Trask v. Chase

• Decision Date: 29 September 1910
• Citation: 107 Me. 137,77 A. 698
• Parties: TRASK et al. v. CHASE et al.
• Court: Maine Supreme Court

77 A. 698

107 Me. 137

TRASK et al.

v. CHASE et al.

Supreme Judicial Court of Maine.

Sept. 29, 1910.

(Syllabus by the Court.)

[Copyrighted material omitted.]

Exceptions from Supreme Judicial Court, Penobscot County, in Equity.

Bill by Allen P. Trask and another against George E. Chase, Robert C. Williston, George W. Smith, and the Bangor Jewelry & Optical Company, a corporation, in which said company the plaintiffs and the said Chase, Williston, and Smith are stockholders, praying for injunctions, both temporary and permanent, restraining the said Williston from voting certain shares of the stock of the corporation held by him, or otherwise exercising the rights of ownership over the same, and from transferring the same, and also that he be ordered to surrender and deliver to the treasurer the certificate thereof to be canceled. The bill also contained other prayers all of which are stated in the opinion.

The defendants filed an answer with a general demurrer therein inserted. The cause was first heard on the demurrer, which was overruled, and the defendants excepted. It was then heard on bill, answer, and proof, and a decree was made in favor of the plaintiffs. The defendants then appealed, and also excepted to certain rulings during the hearing.

Exceptions overruled, and decree affirmed. Argued before SAVAGE, PEABODY, SPEAR, CORNISH, ICING, and BIRD, JJ.

E. C. Ryder, for plaintiffs.

Hugo Clark and Charles H. Bartlett, for defendants.

SAVAGE, J. This is a bill in equity brought by two stockholders in the Bangor Jewelry & Optical Company against all the other stockholders and the corporation itself. It is alleged in the bill, among other things: That the capital stock of the corporation is $10,000, divided into 10,000 shares of the par value of $1 each. That the plaintiffs Trask and Skinner and the defendants Chase, Williston, and Smith are the owners of all the capital stock. That on February 1, 1909, which was the date of the last annual meeting prior to the filing of the bill, 8,025 shares had been issued, which were then owned as follows: 3,300 shares by Trask, 950 shares by Skinner, 2,000 shares by Smith, 1.150 shares by Chase, and 625 shares by Williston. That at the annual meeting it was voted by a majority vote of the stockholders not to sell or issue any more shares of the capital stock of the company. That at said meeting all the stockholders Trask, Skinner, Smith, Chase, and Williston were elected directors, and have since remained such. That Smith was elected president, and Chase treasurer. That it is provided in the bylaws of the corporation that the directors shall cause to be issued to the stockholders in proportion to their respective interests certificates of stock, not to exceed in the aggregate the capital stock of the corporation. That on March 22, 1909, Smith and Chase, president and treasurer, respectively, and both of them directors, in breach of their trust and duty as officers and directors of the corporation, issued to Williston 10 shares of the capital stock. That this was contrary to the vote passed at the annual meeting, before recited, and to the by-laws. That it was done without the authority of any vote passed at any meeting of the stockholders or directors, and without opportunity for other stockholders to purchase the same or any part thereof. That on July 22, 1909, a meeting of the directors called at the request of Chase and Williston, according to the by-laws, was held, at which the following vote was passed: "Whereas it is desirable to reduce the indebtedness of this company to the Kenduskeag Trust Company, and whereas it is also desirable at this time to recognize the faithful and valuable services of R. C. Williston (one of the directors), who came to the company's employ on an understanding, perhaps not binding in law, to the effect that, if he remained in the company's employ giving satisfaction for a reasonable time, he should have the privilege to invest in and become the owner of the company's stock at par to an amount equal to the present holdings of George E. Chase; and whereas, said Williston has remained, and still remains, in the employ ot this company as one of its servants, and has given, and still gives, satisfaction in all respects to the present time: Now, therefore, be it and it is hereby voted that this company sell five hundred and twenty-five shares of its capital stock to R. C. Williston at par, and that the president and treasurer of this company be, and they are hereby, authorized and directed to forthwith issue a proper stock certificate of this company in the usual form to him for said five hundred and twenty-five shares on his payment for the same to the treasurer of this company in cash at par; and that the treasurer of this company be, and he is hereby, authorized to make payment of the sum of five hundred and twenty-five dollars, being the amount to be realized from such sale of stock, on account of this company's indebtedness to the Kenduskeag Trust Company of Rangor, and to give a new note of the company, with such indorsements as may be arranged, for the balance." That the plaintiffs seasonably protested against the passage of the foregoing vote, but that the protest was disregarded by Chase, Williston, and Smith, the defendants. That the protest was recorded. That a certificate for 525 shares of stock was immediately issued to Williston. That he now holds the same. That no opportunity was given to the plaintiffs to purchase any part of the unissued capital stock, though they were ready and willing and offered to take and pay for at par shares of stock in proportion to their respective interests at that time. That the action of the defendants Chase, Williston, and Smith was a violation of their trust and duty as directors of the company. That they were in collusion with one another to prevent the plaintiffs from securing their proportional part of the capital stock, and from retaining control, as the holders of a majority of the capital stock, of the affairs of the company. That their acts were in violation of the vote of the stockholders, before referred to, and contrary to the by-laws of the company and the laws of the state. That the assets of the company, exclusive of unissued treasury stock, then amounted to more than $15,000. That there were no debts due at that time, and no reasons for the sale and issuance of the stock to Williston. That the vote to issue the stock to Williston was passed for the express purpose of securing control of the affairs of the company, and preventing the plaintiffs from holding a majority of the capital stock, and was a fraud upon the plaintiffs. That, if Williston is allowed to retain the stock, the plaintiffs will be prevented to their injury from securing their proportion of the capital stock. That Chase, Williston, and Smith will own a majority of the capital stock, and as such can manage the affairs of the company according to their own pleasure, and for their own benefit, and the plaintiffs will be unable to obtain redress through any action of the corporation itself, and will be deprived of their rights as stockholders, and from acquiring valuable property to which they are entitled. That Chase, Williston, and Smith intend to issue to themselves the balance of the capital stock now remaining unissued. That Williston intends to transfer the certificate of stock. That, if it be necessary to sell additional shares of the stock remaining in the treasury on said July 22, 1909, the plaintiffs are willing and ready, and offer to take and pay for at par all of the shares to which they are entitled in proportion to their respective interests. That the plaintiffs have no adequate remedy at law, and will suffer irreparable loss if Williston is permitted to retain or transfer the stock issued to him on said July 22d, or if Chase, Williston, and Smith, as directors, issue the remaining capital stock now in the treasury.

The bill prays for injunctions, both temporary and permanent, restraining Williston from voting, or otherwise exercising rights of ownership over the stock in question, and from transferring the same, and that he be ordered to surrender and deliver to the treasurer the certificate to be canceled. There is also a prayer that Smith and Chase, as president and treasurer, respectively, be restrained from disposing and issuing certificates for any capital stock now in the treasury, or from issuing certificates transferring the Williston stock. Further, it is prayed that the directors be enjoined from offering for sale, or issuing, any unissued capital stock without first giving all stockholders an opportunity to subscribe for and purchase such stock in proportion to their respective interests. The bill was brought July 20. 1909.

To this bill the defendants answered, and in their answer they inserted a general demurrer, alleging for causes of demurrer want of equity, and plain, complete, and adequate remedy at law.

The case was first heard on the demurrer, which was overruled, and the defendants excepted. It was then heard on bill, answer, and proof, and a decree was made in favor of the plaintiffs. The defendants appealed. They also took eight exceptions to rulings during the hearing.

We will first examine the demurrer. We have stated all of the essential averments in the bill substantially in full, because the argument upon the demurrer attacks it upon every side.

As already stated, the defendants under their general demurrer have assigned two causes—that the bill states no right of the plaintiffs, cognizable in equity, and that the plaintiffs have a plain, adequate, and complete remedy at law. But in argument counsel states 24 specific reasons why the bill is demurrable. Many of these relate to formal and technical questions which should have been raised by special demurrer, and are not properly open under a general demurrer. Whitehouse, Equity Practice, §§ 338, 339. But this...