Ryan v. Seaboard & R. R. Co.

89 F. 397, 1898 U.S. App. LEXIS 3071
CourtU.S. Circuit Court for the District of Eastern Virginia
DecidedSeptember 12, 1898
StatusPublished
Cited by18 cases

This text of 89 F. 397 (Ryan v. Seaboard & R. R. Co.) is published on Counsel Stack Legal Research, covering U.S. Circuit Court for the District of Eastern Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Ryan v. Seaboard & R. R. Co., 89 F. 397, 1898 U.S. App. LEXIS 3071 (circtedva 1898).

Opinion

SIMONTON, Circuit Judge.

The complainant, Thomas F. Ryan, a citizen of the state of New York,‘filed his bill of complaint against the Seaboard & Roanoke Railroad Company and Legh R. Watts, citizens of the state of Virginia, the Raleigh & Gaston Railroad Company, a citizen of the state of North Carolina, and Messrs. Hoffman, McLane, Minis, Nippe, and Fisher, citizens of the state of Maryland. The bill is by a stockholder in the first-named corporation, in behalf of himself and other stockholders. After stating what is the Seaboard & Roanoke Railroad Company, it avers that, it is in the control of eight subordinate railroad companies, constituting with it a system, designated by the style of the “Seaboard Air Line.” Of one of thesé subordinate corporations, the Raleigh & Gaston Railroad Company, it owns a majority of the stock therein, and absolutely controls the election of its directors and other officers, and its operations, policy, income, and assets. The affairs of this Seaboard & Roanoke Railroad Company are managed by a president and six directors, elected by the persons in whose names shares of stock stand on the books of the company, according to a graduated scale of voting, whereby smaller stockholders have a much greater vote, in proportion to their holdings, than larger stockholders. That the annual meeting of the company, at which stockholders elected the president and directors, was approaching. That at the last meeting the defendant Hoffman had been elected president, and Messrs. McLane, Fisher, and Watts, with Moncure D. Robinson, Fuller, and Gordon, directors, of whom Robinson had died. That Hoffman had been continuously president since 1892, owning $20,800 of stock, and that since his election no dividends had been declared, although this had not been the case with his predecessors. That he controlled the elections by the use of proxies, which his position enabled him to solicit and obtain. That Messrs. Watts, McLane, and Robinson had been directors continuously during the presidency of Hoffman; McLane being a relative and occupying the same office room with him, Robinson being the owner of an unremunerative branch railroad, which he desired to lease to the Seaboard system at an exorbitant rental, and in which purpose he had succeeded, and Mr. Watts being the general counsel of the system [399]*399and president of a bank in which it made a goodly part of its deposits. The bill further charged that President Hoffman was in the receipt of large salaries from divers roads in the system, and that he was a member of the firm of E. C. Hoffman & Co., a firm with ño stock or material on hand, but which was the purchasing and selling agent of the system, by which means, acting as the middleman, it made very large profits illegitimately, greatly to (he detriment of the interests of the system. It is not alleged or charged that either MeLane or Mr. Watts shared in (.hese illicit gains. In October, 1896, large purchases of stock of the ¡-Seaboard & Eoanoke Company had been made, which threatened a change in the election of directors, and Messrs. Hoffman, MeLane, Eobinson, and Watts, in order to perpetuate the control they theretofore had in this system, devised a plan for pooling the stock. To this end a pooling agreement was prepared and circulated among the stockholders, whereby the signers agreed for five years not to sell or dispose of their stock, or to delegate the voting power thereof, to any person other than these three directors, without the written consent of three-fourths of the aggregate shares of the signers of this agreement, and further authorizing these directors to vote as proxy for all such of the signers of the agreement who should not be present in person at any meeting of the company. That this pooling agreement was signed by persons holding 8,321 shares, but that Louis MeLane, chairman of the pooling committee, with the purpose of preventing' any concert of action with them, has refused to give complainant the names of (lie subscribers. Notwithstanding this, he has obtained the names of some of them, which are set out in the bill. Among these is Theodore Cook, a citizen of the state of Pennsylvania. That MeLane, on 24th October, 1896, requested the signers of this agreement to send him their certificates of stock, indorsed and assigned to him. That many did so and that some declined. That a very large majority of those who assented to this did so solely under the expectation that a pending offer of S125 per share would be accepted. and with no purpose of tying up the stock for five years or of perpetuating the power of Hoffman and his associates. That Theodore Cook, one of the signers of the pooling agreement, held certificate No. 754, for 153 shares. That he had indorsed a blank assignment thereon, and had sent it to MeLane as requested. That afterwards he sold it to complainant for value. That complainant thereupon demanded t.lie certificate from MeLane, which demand was refused. That subsequently he learned that the committee did not have the certificate, but that the same had been illegally and fraudulently transferred to Louis MeLane, chairman, had been without authority surrendered to the company for cancellation, and a new certificate for said 153 shares had been issued in the name of Louis MeLane, the canceled certificate being now in the custody of the treasurer of the Seaboard” & Eoanoke Eailroad Company, at Portsmouth, Va. That MeLane and his associates claim the right to vote on these 153 shares. The bill then charges that this pooling agreement is revocable by each signing, in so far as it delegates authority to vote. That if it be attenuated to be made binding it is contrary to public policy, and is void, for many reasons stated. That, if it ever [400]*400was valid, it has been abrogated and determined because Messrs. Hoffman, McLane, and Watts negotiated a secret arrangement with persons holding 2,000 shares of stock, who were in the pool, and were dissatisfied', whereby their stock was purchased without the consent of three-fourths of the signers. That this purchase was not made with their own moneys, but with money of the Seaboard & Roanoke Railroad Company, and in the name of the Raleigh & Gaston Railroad Company, — a misuse of the funds of the first-named company for an unauthorized purchase in the name of the last-named company. That, notwithstanding this purchase, the names of the vendors still appear on the books of the company as stockholders, and that the stock will be voted in their several, names, thus violating the provision of the charter as to the graduated vote or stock. That all efforts of complainant to examine the books of the company so as to verify this fact have been refused and frustrated by the treasurer of the company. Besides this, the bill charges that there are some 1,600 shares, held by citizens of New York, associates of complainant, and that Hoffman and his associates have recently obtained an injunction out of the circuit court of the city of Portsmouth, restraining them from voting. ■

Upon these averments of the bill the complainant prayed: (1) That defendants be served with process. (2) That the cancellation of certificate No. 754, for 153 shares, be vacated, that the certificate issued in lieu thereof be erased and canceled, and that complainant be held the true owner of the shares represented thereby. (3) That the pooling agreement be declared null and void; that the pool be wound up; that McLane and Watts be enjoined from exercising any authority by virtue thereof; and, if necessary, that a receiver be appointed to take charge of the certificates lodged with McLane.

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Bluebook (online)
89 F. 397, 1898 U.S. App. LEXIS 3071, Counsel Stack Legal Research, https://law.counselstack.com/opinion/ryan-v-seaboard-r-r-co-circtedva-1898.