Central Co of New Jersey v. Mills
|19 January 1885
|28 L.Ed. 949,5 S.Ct. 456,113 U.S. 249
|CENTRAL R. CO. OF NEW JERSEY and others v. MILLS and another, Surviving Ex'rs, etc. 1
|U.S. Supreme Court
This is an appeal from an order of the circuit court of the United States for the district of New Jersey, remanding to the court of chancery of the state of New Jersey a suit in equity brought by the appellees against the appellants. The case, so far as material to the understanding of the question presented by the appeal, was as follows:
The bill was filed by two citizens of New Jersey, executors of Stephen Vail, and, as such, stockholders in the Central Railroad Company of New Jersey, a New Jersey corporation, against that corporation, and the Philadelphia & Reading Railroad Company, a Pennsylvania corporation, and several individuals, citizens respectively of New Jersey, of Pennsylvania, and of Maryland, and directors in one or both of those corporations, to set aside a lease made by the New Jersey corporation of its railroad and property to the Pennsylvania corporation, and for an account of profits received under the lease.
The bill set out the charter of the New Jersey corporation, enacting that its railroad should be operated by directors elected by its stockholders, and that dividends of its net earnings should be made semi-annually among its stockholders, and alleged that the road was afterwards constructed and operated accordingly; that the corporation, although holding the legal title to all its property, held it as a trustee for the stockholders, and the real, equitable, and beneficial interest in the property, and in all dividends or income accruing or to accrue therefrom, was in the stockholders; 'and that any act or thing done, without the consent of all of said stockholders or due process of law, which destroys the powers and control of those trustees to whom the stockholders have confided their property, or which prevents those trustees from fully and freely performing said trusts, or which, in whole or in part, substitutes new or other trustees for those selected by said stockholders, or which takes from said stockholders their estate or interest in said properties or their control over them and their management, or transfers the possession and management of the property of said stockholders to another corporation or to any other person, or in anywise changes the scheme of said railroad company or the enterprise in which, and to further which, the said stockholders advanced and invested their capital, or which limits the productiveness of their property to them and diverts the earnings, or any part thereof, to other persons, natural or artificial, on any pretense whatever,—is a fraud upon said stockholders, is unlawful as changing the contract between said corporation and said stockholders against their consent, and is absolutely void by the law of the land.'
The bill further alleged that the directors of the New Jersey corporation, in accordance with votes of a majority of the stockholders, but without the consent of all the stockholders or of the plaintiffs, executed and delivered a lease of its rail oad and all its property to the Pennsylvania corporation for the term of 999 years, and the Pennsylvania corporation entered into possession under the lease; that the lease prevented those trustees from performing the trust reposed in them by the stockholders, and affected their rights and interests in the particulars above set forth, and 'was made without any authority of law, and is illegal, inequitable, and void;' that the individual defendants, under cover of that lease, and well knowing its illegality, had been and were actively engaged in furthering the aforesaid invasion of the rights of the plaintiffs as stockholders; that therefore any application by the plaintiffs to the corporation, or to the directors or stockholders, to institute this suit would have been futile, and had not been made; and that consequently the plaintiffs were entitled to bring and maintain this suit in their own name, as well for themselves as for other stockholders similarly situated. The bill prayed for a decree that the lease and the delivery of possession under it were illegal and void, and a fraud upon the rights of the plaintiffs; that the Pennsylvania corporation surrender to the New Jersey corporation the railroad and other property, and account with it for all tolls and profits received; that the New Jersey corporation take possession of the railroad and property, and use and administer it in conformity with the trusts imposed by its charter, and distribute and pay over to the plaintiffs their share of all the money to be found due upon such accounting from the Pennsylvania corporation to the New Jersey corporation; and that, upon the failure of the Pennsylvania corporation to pay back to the New Jersey corporation all moneys taken under the lease, the individual defendants pay the same to the New Jersey corporation; and for further relief.
The defendants filed a joint answer, admitting the plaintiff's ownership of stock in the New Jersey corporation, the construction and operation of the railroad by that corporation, and the execution and delivery of the lease, and of possession under it; denying the other leading allegations of the bill; averring that the charter of the New Jersey corporation was subject by law to alteration, suspension, or repeal in the discretion of the legislature; that the lease was expressly authorized by the laws of New Jersey; and that, if the bill could be maintained, all...
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