Marseilles Land & Water-Power Co. v. Aldrich

Mr. Justice Dickey delivered the opinion of the Court: This decree must be reversed. By the contracts made upon the 19th and 20th of June, 1866, between these parties, as they were evidently understood by the parties themselves, and as they were subsequently construed by the parties, as appears from their actions, it is evident that Warren Aldrich never acquired, either equitably or legally, an absolute title to one undivided fifth of the real estate, water-power, and personal property mentioned in this purchase. Had Aldrich demanded it the next day, having completed his payments therefor, he could not have enforced a partition of the propeity, nor have properly demanded to have his share set apart to himself separately. This would have been a violation of their contracts. What he did acquire in substance by these contracts was a title to one-fifth of the stock of the joint stock company which they agreed to form. His legal title to that stock.was to be consummated when the corporation should be organized and the stock issued. In the meantime, by their contract, he was equitably entitled to be treated as a stockholder, and the owners of the respective shares, from the very nature of the transaction, were dealing with each other upon the same terms and under the same relations precisely, between the time of the making of these contracts and the formation of the corporation, as they would have done had the corporation been organized upon June 19, 1866. Such was the spirit of their contract, and neither party had the right, of his own volition, to terminate that relation and close out the business any more than a stockholder in a corporation has a right to terminate that relation and put the corporation into liquidation upon his mere will. True, each party had a right to sell out his interest if he could find a purchaser, but the purchaser would take the interest subject to the same limitations and restraints under which the original owner held it. It was plainly the intention of these parties—by these contracts of June 19th and 20th — to form at once a special partnership, which should be treated as a corporation from that date, and as a corporation owning all the property of which Aldrich bought one-fifth; and that the parties should be regarded in their dealings with each other and in the management of this property as equitable stockholders in such quasi corporation or special partnership; and that, until a regular organization should be effected under a charter which was to be procured, the business was to be managed by a board of directors, consisting of five members — that is to say, Clark, Underhill, Young and Aldrich were each to have the voice of one director, and the Brabrooks and Hurd united should have a voice of one director; and the business was to be controlled by a majority vote of these directors, in the same manner as if a real legal corporation were organized-; and, by their agreement, each of them was to unite with the others in organizing a regular corporation under the charter when procured — each taking stock in proportion to his interest in the assets of this special partnership, and the regular corporation, when organized, was to become the owner of all the assets of this special partnership, and to assume all its liabilities. In substance, the execution of these contracts authorized the secretary of the association to subscribe the name of Warren Aldrich or Lorin Aldrich to the stock of this corporation at the time it was organized. True, by such subscription no additional personal liability could have been imposed upon the subscriber, but his stock was held, in equity, both before and after the organization of the corporation, subject to reasonable assessments for the building of the dam and the development of the property. A court of equity dealing with the relation 3 between these parties and with the relations between each of these parties and this corporation must follow the substance and spirit of these original contracts and adjust their relative rights and liabilities on the same basis as if the regular corporation had been organized June 20, A. D. 1866, and each of the parties, embracing Warren Aldrich, had then subscribed for and received his proper share of stock. The sale to Lorin Aldrich was in effect a sals of Warren Aldrich’s stock — no more, no less. Complaint is made that the complainant’s share of the proceeds of real estate sold was mixed with the proceeds belonging to the corporation and invested in other property so that it could not be separated. From- the very nature of the transaction this was intended to be done, and the corporation had lawful authority to do so. It is complained that the books of the corporation were not properly kept. Lorin Aldrich and Warren Aldrich held one-fifth of the stock, had a voice in the control and management of this business, and it was as much their duty as stockholders to see that these books were correctly kept as it was the duty of any other stockholders. It is complained that the funds of the corporation have been diverted for purposes outside of the object of the organization. If so, as stockholders or owners entitled to stock, the Aldrichs had a right, at; any time, to enter a court of equity for the purpose of restraining such abuses. If the corporation has unwarrantably disposed of this Aldrich stock so as to sever their relations with the Aldrichs as stockholders, it may be that the corporation is accountable to the Aldrichs for the value of the stock at the time it was sold, or for the money received for the stock when it was sold; but these matters are not investigated in the case. No account was taken as to whether the business had been • profitable or unprofitable, whether the assets of the corporation had increased in value or decreased in value. The court below seems to have assumed that, by the appropriation by the corporation of the property which ivas sold by Underhill, Clark and Young to Aldrichs, the corporation thereby became liable to the owner of Aldrich's share for his share of the property as though it had been misappropriated. This results from the misconception of the relation established between these parties by their original contracts. It is not perceived how the question as to what disposition was made of the machinery which Aldrich sold to Underhill, Clark and Young can be introduced into this controversy at all. The corporation has no interest in that question, nor has any other member of the association. That is a matter l’esting between Warren Aldrich and Underhill, Clark and Young, and can have no connection with the business of the corporation. The deci’ee must be reversed and cause remanded, with directions to permit complainant to amend his bill, and to allow amendments to the other pleadings, if necessary, and for another hearing. ° The abstract in this case is so imperfect and in artistically! prepared that it has given the court but little aid in the examination of the record. No costs will, therefor®, be allowed to appellant for making or printing the abstract. Decree reversed.