Harvey v. Linville Improvement Co.

Clark, J.: At common law stockholders could not vote by proxy. Taylor v. Griswold, 14 N. J. Law, 222, and other cases cited in Cook on Stocks, Sec. 610. This is now otherwise, but it is still held that each stockholder, whether by himself or by proxy, must be free to cast his vote for what he deems for the best interest of the corporation, the other stockholders being entitled to the benefit of such free exercise of his judgment by each ; and hence any combination or device by which any number of stockholders shall combine to place the voting of their shares in the irrevocable power of another is held contrary to public policy. Cone v. Russell, 48 N. J. Eq., 209. Various devices have been resorted to for the purpose.of so tying up the stock that no one of the parties tojhejj ¡mol ” or combination can break the agreement- “ Irrevocable ” [proxies to vote the stock have been given to a designated party who acted as trustee or agent, but the courts held such proxies not irrevocable and that they might be revoked at any time. Cook, supra, Secs. 610, 622; Woodruff v. Dubuque, 30 Fed. Rep., 91; Vanderbilt v. Bennett, 2 Railway & Corp. L. J., 409. Another plan was to place the stock of the various parties in the hands of trustees, with power to transfer the stock to themselves and to hold and vote the same, trustees’ certificates being' is. -ed to the various parties, specifying the amount of stock so deposited by them and their interest in the pool, but the courts held that any holder of a trustee’s certificate might at any time demand back his part of the stock. Woodruff v. Dubuque, supra, and other cases cited in Cook, supra, Sec. 622. Another device was that the parties contracted together not to sell their stock for a specified time or only to a *699 purchaser acceptable to them all. It was held that notwithstanding such contract any one of the parties might sell his stock to any one he pleased and at any time. Fisher v. Bush, 35 Hun., 642; Williams v. Montgomery, 68 Hun., 416. Another plan was to restrict by a by-law the right to transfer stock, but this was held illegal. Morgan v. Struthers, 131 U. S., 246, and other cases cited in Cook, supra, Sec. 332. A provision that a purchaser of a certificate of stock who sold in violation of the agreement should be entitled to the dividends, but should receive no right to vote, was likewise held invalid. Harper v. Raymond, 3 Bosw., (N. Y.,) 29. Numerous decisions affirm the correctness of the above rulings, which are based upon the illegality, because against public policy, of permitting^ large Hocks of stock to.-bejrrevocably tied up tortile purpose of being voted insolido for the interest of a clique or section of the stockholders, and not according to the judgment of.each individual stockholder for the benefit of the entire corporation. There are some few decisions trenching more or less upon the principles above stated, but we deem them contrary to sound principle of public policy, and hence not authority. In short, all agreeme_nts_ajid devices by which stockholders surrender ‘their voting powers are invalid?“15""Thompson Corporations, Sec. 6604. The power to vote is inherently annexed to and inseparable from the real ownership of each share, and can -mly be delegated by proxy with power of revoca* tion.^ Tho_J{ pooling ” arrangement, admitted to have been entered intó'Ufy'thé majbl-ÍTy'of stockholders in the present case is contrary to public policy and voidable (Woodruff v. Dubuque, supra) and the plainflfflissigheepf certain of the trustees’ certificates is entitled to have his name entered as the owner and holder of the shares of stock represented by said trustees’ certificates, and to have *700 said shares issued to him, should the facts be found in accordance with his allegation, and to have the defendant restrained, till the hearing from voting or controlling in any way the stock purchased by the plaintiff or in anyo wise interfering with the plaintiff’s right to vote, control ■or dispose of said stock. Error. Avery, J., did not sit on the hearing of this case.