Mayfield v. Alton Railway, Gas & Electric Co.

Mr. Justice Wilkin delivered the opinion of the court: On the allegations of this declaration the general demurrer raises the single question, does the lawful consolidation of a private corporation organized under the statutes of this State, with another private corporation “of the same kind and engaged in the same general business and carrying on its business in the same vicinity,” also' organized under the general statute of the State, both corporations being organized since the adoption of the act of 1872, amended in 1889, providing for the consolidation of corporations, give a dissenting stockholder in the first company a lawful right to demand of the new or consolidated company payment in cash for his shares of stock? The Consolidation act above mentioned authorizes the consolidation of one corporation with another upon conditions expressed in the act, all of which are shown by the declaration to have existed, or which, from the absence of averments to the contrary, must be presumed to have existed at the time of the consolidation, on August 8, 1899. The authorities are to the effect that when the Alton Railway and Illuminating Company was organized and the plaintiff purchased and paid for fifty shares of its capital- stock, the consolidation statute being in full force and effect, he must be held to have purchased his stock with knowledge thereof, being boiind to know that if, at any time in the future, representatives of two-thirds of all the stock of his company should, in compliance with the requirements and conditions of that law, vote to consolidate his company with another, he would be bound by their action, and that the statute entered into and became a part of his contract of subscription. (6 Am. & Eng. Ency. of Law, — 2d ed. — -808.) In Mansfield, Coldwater and Lake Michigan Railroad Co. v. Brown, 26 Ohio St. 223, it is said: “And it must be observed that at the date of defendant’s subscription the statute of 1856, under which consolidation was effected, was then in force. * * * This contract of subscription must be construed as having been made with reference to the Consolidation act, by which they are bound as fully as if its provisions had been copied into their contract of subscription.” In Nugent v. Supervisors of Putnam County, 19 Wall. 241, the question arose upon demurrer to a replication to pleas, the question being whether bonds issued to the consolidated company upon a vote of subscription to one of the constituent companies were valid. The Supreme Court of the United States, after stating the general rule that a subscriber to the stock of a company is released from obligation to pay his subscription by a fundamental alteration of the charter, says: “But while this is true as a general rule, it has no application to a case like the present. The consolidation of the Kankakee and Illinois River Railroad Company with another company was no departure from its original design. The general statute of the State approved February 28, 1854, authorized all railroad companies then organized or thereafter to be organized to consolidate their property and stock with each other, and with companies out of the State whenever their lines connect with the lines of such company out of the State. The act further declared that the consolidated companies shall have all the powers, franchises and immunities which the consolidating companies, respectively, had before their consolidation. * * * The special charter of the Kankakee and Illinois River Railroad Company contained in its eleventh section an express grant to the company of authority to unite or consolidate its railroad with any other railroad or railroads then constructed. * * * It was therefore contemplated by the legislature, as it must have been by all the subscribers to the stock of the company, that precisely what has occurred might occur. Subscribers must be presumed to have known the law of the State and to have contracted in view of it, * * * . hence the reason of the general rule we have conceded does not exist in this case, and consequently the rule is inapplicable.” Numerous cases from England are then cited in support of the proposition “that a subscriber for the stock of the company is not released from his engagement to take it and pay for it by any alterations of the organization or purpose of the company which, at the time the subscription was made, were authorized either by the general law or by the special charter; and a clear distinction is recognized between the effect of such alterations and the effect of those made under legislation subsequent to the contract of subscription.” It is then further said: “The American authorities are equally explicit. They uniformly assert that the subscriber for stock is released from his subscription by a subsequent alteration of the organization or purpose of the company only when such alteration is both fundamental and not provided or contemplated by either the charter itself or the general laws of the State,” — citing numerous authorities. The court in the same opinion distinguishes the former case of Clearwater v. Meredith, 1 Wall. 25, much relied upon by counsel for appellant. In Beach on Private Corporations (vol. 1, sec. 353,) it is said: “The general rule is, that the consent of every stockholder is necessary for consolidation, and those who dissent cannot be compelled to assent, for shareholders cannot be forced into relations with new corporations without their consent. * * * Though shareholders can not be forced into a new corporation without their consent, statutes in force at the time of their subscription which authorize a consolidation are regarded as entering into and being a part of their subscription contract; and under statutes of this character, purchasers of stock are presumed to have bought it in contemplation of a probable transfer of the property by a majority vote of the stockholders.” Of course, statutes authorizing consolidation after subscriptions have been made cannot be held to compel a dissenting stockholder to transfer his subscription to the consolidated company, because to do so would impair the oblig-ation of his contract. But if a statute already in existence to that effect enters into and becomes a part of his contract, then, manifestly, there is no impairment of his contract by requiring him to submit to the required majority vote for the consolidation; and with this distinction in view, so far as we have had access to the authorities cited and relied upon by counsel for appellant, they are consistent with Nugent v. Supervisors of Putnam County, supra, and other like authorities. Counsel for appellant says: “We concede that a provision in a charter authorizing consolidation is a part of the contract between the stockholders, and enables two-thirds to effect a consolidation without the consent of the other third; but that is a different thing from the confiscation of the shares by means of this power.” We do not understand how the concession can be reconciled with the authorities above referred to and the plaintiff’s claim still be maintained. It is said the act does not undertake to declare the effect of consolidation upon individual rights of the members. The statute, entering into and becoming a part of the contract of subscription, does, in effect, declare the result upon the individual rights of the members to be the same in the consolidated company as they were in the original constituent compány. As we understand the authorities above cited, (and we have been unable to discover any to the contrary,) if the plaintiff had subscribed for fifty shares of the capital stock of the Alton Railway and Illuminating Company and had not paid for the same at the time of this consolidation, the new or consolidated company could have compelled him to do so. That, certainly, is the holding in Nugent v. Supervisors of Putnam County, supra. Then, upon what principle can it be said that, having made payment, he can recover back from it the value of his stock? While, as we have said, the declaration avers that the plaintiff’s stock has been diluted or watered so as to decrease its value one-half, the facts averred, if material in this suit, do not sustain the conclusion. It is true, he is given but fifty shares of stock out of five thousand, whereas he held fifty out of twenty-five hundred, or, as he says, one one-hundredth in the new company in lieu of one-fiftieth in the old. But the new company has exactly twice as much capital stock as the old. It is true, one-half of that stock had not been paid for at the time of the consolidation; but there is nothing in the declaration to show that it was not subscribed for in good faith and is of the par value of $250,000, which, as we have seen, can be collected by the new company. We attach no importance to the claim and argument of counsel for the appellant that his stock has been confiscated; that the attempt is to coerce him, against his will, to become a member of, the new company, in the absence of all allegations of collusion, fraud, irregularity or illegality in the consolidation of the two corporations. We think the judgment of the Appellate Court affirming the decision of the circuit court is right, and should be affirmed. T „ , Judgment affirmed.