Commercial National Bank of Charlotte v. Mooresville Cotton Mills

Denny, J. Does C. S., sec. 1217, give the Superior Court the power in a receivership proceedings to approve a plan of reorganization of a corporation, when approved by a majority in interest of the stockholders of the corporation, whereby the stockholders are reduced and the capital structure changed? If so, are dissenting stockholders, not parties to the receivership proceedings, bound by the decree approving the plan of reorganization? An examination of the above statute discloses that authority is given the corporation, when a majority in interest of the stockholders of the ■corporation have agreed upon a plan of reorganization and a resumption by it of the management and control of its property and business, with the consent of the court, upon a reconveyance to it of its property and franchises, either by deed or decree of court, to mortgage its property for an amount necessary for the purposes of reorganization; and to issue bonds, or other evidences of indebtedness, or additional stock, or *309 both, and use the same for the full or partial payment of creditors who will accept the same, or otherwise dispose of the same for the purposes of the reorganization. There is nothing in the statute to suggest that an adjustment of equities among stockholders is contemplated. However, the fact that the plan of reorganization provides for the readjustment of the capital structure does not make the plan of reorganization void or ineffective if approved by a majority in interest of the stockholders of the corporation with the consent of the court, but it cannot affect the rights of dissenting stockholders not parties to the receivership proceedings. Neither would it affect the vested rights of parties to the proceedings unless they failed to appeal from the judgment entered therein. The general rule seems to be stated in Fletcher’s Cyc. on Corporations, Vol. 11, sec. 5296, p. 732, as follows: “The contract between a corporation and the holders of its preferred stock cannot be changed, or their rights in any way impaired, without their consent, by any subsequent action of the corporation.” Therefore, the reorganized corporation must deal with its dissenting stockholders in accord with the contract existing between the corporation and such stockholders. The fact that the dissenting stockholders may actually obtain a preference over other stockholders holding similar stock who consent to the plan of reorganization, is not controlling. The further fact that the dissenting stockholders have profited by the action of the majority in the reorganization of the corporation will not divest them of their legal rights when properly asserted. It appears from the record that the defendant corporation, under its plan of reorganization, has been operating profitably and that the majority in interest of the stockholders of the corporation, by their action in reorganizing it, has greatly enhanced the value of their holdings. However, the plaintiff in these cases, acting in its fiduciary capacity, as executor and trustee, not only has the right but the duty to assert whatever legal rights it may have which in its opinion will be for the best interests of the estates involved. The weight of authority seems to be to the effect that a dissenting stockholder desiring to prevent the reorganization of a corporation under a proposed plan, must act with reasonable promptness. This, however, does not prevent a stockholder from asserting his rights under the contract contained in his preferred stock certificates, in lieu of attacking the plan of reorganization. 13 Am. Jur., sec. 1225, p. 1118. In view of the provisions of the statute pursuant to which this corporation was reorganized, the plaintiffs had no cause of '.action until the declaration of a dividend on the common stock of the corporation on 4 December, 1941, without first making provision for the payment of the cumulative and unpaid dividends oil the preferred stock held by plaintiffs, in accordance with the provisions contained in said preferred stock. Patterson v. Hosiery Mills, 214 N. C., 806, 200 S. E., 906; Patterson *310 v. Henrietta Mills, 216 N. C., 128, 6 S. E. (2d), 531; Clark v. Henrietta Mills, 219 N. C., 1, 12 S. E. (2d), 682; Patterson v. Henrietta Mills, 219 N. C., 7, 12 S. E. (2d), 686. These actions were brought on 24 December, 1941, and are not barred by the three-year statute of limitations. Clark v. Henrietta Mills, supra. We think the judgment of the court below, holding that plaintiffs retain their status as preferred stockholders and awarding judgment in favor of plaintiffs, in accord with the consent decrees entered 27 December, 1941, is correct. The judgment of the court below is Affirmed.