Barr v. Pittsburgh Plate-Glass Co.

• Citation: 57 F. 86
• Parties: BARR v. PITTSBURGH PLATE-GLASS CO. et al.
• Decision Date: 15 August 1893
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

57 F. 86

BARR v. PITTSBURGH PLATE-GLASS CO. et al.

United States Court of Appeals, Third Circuit.

August 15, 1893

The bill alleges, in substance:

(1) That J. B. Ford, Edward Ford and Emory L. Ford, sons of J. B Ford, were the promoters of an organization known as the New York City Plate-Glass Company, organized under the laws of New York, with a capital stock of $600,000, all of which said Fords took in consideration of a plate-glass works plant about to be by them constructed. (2) That the plaintiff was an owner of shares of stock in that company. (3) That the New York City Plate-Glass Company was reorganized under the laws of Pennsylvania, under the name of the Pittsburgh Plate-Glass Company, in August, 1883, taking over to itself all the assets of the former corporation, and having the same capital stock. (4) That the said John Pitcairn, Jr., Edward Ford Emory L. Ford, and Artemus Pitcairn, being directors of the Pittsburgh Plate-Glass Company, and J. B. Ford, entered into a conspiracy and combination to erect and build similar plate-glass works of larger capacity at Tarentum, in Allegheny county, Pa., about a mile distant from the works of the Pittsburgh Plate-Glass Company, and to compel the said Pittsburgh Plate-Glass Company to purchase the same, to prevent a dangerous and destructive competition therefrom for the price of $10,000 shares of the capital stock of said company, of the par value of $1,000,000, worth then in the market $155 per share, making the real consideration $1,550,000; and that at the time the said John Pitcairn, Jr., Edward Ford, Emory Ford, Artemus Pitcairn, and J. B. Ford held together 4,350 shares out of 6,000 shares of the capital stock; that said sale was consummated; that any information as to the actual cost of the works was refused to stockholders; and the bill avers that the actual cost of the said works did not exceed $647,000. (5) That thereupon the capital stock of the Pittsburgh Plate-Glass Company was increased to the amount of $2,000,000, and purchase-money shares, as aforesaid, were issued to the vendors; and that, a division of the purchase-money stock having been made, the said J. B. Ford was made to appear as the owner of 4,000 shares, John Pitcairn, Jr., of 8,212 shares, Emory L. Ford of 500 shares, and Artemus Pitcairn of 200 shares. That the board of directors at that time consisted of John Pitcairn, Jr., Edward Ford, Emory L. Ford, Artemus Pitcairn, and John Scott, (since dead,) Edward Ford being the president, Emory L. Ford, secretary, and John Pitcairn, Jr., having resigned the vice presidency, Artemus Pitcairn succeeded him in that office. (6) The bill further avers that the said John Pitcairn, Jr., Edward Ford, E. L. Ford, and Artemus Pitcairn, directors of said company, entered into a conspiracy with J. B. Ford to erect another and additional plate-glass works at Ford City, Armstrong county, Pa., and to compel the Pittsburgh Plate-Glass Company to purchase the same, at such price as they might see fit to exact, by reason of the menace which said works so constructed would present of disastrous or ruinous competition should the Pittsburgh Plate-Glass Company not make the purchase of the same; and that these persons formed a conspiracy, under the name of J. B. Ford & Co., to construct such works, and at the date of the filing of the bill had proposed to sell them to the Pittsburgh Plate-Glass Company for $750,000 of first-mortgage bonds and $750,000 of the capital stock of the company, to be issued at par, the bonds to mature in three, four, and five years, with interest at 6 per cent.; and that the capital stock of the company at that time commanded a premium of $62.50 per share, so that the price aforesaid in reality amounted to $1,968.750; and that the said works when completed would not cost more than $1,000,000. (7) That said directors and J. B. Ford claimed the right to build competitive works for their own benefit, to be operated by themselves, or to be sold to others for that purpose; and that said Ford City works were then in partial operation, and constituted a direct threat and menace to the Pittsburgh Plate-Glass Company to compel them to accede to the demands of the syndicate; and that said syndicate controlled about seven-tenths of the capital stock of said company, upon the then capitalization of the company. (8) That the directors, together with J. B. Ford, in pursuance of such conspiracy, by their undue influence and efforts, had procured a vote authorizing the acceptance of said offer to sell said Ford City works, and to that end had taken steps to procure an increase of the capital stock of the company to $2,750,000, and to procure the amendment of their charter powers to enable them to carry on their corporate business in other counties than the county of Allegheny. (9) That all the members of the board of directors of the Pittsburgh Plate-Glass Company, and all the officers thereof except the treasurer, were members of the syndicate firm of J. B. Ford & Co., and were interested in the consummation of the proposed sale of the Ford City works, and that seven-tenths of the capital stock of the company were held by them.

The bill then proceeds to aver that the said directors, acting in concert with the said J. B. Ford, he, the said J. B. Ford, knowing their official and trust relation, are prohibited from acting in derogation of the interests they represent as officers and directors to the prejudice of the Pittsburgh Plate-Glass Company, and that the works so erected by them were equitably the property of said Pittsburgh Plate-Glass Company, for the construction of which they, said corporation, should pay the actual cost thereof, with such reasonable profit as the court might allow to the constructors thereof.

A demurrer was filed, which was overruled, and thereafter the defendants made answer, admitting the building and sale of the Tarentum works, and the proposed sale of the Ford City works, and also admitting the withholding of information from the stockholders as to the cost of either of those works, and deny that the cost of the Tarentum works was only $650,000, or that the cost of the Ford City works was only $1,000,000. They admit that the stock of the company bore a premium in the market at the time of these transactions, but deny that the premium was as much as is averred in the bill. They also deny that Edward Ford, Emory L. Ford, and Artemus Pitcairn were interested in the building or in the profits derived from the sale of the Tarentum works, but they admit that the Ford City works were built by a partnership consisting of all the directors of the Pittsburgh Plate-Glass Company then living, including therein the president and vice president of said company. The answers set up as justification for the purchase of the Tarentum works that such purchase was the unanimous vote of the stockholders, at a meeting called to consummate the purchase thereof, and, as respects the Ford City works, that the stockholders had refused to build such works; and aver good faith to the minority stockholders in both transactions, and also aver their legal right to act as they did.

The bill was filed to May term, 1889, prior to the meeting called for the purpose of increasing the capital stock and the indebtedness of the company to provide means for the purchase of the Ford City works, but that meeting was subsequently held, and a vote taken, and the property conveyed, with full notice of the pendency of this bill.

A replication having been filed, testimony was taken before an examiner. The case was argued upon the testimony and the law involved before the circuit judge, presiding in the circuit court of the United States for the western district of Pennsylvania, who adjudged that the bill should be dismissed, at the cost of the plaintiff; and in his opinion filed held that the plaintiff was not entitled to the relief prayed for as to either of the properties; that the defendants in the various transactions had a right to build the two works specifically described, and that their action in the premises was in good faith, and that the said purchase had been duly ratified by the stockholders, and that offers of rescission made by the vendors of said works to the stockholders had been refused.

S. Schoyer, for appellant.

D. T. Watson, for appellees.

Before DALLAS, Circuit Judge, and BUTLER and WALES, District Judges.

WALES District Judge, (after stating the facts.)

The charges of conspiracy and fraudulent combination made against the defendants, and which are specifically set forth in the plaintiff's bill, involve questions of fact which are to be decided on the proofs. These charges cover two distinct and separate transactions, which will be considered in the order of their occurrence.

1. The sale and purchase of the Tarentum works. It is very clear that J. B. Ford was the original and sole projector of these works, and that he had made all the preparations for building them, by the purchase of land and materials, on his own responsibility, without the knowledge or aid of any one of his codefendants, and that as soon as his design became known to them they immediately opposed its further prosecution. At this time--in the year 1885--the defendants owned a majority of the stock of the Pittsburgh Plate-Glass Company, and, with the exception of J. B. Ford, were directors of the company. Edward and Emory L. Ford, the sons of J. B. Ford, opposed the erection of the Tarentum works by their father on account of his advanced age, and for fear that he would become embarrassed financially; and the other defendants saw in the new enterprise a serious rival to the works already in successful operation at Creighton; but, finding their remonstrances to be unavailing...