Mason v. Pewabic Min Co Pewabic Min Co v. Mason

• Decision Date: 13 January 1890
• Parties: MASON et al. v. PEWABIC MIN. CO. et al. PEWABIC MIN. CO. et al. v. MASON et al. 1
• Court: U.S. Supreme Court

133 U.S. 50

10 S.Ct. 224

33 L.Ed. 524

MASON et al. v. PEWABIC MIN. CO. et al.

PEWABIC MIN. CO. et al.

v. MASON et al.¹

January 13, 1890.

These are an appeal and a cross-appeal from a decree of the circuit court of the United States for the western district of Michigan. On March 31, 1884, there was filed in the circuit court for that district the bill of complaint of Thomas G. Mason, William Hart Smith, and Sullivan Ballou, who describe themselves as 'citizens of the state of New York,' against the Pewabic Mining Company, a corporation existing under the laws of the state of Michigan, Johnson Vivian, a citizen of the state of Michigan, and Henry Billings, Thomas H. Perkins, Alden B. Buttrick, and Daniel L. Demmon, citizens of the state of Massachusetts, and the Pewabic Copper Company, a corporation created under the laws of the state of Michigan. The bill professes to be filed in behalf of the complainants above named, and of all the stockholders in the Pewabic Mining Company who may desire to join herein and take the benefit of the proceedings of the court. The bill is too long to copy in full in this opinion. The substance of it is that the complainants were members of the Pewabic Mining Company, a corporation organized under the laws of Michigan on the 4th day of April, 1853, with a capital stock of 20,000 shares, of $25 each, afterwards increased to 40,000, which was invested in a copper mine near Houghton, Mich. The complainants allege themselves to be, at the time of the filing of the bill, the owners of 2,650 shares of the stock of the company. They allege that the charter of the company expired on April 4, 1883, but that nevertheless the directors who were elected in March of that year, disregarding this fact, continued the ordinary business of the corporation, and among other things made an assessment of $88,000 on the capital stock, which was paid. They further allege that at the annual meeting of the stockholders on the 26th of March, 1884, for the election of directors and for other purposes, the following resolutions were adopted, against the vote and the protests of the complainants: 'Resolved, that the board of directors be authorized to sell and dispose of the property of the company for a sum not less than $50,000; that the president and secretary be authorized to execute all conveyances necessary to carry out the contract for the sale of the property of this company made by the board of directors; and that the board of directors be and hereby are, authorized to close up the business of the company. Resolved, that it is the sense of this meeting of stockholders that the property shall be sold to a new corporation, organized under the laws of Michigan, on the basis of forty thousand shares, and that the stock of such new corporation shall be issued to and received by the stockholders of this company in payment for the same, stockholders to have the right to receive equal number of shares in new company, if they so elect, on surrendering certificates of this company, within thirty days after April 12, 1884, and in case a stockholder does not take stock of the new corporation he is to receive his pro rata share in money.' The vote in favor of the adoption of these resolutions was 27,919 shares, against 6,754 shares in the negative. On the same day a certif cate of incorporation under the laws of Michigan was executed, forming the Pewabic Copper Company, and filed two days afterwards. Its capital stock was also 40,000 shares, at $25 each, which was taken up by the defendant corporators, who, with two others, were named as the first directors, being the same persons who controlled the old company. The third article of this association declared that no cash is actually paid on the capital stock. The cash value of real and personal property conveyed to the company contemporaneously with its organization is the sum of $50,000.

The constitution of the state of Michigan declares (article 15, § 10) that no corporation, except for municipal purposes, or for the construction of railroads, plank-roads, and canals, shall be created for a longer time than 30 years. A statute of Michigan (1 How. St. § 4867) enacts that all corporations whose charters shall expire by their limitation, or shall be annulled by forfeiture or otherwise, shall nevertheless continue to be bodies corporate for the term of three years after the time they would have been so dissolved, for the purpose of prosecuting and defending suits by or against them, and of enabling them gradually to settle and close their concerns, dispose of and convey their property, and divide their capital stock, but not for the purpose of continuing the business for which such corporations have been or may be established. The bill prayed for an injunction and restraining order forbidding the defendants from carrying out the purpose of transferring the property of the Pewabic Mining Company to the new corporation. It also prayed for the appointment of a receiver to take charge of the effects of the Pewabic Mining Company, that they might be sold, the debts of the company paid, and the remainder of the proceeds distributed among the stockholders. The defendants answered the bill, admitting substantially its principal allegations, stating, as an excuse for continuing the operations of the company beyond the period of its 30 years' existence, that they were not aware of the time when that 30 years expired. They assert that, in all they had done since, they had acted honestly and fairly, and had the assent of the majority of the stockholders; that the arrangement under which they proposed to transfer the property of the Pewabic Mining Company to the new corporation was one which met with the approval of the majority of the stockholders, and a still greater preponderance of the stock in the corporation. They allege that they offered to pay the dissenting stockholders for their stock at the rate of $50,000 for the value of the whole stock, which was the sum at which it was to be sold to the new company, or to permit them to exchange it for stock in the new company, share for share; and they insist that this was just and fair, and what they had a right to do, and that they should still be permitted to carry out this plan. They say that the complainants, in refusing to accede to the new arrangement, are acting in the interest of rival copper mining companies, whose mines adjoin that of the Pewabic Company, and that their object is to force a sale at public auction, when those companies, whose shareholders are wealthy, will have an unfair advantage in purchasing the property below its real value. They repeat their offer to pay the defendants for the pro rata value of their stock, estimating the whole at $50,000, or to exchange it for stock in the new company. Replication was filed.

The court refused the appointment of a receiver, but did issue a restraining order against the defendants to prevent the consummation of the sale to the Pewabic Copper Company. A special master was appointed, with all the powers usually possessed by a master in chancery, to whom the case was referred, with directions to ascertain what assets and property, real and personal, were owned by the defendant the Pewabic Mining Company, on the 26th day of March, A. D. 1884; and also what assets and roperty, real and personal, said company owned at the time of filing the bill of complaint in this case, on the 31st day of March, 1884; and also to ascertain the fair cash value of such assets and property at the several dates aforesaid, distinguishing the value of the several parcels and kinds of said property, and for that purpose to take testimony and make report thereon. The report of the master shows the value of the property belonging to the Pewabic Company to be much greater than $50,000, and the defendants concede it to be worth $75,000, which they profess a willingness to pay. The master took many depositions as to the value of this property on the part of plaintiffs and defendants, and he says:

'Between the extremes of the testimony I find it very difficult to say what these several parcels of property are worth, but for the purposes of this reference I find the value of the several classes as follows:

Stamp-mill plant, including pumps

and buildings................... $ 40,000 00

Mining equipment, not including

dwellings........................ 35.000 00

Eighty-nine dwellings............. 30,000 00

Wood and timber................... 27,398 59

Mining supplies................... 30,000 00

Cash on hand....................... 9,197 32

Copper on hand.................... 43,757 66

Water front, stamp-mill site....... 2,000 00

Real estate and mining rights.... 250,000 00

Mine buildings and shops.......... 30,000 00

Bills receivable................... 1,058 67

---------

Total........................... $498,412 24 Upon final hearing, the circuit court decreed that the equity of the case is with the complainants, and 'that the affairs of the Pewabic Mining Company be, and are hereby, decreed to be wound up.' It then directs that 'all the assets and property of the Pewabic Mining Company be sold at public vendue for cash to the highest bidder: provided, that if at such sale the bid for the aggregate of the property and assets should not be in excess of $50,000, above the amount of the debts of the company existing at the time of the sale, then the arrangement for the sale of such property, made at the stockholders' meeting in Boston on the 26th day of March, 1884, as set up in defendants' answer, shall be carried out under the direction of the special master, hereinafter designated, and as provided by the resolution adopted by the stockholders at said meeting. * * *' It was further ordered that 'the cause be referrred to Peter White, as special master, for the following purposes, and with the following powers, to-wit: That said master proceed to ascertain the assets and property...