Ontjes v. Bagley

• Decision Date: 19 September 1933
• Docket Number: No. 41953.,41953.
• Citation: 250 N.W. 17,217 Iowa 1200
• Parties: ONTJES v. BAGLEY et al.
• Court: Iowa Supreme Court

217 Iowa 1200

250 N.W. 17

ONTJES

v.BAGLEY et al.

No. 41953.

Supreme Court of Iowa.

Sept. 19, 1933.

Appeal from District Court, Cerro Gordo County; M. F. Edwards, Judge.

This is an action by plaintiff as a stockholder of the Northwestern States Portland Cement Company, a West Virginia corporation, to enjoin that corporation, its officers, and the Northwestern States Portland Cement Company, an Iowa corporation, from carrying out an agreement entered into between the two corporations, to transfer and convey all of the assets of the West Virginia corporation to the Iowa corporation under a plan of reorganization adopted by its board of directors and consented to by over 99 per cent. of the stockholders of the West Virginia corporation. A temporary injunction was applied for and granted by the lower court. Defendants appeal.

Reversed on condition.Davis, McLaughlin & Hise, of Des Moines, and Smith & Feeney, of Mason City, for appellants.

F. A. Ontjes, of Mason City, for appellee.

KINTZINGER, Justice.

The Northwestern States Portland Cement Company was organized as a corporation under the laws of West Virginia in 1906 with an original capital stock of $3,500,000, which was subsequently increased to $5,250,000, divided into 52,500 shares of common stock with a par value of $100 each. All of the shares are outstanding. Plaintiff is the owner and holder of 100 shares of the common stock.

As indicated by its title, the business of the corporation was the manufacture and sale of cement and its allied products. The corporation was a successful and going concern.

In June, 1930, a reorganization plan, providing for the creation of an Iowa corporation, was adopted by the board of directors and consented to by over 99 1/2 per cent. of all of the capital stock of the corporation. The new corporation was organized under the laws of the state of Iowa, with the same name as the old.

Under the reorganization plan, all of the assets and property of the West Virginia corporation were to be sold, assigned, and transferred to the new Iowa corporation, in consideration of which the Iowa corporation was to assume all of the liabilities of the West Virginia corporation, and was to issue four shares of its common stock for each share of common stock held by the stockholders of the West Virginia corporation, the new stock to be deposited in a depository where the exchange of stock would be made.

The reorganization plan also provided for the payment of $100 per share to all nonassenting stockholders. The plan also contemplated the dissolution of the West Virginia corporation. The Iowa corporation was organized under the laws of Iowa, and more than 99 per cent. of the stockholders in the West Virginia corporation deposited their stock in accordance with the reorganization plan. Less than one-half of 1 per cent. failed to join in the reorganization plan. There were 52,500 shares outstanding in the old corporation, and the holders of over 52,000 shares assented to the reorganization. Plaintiff holds 100 shares of stock, and he refuses to join. The total stock not joining in the plan represented about 210 shares.

At and long prior to the time of the proposed reorganization, the statutes of West Virginia authorized corporations of that state to sell, assign, and transfer all of its assets on the affirmative vote of 60 per cent. of its outstanding stock.

The statutes of West Virginia, where the corporation was organized, provide as follows: “§ 83. On the affirmative vote, in person or by proxy, of the holders of at least sixty per centum of the outstanding stock of the corporation, such corporation may sell, transfer or assign in good faith, all of its property and assets; but a smaller majority shall not have the right to make such a sale, transfer or assignment.” W. Va. Code, c. 54, § 83, added by Acts 1901, c. 35, § 33. They also provide: “§ 56. The stockholders may at any time in general meeting resolve to discontinue the business of the corporation, the majority of the capital stock being represented and voting in favor of such discontinuance; and may divide the property and assets that may remain after paying all debts and liabilities of the corporation.” Section 56, ch. 53, Code.

Appellee alleges that the West Virginia corporation has a valid claim of over $2,000,000 against the estate of its former president, C. H. MacNider; that the action of the corporation was controlled by the former president and his relatives, one of whom is now president of that corporation. Appellee also claims that the reorganization plan contemplates the transfer of all the assets of the corporation to the new corporation without reference to said claim, and with no intention to collect the same.

He also contends that the corporation has no power to arbitrarily fix the price of his stock and that of other nonassenting stockholders, regardless of the actual value of this stock. Plaintiff alleges that the reorganization scheme would work an irreparable injury upon him. It is shown that, if the claim he urges for the corporation is fully established, the value of his interest in the corporation would be increased about $100 per share.

[1][2][3] I. It is claimed that the plan or scheme of reorganization was an undertaking to convey all of the West Virginia company's assets and property to the Iowa corporation, and that it had no power to do so as against plaintiff's objection.

It is well settled that the laws of the state in which a corporation is organized constitute a part of its corporation charter, and, both taken together, form the contract between the corporation and its stockholders.

The provisions of the statute or general incorporation laws of the state in which a corporation is organized enter into and form a part of the charter. It is the rule that, in construing a corporate charter, the incorporation papers and statutes of the state of incorporation are to be construed together. The statutes need not be copied into the charter, but they form an essential part of it, and all parties are bound thereby, whether contained in the charter or only in the statutes. Statutory or constitutional provisions automatically become a part of the charter. 1 Fletcher on Corporations, vol. 1, § 164; 1 Morawetz on Private Corp. 318; Traer v. Lucas Prospecting Co., 124 Iowa, 107, 99 N. W. 290;Peters v. U. S. Mortgage Co., 13 Del. Ch. 11, 114 A. 598;Detroit Mortgage Corp. v. Vaughan, 211 Mich. 320, 178 N. W. 697, 182 N. W. 526;Weede v. Emma Copper Co., 58 Utah, 524, 200 P. 517;Germer v. Triple-State Natural Gas & Oil Co., 60 W. Va. 143, 54 S. E. 509.

The articles of incorporation of the West Virginia corporation themselves contain no specific reference to its authority to sell, assign, and transfer its property. This authority, however, is contained in the statutes hereinabove referred to, and these statutes authorizing such transfer automatically become a part of its charter. Therefore the charter, when read in the light of the statutes, fully authorizes the West Virginia corporation to make such transfer. Such is the law of West Virginia and Iowa. Germer v. Triple-State Natural Gas & Oil Co., 60 W. Va. 143, 54 S. E. 509;Traer v. Lucas Prospecting Co., 124 Iowa, 107, 99 N. W. 290.

In Germer v. Triple-State Natural Gas & Oil Co., 60 W. Va. 143, 54 S. E. 509, 512, the Supreme Court of West Virginia said: “Did the stockholders have the right, under the laws of West Virginia, to vote and sell all the property of the corporation, and take in payment the stock and bonds of another corporation? It is conceded that, prior to the act of 1901, no such power existed under our statute in the stockholders to so dispose of their property, but it is claimed that under section 83, added to chapter 54 of the Code of 1899 by chapter 35, p. 93, Acts 1901, full power was granted to so sell and dispose of the property of the corporation by the holders of at least 60 per centum of the outstanding stock of the corporation and to transfer the same, taking in payment therefor the stock of another corporation. It will be seen that the said section 83 provides that holders of 60 per centum of the outstanding stock of the corporation may sell, transfer, or assign in good faith all of its property and assets, and, while it does not expressly and in terms authorize the corporation to take in payment therefor the stock or bonds of another corporation, yet, with the full power to sell, transfer, or assign in good faith all of its property and assets under the said new section 83, it would seem clear that under the provisions of section 3, c. 52, of the Code of 1899, as amended by said chapter 35, p. 93, of the Acts of 1901, the corporation has full power to subscribe for or purchase the stock, bonds, or securities of any joint stock company. This it can do, upon a majority vote of the stock, by plain implication. Having the right to sell, transfer, and assign all its property under section 83, and, under said section 3, c. 52, as amended, having the right to subscribe for, or purchase the stock, bonds, or other securities of any joint-stock company, it would follow as a necessary sequence that it could take the one in payment for the other.”

In Traer v. Lucas Prospecting Co., 124 Iowa, 107, loc. cit. 112, 99 N. W. 290, 292, we said: “The charter of a corporation formed under a general law consists of its articles of incorporation, taken in connection with the law under which the organization takes place. The provisions of the law enter into and form a part of its charter, and the charter, thus construed, contains the “terms of the agreement of the association between the shareholders, and indicates the character and extent of the business in which the company shall engage.' * * * When a person becomes a shareholder in a corporation, he assents to the transaction of the business expressly or impliedly authorized by its charter; and therefore, if the charter authorizes the sale or...