Groub v. Blish
| Decision Date | 11 June 1926 |
| Docket Number | 12,102 |
| Citation | 152 N.E. 609,88 Ind.App. 309 |
| Parties | GROUB v. BLISH ET AL |
| Court | Indiana Appellate Court |
Rehearing denied November 19, 1926. Transfer denied December 1, 1928.
From the Jackson Circuit Court; John W. Craig, Special Judge.
Action by Margaret T. Groub against Tipton S. Blish and others. From a judgment for defendants, the plaintiff appeals.
Affirmed.
Charles T. Hanna, Thomas A. Daily and Seba A. Barnes for appellant.
William F. Peter, Samuel D. Miller, Frank C. Dailey, William H Thompson, Albert L. Rabb, Thomas D. Stevenson, Perry E O'Neal and Oscar H. Montgomery, for appellees.
OPINION
Action by appellant in two paragraphs of complaint to recover damages for the alleged conversion of certain shares of the corporate stock of the Blish Milling Company, an Indiana corporation. A demurrer for want of facts was sustained to each paragraph of the second amended complaint hereinafter mentioned as the "complaint." Appellant refused to plead over, but elected to stand by her complaint and judgment was rendered against her that she take nothing. The only errors assigned in this court are the action of the court in sustaining appellees' demurrer to the first paragraph of complaint and in sustaining their demurrer to the second paragraph of complaint.
It is averred in the first paragraph of complaint, in substance, that on January 31, 1916, appellant was the absolute owner of 115.1 shares of the capital stock of the Blish Milling Company, a corporation, incorporated in 1886 under the laws of the State of Indiana, of the par value of $ 100 per share, said ownership being evidenced at said time by certain certificates of stock issued by said corporation to appellant. On said day, of the residue of the shares of the capital stock of said company, Lucy B. Humbert owned 115.1 shares, Maude B. Thompson 115.1 shares, Tipton S. Blish 260.1, Meedy S. Blish 260.1 and John Humbert, a person of unsound mind, 34 1/2 shares, making a total of 900 shares. On said day, appellant and said Lucy B. Humbert, Maude R. Thompson, Tipton S. Blish and Meedy S. Blish entered into a written agreement which is set out at length in the body of the complaint, covering thirty-four pages of the record, and which provided, in substance and effect, that all of said stockholders except John Humbert, who was of unsound mind and not capable of entering into any agreement, agreed to assign their stock in blank to Tipton S. Blish, Meedy S. Blish and J. Louis Davis as depositaries, the same to be held by such depositaries until January 1, 1936, and gave to said depositaries their irrevocable proxy to vote such stock until the year 1936 and as long as it remained on deposit, and gave irrevocable direction to the milling company to pay the dividends to the depositaries. Said depositaries agreed to issue one part represented by participation certificates class "B" for each share of stock so deposited with them and 3 1/3 parts represented by participation certificates class "A," for each share of stock so deposited. Out of the earnings of said business, it was agreed that $ 6 per year should be paid from January 1, 1916 to January 1, 1936, on each share of participation certificates class "A," and, after this payment, the depositaries agreed to set aside $ 8,400 each year in a sinking fund which, with accumulations, was to be used for the redemption and retirement of all participation certificates class "A," on January 1, 1936, by paying to the holders of such certificates $ 100 for each and every equal part represented by said certificates class "A." After these payments and the payment of $ 500 per year to each of the depositaries, the holders of the class "B" certificates were to receive the balance. If nothing was earned, no payments were guaranteed. After the redemption of the participation certificates class "A," the stock in said milling company was to be delivered to holders of the class "B" certificates, together with all other cash securities on hand. Contemporaneously with the execution of this contract, a second contract was entered into, which is set out at length in the body of the complaint, and which provided that, in order that said Meedy S. Blish and Tipton S. Blish might become the sole owners respectively of all the participation certificates class "B," appellant, Lucy B. Humbert and Maude R. Thompson agreed to exchange all of their participation certificates class "B" with Meedy S. Blish and Tipton S. Blish for an agreed amount of participation certificates class "A." Two years after the date of these contracts, a third contract was entered into, which is set out in the body of the complaint and which provided for the increase of the dividends on participation certificates class "A" from $ 6 to $ 10 per year. Pursuant to said first agreement, the parties delivered their respective certificates of stock to said depositaries, who proceeded to act thereunder. Said J. Louis Davis, prior to December 29, 1921, resigned, and, after the commencement of this action, the said Meedy S. Blish died, and Belle S. Blish, the executrix of his last will and testament, was substituted as party defendant. It is averred that appellees are now in the possession of all of said property rights and authority so delivered to the said Tipton S. Blish, Meedy S. Blish and J. Louis Davis, and are holding the absolute possession of appellant's certificates and shares of stock, claiming and asserting the right so to do solely under and by reason and force of said agreements and not otherwise; that each and all of said agreements were made and entered into without any consideration whatsoever therefor, and were and are wholly void; that the agreements were not ratified by the stockholders; that on December 29, 1921, appellant notified the said Meedy S. Blish and Tipton S. Blish that said agreements were void and demanded of them the return of her 115.1 shares of the capital stock of said company, and the certificates therefor, together with the accrued dividends thereon not accounted for; that the said Blishes, and each of them, claimed said certificates and the right of possession thereof under said contract, and refused the return of the same to appellant thereby converting them to their own use; that said shares of stock and certificates were of the reasonable value of $ 400,000 for which amount appellant demands judgment and all proper relief.
The facts averred in the second paragraph of complaint are substantially the same as in the first paragraph, and, in addition thereto, there are allegations of confidential relationship between appellant and Tipton S. and Meedy S. Blish, of whose last will appellee Belle Blish is executrix, by reason of family, business and blood relationship, and of the abuse of that confidential relationship, and allegations that Tipton S. Blish and Meedy S. Blish fraudulently represented to appellant that the stock and business of the milling company was of the value of $ 390,000, whereas, its true value was $ 1,500,000, thereby inducing appellant to enter into said contracts. It is appellant's contention that the agreements embodied in each paragraph of the complaint, and by which the depositaries got possession of the certificates, were absolutely void, and gave the depositaries no right to retain them when demand for their return was made. Appellant says that the agreements were void for each of the following reasons: (a) Because they violate §§ 4932 and 5508 Burns 1926, § 4046 and § 5071 Burns 1914, which give each stockholder in an Indiana corporation one vote for each share of stock, and are against public policy; (b) because they suspend the absolute ownership of personal property for longer than lives in being, in violation of § 12171 Burns 1926, § 9723 Burns 1914; (c) because they provide for an accumulation of personal property in violation of § 12172 Burns 1926, § 9724 Burns 1914; (d) because said Tipton S. Blish and Meedy S. Blish contracted with themselves; and (e) because said contracts, in effect, provide for the issuance of illegal preferred stock.
These in their order:
Section 4046, supra, provides that, "Each stockholder shall have one vote for each share owned and held by him for ten days previous to the meeting of the corporation."
Section 5071 provides that, "Absent voters may vote by proxy, and each share of stock shall entitle the owner thereof to one vote."
We cannot agree with appellant's contention that the transaction here involved is in any sense violative of either of the above-quoted sections of the statute. The contracts were simply agreements, in effect, on the part of appellant and two other stockholders to sell their stock to Tipton S and Meedy S. Blish, and of the latter to buy the same, upon specified terms, the carrying out of which covered a period of years from 1916 to 1936. The selling parties were minority stockholders, and the purchasing parties were majority stockholders, and, as such, were, at and before the time of the execution of the agreements, fully able to control the policy and management of the company. The execution of the agreements by which the depositaries were given irrevocable authority to vote appellant's stock did not give them any power over the corporation that they did not already possess, and did not create a voting trust that was invalid under the facts and circumstances of this case. The primary object of a voting trust is to control the corporate business. As defined by Bouvier, it is the accumulation, in a single hand, or in a few hands, of shares of corporate stock belonging to many owners in order thereby to control the business of the company. These agreements did not...
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