Theis v. Spokane Falls Gaslight Co.

• Decision Date: 05 January 1904
• Citation: 74 P. 1004,34 Wash. 23
• Parties: THEIS v. SPOKANE FALLS GASLIGHT CO. et al.
• Court: Washington Supreme Court

74 P. 1004

34 Wash. 23

THEIS v. SPOKANE FALLS GASLIGHT CO. et al.

Supreme Court of Washington

January 5, 1904

Appeal from Superior Court, Spokane County; Geo. W. Belt, Judge.

Action by Charles Theis against the Spokane Falls Gaslight Company and others. From a judgment in favor of defendants, plaintiff appeals. Reversed.

Post, Avery & Higgins, for appellant.

George Ladd Munn, Thayer & Belt, and Walker & Munn, for respondents.

DUNBAR, J.

The Spokane Gaslight Company, a corporation, one of the respondents herein, was organized under the general incorporation laws of the state of Washington in the year 1887. Its life under the articles of incorporation, was 50 years. In March 1903, three companies of eastern bond buyers, viz., N.W Halsey & Co., Farson, Leach & Co., and Cyrus Pierce & Co. purchased the bonds outstanding against this corporation, and formed a syndicate for the purpose of purchasing the shares of stock of the corporation, and sent a member of the firm of Cyrus Pierce & Co. (Isaac W. Anderson) to Spokane as their representative. It was the object of Mr. Anderson, as representative of the syndicate, to purchase all the outstanding stock of the company, and nearly all of said stock was so purchased. However, the appellant, Charles Theis, the owner of eight shares of stock, refused to sell his stock to the syndicate. By resolution, passed by a more than two-thirds majority of the stockholders, it was determined that the entire property of the corporation should be sold, whereupon this action was brought by the appellant to enjoin the sale of the entire property of the corporation. The original defendants were the corporation; A. D. Hopper, the president; W. A. Aldrich, the secretary; and Isaac W. Anderson, a member and the representative of the eastern syndicate. The application for injunction was denied, and the property was struck off to one Charles S. Reeves, who, it is admitted, had been selected by Anderson to act as agent for the syndicate; and, immediately upon the sale of the property, anderson filed articles of incorporation of a new company, called the Spokane Gas Company. Thereafter, by leave of the court, plaintiff filed a supplemental complaint, and brought in as additional parties said Reeves, Spokane Gas Company, and all members of the syndicate. Application was made for an injunction, and a hearing had upon said application. The answer denied that the proposed sale was a scheme of reorganization conceived for the purpose of forcing the small stockholders out of the corporation. It was agreed that testimony should be heard as upon the merits of the case, and it was so heard, and upon said hearing judgment of dismissal of the action was entered by the court, from which judgment this appeal is taken.

A circumstantial review of the testimony in this case would not be profitable, but, from an examination of all the testimony, we are convinced beyond a doubt that the object of the attempt to dissolve the corporation was for the purpose of getting rid of uncongenial minority stockholders. This plainly appears from the testimony of both the appellant and the respondents. The corporation Spokane Falls Gaslight Company appeared by one attorney, and the syndicate by another, though it appears from an examination of the record that they regarded their interests as identical. On the question of the object of the dissolution, the syndicate representative, Mr. Anderson, in his testimony, was very candid; evidently construing the statute, which will hereafter be noticed, as granting an absolute right to a two-thirds majority of the stockholders to disincorporate for any reason which seems to them necessary. So that the real question to be determined here is whether or not the statute confers power upon a two-thirds majority of a prosperous corporation to disincorporate, and dispossess minority stockholders of their stock by paying them the market price for the same. There is some contention in this case that it was the intention of the appellant to obtain a majority of the stock of this corporation, and then undertake to do what has been undertaken by the majority stockholders. However that may be, it is not a pertinent question here, for the law would apply to him as it will to the respondents. It is conceded that at common law a corporation had no power to dissolve, excepting by universal consent of stockholders, and that an injunction would be granted upon the application of a single stockholder to prevent such dissolution; but respondent contends that authorities cited to that effect are not in point, for the reason that the statute abrogates the common-law rule. Section 4275, 1 Ballinger's Ann. Codes & St., is as follows: 'Any corporation formed under this chapter may dissolve and disincorporate itself by presenting to the superior judge of the county in which the office of the company is located a petition to that effect, accompanied by a certificate of its proper officers, and setting forth that at a meeting of the stockholders, called for the purpose, it was decided, by a vote of two-thirds of all the stockholders, to disincorporate and dissolve the corporation. Notice of the application shall then be given by the clerk, which notice shall set forth the nature of the application, and shall specify the time and place at which it is to be heard, and shall be published in some newspaper of the county once a week for eight weeks, or if no newspaper is published in the county, by publication in the newspaper nearest thereto in the state. At the time and place appointed, or at any other time to which it may be postponed by the judge, he shall proceed to consider the application, and if satisfied that the corporation has taken necessary preliminary steps and obtained the necessary vote to dissolve itself, and that all claims against the corporation are discharged, he shall enter an order declaring it dissolved.' Under the provisions of this statute, it is the contention of the respondents that an absolute right is given a two-thirds majority to dissolve the corporation whenever they see fit; and the broad ground is taken that, inasmuch as the corporation is acting within its legal capacity, the court has no right to inquire into the motives which actuated the moving stockholders; that its only concern is to see that the formal legal requirements have been complied with; and such was evidently the theory adopted by the trial court.

This in a sense, is true, and would apply to this case if the actual attempt was to dissolve the corporation, within the meaning of the law. But a court of equity will never aid in the perpetration of a fraud simply because application is made in empty form of law. Its powers are not so superficial or so restricted. Equity is, we are told, the correction of that wherein the law, by reason of its universality, is deficient. He who asks its aid must present himself...