Boyer v. Nesbitt
| Decision Date | 14 March 1910 |
| Docket Number | 205 |
| Citation | 76 A. 103,227 Pa. 398 |
| Parties | Boyer, Appellant, v. Nesbitt |
| Court | Pennsylvania Supreme Court |
Argued January 3, 1910
Appeal, No. 205, Jan. T., 1909, by plaintiff, from decree of C.P. Luzerne Co., Dec. T., 1908, No. 2, dismissing bill in equity in case of Joseph Boyer v. A. G. Nesbitt, J. C Wiegand, A. L. Williams, W. J. Richards, George T Coddington, Benjamin Dorrance, Charles Gardner, Minnie S. Galland, Lea Hunt, Henry Kunkle, O. W. Lance, E. W. Marple, S. R. Miner, John Mainwaring, C. R. McAlamey, Abram Nesbitt, F. J. Stegmaier, Charles Stegmaier, Stegmaier Brewing Co., Ambrose West, Harry B. Schooley, and the Adder Machine Company. Affirmed.
Bill in equity to revoke a voting trust of corporate stock. Before HALSEY, J.
The voting trust was to continue for a period of five years with a provision for further continuance at the desire of a majority.
The facts appear in the opinion of the Supreme Court.
Error assigned was decree dismissing bill.
Decree affirmed at the cost of appellant.
Frank P. Prichard, with him E. F. Heller, for appellant. -- The agreement in the present case is clearly invalid or at all events revocable and the clause in the agreement giving the option of purchase unless the agreement is renewed does not make the trust valid or the delegation of voting power irrevocable: Shelmerdine v. Welsh, 8 Pa. C.C. Rep. 330; Rigg v. Railway Co., 191 Pa. 298; Vanderbilt v. Bennett, 6 Pa. C.C. Rep. 193; Morgan v. Hartley, 30 Pa. C.C. Rep. 22; Shepaug Voting Trust Cases, 60 Conn. 553 (24 A. Repr. 32); Railway Co. v. State, 49 Ohio 668 (32 N.E. Repr. 933); Kriessl v. Distilling Co., 61 N.J. Eq. 5 (47 A. Repr. 471); Warren v. Pim, 66 N.J. Eq. 353 (59 A. Repr. 773); Harvey v. Imp. Co., 118 N.C. 693 (24 S.E. Repr. 489); Moses v. Scott, 84 Ala. 608 (4 So. Repr. 742).
William S. McLean, with him F. W. Wheaton and A. L. Williams, for appellees. -- The agreement contains a power coupled with a beneficial interest and is therefore irrevocable: Hunt v. Rousmanier, 21 W. & S. 174; Smyth v. Craig, 3 W. & S. 14; Blackstone v. Buttermore, 53 Pa. 266; Wood v. Kerkeslager, 225 Pa. 296; Garrett v. Phila. Lawn Mower Co., 39 Pa.Super. 78.
The interest coupled with the power is a property interest: Fitzsimmons v. Lindsay, 205 Pa. 79.
The option is not invalid because contingent: Corson v. Mulvany, 49 Pa. 88.
The agreement creates a valid, active and irrevocable trust: Eshbach's Est., 197 Pa. 153; Briggs v. Davis, 81 Pa. 470.
Before FELL, C.J., BROWN, MESTREZAT, POTTER, ELKIN, STEWART and MOSCHZISKER, JJ.
It is apparent from this record that many citizens of the city of Wilkes-Barre desirous of building up a local enterprise procured the incorporation of the Adder Machine Company and became subscribers to its capital stock. It is in the nature of a private trading corporation and questions of public policy relating to public and quasi-public corporations do not arise. After the business of the corporation had been successfully started under competent and satisfactory management, a large number of the shareholders representing a majority of the stock, concluded that the mutual interests of the stockholders as well as the interest of the corporation itself would be best served by a continuation of the business policy of the company inaugurated by the officers then in control of its affairs. To effectuate this purpose an agreement in writing was entered into between all of the stockholders who chose to become parties to it and the three stockholders who at the time of its execution had formulated the policy of the company and were directing its business affairs. This agreement named the three persons then constituting the board of directors and in charge of the business management of the company as trustees. It defined the rights of the shareholders on one side and the powers and duties of the trustees on the other. The duty of management was imposed upon the trustees who accepted the responsibilities and have continued to perform the duties of their trust. Under the agreement each of the contracting shareholders transferred his stock to what is called voting trustees who surrendered the same to the corporation and received new certificates in the individual names of the trustees in lieu thereof. The trustees then issued trust certificates to the shareholders who had thus contracted defining the rights and interests of the contracting parties. The trustees therefore hold the legal title to the stock have imposed upon them the duties of management and are clothed with power to continue through their stock control a business policy helpful to the corporation and beneficial to the shareholders. The important question raised by this appeal is whether this agreement is invalid because against sound public policy. It may be conceded that the question is not free from difficulty and in our own state there is no decided case squarely ruling it. In other jurisdictions courts have differed as to the rule properly applicable to such a state of facts and creditable authority may be cited in support of either side of the present controversy. Courts as a rule have predicated their decisions upon the character of the trust agreement and the statutory requirements as to the control and management of corporations in the particular state where the question arose. In Shepaug Voting Trust Cases, 60 Conn. 553, and Warren v. Pim, 66 N.J. Eq. 353, the leading cases cited by counsel for appellant, the courts treat the question of public policy indicated by the statutes of the respective states as the basis of their reasoning and the foundation upon which their conclusions rest. This seems to be the sounder rule because the public policy which should prevail in the management and control of corporations is primarily a legislative rather than a judicial question. In this connection it is very ably argued that the agreement in question is in contravention of our Pennsylvania statutes. If this were true in fact it would necessarily follow that the agreement must fall because void as against a declared statutory policy of the state, but no such statute has been called to our attention, nor does the agreement offend in terms or by necessary implication against any positive legislative enactment. It is argued that the corporation acts of 1874 and 1891 provide for annual elections by the stockholders and so they do, but annual elections are held by the appellee corporation and directors are annually chosen by the stockholders. The agreement in question in no way disregards the duty to hold annual elections but on the other hand contemplates the holding of such elections. It is further contended that the act of 1903 confirming the right to vote by proxy and providing that proxies dated more than two months prior to a meeting or an election shall not confer the right to vote, is in effect contravened by the agreement relied on by the appellees in the present case. In answer it may be said that no question of the right to vote by proxy arises in this case. It seems perfectly clear that the proviso referred to has reference to formal proxies given by a stockholder authorizing the person designated therein to vote his stock at a meeting or at an election. No proxy of any kind was given in the case at bar and therefore the sixty-day limitation has no application. In the present case the persons in whose names the stock stands on the books of the company vote the same as they have the prima facie right to do under...
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