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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 178 The defense is founded upon the propositions, (1) that the plaintiff failed to prove that he was a beneficiary under the Standard Oil Trust agreement, or entitled to become such by means of transfer upon the books of the shares represented by the certificates held by him, and (2) that he is not seeking such relation in good faith, but for purposes hostile to the trust, and for that reason is not entitled to the aid of the equitable powers of the court in that behalf.
The Standard Oil Trust represents a voluntary association. It was created by agreement of the stockholders of various corporations and others engaged or interested in a certain enterprise, and the several branches of business connected with and incidental to it. The effect of its creation is the concentration of supervisory power in nine trustees, whose certificates *Page 179 of the trust are taken in place of the stock and bonds of the several corporations. The characteristic feature of it is in the voluntary surrender of the control and management of the business of those corporations, and in the fact that for its continuance, it has the capacity of succession. The agreement constituted not a partnership, but a trust in behalf of the beneficiaries. And while it is not a corporation, it, by the agreement, took some of the attributes of a corporation in so far that, through its trustees, certificates of shares in the equity to the property held by them were issued, and were transferable in like manner apparently as are those of corporations. They are transferable on the books of the trustees, and until that is done, it is said that the holder is not a beneficiary of the trust. And it is further urged that it does not appear that the plaintiff is entitled to that relation, because the right to transfer upon the books depends upon the provisions of the agreement and by-laws and compliance with them in that respect, and as they were not put in evidence, the conditions requisite for the purpose do not appear. It is true that the burden was with the plaintiff to show that he was entitled, within the meaning of the agreement and by-laws, to the relation of a transferee or beneficiary, and to have it perfected by transfer on the books. The fact that the shares were transferable and were for sale in the open market, enabled the plaintiff to become the holder of those he did purchase. It may be observed that, by the terms of the certificates, the shares appear to have been "issued upon condition that the holder, or any transferee thereof, shall be subject to all the provisions of the agreement creating said trust, and of the by-laws adopted in pursuance of said agreement as fully as if he had signed the said agreement." This relation of holder was given the plaintiff when he became such by taking the transfer from Mallaby. It is said that this does not constitute him a transferee, and that transfer on the books was essential to that relation and to make him a beneficiary. By the terms of the certificate, the holder and transferee are alike subject to the provisions of the agreement upon which the trust is *Page 180 founded. But to give him the character of transferee for the purposes of recognition by the trust the transfer on the books is requisite inasmuch as the shares are transferable only upon them. This is for the benefit and protection of the trust. (Bank ofUtica v. Smalley, 2 Cow. 770.) The holder, as between him and his assignor, having the title, would seem in some sense to be a beneficiary of the trust since he is subject to all the provisions of the agreement on which it is founded and its by-laws.
The allegations in the complaint of what purport to be the nature, purpose and effect of the agreement, are, by the defendants' answer, admitted. The fact thus appears that the shares are transferable on the books of the trustees. From that arises the inference that the conditions were applicable alike to all purchasers and holders. And this quality of the shares is recognized by the terms of the certificate and of the blank indorsement for transfer upon the back of and accompanying it, in which, when filled out, appears the name of the person designated by the transferer as his attorney to make the necessary transfer upon the books of the trust in accordance with the regulations thereof, and upon the conditions expressed in the certificate. Those conditions are that the transferee shall be subject to all the provisions of the agreement creating the trust, and of the by-laws adopted pursuant to it. The quality of transferability given to the shares would seem to import the right to make it effectual by transfer on the books, as that is treated as essential to accomplish it. And when the plaintiff applied to have it done it may, in view of what appears in the indorsement upon the certificate as well as in it, be assumed that he sought to have the transfer made to him upon the books of the trust "in accordance with the regulations thereof," and upon the conditions in the certificate. They seem to relate to the manner and effect of doing it, and not to the right to have it done. And, therefore, when the essential fact of the transferability of the shares and the general nature and purpose of the trust as created by the agreement were made to appear, as they did by the admitted allegations of the complaint, *Page 181 there was nothing wanting in the evidence to establish the right of a holder of shares to effectually become a transferee. And it cannot be presumed that there were in the agreement any negative provisions qualifying such apparent right. If there were any such it was for the defendants to make it appear.
In Burrall v. Bushwick R.R. Co. (75 N.Y. 211), the question arose upon demurrer to the complaint, which did not allege any facts tending to show that transfer of shares of stock on the books of the company was requisite to perfect it, and it was held that if it was not no transfer upon them was necessary for such purpose. The defendants here claim that the holder of shares in the trust is not entitled to recognition as such, or as transferee, until transfer is made on their books, and, accordingly, it appears that they declined to treat him as a beneficiary for the purpose of receiving dividends upon the shares he had purchased, but paid them to Mallaby, who was named in the certificate as such, and as the consequence the plaintiff was not permitted to take any dividends or rights as holder of the shares otherwise than through him. The denial of the right to transfer upon the books is not consistent with the transferable quality of the shares, which imports that the purchaser taking an assignment of them in a duly formal manner has the right to become a transferee within the meaning of the agreement upon which the trust was formed. And it is difficult to see any substantial distinction in that respect between a holder of such shares and of those of a corporation, which are transferable only upon its books. In such case it is within the equitable power of the court to compel such transfer to be made. (Cushman v.Thayer M.J. Co., 76 N.Y. 365.) And unless some further reason appears for the denial of such right the plaintiff was entitled to such relief in this action.
It is evident from what appears that the ground of the refusal of the defendants to grant the plaintiff's request to make the transfer on the books was personal to him. And they, amongst other matters by their answer, charge in effect *Page 182 that the plaintiff, as competitor of the companies whose stock is held by the defendants in trust, in the business of manufacturing and dealing in oil products is hostile to them, and that his demand for transfer of his shares on the books of the defendants is not in good faith, but that he seeks to vex and harrass them. Upon that subject the trial court found that since in 1876 the plaintiff has been a competitor and rival of the constituent corporations of the Standard Oil Trust, and since its creation he has been such of the trust in the business of oil refining, and has maintained a hostile attitude and been engaged in hostile transactions and proceedings towards those companies, the trust and the defendants as trustees, that he believes an oil trust ought not to exist, and is opposed generally to trusts of that character, and that since that time to the commencement of this action he has been prosecuting or aiding in prosecuting litigations and proceedings in courts as well as before the interstate commerce commission, and before an investigating committee in congress, directed mainly and in effect against such corporations or the trust for the purposes of securing from the railroads what he considered equal rates with those corporations and such trust for carrying his products. The court also found that the plaintiff "having for ten or more years been engaged in the oil refining business at Marietta, Ohio, had suffered from discrimination in freight rates for the transportation of oil by various railroad companies against him and in favor of his competitors in the trade; that the litigations instituted by him before the interstate commerce commission against a number of railroad companies were conducted by the plaintiff in good faith and for his protection from unjust discrimination against him on freight charges by them in such transportation; and that in quo warranto suits of the state of Ohio against certain named railroad companies it was found as a fact and determined by the referee in each of them that a discrimination in freight rates for transportation of oil existed greatly to the injury of the business of the plaintiff in this action; and that his connection with those suits "was in good faith wholly justifiable and in the protection of *Page 183 his legal rights." The facts so found by the court in the present action had the support of evidence. And it also appears that the plaintiff proposed and offered to sell his oil property and works to the defendants for a sum greatly in excess of their value, and that in December prior to the creation of the trust he published a severe pamphlet against the Standard Oil Company, which became one of the constituent companies of the trust. In this publication he manifested his hostility to the company for reasons, as expressed in it, having relation to its rival business methods which he charged were conducted in a manner and with a purpose to injure and oppress him in his business of like character. In view of all these facts it is urged by the defendants that the motives of the plaintiff in seeking to become a recognized member of the association and beneficiary of the trust, were such as to justify the refusal to permit him by transfer of his shares on its books to take such relation to it. The question of motive of the plaintiff so far as it had any essential bearing in the case was one of fact. And upon that subject the plaintiff testified that he had no hostile purpose in purchasing the shares and in seeking a transfer of them on the books, but that it was his "idea if possible to become a record stockholder in order to enjoy the ordinary legal rights of a stockholder." And the trial court determined that there was nothing in the relations of the plaintiff to the defendants and the trust that should prevent such transfer on the books of the defendants. The plaintiff purchased the shares in the trust with his own money, and he represents no interests or purposes other than his own in this action. His claim is founded upon a right of property lawfully acquired. He, as holder, became subject to the agreement by which the trust was created and its by-laws, and if the transfer to him is perfected he will necessarily continue in such relation of subjection to them. When no discretionary power is reserved to that effect there is not, nor should there be any rule of law which will enable a corporation or company whose stock is on sale in the open market to so discriminate betweenbona fide purchasers who invest money in it for their *Page 184 own benefit, as to deny to some of them the right to make their title effectual for recognition by the company in the manner provided by it for that purpose. The perfection in such case of the transfer is one of apparent right incident to the purchase, and which the holder who thus acquires the stock in the market is permitted to assume will be effectuated. (Weston's Case, L.R. [4 Ch. App.] 20.)
A discretion in that respect when given or reserved by the articles under or pursuant to which the company is organized or in any manner requisite to vest the power in those charged with its executive duties may be effectually exercised. (In reStranton, etc., Co., L.R. [16 Eq. Cas.] 559; 7 Moak, 581;Moffatt v. Farquhar, L.R. [7 Ch. Div.] 591; 23 Moak, 731.)
In the present case no such discretionary powers seem to have been vested in the trustees. And the purchase of the stock was open to the plaintiff and fairly made by him. Attached to it was the quality of transferability, and with it was presumptively the right of the beneficial holder to have recognition as such by means of transfer to him on the books of the trust. And this was essential to the protection of his rights derivable from the title. The remedy sought by the plaintiff is within the equitable powers of the court, and is founded upon an indubitable title, as between him and his vendor, and a right in property. In such case it is difficult to see that motive legitimately becomes a subject of consideration unless the relief in view may for that reason result unjustly to others in whose behalf it is resisted, or to the prejudice of their legal rights. (Bloxam v. MetropolitanRy. Co., L.R. [3 Ch. App.] 337; Ramsey v. Gould, 57 Barb. 398, and cases there cited.) And how that could be the consequence is not evident. The transfer on the books to the plaintiff does not change the identity of the shares, but merely substitutes for one another beneficiary, and the latter is subject to the trust agreement and by-laws. It is true that equitable considerations not recognized in courts of law may control results in courts of equity. And while the granting of relief there is in some sense matter of discretion, *Page 185 it is not an arbitrary or capricious, but a sound judicial discretion controlled by established principles in equity and exercised in view of the circumstances in each case. (3 Pom. Eq. Jur. § 1404.) The party seeking relief must come into court with clean hands, as such maxim is understood in its application to that relation. If, for instance, he appears there under false colors his complaint may for that reason be dismissed. Such was the case of Forrest v. Manchester, etc., Ry. Co. (4 De G., F. G. 126). There a party filed his bill in behalf of himself and all other shareholders of the defendant company to restrain it from running its vessels, etc. It appeared at the trial that he was also a shareholder in a rival company; that by its direction he instituted the suit, and by it was indemnified against costs. The bill was dismissed; and on review the lord chancellor, in holding that the bill was an imposition on the court and sustaining its dismissal, said: "It is not that they persuaded him to institute the suit, not that they instigated the suit, but that the directors of the other company have directed the suit, and are to indemnify the plaintiff against the costs of it. To use a familiar expression, the plaintiff is the puppet of that company." And he added: "I have nothing to do with the motives of plaintiffs suing in this court. If they come here in abona fide character, the reason for their coming here is a matter beyond the province of a court of justice to inquire into." In the present case the plaintiff's claim to relief is founded upon his own title to the shares in question, and the action was instituted and prosecuted solely for his own benefit. The relief by way of transfer of his stock upon the books of the trust is not of itself unconscionable. Nor is it seen how it can be prejudicial to any legal rights of the defendants or any other beneficiary. It is not so much to the perfected title in the plaintiff of the shares that the defendants object, as it is to the relation which he will as the consequence of the transfer on the books take to the trust. Nor so much to relief in his behalf as in the alleged apprehension of consequences which may follow its execution. And those are dependent upon the manner he may conduct himself *Page 186 in that relation, whether offensively or otherwise. Whether the plaintiff would seek to do anything other than that which legitimately pertained to the right of a stockholder is entirely speculative; and it is not seen that anything more than that could be accomplished by him in such relation. The objection before mentioned might be made against any holder of stock, and the reason for its support would be one of degree. It has no relation to the plaintiff's legal right founded upon his title; but the court is called upon to make inquiry beyond that and into his motives or purposes by which his conduct and actions towards the trust may be influenced if he becomes its recognized beneficiary. As said by a learned text writer: "When a court of equity is appealed to for relief it will not go outside of the subject-matter of the controversy, and make its interference to depend upon the character and conduct of the moving party, in no way affecting the equitable right which he asserts against the defendant, or the relief which he demands." (1 Pom. Eq. Jur. § 399.) Assuming that there may be reasons for denial of relief in an action within equitable jurisdiction there sought, and founded upon unquestionable title fairly obtained, they must be such as to make it appear that the relief may result oppressively or to the undue prejudice of the defendant. In the case at bar the plaintiff's title to the stock derived from his purchase is not challenged by the evidence, but the ground of the defense is in the standing of the plaintiff in his relation to the trust, of which the defendants are trustees. And this is based upon the fact that his was an attitude of hostility to the Standard Oil Company, and after its creation to the Standard Oil Trust, arising out of rivalry in business. This may be a reason for making his recognition as a beneficiary undesirable. But while there may be an inherent power or discretion in the trustees of a corporation or company when its due protection requires or justifies it to decline to perfect title to stock by transfer on the books, it cannot be supposed, unless the power is duly reserved to or conferred upon them, that they are for that purpose permitted to discriminate between bona fide purchasers, who are *Page 187 owners and holders of its stock having assignment duly and in due form made to support application for such transfer. And in view of the facts found by the trial court and the preponderance of evidence, as we view it, there seems to be no sufficient reason founded upon the plaintiff's relations to the defendants or to the trust or otherwise, to fairly justify a denial to him of the rights of any holder in good faith of the stock of the trust.
The suggestion that the plaintiff should not have equitable relief because he has an adequate remedy at law for damages requires no consideration, as that question does not appear to have been specifically raised upon the trial or for determination of the trial court.
And in view of the fact that the shares of the trust were unqualifiedly transferable, there seems, for the purposes of the relief, to be no practical or substantial reason to distinguish between them and those of a corporation. There are no exceptions requiring special consideration. These views lead to the conclusion that the order of the General Term should be reversed and the judgment entered on the decision of the Special Term affirmed.
All concur.
Order reversed and judgment affirmed.