Warren v. Pim

• Decision Date: 30 November 1904
• Citation: 59 A. 773,66 N.J.E. 353
• Parties: WARREN et al. v. PIM et al.
• Court: New Jersey Supreme Court

59 A. 773

66 N.J.E. 353

WARREN et al.

v. PIM et al.

Court of Errors and Appeals of New Jersey.

Nov. 30, 1904.

Appeal from Court of Chancery.

Bill by Lyman E. Warren and others against J. Harold Pim and others. Decree for plaintiffs, and defendants appeal. Affirmed.

See 55 Atl. 66.

Richard V. Lindabury and William I. Lewis, for appellants.

William H. Corbin, for respondents.

DIXON, J. The bill of complaint in this cause was filed in January, 1903, by Lyman E. Warren against the Fisheries Company, a corporation of this state, J. Harold Pim, Langley Archer West, and Montgomery Horne-Payne, constituting what is called the "Pim Committee," and the Association of Foreign Shareholders of the Fisheries Company of New Jersey, Limited, a corporation of Great Britain. Subsequently Nathaniel B. Church, Adolph Hirsh, James E. Heller, the American Net & Twine Company, William B. M. Chace, and John Shepard were admitted as complainants in the suit The objects of the bill are, first, to compel a transfer to the complainants, upon the books of the Fisheries Company, of certain shares of stock in that company now standing on its books in the names of the Pim Committee, but claimed by the complainants as their property; second, to restrain the Fisheries Company from holding any election of directors until such transfer shall have been made; and, third, to have it decreed that a certain "voting trust," under which the Pim Committee and the British Association claim some control over shares of stock in the Fisheries Company, is against public policy, fraudulent, inoperative, null, and void. The bill was accompanied by affidavits and exhibits. The members of the Pim Committee and the British Association filed an answer, which was also accompanied by affidavits and exhibits. The Fisheries Company filed a separate answer, adopting substantially the views of the complainants. The bill and the answer of the Pim Committee and the British Association disclose the grounds of litigation. The cause being submitted on bill and answers, the Chancellor on November 10, 1903, made final decree in conformity with the prayer of the bill, and from that decree the appeal now to be decided was taken.

It appears that when the Fisheries Company was organized, on May 25, 1900, a majority of the shares of its stock was taken by persons residing in Great Britain and Ireland, and, in order that a combination called a "voting trust" might be formed, enabling some representative of these shareholders to control the Fisheries Company, the British Association was incorporated. As a preliminary to the formation of the voting trust, most of the shares of these foreign holders (being a majority of the stock of the Fisheries Company) were transferred to the Pim Committee. Afterwards, on November 12, 1900, a deed poll was executed by that committee and the British Association, which recites the authority of the Pim Committee to create a voting trust of the shares of the Fisheries Company, and that the British Association is the proposed voting trust, and then, to complete the constitution of the trust, declares as follows: "The said shares in the Fisheries Company now held by the said J. H. Pim, L. A. West and R. M. Horne-Payne * * * shall be held by the Association with all rights and powers against third persons as if it were the absolute owner and holder thereof, but as between the Association and the owners of the deposited shares the certificates of the Association issued to such owners shall carry all rights and benefits except that of voting, subject nevertheless to the provisions hereof. * * * The Association will recognize the registered owner of any deposited share as the absolute equitable owner thereof, subject to these presents. ** * The deposited shares shall be held by the Association upon trust that they may and shall according to the best of their discretion do the things following, that is to say: Exercise all voting rights incident to the ownership of shares as and when the Association shall think it expedient to exercise the same; receive all dividends and bonuses and other moneys receivable in respect of the deposited shares; raise or borrow on the security of the deposited shares any money required for the purposes of the execution of the trust; take all such actions and proceedings as they think expedient from time to time to protect the interests of the owners of the deposited shares. * * * Dividends received * * * shall be paid over to the respective owners of the deposited shares, but the Association may retain * * * any sum which the Association may deem it advisable to set aside to meet contingencies and anything due * * * for expenses. * * * The Trust shall be closed * * * when and so soon as the Association shall by deed declare that it is to be closed, or when the owners of three-fourths of the deposited shares of each class by notice in writing to the Association declare the trust to be closed, or when the last survivor of the now existing descendants of Her Majesty shall have been dead for 20 years, or when fifty years from the execution hereof shall have elapsed." These excerpts denote the character of the voting trust now in question, and, it may be added, the corporate powers of the association are such as would enable it to execute the trust, but the owners of the deposited stock, as such, have no voice in its management.

It is admitted by the defendants that all of the shares claimed by the complainants really belong to them, but the defendants insist that some of those shares were by consent of the present or former owners subjected to the provisions of this deed poll, while the complainants contend that, although these shares were deposited with the Pim Committee for the purpose of forming some voting trust, one having the qualities specified in the deed poll was not contemplated. This disputed question of fact would not dispose of the whole case, and need not be considered until it is decided whether, even if consented to by the stockholder, such a scheme would be binding upon him or supportable against other stockholders.

The provisions of the deed poll above recited make it plain that the only claim which the Pim Committee and the British Association can make to the stock is the power of voting upon it, and the right to defray out of the dividends the expenses incident to the protection and exercise of that power. If the power to vote be denied, no reason is suggested for their retention of any connection with the stock. The object of the deed poll is to lodge the voting power thus separated from the ownership of the stock in the British Association, and the question is therefore fairly presented whether such a foreign corporation can lawfully exercise that power upon the stock of a New Jersey corporation which it does not own.

The underlying judicial doctrine pertinent to the solution of this question was declared by our Supreme Court in Taylor v. Griswold, 14 N. J. Law, 222, 27 Am. Dec. 33. In that case the petitioners sought to set aside, under the act of December 8, 1825 (P. L. p. 81), an election held by the stockholders of a bridge company organized in 1797 (P. L. p. 201), because the tellers had refused to receive votes tendered by proxy. The petition was denied on the ground that the common law required all votes to be given in person, and that the duty of the corporators to attend in person for the purpose of exercising the franchise is implied in and forms part of the fundamental constitution of every charter in which the contrary is not expressed. This decision was affirmed by the Court of Appeals on February 24, 1835, and since that time has been deemed settled law concerning the corporations of this state. Primarily, therefore, the voting power of corporate stock must be considered the personal privilege of the stockholder, not separable from ownership of the stock except as such separation is sanctioned by the Legislature. In 1841 the Legislature authorized stockholders in all incorporated companies whose charters did not otherwise provide to vote by proxy at the election of directors, if the vote was tendered not more than three years after the date of the proxy. P. L. 1840-41, p. 116, § 2. In 1846 (P. L. p. 64) it was enacted with regard to manufacturing companies that, at all meetings of a company, absent stockholders might vote by proxy authorized in writing (section 11); that every person holding stock in such company, as executor, administrator, guardian, or trustee, should represent the stock in his hands at all meetings of the company, and might vote accordingly as a stockholder, and that every person who should pledge his stock as collateral security might nevertheless represent the same at all meetings and vote as a stockholder (sections 40, 41). These provisions were in 1849 (P. L. p. 300, §§ 11, 37) extended to some other sorts of corporations. In the revision of our corporation acts adopted April 7, 1875, these enactments of 1841 and 1846 were made applicable to all companies organized under the laws of this state (Gen. St. p. 907, §§ 21, 38, 39), and they are also embraced in the revision of 1896, with these additions: that persons holding stock in any other representative or fiduciary capacity than those above specified may likewise represent the stock, and the person pledging his stock as collateral security may empower the pledgee to vote thereon (P. L. 1896, p. 277, §§ 17, 37).

For many years past, our statutes have required corporations to keep books in which the transfer of stock should be registered, and have declared that at any election these books should be the only evidence as to who were the stockholders entitled to vote. But while the books are conclusive evidence for the officers conducting the election, they are only prima facie evidence when the right to vote is the subject of judicial investigation. Archer v. American Waterworks Co., 50 N. J. Eq. 33, 24 Atl....