Southern Electric Securities Company v. State

• Decision Date: 21 October 1907
• Citation: 44 So. 785,91 Miss. 195
• Court: Mississippi Supreme Court
• Parties: SOUTHERN ELECTRIC SECURITIES COMPANY v. STATE OF Mississippi

44 So. 785

91 Miss. 195

SOUTHERN ELECTRIC SECURITIES COMPANY v. STATE OF Mississippi

Supreme Court of Mississippi

October 21, 1907

October 1907

FROM the chancery court of Warren county, HON. J. S. HICKS Chancellor.

The State, appellee, was complainant in the court below; the Securities Company, appellant, was defendant there. From a decree in complainant's favor defendant appealed to the supreme court.

The opinion of the court states the facts of the case.

Affirmed and remanded.

Catchings & Catchings; Charles Payne Fenner and Smith, Kirsh & Landau for appellant.

R. V. Fletcher, attorney-general; Anderson & Voller, and Alexander & Alexander, and Geo. B. Power, for appellee.

[The briefs of counsel have been misplaced, and have never come to the hands of the reporter.]

Argued orally by Oliver W. Catchings, and Chas. P. Fenner, for appellant, and by C. H. Alexander, for appellee.

OPINION

CALHOON, J.

The state of Mississippi, upon the relation of the district attorney, exhibited its original, and subsequently its amended, bill in the chancery court of Warren county against the appellant herein. Primarily the purpose of the bill was to enjoin the defendant the Southern Electric Securities Company from voting in a stockholders' meeting of the Vicksburg Railway & Light Company, a domestic corporation, and to enjoin the said defendant from in any manner controlling, operating, managing, or reorganizing the said Vicksburg Railway & Light Company, or from electing any officers of the company, or from doing anything in the management, control, or operation thereof. The ground of attack is that the Southern Electric Securities Company, a corporation organized under the laws of the state of New Jersey, is an illegal trust, exercising its corporate powers in this state in violation of its statutes and policy. The defendants to the original bill were the Southern Electric Securities Company, the Interstate Trust & Banking Company, a corporation chartered under the laws of the state of Louisiana, and Lynn H. Dinkins, H. M. Young, J. H. Levy, Sam Henderson, E. M. Loeb, K. K. McLaurin, Charles Levy, R. S. Sternes, and R. J. Wood. By the amended bill Sr. R. Hughes and C. P. Fenner were made defendants.

The bill charges that on the 20th of May, 1903, a written contract was entered into between Sol Wexler, W. B. Rogers, J. H. Levy, and S. S. Bullis, severally, but not jointly, as parties of the first part, and Harry K. Johnson, party of the second part, whereby it was recited that the parties of the first part owned and controlled $ 375,000 of the $ 500,000 of the capital stock of the Southern Light & Traction Company, which was a corporation owning and operating the street railroad, gas, and electric light properties in Natchez, Miss. and that Harry K. Johnson owned or controlled $ 375,000 of the $ 400,000 capital stock of the Vicksburg Railway & Light Company, which was a corporation owning and operating a street railway and electric light plant in the city of Vicksburg; that it was agreed that these parties should organize a securities holding company under the laws of the state of New Jersey, with a capital stock of $ 100,000 or more, to which company all of said stock owned by the said parties, together with all the securities held, owned, and controlled by the Natchez and Vicksburg, Miss. street railroad companies, should be turned over, in consideration of which each of the said parties should receive one-fifth of the capital stock of such securities holding company. A copy of the contract referred to was made an exhibit to the bill, by which it appears that Johnson agreed, in the event he should gain an option on, or acquire the ownership of, the balance of the capital stock of the Beaumont Traction Company, over and above that then owned by him, he should, at the option of the said securities holding company, sell and transfer the same to that company at the price paid by him. The bill further averred that the said parties did obtain a controlling interest in the Beaumont Traction Company, which was a corporation operating street railroads and other industries in the city of Beaumont, in the state of Texas, and in a like corporation engaged in a like business in the city of Jennings, in the state of Louisiana, and under an arrangement such as that described in the said contract agreeing to turn over and transfer to the said securities holding company said stock and securities. The bill averred that the purpose and intent of the contract was to place within the power of the said securities holding company and create in it a monopoly in the running and operating of any of the street railroads or electric light companies in any of the states mentioned in said contracts, and to put it in the power of said securities holding company, or a large majority of the stockholders thereof, to dictate and control the management and business of the Vicksburg Railway & Light Company and the other like corporations in the other states mentioned, and to create a pool, trust, combination, or understanding for the purpose of regulating and fixing the price of fares on the street railways, and the price of electricity for power and illuminating purposes, and the price of the stocks, bonds, and securities held, owned, or operated by said Vicksburg Railway & Light Company and the other corporations mentioned. The bill averred that, in pursuance of said contract and the other agreements as stated, there was organized under the laws of New Jersey a securities holding company under the corporate name of the Southern Electric Securities Company, to which a majority of the capital stock of the said Vicksburg Railway & Light Company, the Southern Light & Traction Company the Beaumont Traction Company, and the Jennings Company was transferred and turned over, to be used in accordance with said contract, and that the said Southern Electric Securities Company, in pursuance of said agreement, issued its stock. The bill further alleged that the Interstate Trust & Banking Company, a Louisiana corporation, has acquired and now holds and controls a large part of the capital stock of the Southern Electric Securities Company and of the other corporations mentioned, and, in connection with the Southern Electric Securities Company, many of whose officers are also the officers, agents, and representatives of the Interstate Trust & Banking Company, has taken control of the operation and business of the Vicksburg Railway & Light Company, and has called a stockholders' meeting for the purpose of electing officers and taking other steps looking to the management and control of the said corporation. The prayer of the bill is that an injunction may be issued restraining the Southern Electric Securities Company from voting as a stockholder in said meeting, or taking any part in the management, control, or operation of the Vicksburg Railway & Light Company. The bill also prays that on final hearing the injunction shall be made perpetual, and that all the pains and penalties prescribed by the act of 1900 and by the Code of 1906 against trusts and combines shall be adjudged against said defendants and each of them. An injunction was issued as prayed.

The defendants, answering the bill, admitted the execution of the contract, Exhibit A thereto. They admit that defendants Wexler, Rogers, Levy, and Bullis, after the execution of the said contract (Exhibit A), obtained a controlling interest in the Beaumont Traction Company, a Texas corporation operating a street railway in the city of Beaumont, and in a like corporation in the city of Jennings, in the state of Louisiana, and in pursuance of an arrangement similar to that set forth in said contract (Exhibit A). The defendants aver that the said contract (Exhibit A) was made in the state of Louisiana, and was a perfectly valid and lawful contract under the laws of that state, and claim that no statute of the state of Mississippi could have any extraterritorial effect, so as to invalidate such contract, and that, if there is such statute in the state of Mississippi, it is unconstitutional. The defendants also set up that the Southern Electric Securities Company is a corporation created under the laws of the state of New Jersey, and file a copy of the act of incorporation as an exhibit to their answer. Defendants claim that by said charter the Southern Electric Securities Company has corporate authority conferred upon it to acquire by purchase, subscription, or otherwise, and to hold as an investment, any bonds, debentures, or other securities as evidence. of indebtedness, or any shares of capital stock created or issued by any other corporation or corporations of the state of New Jersey or of any other state, territory or country, and, while the owner of such stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote the same. The defendants claim that under its charter the Southern Electric Securities Company had the right to acquire the stocks of the various corporations mentioned, and aver that such stock was not acquired or purchased within the territorial limits of the state of Mississippi. They deny that the statutes of this state prohibit, or can be construed to prohibit, such acquisition of stock by said corporation, and if such is their nature, that they are unconstitutional and void. The defendants aver that the stock in these companies was personal property, assignable under their corporate by-laws and charters, and that the owners thereof had the right to transfer the same, and the Southern Electric Securities Company, under its charter, had the power and authority to purchase the stock. They deny that the statutes of Mississippi have or can have any...