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The United Globe Mines, a New York cor- The shares in the New Jersey corporation poration, had a capital of 23,000 shares of which have been exchanged for shares in the par value of $100 each. Both corpora- the defendant have never been transferred tions owned mining properties in Arizona, to the defendant corporation, but were which were near to each other. A large transferred to Cleveland H. Dodge and majority of the stockholders of each of Charles S. Smith on the books of the New these corporations, believing that it would Jersey corporation. The certificates for be for the advantage of each corporation if those shares have upon their backs a transthey operated in harmony, determined to fer in blank signed by Dodge and Smith, make a practical amalgamation of them by and they have all been placed, and now organizing a new corporation to own and remain, in the defendant's vaults. Smith hold the stock of these two corporations, and Dodge are directors of the defendant and in pursuance of this determination, corporation, and Smith is vice president. they organized the defendant corporation, Smith is president and a director of the the Old Dominion Company of Maine. The New Jersey corporation. Dodge is a direcdefendant corporation has an authorized tor of the United Globe Mines, and the capital stock of 350,000 shares of the par directorates of the three corporations are value of $25 each, of which 293,245 shares more or less interlocked otherwise. The of the par value of $7,331,125 have been directors of Phelps, Dodge, & Company, one issued. Among the incorporated purposes of whom is Dodge, own severally about one of the defendant is the following: “To pur- half of the shares in the defendant corpochase, acquire, hold, sell, or otherwise dis-, ration. pose of, or deal with, shares of the capital Dodge and Smith admit that they hold stock, bonds, evidences of indebtedness, or record title to these shares in the interest other securities of, or issued by, any cor- of the defendant. There is no written or poration or corporations.”

other formal trust agreement executed beBy the scheme agreed upon, stockholders tween them and the defendant, nor have in the Old Dominion Copper Mining & they made any written declaration of trust Smelting Company, designated by us here- respecting this stock. But when the stock after as the New Jersey corporation, were of the New Jersey corporation was deposto have the right to exchange their stock, ited in furtherance of the scheme agreed share for share, for stock in the Old Do- upon, Smith, the president of the New Jerminion Company of Maine. It was pro- sey corporation, was advised by counsel vided, in effect, that 138,000 shares of the that a legal doubt had been expressed as Maine corporation should be issued in pay- to whether stock in a New Jersey corporament of the entire capital stock, 23,000 tion could, under the laws of New Jersey, shares, of the United Globe Mines, and for be held by a corporation organized under $350,000 in cash, in addition. It was also the laws of another state, and the defendprovided that before the agreement should ant claims that it was because of this be made effective, the assent of two thirds uncertainty that Dodge and Smith took in interest of the outstanding stockholders title to these shares in their own names, in the New Jersey corporation, and of all in order that the plan and agreement might of the stockholders of the United Globe be carried out in a lawful manner, and the Mines, should be secured.

chance that anyone would raise the quesIn 1904, in accordance with the scheme tion avoided. thus outlined, the whole of the capital The by-laws of the defendant provide stock of the United Globe Mines was first that "the board of directors shall have the deposited with a banking house agreed upon, general control and supervision of the busiand afterwards transferred to the defendness of the corporation, with all the powers ant company for 138,000 shares of its stock that could be exercised by the stockholders, and $350,000 in cash. More than two thirds except so far as limited by the vote of the in interest of the stockholders of the New stockholders or by law; may among other Jersey corporation deposited their shares, things sell, assign, transfer, convey, and received in exchange stock in the de- otherwise dispose of the property, real or fendant corporation, share for share. Since personal, of the corporation, and may delethen, other shares have been exchanged, so gate any part of their power to any officer that in all 155,245 shares in the New Jer or committee of the board.” sey corporation now belong to the defend- It appears that neither the stockholders ant. Among the shares thus received were in meeting nor the directors as a board 150 shares which, after passing through have ever passed any vote directing, sancvarious transfers, were purchased by the tioning, or expressly ratifying, or even menplaintiff in 1912, in the name of another, i tioning, the holding of this stock by Dodge and transferred of record to him in May, and Smith for the defendant corporation, 1913, and are now owned by him.

But the fact that the stock stood in the



names of Dodge and Smith has been at all still remains in the name of Dodge and times known to a majority in interest of Smith with the acquiescence and tacit apthe defendant's stockholders, and to all of proval of the board of directors. Directors its directors. By whose particular author- of a corporation must act as a board, but ity, unless it be that assumed by Dodge it is not necessary that their action be and Smith themselves, the stock was placed formal or their votes recorded. Peirce v. in their names, is not disclosed.

Morse-Oliver Bldg. Co. 94 Me. 406, 47 Atl. At the annual meeting of the stockhold. 914. It may be sufficient as to third parers in 1905, and at each annual meeting ties, if they establish a mutual understandsince, “all acts, matters, and things entered ing. York v. Mathis, 103 Me. 67, 68 Atl. into and performed by the officers and di. 746. Their action or their mutual underrectors” have been by unanimous vote, standing may be shown by circumstances "fully and in all respects ratified, confirmed, or conduct. Cases just cited. When it apand approved.” Some of the persons who pears, as it does in this case, that for nine at different times owned the stock which years all the directors have been conversant the plaintiff now were present at with the fact that two of their number various ones of these annual meetings. But hold in their names the record title to more what knowledge they had of the fact that than one half of the assets of the corDodge and Smith held the New Jersey cor- poration, and have made no objection, it poration stock is not made to appear, nor certainly affords very strong evidence of is it shown that information was possessed their mutual understanding and unanimous by the minority stockholders in general. assent. The annual balance sheets since 1908, if In the next place we must find that there accessible to the stockholders, or made has been no ratification of the acts of the known to them, would have indicated to directors, if any was necessary, by the them that the defendant had full title to stockholders. The fact that a majority in the stock.

interest of the stockholders knew of the The plaintiff never owned any shares in situation and approved it has no legal sigthe defendant prior to September, 1912, nificance. Stockholders can act only as a and there has been no assent by him or by body, and in meeting assembled. While it his predecessors in title to the retention of is undoubtedly competent for the stockthe stock in the names of Dodge and Smith, holders to ratify unauthorized acts of diexcept such, if any, as has been shown by rectors, which are within the corporate the foregoing statement.

powers, he who relies upon a ratification There has been no dissipation of the as- has the burden of showing that attempted sets of the defendant corporation, unless ratification really ratified. Neither individthe retention of the title to the stock by uals, nor stockholders in a body, can be Dodge and Smith be regarded as such a said to ratify acts of which they have no dissipation. The dividends on the stock of knowledge. The resolutions of ratification the New Jersey corporation held by Dodge were sweeping. They referred to no parand Smith are paid directly to them when ticular act. It does not appear that the declared, and by them paid forthwith to stockholders generally, outside of the directhe defendant.

tors, had any knowledge that the directors The purposes and powers of the defend had authorized the New Jersey stock to be ant corporation, as stated in its certificate put into the names of Dodge and Smith. of organization, embrace the doing of many It does not appear that this was known to kinds of business other than the holding the stockholders then holding the stock now and owning of shares of the capital stock owned by the plaintiff. Such a ratification of other corporations. But so far as the is ineffective because it really does not record shows it has never attempted to ratify. It is a paper ratification, not a exercise any of those additional powers. real one. A decent respect for the rights Its entire assets consist of the shares of of stockholders, especially of minority capital stock of the New Jersey corporation stockholders, should require that he who and of the New York corporation, and seeks to bind them by votes of ratification claims for money loaned to those corpora- should show that the stockholders generally tions. It is therefore, so far as any of the knew specifically what they were voting rights here involved are concerned, a mere about. Camden Land Co. v. Lewis, 101 Me. holding corporation, and it is to be treated 78, 63 Atl. 523. as such.

Again, we find that Dodge and Smith From these agreed facts we draw certain have no interest in the stock. Whether conclusions of fact, and state them now they are even naked trustees is left uncerwithout regard to their effect upon the tain. They have signed transfers of the rights of the parties. We think that it stock certificates in blank, and have put must be held that the stock was placed and 'them into the defendant's vault. Whether. they have delivered them to the defendant | the defendant corporation is deliberate and in such way as to devest themselves of any of long standing. And whatever the moactual control of them is not clear. But we tives for it may be, there is not the slightthink it is immaterial. The stock in fact est reason to be drawn from the history of belongs to the defendant. The certificates the corporation, to think that the policy of stock are in the physical possession of would be abandoned at the request or dethe defendant. As sole owner in fact it mand of a minority stockholder, but rather has the undoubted right to reduce them to the contrary. This point in defense is not its legal possession, fill out the blank trans- tenable. fers, and present them to the proper officer II. The matter of ratification by stockof the New Jersey corporation to be trans- holders' vote has already been discussed in ferred of record to itself. And that is what part. We will add that if it should turn the plaintiff seeks to have it compelled out, as claimed by the plaintiff, that the to do.

act of the directors in keeping the stock in Several defenses are offered: (1) That the names of private individuals, though the complainant has not sufficiently at they were possessed by by-law with full tempted to obtain redress by application corporate powers, was ultra vires the corto the directors or to the corporation itself; poration, or if it should appear that the (2) that the defendant corporation has duly act was in manifest disregard of the duties ratified the holding of the New Jersey cor- of the corporation to its stockholders, and poration stock by Dodge and Smith; (3) of the legal rights of minority stockholders, that the complainant cannot complain, be the ratification must, from the nature of cause if any wrong was done, it was done things, be nugatory. In fact, there was no long before he became a stockholder; (4) such ratification as should be held to bind that the holding was approved by his prede- nonassenting stockholders with regard to cessors in title; (5) that a transfer on unauthorized acts of the directors not the books of the New Jersey corporation known, or made known, to the body of the should not be required in a suit to which stockholders. that corporation is not a party; (6) that The matter of ratification, however, is the alleged uncertainty of the law of New not very important. For if the act of the Jersey with respect to the susceptibility of directors was ultra vires the corporation, stock in any New Jersey corporation to be as the plaintiff claims, ratification would transferred to and held by a foreign corpo not help it. And if, as the defendant ration was an adequate reason for having claims, the act was ultra vires and proper, the shares of the New Jersey corporation ratification was unnecessary. stand, of record, in the names of individ- III. The third objection is that the plainuals, rather than in the name of the de- tiff cannot complain because the wrong, if fendant; and (7) that the defendant cor- any, was done before the plaintiff became poration has the right, with the approval a stockholder. One answer to this, and a of its directors and a majority of its stock- sufficient one, is that the wrong is a conholders, irrespective of any question about tinuing one. If there was a wrong before the law of New Jersey, to have individuals the plaintiff became a stockholder, it is no hold the record title to this stock.

less a wrong since. It is an existing conI. It is a wise rule of procedure which dition, alleged to be a corporate wrong, requires that aggrieved stockholders seek that he complains of. This point is not ing remedies for corporate wrongs should sustainable. first make application for relief through IV. The claim that the holding of the corporate channels, or allege and prove stock by Dodge and Smith was assented to sufficient reasons why such applications and approved by the plaintiff's predecessor would be ineflectual. Ulmer v. Maine Real in title does not appear to be true in fact. Estate Co. 93 Me. 324, 45 Atl. 40; Trask At least it is not shown. Whether his v. Chase, 107 Me. 137, 77 Atl. 698. They predecessors were among those stockholders must apply to the directors or the corpora- who knew of it does not appear. tion before they apply to the court, unless V. We think the New Jersey corporation it appears from the bill and proof that such is not a necessary party to this suit. As application would be useless. But the law a corporation, it can have no interest in requires in this respect no useless formal- the ownership of its own capital stock. ity. The plaintiff in his bill alleges that The New Jersey corporation is not asked he has made no application to the directors to do anything. The bill assumes that its or corporation, for the reason that such officers will, upon request, and as a matter application would be futile. And we are of of customary business, transfer the title of opinion that his apprehension is well record of the Dodge and Smith stock to founded. The policy pursued by the direc- the defendant, who is the owner. tors and the majority interests controlling VI. The defendant contends that it was

proper, as a matter of business policy, for as to their ownership of such stock, or as it to allow the record title to the New to their right to vote upon it. Other jus. Jersey stock to remain in the names of tices expressed similar views. One intiDodge and Sinith, on account of the doubts mated that the corporations of a sister expressed as to whether, under the laws of state, whose laws permitted them the right New Jersey, stock in a New Jersey corpo- to hold stock in the corporations of another ration can legally be held by a corporation state, might invoke the doctrine of comity of another state. This point is material, to support them in exercising a similar because if it cannot be done, it would be right in New Jersey corporations. Some of futile to grant the plaintiff's prayer and the justices expressed no opinion on this direct the defendant to try to have it done. question, as it was not in issue. No one If such were the case, it might be that the advised that the power did not exist. promoters of the defendant corporation In State v. Atlantic City & S. R. Co. 77 would find it expedient to adopt some other N. J. L. 465, 72 Atl. 111 (1909), which method by which they could adjust them- was an information in the nature of quo selves to the law. But we think there is warranto, the question was whether a New no considerable doubt with respect to the Jersey railroad corporation could buy and law of New Jersey.

hold the capital stock of another New JerWe do not propose to discuss the law of sey railroad corporation. The power of a New Jersey at length. It is settled law corporation of another state to hold stock generally that one corporation cannot hold in a New Jersey corporation was not inthe capital stock of another corporation volved. But Chancellor Pitney, speaking without legislative authority. But it ap- for the court, took occasion to refer to the pears from the cases cited from the New case of Warren v. Pim, and to make the Jersey courts that, by statute in that state, cautionary observation that a majority of "any corporation may purchase, hold, sell, the court had not agreed upon any legal assign, transfer, mortgage, pledge or other proposition involved in that case. It is not wise dispose of the shares of the capital improper to add that the question before stock of

any corporation of this us was not involved in that case. or any other state, and while owner of such But in Denver City Waterworks Co. v. stock may exercise all the rights, powers American Waterworks Co. 82 N. J. Eq. 365, and privileges of ownership, including the 88 Atl. 1053 (1913), we get a little clearer right to vote thereon.” Under this statute | light. The plaintiff, a Colorado corporathere is no doubt that a New Jersey cor- tion, held stock in the defendant, a New poration can hold stock in a Maine corpo- Jersey corporation, which was insolvent, ration. But here the question is, Can a and began proceedings to wind up the afMaine corporation hold stock in a New fairs of the defendant. Later it applied to Jersey corporation? Will the New Jersey the court to direct the receiver to disconlaw permit it? The case of Warren v. tinue a certain suit commenced by him. Pim, 66 N. J. Eq. 353, 59 Atl. 773 (1904), Objection was made that the plaintiff had which has been discussed by counsel, is no interest to protect, was a mere volunsomewhat illuminating, but by no means teer, and had no right to invoke the judg. decisive. The question in that case was

ment of the court. Howell, V. C., said: not whether a corporation created by an- “I think it sufficiently appears that the other state could own and hold shares in a complainant is still the owner or holder of New Jersey corporation, but whether an shares of stock in the defendant, the Amer. English corporation or association, organ. ican Waterworks Company, and, if so, there ized purely as a voting trust, and having can be no question of its right to prosecute no beneficial ownership of the shares them this matter.” Denver City Waterworks Co. selves, could so own and hold. The ques. v. American Waterworks Co. 81 N. J. Eq. tion was answered in the negative, but for 139, 85 Atl. 826. reasons in no one of which did the ma- The court of errors, on the appeal from jority of the court concur. The opinions the vice chancellor's decree, said: “The deof the justices are interesting, however, in cree appealed from will be aflirmed for the this connection, inasmuch as they show the reasons stated in the opinion filed tendency of judicial thinking, though the below by Vice Chancellor Howell.” Denver expressions touching the power of a corpo- City Waterworks Co. v. American Waterration of another state to hold stock in a

works Co. supra. New Jersey corporation are mere dicta. Here it seems to us is a distinct recogniChancellor Pitney, now Mr. Justice Pitney, tion of the power of a corporation of ansaid that he could find nothing in the New other state to hold capital stock in a New Jersey statute that satisfied him that any | Jersey corporation. It is true the question discrimination was intended to be made was not debated. It seems to have been against alien or foreign corporations, either' assumed. If the corporation of another,


state has not lawful power to hold stock, these shares, and who are not in any way in a New Jersey corporation, or, to put it made accountable to it for the manner in the other way, if the stock of a New Jersey which they exercise functions committed to corporation is not susceptible, by reason of them, not by the corporation itself, but by New Jersey law, of being held by a corpo- stockholders in the corporation holding a ration of another state, it is difficult to controlling interest. This state of things perceive how an outside corporation by rea- has existed from the very organization of son of its attempted, but unauthorized, the corporation. And as it seems to be in holding of stock, could get a standing in accord with the settled policy of the macourt to proceed for the appointment of a jority stockholders, it is likely to continue, receiver and the winding up of the New unless minority stockholders may interfere Jersey corporation, whose stock it had. Its and obtain a remedy from the court. status in court depended solely upon its The positions of the parties may be rights as a stockholder. If a stockholder, briefly stated as follows: The plaintiff it could be recognized; otherwise not. This contends that the conduct of the defendant point was decided. If an outside corpora- | in permitting its stock in the New Jersey tion can be enough of a stockholder to be corporation to be held of record and voted able to cause the dissolution of the corpora- | by individuals in the manner stated has tion whose capital stock it held, it would been ultra vires, beyond the legitimate seem that it should be enough of a stock power of the corporation, and that it has holder to hold its stock in its own name, been such wilful neglect of its corporate and to require the transfer of record to it duty to its stockholders as to constitute a of any stock that it owns. It is our judg. corporate breach of trust. The defendant ment that the law of New Jersey permits contends that the conduct complained of a corporation of another state, when em- has been purely intra vires, that it related powered by its own state to do so, to hold to the internal management of its business shares in a New Jersey corporation. affairs, and that minority stockholders have

VII. We are now brought to a considera- no remedy. tion of the fundamental question in this The general policy of the law is so well

It is this: Has a minority stock settled that the citation of many authoriholder in a corporation the right to insist, ties is unnecessary. It is well settled that under such circumstances as are shown in courts will not undertake to control the this case, that it shall hold in its own discretionary powers of the directors, or of name the shares of capital stock which it the majority of the stockholders expressed owns in another corporation?

in stockholders' meetings, as to acts intra The facts, briefly stated, are these: The vires. Such acts cannot be questioned by defendant is a mere holding corporation. minority stockholders except in cases of More than one half of its estate and assets fraud, and, as for a breach of trust, of such consist of shares of stock in the New Jer- acts as imperil the existence of the corposey corporation. These shares constitute ration itself. As to acts within the power more than one half of the issued capital of the corporation, which concern the instock of that corporation. It, therefore, by ternal management of the corporation, as stock ownership, has the right and the to questions of corporate policy and econopower to control the New Jersey corpora- my, questions of business discretion and tion. For ten years it has neglected, and judgment, the majority stockholders and apparently is now unwilling, to have the the directors to whom the corporate powers record title to those shares transferred to are delegated ordinarily have absolute conitself, but has tacitly permitted them to trol, and the minority must submit. The stand in the names of two of its officers, courts will not undertake to pass upon the although the certificates of stock, with wisdom or unwisdom of such corporate transfers signed in blank, have all the time acts. 2 Cook, Corp. § 684; 4 Thomp. Corp. been in its physical custody. It has taken § 4443. no corporate action with respect to these On the other hand, corporate powers are shares. It has not voted at the corporate limited to those expressly granted and the meetings. Neither has the corporation it incidental implied powers necessary to carry self, nor have the directors, so far as the into effect the powers so expressly granted. case shows, directed the holders how to The exercise of any other power is ultra vote upon any matter at stockholders' vires. Franklin Co. v. Lewiston Inst. for meetings. As a corporation, it has aban. Sav. 68 Me. 43, 28 Am. Rep. 9; 2 Cook, doned the exercise of the rights, powers, Corp. § 669; Morawetz Priv. Corp. § 682. and privileges appertaining to stock owner. The relation between a corporation and ship, and has left the exercise of those its stockholders is essentially contractual. rights, powers, and privileges to the will | The charter is the embodiment of the conof individuals who have no interest in' tract. See same cases. The rule of the

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