Delaware Hudson Company v. Albany Susquehanna Railroad Company
| Decision Date | 03 May 1909 |
| Docket Number | No. 416,416 |
| Citation | 213 U.S. 435,53 L.Ed. 862,29 S.Ct. 540 |
| Parties | DELAWARE & HUDSON COMPANY v. ALBANY & SUSQUEHANNA RAILROAD COMPANY et al |
| Court | U.S. Supreme Court |
Messrs. James M. Beck, Alfred Opdyke, and William S. Opdyke for the Delaware & Hudson Company.
[Argument of Counsel from pages 436-438 intentionally omitted] Messrs. E. Parmalee Prentice, George Welwood Murray and Charles P. Howland for the Albany & Susquehanna Railroad Company et al.
[Argument of Counsel from pages 438-442 intentionally omitted] Mr. Justice McKenna delivered the opinion of the court.
The certificate of the court is as follows:
'This cause comes here upon appeal from a final decree of the circuit court, southern district of New York, which directs that the defendant, Delaware & Hudson Company (hereinafter called the Delaware Company) pay to the defendant the Albany & Susquehanna Railroad Company (hereinafter called the Susquehanna Company) the amount of $1,107,923.24.
'The case was fully argued and submitted on briefs. It thereupon developed that there was a question presented whether the bill could be maintained under the 94th equity rule. That question is a preliminary one, it has been held to be jurisdictional in character. Chicago v. Mills, 204 U. S. 321, 51 L. ed. 504, 27 Sup. Ct. Rep. 286; Doctor v. Harrington, 196 U. S. 579, 49 L. ed. 606, 25 Sup. Ct. Rep. 355), and this court desires the instruction of the Supreme Court for its proper decision.
Statement of facts.
'The facts upon which the question arises are as follows:
'The defendant corporations are both citizens of the state of New York; the complainants are citizens of the states of Connecticut and Rhode Island. The bill was brought to obtain an accounting for various sums of money which it was alleged became due at intervals during a series of years from the Delaware Company to the Susquehanna Company as rental or in the nature of rental under a lease made in 1870. For the convenience of all, a copy of the pleadings is hereto annexed, marked Exhibit 'A,' which may be referred to for a more detailed statement of the cause of action. The bill does not 'set forth with particularity the efforts of the plaintiffs to secure such action as they desire on the part of the managing directors or trustees.' Nor did the proofs show any such efforts. Nor does the bill set forth any efforts to secure 'such action on the part of the shareholders.' Nor did the proofs show any such efforts. Nor did the bill set forth, or the proof show, 'the causes of their failure to obtain such action' otherwise than is hereinafter disclosed.
'The complaint was filed on June 12, 1906. The Susquehanna Company was organized ganized under the act of April 2, 1850, which provides that 'there shall be a board of thirteen directors . . . to manage its affairs,' and for many years before this suit was brought a majority of the board of directors of the Susquehanna Company consisted of persons who were officers, directors, or employees of the Delaware Company. At the time this suit was instituted the directors and officers of the Susquehanna Company the dates of their election as such, and their relations to the Delaware Company, with dates of election, were as shown on the following statement:
Names of directors of Susquehanna
Company and dates of election as Position in Delaware & Hudson
directors and officers. Company and dates.
Robert M. Olyphant, 1878. Director since 1872.
President from 1884 to 1903.
Chariman of the board since 1903.
George I. Wilber, 1883. Director since 1901.
David Wilcox, 1894 (vice pres- General counsel, 1894 to 1903.
ident, May 9, 1906). Director since 1899.
President since 1903.
R. Suydam Grant, 1901. Director since 1886.
Charles A. Peabody, 1902. Director since 1902.
William S. Opdyke, 1903. General counsel since 1903.
Director since 1905.
Abel I. Culver, 1903. A vice president since 1903.
Charles A. Walker, 1892. Treasurer, 1892.
Robert Olyphant, 1887 (presi-Son of Robert M. Olyphant.
dent since 1889).
James M. Manning, 1890. Company, as stated in the
Delaware Company's answer.
'Of these, Robert M. Olyphant, R. Suydam Grant, Charles A. Peabody, William S. Opdyke, Abel I. Culver, and Robert C. Pruyn, at the time this suit was begun, did not own or hold, in their own right, any shares of stock in the Susquehanna Company, but shares of stock of that company owned by the Delaware Company were transferred to each of them on the books of the Susquehanna Company by the Delaware Company for the purpose of qualifying them as such directors. Charles A. Walker owned five shares of Susquehanna stock from 1901 to 1906; it does not appear that he owned any stock in the Susquehanna Company during the year 1906.
'So far as appears from anything shown in this record, none of the directors or officers of the Delaware Company ever, before or after the bringing of this suit, treated the claim therein set forth otherwise than as one of doubtful validity, the payment of which was to be resisted.
'On June 12, 1906, and for thirty years prior thereto, the capital stock of the Susquehanna Company had been fixed at and limited to 35,000 shares. Of this capital stock on June 12, 1906, the Delaware Company owned 4,500 shares and its directors or officers owned or controlled 4,340 shares; the complainants owned 1,312 shares, and a so-called 'protective committee' who, from and after December, 1905, had been opposing the administration of the Delaware Company upon the questions involved in this bill, controlled 6,688 shares. The entire 35,000 shares were held by 546 different persons, of whom 423 owned 50 shares or less, and of whom 383 resided in the state of New York.
'An annual meeting of the Susquehanna Company was held subsequent to the beginning of this suit, on October 16, 1906. At that meeting the nominess of the protective committee were elected, receiving 15,501 ballots, the nominees of the former management receiving 15,441 ballots. About two weeks before such annual meeting the Susquehanna Company, being then controlled by the directorate above named, filed a demurrer to the bill, which is hereto annexed as Exhibit 'B.' Copies of such demurrer were sent by stockholders opposed to the existing control to all stockholders, and thereafter and before the meeting proxies for several thousand shares were received by the persons who voted for the nominees then elected.
Questions certified.
'Upon the facts above set forth, the questions of law concerning which this court desires the instruction of the Supreme Court are:
'First. 'Does the fact that, before institution of this suit, complainants made no demand for relief upon the board of directors of the Susquehanna Company, prevent them from maintaining this ball?'
The questions in connection with the 94th equity rule present the issue in the case. The rule is as follows:
Do the facts show a compliance with the rule, or rather that part of it which we have expressed in italics? The other parts of it are not involved.
It is the contention of appellant that the averments in the bill, as exhibited in the certificate, do not satisfy either the language of the rule or its substance. The argument is that (1) a shareholder, as a condition of his suit, must show that he has exhausted all the means within his reach to obtain within the corporation itself the redress of his grievances; that his efforts must be earnest, not simulated, and this must be made apparent to the court; (2) his failure to apply to the managing body of the corporation will not, in the absence of fraud, be excused by the fact that such managing body are also officers, directors, or employees of the corporation against which the suit is brought; (3) if the facts of this case excused from a preliminary demand upon the directors, the complainants were required to show 'that they could not have secured appropriate action by an appeal to the stockholders of the Susquehanna Company.' The appellees counter these contentions by asserting that (1) the case is not within the requirements of rule 94. 'The bill shows, under oath,' it is said, 'that the directors were hostile, and that demands upon them would be 'idle and nugatory.' . . .' (2) Complainants (appellees here) were not required to appeal to the stockholders of the Susquehanna Company because (a) the stockholders, under the charter of the company, could not grant relief; (b) even if such power existed, the stockholders 'could not oust directors from office before expiration of their terms.' And it is further contended that, at the time the suit was instituted, 'the Delaware Company controlled the stock vote of the Susquehanna Company.'
These opposing contentions present a not unusual case where the rule or principle of law is clear...
To continue reading
Request your trial
-
Flocco v. State Farm Mut. Auto. Ins. Co., No. 98-CV-135.
...futility would eviscerate the "right of the corporate directory to corporate control." Delaware & Hudson Co. v. Albany & Susquehanna R.R. Co., 213 U.S. 435, 446-47, 29 S.Ct. 540, 53 L.Ed. 862 (1909). In the present case, it is undisputed that prior to the institution of his action, Flocco f......
-
Daily Income Fund, Inc v. Fox
...(1947); Price v. Gurney, 324 U.S. 100, 105, 65 S.Ct. 513, 516, 89 L.Ed. 776 (1945); Delaware & Hudson R. Co. v. Albany & Susquehanna R. Co., 213 U.S. 435, 447, 29 S.Ct. 540, 543, 53 L.Ed. 862 (1909).4 The origin and purposes of Rule 23.1 support this understanding of its scope. The Rule's p......
-
Rogers v. Guaranty Trust Co of New York
...Co. v. Belmont, 206 N.Y. 7, 17, 99 N.E. 138, 51 L.R.A. (N.S.) 112, Ann. Cas. 1914A, 777; cf. Delaware & Hudson Co. v. Albany & Susquehanna R.R. Co., 213 U.S. 435, 29 S.Ct. 540, 53 L.Ed. 862. Authority of the directors to bestow gratuities upon themselves in the form of subscription rights m......
-
Duane v. Merchants' Legal Stamp Co.
...1102, Ann. Cas. 1913C, 374;Hayden v. Perfection Cooler Co., 227 Mass. 589, 593, 116 N. E. 871;Delaware & Hudson Co. v. Albany & Susquehanna R. R., 213 U. S. 435, 29 Sup. Ct. 540, 53 L. Ed. 862. It is only because this plaintiff in his capacity as shareholder is not innocent touching the ver......