property, has actually begun and nearly carried through the distribution of its cash among the stockholders, it cannot now, of a sudden, cease the process of liquidation and distribution, and invest a part of its cash, that is merely awaiting distribution, in the stock of another corporation, thus compelling its own dissenting stockholders to embark in a business enterprise against their will. This position I believe to be sound. The subscription of $700,000 proposed is obviously not liquidation at all. On the contrary, it is investment; and, while it may be the part of business prudence to enlarge the Coupler Company's plant and facilities, so that it may carry on two kinds of manufacturing instead of only one, the Steel Company is, I think, without power to devote any of its funds to this object, under the facts as they have already been set forth. Whatever right, derived from either the Pennsylvania statutes or from any other source, the Steel Company may have had, while it was a going concern, actively engaged in carrying on its corporate business, to subscribe to the stock of a manufacturing company chartered by the state of New Jersey, it seems to me to be clear that the right was lost after the Steel Company had gone so far upon the road to dissolution. Suppose the process of liquidation had been complete, and that ali the assets had been converted into cash, ready to be distributed—could it be doubted that neither the directors nor the majority of the stockholders could embark any part of this cash in a new venture, so as to bind a minority stockholder who refused to take part in the enterprise ? Under the facts before the court, the difference is one of degree mainly, for I think no difference in principle appears. It is doubtless true that the proposed subscription to the Coupler Company's stock is in good faith regarded by the directors and the majority stockholders of the Steel Company as a highly desirable step to take; and it may even be conceded, for the immediate purpose, that their business judgment is correct, and that in all probability the result of the proposed subscription would be to enhance the value of the Coupler Company's stock, both the . shares now held and those proposed to be acquired by the Steel Company. But, even if these be assumed to be the facts, I am still of opinion that the complainant cannot be compelled to take the risk of subscription; that he has a right to his share in cash of the money that the Steel Company proposes to divert to the uses of another corporation; and that he is, therefore, entitled to such equitable relief as will protect so much of his property from being devoted to an object to which he is opposed. The brief of complainant's counsel refers to many decisions that support the propositions just stated, but I shall not delay this opinion by taking the time necessary to discuss them. The reasoning of Mason v. Pewabic Mining Co., 133 U. S. 50, 10 Sup. Ct. 224, 33 L. Ed. 524, Lauman v. Railroad Co., 30 Pa. 42, 72 Am. Dec. 685, and Clearwater v. Meredith, 1 Wall. 25, 17 L. Ed. 604, to name no others, is instructive, and justifies, I think, the conclusions to which I have come.

The bill raises no question concerning the right of the Steel Company to distribute among its own stockholders in specie the 3,000 shares

of the Coupler Company. Assuming this right to exist, or—what comes to the same thing—the consent of the Steel Company's stockholders to accept these shares instead of requiring what might be a ruinous sacrifice by a forced sale, the Coupler Company may then be in a situation to take such steps for its own business advancement as it may think wise. But this is a different question, and I express no opinion about it.

In reply to a part of the defendants' argument, I may add that I do not regard as important the fact that a formal dissolution of the Steel Company has not yet taken place. Obviously, if the corporation had been actually dissolved, there could be no such question as is raised by the bill; for the power to carry on the corporate business would have ceased and the company's affairs would be in the course of administration by a judicial tribunal, or in some other manner. The controlling facts here are that the company undertook to liquidate and dissolve, that the process of liquidation and distribution has gone so far as to be nearly complete, that the corporate business has been wholly abandoned, and therefore that the corporate organization -so it seems to me-exists in effect for the mere purpose of dividing the remaining assets among the stockholders, and not for the purpose of taking up again, and using, corporate powers that have been already relinquished. Of course, the unanimous consent of the stockholders would leave nobody to object; there being no creditors, and the interest of the state being laid aside without consideration. But, in the face of objection by a dissenting stockholder, I think the courts are bound to protect his rights, and to see that he gets his share of the money that is now on hand, ready to be distributed.

It remains to pass upon the respondents' motion to strike out certain testimony taken by the complainant in support of the supplemental bill. It is needless to go into this matter fully. I have given it careful consideration, and am clearly of opinion that the motion should prevail. It was unnecessary for the complainant to prove more than the bare facts that he had sold 1,100 shares of his holdings, and that he had been successful in a suit to reclaim them. The details of the litigation were irrelevant. The complainant should therefore pay the costs of the supplemental bill, and also of taking and printing the testimony referred to in the motion to strike out. The remaining costs should be paid by the Steel Company.

A decree may be drawn as prayed for by the bill.


(Circuit Court, W. D. Wisconsin. August 15, 1907.)

No. 90.



Under Wis. St. 1898, § 1114, which provides that delinquent city taxes on real estate turned over to the county for collection, whether general or special taxes, become the property of the county, which is debtor to the city for the total amount thereof, a county to which a city has turned

over as delinquent taxes due on a special assessment pledged for the payment of improvement bonds does not become a statutory trustee for the benefit of a holder of such bonds, and he has no standing to maintain

a suit in equity against it for an accounting. 2. SAME-DIVERSION OF TAXES COLLECTED-REMEDY OF BONDHOLDER-JURIS


A bill by a holder of improvement bonds issued by a city, which alleges that by the statute of the state the city is made a trustee to levy and collect special assessments on the property benefited by the improvement and to apply the proceeds solely in payment of the principal and interest of such bonds, and that it has diverted such proceeds to other purposes in violation of the statute and its duty as trustee and threatens to do so with future proceeds, states a cause of action for relief in equity against the city and which a court of law could not afford.

[Ed. Note.—Rights and remedies of holders of invalid municipal securities, see note to Chelsea Savings Bank v. City of Ironwood, 66 C. C. A.


Where the Supreme Court of a state has expressly held that under a state statute a certain issue of bonds by a city created a general liability for their payment on the part of the city and also made it a statutory trustee for the collection and application on the bonds of a special assessment, a bill in equity by a holder of such bonds to enforce the duty of the city as trustee is not multifarious, because it also seeks to enforce its general liability by obtaining a judgment against it, which may properly be treated as incidental or supplementary to the equitable remedy sought and not inconsistent with it.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 19, Equity, 88 340, 341, 347.)

In Equity: On demurrers to amended and supplemental bill and motion for preliminary injunction.

This is a suit in equity against the city of Superior and the county of Douglas, based upon certain street improvement bonds of the city of Superior. The bill has been twice amended, and the demurrers involve the sufficiency of the amended and supplemental bill of complaint. Briefly stated, the bill of complaint sets forth the following facts:

By section 30, c. 124, p. 796, Laws 1891, the common council of the defending city was authorized to lay out, make, open, and keep in repair all highways and streets. This charter provides a scheme of special assessments upon abutting property to defray the expense of improvement of highways or streets. Section 132 authorizes the common council to issue improvement bonds, leaving a wide discretion to the common council as to the terms of said bonds. Section 133 provides that such bonds shall be semiannual interest coupon bonds, payable in annual installments, and shall draw interest at a rate not exceeding 6 per cent. Such bonds may be sold by the common council at not less than par, and the proceeds collected by the city treasurer shall be paid to the contractor when due to him, etc. Section 134 requires the city clerk to prepare a statement of the special assessment in which the bonds are issued, and record the same together with a copy of said bonds. Section 135 requires the city treasurer to pay the interest and principal of said bonds as the same become due, and charge the amount to the proper fund. Section 136 requires a special tax on said property benefited to be levied each year, susficient to pay the installment and interest due on such bonds. Section 82 withdraws from the control of the common council the special fund for street improvement. Section 83 prohibits the city treasurer from encroaching upon said special fund, or diverting any part thereof to any other purpose.

By virtue of the provisions of this charter, the city undertook the improvement of Belknap street between Hammond avenue and West Seventh street in said city, and the necessary and proper steps required by the charter were taken to that effect. Special assessments were levied upon abutting prop

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