Taylor v. Earle

15 N.Y. Sup. Ct. 1

• Court: New York Supreme Court
• Decided: June 15, 1876
• Status: Published

Opinion

BaeNARd, P. J.:

I think the court erred in dismissing the plaintiff’s complaint. He was a stockholder in the Burlington Cotton Mills, a New York corporation.

By a vote of a large majority of the stockholders (not including plaintiff), this corporation sold all its property, real and personal, except cash in hand, mills and franchises, to the Burlington Cotton Mill Company, a Yermont corporation, and took in payment 1,747 shares of this Yermont corporation.

The Burlington Cotton Mills, on plaintiff’s request, refuse to bring this action, and it is well settled that, in such a case a stockholder may assert his own rights, making the corporation a defendant.

I think it quite clear that plaintiff had a right to relief.

Either the transfer was void as ultra vires, or the property received in some way was liable to the debts of the Burlington Cotton Mills, and after their payment to distribution among those of the stockholders who did not wish to take a proportion of stock in the Vermont company.

The plaintiff cannot be forced to take the stock of the Burlington Cotton Mill Company without his own consent. The facts are all averred in his complaint, and he is entitled to any relief warranted by the facts, and not alone to that for which he has asked.

I am of opinion, however, that the whole scheme of the transfer and its execution was illegal.

There is no power given by the acts under which the Burlington Cotton Mills were incorporated to transfer all the property of a corporation, and then terminate its existence, and take in payment stock in a company carrying on the same business, with a different name, charter and stockholders, and being a foreign corporation.

The corporation, by the New York law, could increase or diminish its stock, or extend its business to other objects, but that falls far short, I think, of the sweeping power exercised on this occasion. The sale was not real. It was a mere form to turn a New York corporation into a Vermont one, and thus escape the scrutiny into the affairs of the company permitted by the New York law to the stockholders.

No majority can bind the non-consenting minority to this. He became a stockholder under the security of the New York law, and, when that is taken from him, at least he should have the property of his corporation applied to the payment of its debts, and the surplus, if any, divided among the stockholders.

I think the judgment should be reversed, and a new trial granted, costs to abide event.

GiibeRt, J., concurred; DyemAN, J., not sitting.

Judgment reversed, and new trial granted, costs to abide event.