Kreissl v. Distilling Co. of Am.

• Citation: 61 N.J.E. 5,47 A. 471
• Parties: KREISSL v. DISTILLING CO. OF AMERICA et al.
• Decision Date: 29 October 1900
• Court: New Jersey Court of Chancery

47 A. 471

61 N.J.E. 5

KREISSL

v. DISTILLING CO. OF AMERICA et al.

Court of Chancery of New Jersey.

Oct. 29, 1900.

(Syllabus by the Court.)

Bill by Fillipp Kreissl against the Distilling Company of America and others to set aside a voting trust, and for an injunction. Injunction granted.

This bill was filed by Fillipp Kreissl as a stockholder in a corporation of this state known as the Distilling Company of America. It sets forth an agreement, made June 9, 1900, between the owners and holders of shares of capital stock in the Distilling Company of America who should subscribe and become parties thereto, therein called the "stockholders," parties of the first part; William L. Bull, William P. Harrity, Rudolph Keppler, Alvin W. Krech, and Richard Sutro, therein called the "committee," parties of the second part; the Mercantile Trust Company, therein called the "trust company," party of the third part; and August Belmont, John L. Cadwallader, T. Jefferson Coolidge, Jr., William P. Harrity, and Alvin W. Krech, therein called the "trustees," parties of the fourth part. The agreement recites as follows: "Whereas, the parties of the second part are a committee acting at the request of holders of shares of the capital stock of the Distilling Company of America, for the purpose of instituting an inquiry into the affairs of the' company, and recommending such action as might be for the benefit of the stockholders; and whereas, said committee has made a report to the stockholders, bearing date June 1, 1900, a copy of which is hereto attached and made part hereof, and has recommended that the stockholders deposit with the trust company, subject to the order of the committee, their certificates of stock, for the purpose of transferring the same to the trustees, who for the period of five years from the first day of July, 1900, shall be the owners thereof under the provisions of this agreement." The agreement also contains, among others, the following provisions: "(1) The stockholders respectively agree that they are the owners and holders of shares of stock of the said company to the amount at par respectively set opposite their names, or deposited as hereinafter provided; that they will at once deposit with the trust company, in accordance with and subject to the terms of this agreement, at its office in the city of New York, the said stock, to be disposed of as herein provided, and will execute and deposit with the said trust company transfers of said stock, and any powers of attorney or other documents necessary to transfer the legal title to said stock to said committee, in order to empower said committee to fully carry out the provisions and exercise the authority set forth in this agreement, and will accept in place of said stock negotiable certificates of deposit signed by the said trust company, in suitable form, to be prescribed by the said committee." (2) The committee shall cause said stock to be transferred on the books of the company into the names of the trustees when a majority of the entire capital stock shall have been deposited, or sooner if the trustees shall request the same, and receive from the Distilling Company of America a single certificate or certificates, in such amounts as may be convenient, in the names of the trustees, in lieu thereof; such certificate or certificates to be lodged with said trust company, subject to all the terms and conditions of this agreement (3) The committee is authorized and empowered to consider and present to the trustees the best means, in their judgment, of providing the said Distilling Company of America with such additional capital as may, in the opinion of the trustees, be necessary for the purposes of said company, and for the issue of such bonds, mortgages, or other obligations as may be deemed advisable: provided, however, that such means so to be proposed shall not involve the assessment of any sum of money to be paid by the said stockholders. When the committee shall have presented the said subject, and the same shall be agreed on by the trustees, with such modification or changes as may be proposed thereto by the trustees, the same shall be signed by the trustees, or a majority of its members, and shall be filed or lodged at the office of' the trust company in the city of New York, with which copies shall be left for distribution to the stockholders, and a brief publication of the fact of the adoption of the best means in their judgment, referred to, shall be made at least twice in each week, for at least two weeks, in two newspapers published in the city of New York, and one each in the cities of Boston, Philadelphia, Louisville, Cincinnati, and Chicago, and such lodgment of such plan, and such publication thereof, shall be conclusive notice to all the stockholders and to all holders of certificates of deposit of the adoption thereof: provided, however, and it is made an express condition of the execution hereof by the stockholders, that any holder of such certificates of deposit who may not agree to such plan within fifteen days after the expiration of such publication may withdraw from this agreement, and be entitled to a return of his said stock, by filing with said trust company, at its office in the city of New York, written notice of his election so to do, whereupon said holder shall be released from the obligations of this agreement and from such plan, and shall be entitled to a return of his stock, and receive it, upon surrender of the certificates of deposit issued for the same, without deduction for expenses or otherwise. But, as to every certificate holder who shall not within said period make and file such notice in writing, his assent to and ratification of such plan shall be conclusively and finally assumed, conferred, and given, and shall be irrevocable: and provided, further, however, that the trustees shall have liberty to proceed to execute such plan and this agreement, irrespective of the parties so withdrawing, and such withdrawing parties shall have no further interest of any kind under this agreement or such plan, except upon such terms as the trustees may prescribe. (4) The trustees are hereby given full authority and power to carry out and put into effect the plan to be adopted by it as aforesaid, and to take any and all steps necessary to such plan, or which in its judgment may tend to promote the same subject to the rights of the holders of the certificates of deposit to dissent therefrom and withdraw from this agreement as hereinbefore provided. (5) This agreement is made upon the condition that the stockholders of said Distilling Company of America who do not sign this agreement, or do not deposit their certificates of stock in accordance with its terms, shall have no rights and be entitled to no benefits under the same, except that the committee is empowered to extend the time, in its discretion, in which holders of stock may assent to and come in under this agreement, or the plan to be hereafter adopted, and to admit such stockholders to participation in the benefits thereof upon such conditions and penalties as the committee and the trustees may decide. * * * (8) This agreement and the means adopted for raising additional capital shall respectively become binding and effective whenever a majority of all outstanding stock shall assent thereto, or whenever, in the judgment of the trustees, a sufficient number of stockholders have signed this agreement or deposited their stock. * * * (12) The trustees agree that they will vote upon the shares of stock standing in their names at all meetings of the stockholders of the Distilling Company of America for such directors and for such measures as shall, in their judgment, be for the best interest of the stockholders." The bill further charges that the parties are proceeding to perform and carry out this agreement, and that the trustees propose to vote upon the stock so transferred to them at the next election for directors of said Distilling Company. The bill charges that the agreement in respect to the above provisions and others infringes upon his rights as a stockholder in said company. To this bill the Distilling Company of America and the persons named in the agreement as trustees were made parties defendant. Among the prayers of the bill was one for an injunction restraining the trustees from voting upon any of the stock deposited with the Mercantile Trust Company under the agreement, at any meeting of the stockholders of the company, except to adjourn the same from time to time. On filing the bill and its accompanying affidavits, a rule to show cause was allowed. On the return of the rule the defendants filed answers and affidavits. The answers admitted the execution of the agreement, and the purpose to carry it out. By the affidavits it appears that, out of an issue of stock amounting at par to about $75,000,000, stock amounting at par to about $54,000,000 has been deposited with the said trust company under the agreement.

R. H. McCarter, for rule.

R. V. Lindabury, opposed.

MAGIE, Ch. (after stating the facts). The complainant, as the owner of 85 shares of preferred stock and 420 shares of common stock of the Distilling Company of America, each share being of the par value of $100, seeks relief which will affect stockholders of the company owning shares of both kinds of stock amounting at par to about $54,000,000, out of a total of stock issued amounting at par to about $75,000,000. The holdings of complainant are therefore comparatively small, but, however insignificant his interest may be, he is entitled to relief against inequitable conduct which does or may injuriously affect his interest. The comparatively small amount of interest should doubtless lead the court to scrutinize his claim with care, and not to interfere with interests in the same property which are vastly greater, except it is necessary for his eventual relief upon the final hearing.

It is...