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and 140 New York State Reporter iron anchor made for the purpose, projecting from the hole in the block back upon the wall, to be held in place by filling in upon it the material of which the inner part of wall was to be constructed. The defendant, however, called numerous witnesses, who testified that the · method adopted by it was in common use, was adequate for the purpose, and more safe than using iron anchors. If the accident was caused owing to the failure of Donaldson to perform his duties properly, of course, defendant would not be liable; but, if the nails and wire and manner of fastening the same were not suitable or proper, then the jury might have found that to be a contributory cause, for which defendant would be liable.

It is also claimed that the defendant was negligent in not closely following up the work which the decedent and Donaldson were doing, by having the wall filled in behind the row of terra cotta blocks which they were setting. The evidence indicates that this should have been done, and the foreman of the defendant claims that he directed another employé to do it and saw him doing it. Other evidence in the case, however, tends to show that the work was not done, and presented a question of fact as to whether the foreman ordered it done. The evidence shows that the decedent and Donaldson were instructed by the foreman to lay the blocks as rapidly as possible, and that he informed them that he would send bricklayers to fill in the wall behind when they had sufficiently advanced with the work to require it. It does not appear that the decedent knew that this had not been done, or that the work had been so far advanced that it should have been done. If the failure to fill in the wall behind these blocks was the cause of the accident, then, perhaps, the defendant would be liable under the emplover's liability act (Laws 1902, p. 1748, c. 600), for the failure of its foreman to direct that it be done; and so, also, if such negligence concurred with the negligence of a co-employé in causing the accident. On this branch of the case probably a question of fact was presented for the consideration of the jury. I am of opinion, however, that an error was committed in the reception of evidence which requires a new trial.

The architect of the building was called as a witness for the defendant. He testified to the manner in which the building was constructed and that the plans and specifications were followed. On cross-examination he was asked by counsel for the plaintiff whether, representing the owner of the building, he found that the south wall was built according to the plan. This was objected to as immaterial and not involved in the issue. The objection was overruled, counsel for defendant excepted, and the witness answered that it was not. It is to be borne in mind that the accident occurred on the west wall of the building, and was in no manner connected with or caused by any condition of the south wall. The witness was then further asked, on cross-examination, whether it was not true “that the south wall of that building in hurry construction was such that it was all out of alignment, and that a workman was put upon the job to cut the bricks down, in order, if possible, to assist the eye in the belief that there was a straight line there?" This was objected to as incompetent, improper, and not the subject of cross-examination. The objection was over

ruled, counsel for defendant excepted, and the witness answered, “I cannot answer that question the way it is put, sir.” The witness was then asked, “What was there wrong about the south wall?” to which counsel for defendant objected upon the same grounds, stating that he desired the same objection to each question relating to the construction of the south wall, and that he desired an exception thereto. This suggestion was apparently acquiesced in. The witness answered:

"The south wall, during a windstorm, was blown out of plumb during one night's storm, and the building department put a survey on the building. The survey was made, and the thing was rectified in accordance with their demands and to their satisfaction."

The witness was then asked how it was rectified, and he replied that portions of it were taken down, "as it was bad, and those portions which you saw or spoke of being cut off were portions they did not object to, and were cut off simply to make an alignment to the front." Counsel for the plaintiff then pointedly asked if the witness intended to testify that the building department did not object to the alignment being made more perfect by means of chopping off the bricks on the side, and he answered in the affirmative. Counsel for the plaintiff then showed that the superintendent of buildings was Isaac A. Hopper, after whom the defendant corporation was named, and who appears to have been the party principally interested therein.

This evidence was prejudicial, as it not only showed negligence on the part of the defendant in the construction of part of the building, which had no connection with the accident and was calculated to lead the jury to infer that the entire work was constructed hastily and negligently, but also tended, and evidently was intended, to prejudice the jury against the defendant, upon the theory that Isaac A. Hopper, as superintendent of buildings, failed to perform his official duty with respect to contract business in which he was directly personally interested.

On account of error in the reception of this evidence, the judgment and order should be reversed, and a new trial granted, with costs to appellant to abide the event. All concur; INGRAHAM, J., in result.

(55 Misc. Rep. 3.55.)

COLBY v. EQUITABLE TRUST CO. OF NEW YORK et al.

(Supreme Court, Special Term, New York County. July, 1907.) 1. CORPORATIONS-MERGER-RIGHTS OF MINORITY STOCKHOLDER.

Where two corporations having common directors enter into a contract of merger, which is ratified by the majority of the stockholders, it may be declared void on the objection of a minority stockholder, if such ratification was induced by fraud or in disregard of his rights.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, 8

2343.) 2. SAME-INJUNCTION.

Where two corporations having common directors agree as to a merger, and it cannot be properly ratified against the objection of a dissenting stockholder, the merger will be enjoined.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, i 2346.)

106 N.Y.S.-51

and 140 New York State Reporter 3. SAME.

A certain corporation earned 6 per cent. per annum for four years on the book value of its stock. Another corporation earned twice as much. It was proposed to merge the same; the amount of capitalization to be furnished by each company being approximately the same. The stockholders of the first company were offered only one-half the amount of stock offered to those of the other company, resulting in a loss in the book value of the former, and compelling its stockholders to forego the possibility of receiving on their stock more than one-half of what the stockholders of the other company would receive. Nine of the directors of the first company were directors in the second, and three of the latter directors of an insurance company which held 49 per cent of the stock of one of the companies proposed to be merged, and 67 per cent. of the other, and all voted in favor of the merger. Held, in an action by a stockholder of the first corporation, who was also a policy holder in the insurance company, the merger would be enjoined, though not tainted with fraud, as unfair to plaintiff and his fellow stockholders.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, $

2316.) 4. SAME-REMEDIES OF STOCKHOLDER.

Banking Law, Laws 1895, p. 222. c. 382, $ 36, providing that on a merger of two corporations any dissenting stockholder may, within 60 days "after the merger takes effect,” apply for appraisers and receive the value of his stock from the new company, does not prevent the court in a proper case from enjoining the merger at the suit of a stockholder; such remedy not being open to him until the merger is complete, and not being exclusive.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 12, Corporations, $ 2346.) Action by Bainbridge Colby against the Equitable Trust Company of New York and the Mercantile Trust Company. Motion for an injunction granted.

Ivins, Mason, Wolff & Hoguet (William M. Ivins, William N. Cohen, Herbert D. Mason, and Benjamin N. Cardozo, of counsel), for plaintiff.

Cravath, Henderson & Degersdorff (Paul D. Cravath and Carl A. Degersdorff, of counsel), for defendant Equitable Trust Co.

Alexander & Green (Allan McCulloch, of counsel), for defendant Mercantile Trust Co.

BLANCHARD, J. This is an application for an order restraining the defendants from taking any further steps toward completing a proposed merger between the defendant the Equitable Trust Company of New York and the defendant the Mercantile Trust Company. "The present action is brought by a stockholder of the Equitable Trust Company, who also alleges that he is a policy holder of the Equitable Life Assurance Society of the United States, which holds among its assets 14,531 shares of stock of the Equitable Trust Company. An injunction is prayed for against the defendants to restrain the completion of their proposed merger on the ground that the proposed terms of merger authorized by the directors of the defendants, and proposed to be submitted for action at a meeting of the stockh lder; of the Equitable Trust Company, are calculated unlawfully to injure the rights of the plaintiff and other minority stockholders and the Equitable Life Assurance Society, of which the plaintiff is a policy holder,

The Equitable Trust Company has a capital stock of $3,000,000, and a surplus and undivided profits amounting to $10,212,117.50, making a total of $13,212,117.50. The book value of a share of its stock, according to the answering affidavit of Mr. Krech, the president of the Equitable Trust Company, is approximately $440 a share. Mr. Krech states that the approximate cost of liquidating the company would reduce by about $10 the book value of each share of stock. Accordingly, he regards the sum of $135, which is stated in the proposed terms of merger as the book value of each share of stock, to be a fair valuation for the purposes of merger. He further shows that the earnings of the Equitable Trust Company, for the four years beginning 1903 and extending through 1906, computed upon the basis of the book valuation of $135 per share, averaged 6.06 per cent. a year.

The Mercantile Trust Company has a capital stock of $2,000,000, and a surplus and undivided profits amounting to $6,986.861.85, making a total of $8,986,861.85. The book value of a share of its stock, according to Mr. Krech, is $152. From the same source it appears that the average earnings of the Mercantile Trust Company, during the four years beginning 1903 and extending through 1906, have been 11.52 per cent., upon the basis of the book value of the stock.

The plan of the proposed merger, to which the plaintiff objects, contemplates the merger of the Equitable Trust Company into the Mercantile Trust Company; the name of the merged company to be the Mercantile Trust Company, and the capital stock of the said company to be increased from $2,000,000 to $3,000,000. The stockholders of the Equitable Trust Company, at their option, may exchange two shares of their stock for one share of stock of the merged company, or may receive for each share of their present holdings $135 in cash. The stockholders of the Mercantile Trust Company may exchange their stock, share for share, for the stock of the merged company.

The meeting of the board of directors of the Equitable Trust Company, consisting of 32 members, at which the proposed merger agreeinent was authorized, was held on June 13, 1907, and was attended by 20 members of the board. Nine of such directors are also directors of the Mercantile Trust Company. Three other directors, who were present at the meeting, are officers of the Equitable Trust Company. The resolution authorizing the merger agreement was unanimously adopted.

At a meeting of the directors of the Mercantile Trust Company held upon the same day the nine directors above referred to attended and voted in favor of the resolution authorizing said merger agreement.

The Equitable Life Assurance Society, it may be noted, holds about 49 per cent of the stock of the Equitable Trust Company and about 67 per cent. of the stock of the Mercantile Trust Company. Three of the nine directors of the Equitable Trust Company and the Mercantile Trust Company above referred to are also directors of the Equitable Life Assurance Society.

At the outset the defendants suggest that the plaintiff has an adequate remedy under section 36 of the banking law (Laws 1895, p. 222, c. 382), and consequently should not be granted the relief prayed for upon this motion. The section provides that, in the event of a merger

and 140 New York State Reporter of two or more corporations; any dissenting stockholder may, within 60 days after the merger takes effect, apply for the appointment of appraisers and receive from the merged company, in cash, the value of his stock thus appraised. In the present case the merger has not yet been effected. This remedy, therefore, is not yet open to the plaintiff. Furthermore, it seems that the remedy afforded by section 36 of the banking law is not exclusive, and does not prevent the court in a proper case from granting relief by injunction. Langan v. Francklyn, 29 Abb. N. C. 102, 113, 20 N. Y. Supp. 404.

A contract made between two corporations having common directors is not absolutely void, but in a proper case and upon the objection of either corporation may be declared void by a court of equity. Burden v. Burden, 159 N. Y. 287, 307, 54 N. E. 17; Continental Ins. Co. v. N. Y. & H. R. R. Co., 187 N. Y. 225, 238, 79 N. E. 1026; Barr v. N. Y., L. E. & W. R. R. Co., 125 N. Y. 263, 277, 26 N. E. 145. Compare Munson v. Syracuse, Geneva & Corning R. R. Co., 103 N. Y. 58, 74, 8 N. E. 355. Similarly, such a contract, even though it has been ratified by the majority of the stockholders, may be declared void upon the objection of a minority stockholder, if the circumstances show that such ratification was induced by fraud or obvious disregard of the rights of minority stockholders. Gamble v. Queens County Water Co., 123 N. Y. 91, 98, 99, 25 N. E. 201, 9 L. Ř. A. 527; Farmers' Loan & Trust Co. v. New York & Northern R. R. Co., 150 N. Y. 410, 434, 44 N. E. 10:13, 34 L. R. A. 76, 55 Am. St. Rep. 689; Continental Insurance Co. v. N. Y. & H. R. R. Co., supra; Oelbermann v. New York & Northern R. R. Co., 7 Misc. Rep. 352, 357, 27 N. Y. Supp. 945; Robotham v. Prudential Ins. Co., 64 N. J. Eq. 673, 709, 53 Atl. 812. This principle was well stated by Judge Peckham in Gamble v. Queens County Water Co., 123 N. Y. 91, 98, 99, 25 N. E. 201, 202, 9 L. R. A. 527, as follows:

“Their action (i. e., the action of the stockholders' meeting) resulting from such votes must not be so detrimental to the interests of the corporation itself as to lead to the necessary inference that the interests of the majority of the shareholders lie wholly outside of and in opposition to the interests of the corporation and of the minority of the shareholders, and that their action is a wanton or fraudulent destruction of the rights of such minority. In such cases it may be stated that the action of the majority of the shareholders may be subjected to the scrutiny of a court of equity at the suit of the minority shareholders. * * * I think that where the action of the majority is plainly a fraud upon, or, in other words, is really oppressive to, the minority share holders, and the directors or trustees have acted with and formed part of the majority, an action may be sustained by one of the minority shareholders, suing in his own behalf and in that of all others coming in, etc., to enjoin the action contemplated, and in which action the corporation should be made a party defendant.

Tb warrant the interposition of the court in favor of the minority shareholders in a corporation or joint-stock association, as against the contemplated action of the majority, where such action is with. in the corporate powers, a case must be made out which plainly shows that such action is so far opposed to the true interests of the corporation itself as to lead to the clear inference that no one thus acting could have been influenced by any honest desire to secure such interests, but that he must have acted with an intent to subserve some outside purpose, regardless of the consequences to the company and in a manner inconsistent with its interests."

From the doctrine thus laid down it follows that the injunction prayed for upon this motion must be granted if the proposed merger

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