Sprigg v. Western Tel. Co.

• Decision Date: 01 March 1877
• Citation: 46 Md. 67
• Parties: WILLIAM O. SPRIGG v. THE WESTERN TELEGRAPH COMPANY, WILLIAM ORTON, and others.
• Court: Maryland Court of Appeals

46 Md. 67

WILLIAM O. SPRIGG v. THE WESTERN TELEGRAPH COMPANY, WILLIAM ORTON, and others.

Court of Appeals of Maryland

March 1, 1877

APPEAL from the Circuit Court of Baltimore City.

The Western Telegraph Company was created by special Act of the Legislature of Maryland, 1846, ch. 39, to continue for a period of thirty years. And the Legislature reserved to itself the right to alter and amend the charter at pleasure. Shortly before the expiration of this charter, steps were taken by a majority of the stockholders to reorganize under the General Corporation Act of 1868, ch. 471. The present bill was filed by one of the stockholders to obtain an injunction to prevent said re-organization, the Western Telegraph Company and the stockholders charged with attempting to effect said re-organization, being made the defendants.

The application for the injunction was set down for hearing, an answer was filed by the defendants, and the Court, (PINKNEY J.,) after a hearing upon the bill, answer and exhibits passed an order refusing the injunction.

From this order the present appeal is taken by the complainant. The case, in other respects, is sufficiently stated in the opinion of the Court.

The cause was argued before STEWART, GRASON, MILLER, ALVEY and ROBINSON, J.

John K. Cowen and John H. B. Latrobe, for the appellant.

Without the consent of all the stockholders, the action of the new company under these circumstances would be equivalent to taking the property of an individual without his consent, and to give to the Act of 1868, ch. 471, such a construction would make it operate to impair the obligation of a contract and therefore be unconstitutional. See Green's Brice's Ultra Vires, 539, et seq., and note pp. 543-4-5.

A fundamental change in the charter of a corporation by act of a majority of the stockholders will be prevented by an injunction at the suit of an individual stockholder, although such action is authorized by express Act of the Legislature. Stevens vs. Rutland & Burlington R. R. Co., 29 Vermont, 547.

If the Legislature intended by the Act of 1868, to alter the charter of 1846, ch. 39, in the exercise of the right to "alter or annul" given by the 17th section, then the Act of 1868 would be unconstitutional, because it would impair the obligation of a contract, "it would compel a dissenting stockholder to transfer his interest, because two-thirds of his co-stockholders desired to do so." Clearwater vs. Meredith, 1 Wallace, 25-39-40.

In this last case, under the general railroad law of Indiana, passed May 11th, 1857, the Cincinnati, Cambridge and Chicago Short Line R. R. Co., was organized. There was no provision in the Act permitting railroad corporations to consolidate their stock, but it did contain the following clause: "This Act may be amended or repealed at the discretion of the Legislature." A general Act, passed February 23rd, 1853 authorized all railroad companies in Indiana to unite and consolidate their roads with any other road or roads, constructed, or in the process of construction. It was held, that "this Act of the Legislature of Indiana, was permissive and not mandatory. That in conferring the authority to consolidate, the Legislature never intended to compel a dissenting stockholder to transfer his interest, because a majority of the stockholders consented to the consolidation. Even if the Legislature had manifested a purpose to do so, the Act would have been illegal, because it would have impaired the obligation of a contract." "If a majority of the stockholders of a corporation, of which he (the plaintiff,) was a member, had undertaken to transfer his interest against his wish, they would have been enjoined. There was no power to force him to join the new corporation, and to receive stock in it, on the surrender of his stock in the old company." See pp. 40, 41.

The following authorities sustain the above views: McCray vs. Junction R. R. Co., 9 Indiana, 358; Bove vs. Junction R. R. Co., 10 Indiana, 93; Oldtown & Lincoln R. R. Co. vs. Veazie, 39 Maine, 571; Zabriskie vs. Hackensack R. R. Co., 3 C. E. Green, 178; Kenosha & Rock Island R. R. Co. vs. Marsh, 17 Wisconsin, 17; 7 C. E. Green, 260, &c., and argument of counsel.

In this last case, a corporation was organized to build a railroad from A. to B. By another Act of the Legislature, amending its charter, it was authorized to make a road from A. to C. Held, that dissenting stockholders were released from their obligations by this attempt to change the charter of the company. Redfield on R., vol. 1, p. 196, sec. 36; Same, vol. 2, p. 656, sec. 252; Am. Law Rev., N. S., vol. XI, p. 1, &c.

The power to alter or annul the Act of incorporation may authorize the taking away of a charter, but does not authorize the imposition of a new charter and the creation of a new company. Zabriskie vs. Hackensack & New York R. R. Co., 3 C. E. Green, 178; Black vs. Delaware & Raritan Canal Company, 9 C. E. Green, 463.

The defendants' answer admits the equities set forth in the bill, but seeks to avoid them by setting up new matter.

On an application for a preliminary injunction, it is the rule of equity, that the new matter cannot be considered until proved in the cause. Hardy vs. Summers, 10 G. & J., 316; Barroll's Chancery Practice, 303; Ringgold vs. Ringgold, 1 H. & G., 12; Glenn, Adm'r vs. Hebb, 12 G. & J., 271; Salmon vs. Claggett, 3 Bl., 141.

Attorney General Gwinn, for the appellees.

The answer filed in this case was responsive in all its parts, to the substance of the bill--that is to say, to the allegations expressed and implied by the bill; and ought, upon the hearing on bill and answer, to have been taken as true. Dorsey vs Hagerstown Bank, 17 Md., 412. It fully denied all the expressed and implied equities of the bill.

The replication, filed by the appellant, had no operation whatever upon his motion for an injunction. Upon the hearing of a motion for an injunction, upon bill and answer, a replication cannot be considered. If the answer is responsive, and denies the equities of the bill, it must be taken as true, whether a replication be filed or not.

It is moreover the duty of a party asking for an injunction, to bring under the notice of the Court, all facts material to the determination of his right to that injunction. It is no excuse for him to say that he was not aware of the importance of any facts, which he has omitted to bring forward. And if it appears by the defendant's answer, that there are questions of fact, or law, on which the right of the complainant to the injunction depends, the Court, even if not controlled, but only cautioned, by the answer, ought to refuse a preliminary injunction. The jurisdiction of the Court in granting ex parte injunctions, is not a matter which can be demanded of right by a complainant, but rests within the sound discretion of the Court; and the power ought to be exercised with extreme caution. State vs. Jarrett, 17 Md., 330; Nusbaum vs. Stein, 12 Md., 318; Reddall vs. Bryan, 14 Md., 476; High on Injunctions, page 4; Bonaparte vs. Camden & Amboy R. R. Co., Baldwin, 217, 218. Because the power is a hazardous one, which may be used to the injury of others, and a strict hand should be held over those who come with such applications. 2 Joyce on Injunctions, 1034; Attorney General vs. Mayor of Liverpool, 1 Myl. & C., 13 Eng. Ch. Rep., 343.

The doctrine stated in Dalglish vs. Jarvie, 2 Mac. & G., 242, 243, is precisely identical with that enforced by the cases in Maryland, and with other authorities. These have held that if it appears by the bill that an unreserved and candid statement of the matters actually in controversy, has not been made, an injunction ought to be refused. Keighler vs. Savage Manuf'g Co., 12 Md., 383; Johnson vs. Glenn, 40 Md., 207; Reddall vs. Bryan, 12 Md., 476; Shoemaker vs. Nat. Mech. Bank, 31 Md., 396; Canton Company vs. Northern Central R. W. Company, 21 Md., 398; Kerr on Injunctions, 1 Am. Ed., 608, and cases cited; High on Injunctions, sec. 11; 2 Joyce on Injunctions, 1034.

It is the duty of the Court to weigh and balance the inconveniences which would arise from granting or refusing the injunction prayed; and to refuse the injunction, if greater mischiefs would result from granting than refusing it. Attorney General vs. Mayor, &c. of Liverpool, 1 Myl. & Cr., 13 Eng. Ch. Rep., 208; 2 Joyce on Injunctions, 226; Kerr on Injunctions, 210; High on Injunctions, sec. 13.

It would seem to be clear, upon principle and authority, that when a charter is granted to a corporation, and the Legislature reserves, in the charter itself, the power to amend such charter, or to repeal it, the Legislature may, at its pleasure, wholly revoke the entire grant and so dissolve the corporation. Miller vs. State, 15 Wallace, 497; Tomlinson vs. Jessop, 15 Wallace, 457; County Commissioners of Washington County vs. Franklin R. R. Co., 34 Md., 161, 162, 163; State vs. Northern Central R. R. Co., 44 Md., 165; Mumma vs. Potomac Co., 8 Peters, 286; Penn. College Cases, 13 Wallace, 218.

If the Legislature may alter or annul an Act of incorporation at its pleasure, when the corporation has agreed that it may exercise the power, it may assuredly, with the consent of the corporation, make the alteration as lawfully by the substitution of a new charter as by the amendment of the old charter.

If the new charter is germane, and necessary to the purposes for which the old charter was granted, and is accepted by the corporation, it is as obligatory upon all the members of the corporation, as if it were an amendment to the old charter. It has, in law, only the force and significance of an amendment.

The amended or substituted charter may be conferred by special Act or by general law, authorizing...