Opinion
04-14-1904
McALPIN et al. v. UNIVERSAL TOBACCO CO. et al.
Robert H. McCarter, Atty. Gen., and Wheeler H. Peckham, for the motion. E. A. S Lewis and James B. Vreedenberg, opposed.
Bill by Edwin A. McAlpin and others against the Universal Tobacco Company and others. On motion to vacate an order staying the issuance of bonds. Motion granted.
See 57 Atl. 418.
Robert H. McCarter, Atty. Gen., and Wheeler H. Peckham, for the motion. E. A. S Lewis and James B. Vreedenberg, opposed.
REED, V. C. The conditions under which the rule to show cause was ordered, under which testimony has been taken, and upon the return of which the present decision is to be made, sufficiently appear in the conclusions filed by me on March 3, 1904. 57 Atl. 418.
The testimony taken shows that, at a duly called meeting of the holders of the preferred stock of the corporation and of the common-stock certificate holders, the acts of the officers and directors of the company in executing and delivering the mortgage of July 1, 1903, were ratified by a very large majority vote. At the same meeting the issuance of the bonds to be secured by the said mortgage for certain named purposes was also approved and ratified by a similar vote. The consequence of this action by the stockholders, if valid, was to substitute the authority of the stockholders themselves for the previous authority of the board of directors. The attack made in the bill upon the personnel of the board of directors and of the voting trustees, and upon their conduct in causing the mortgage to be made and the bonds issued, was nullified when the owners of the stock stepped in and made the acts of the board of directors their own. The ratification by the stockholders was equivalent to an original authorization by them. Had it appeared, when the rule to show cause why an injunction should not issue was signed, that the mortgage of July 1, 1903, had been executed and a part of the bonds had been issuedand another portion were to be issued by the express authority of a majority of the stockholders conferred at a regularly convened meeting, it is clear that no court, at the instance of a minority stockholder, would have enjoined the execution of the project The facts now appearing deprive the complainants of any ground for insisting upon the continuance of the restraining order. Nothing but a successful challenge of the regularity and legality of the stockholders' meeting can avert this conclusion. The single ground of attack upon the validity of the stockholders' vote at the meeting is that certain stockholders who voted with the majority were induced to do so in consideration of their being discharged from liability to answer in a suit pending against them, in which suit Wm. H. Butler was complainant Aside from other considerations, which need not be discussed, it is sufficient to say that it does not appear that in the settlement of the Bock suit the defendants received anything as a consideration for their votes at the stockholders' meeting.
I will advise an order vacating the restraining order of July 13, 1903, made in this cause, restraining the issuing, negotiating, and delivering of the bonds to be secured by the mortgage of July 1, 1903.