Germer v. Triple-State Natural Gas & Oil Co.

McWhorter, President:

Triple-State Natural Gas and Oil Company was chartered by the State of West Virginia on the 5th day of May, 1898, “For the purpose of acquiring, owning, leasing, holding, developing and disposing of lands, and interest in lands containing, or supposed to contain, oil or natural gas, or both, or of acquiring, owning and operating all such pipe lines, and other instrumentalities as may be necessarj^ and desirable, or either, in the production, transportation, consumption, sale, and delivery of oil or natural gas, or both, and of doing all other lawful acts necessary or believed to be necessary or of use or believed to be of use in carrying out the objects of the said proposed company, and of the business which may be connected therewith in the production, transportation, sale and delivery of oil and natural gas, or either one hereof.” And was duly organized with a capital stock of two million dollars, with two hundred thousand dollars paid in, with privilege of increasing the capital stock to five million dollars in all, by the sale of additional shares of one hundred dollars each. On the 6th Ray of February, 1905, a special meeting of the stockholders was called, at which meeting one O. D. Bleakley made to said meeting of stockholders the following proposition:

"To the Triple-State Natural Gas and Oil Company:

“GeNtlemeN: — I hereby offer to purchase and acquire from you, each and all of the property, assets and things of' value belonging to your company, upon the following terms and conditions:

“l. By the term ‘property, assets and things of value,’ I mean all of the real property, all of the gas and oil leases, rights and privileges, mains, pipe lines, machinery, implements, apparatus, furniture, fixtures, supplies and every species of real and personal property; your books, bills, notes, stocks, bonds, moneys, bills receivable, accounts receivable, contracts, ordinances, franchises, rights of way, and *145each and every species of property, right privilege or thing of value, real, personal or mixed, tangible or intangible, legal or equitable, wheresoever situated and in whatsoever form, whether held in your name, or the name of others for you, it being intended that I shall take over your business as a going concern.

“2. A corporation is about to be organized under the laws of the State of West Virginia, which corporation will acquire the property and assume the liabilities of your company and of the Kanawha Natural Gas, Light & Fuel Company, the latter company having outstanding capital stock to the amount of $500,000 and bonds to the amount of $330,-000. The new corporation will be authorized to issue Three-Million Dollars ($3,000,000) par value of capital and Three Million Dollars ($3,000,000) six per cent, fifteen-year gold bonds secured by a consolidated mortgage upon all the property of the companies thus acquired; subject, however, to the lien of such of the outstanding bonds of your company and of the Kanawha Natural Gas, Light and Fuel Company as shall not be surrendered for the consolidated bonds of the-new company. For the property of your company which I hereby offer to purchase, I agree to pay you the sum of $1,-000,000, par value of the stock of the said new corporation fully paid and non-assessable.

“3. As a further consideration of the transfer of your property to me, or to said new corporation, I will also cause said new corporation to assume and agree to pay, discharge, ■ carry out and perform each and all of the debts, liabilities, contracts, obligations and undertakings of your company (other than the liability of your company to its stockholders on account of their respective stockholdings), including your outstanding bonded indebtedness.

“4. In order that your company and all its stockholders may be fully advised of my connection with the transaction, and of all profits to be derived by me therefrom, I beg to advise you that I have arranged, that I shall transfer, or cause to be transferred, the property of your company, and the property of the Kanawha Natural Gas, Light & Fuel Company to said new corporation, and to pay to said new corporation $1,249,000 in cash, in consideration of the issuance to me of $2,999,000 of its capital stock, ($1,000 having been *146subscribed for the corporators and paid in cash), and $1,250-, '000, par value, of its said proposed bonds. The remaining bonds will be reserved and used for the following purposes:

■“$956,000 par value thereof, for the purpose of being used' .at par to exchange for or retire the present outstanding bonds of your company, amounting to $626,000; and the present outstanding bonds of the Kanawha Natural Gas, Light & Fuel Company, amounting to $380,000; $794,000 of said new bonds are to be reserved for the future corporate needs of the new company.

“Of the stock to be issued to me, $1,000,000 thereof will be issued and delivered to me by your company in payment for its property, as provided in this offer; and $666,000 thereof will be issued and delivered by me to the Kanawha Gas, Light & Fuel Company in payment for the property of that company.

“$84,000 of said sto’ck and $1,000 par value of said bonds will be retained by me for my own individual use, as a profit derived by me out of the transaction.

“The $1,249,000 to be paid by me to the new company will be raised by the sale of $1,249,000 of the bonds issued to me and $1,249,000 par value of the stock which will be sold by me to various persons (most of whom are now interested as directors or stockholders, or both, in one of the other of the old companies above mentioned), at the rate of •one bond and ten shares of stock for each $1,000 subscribed.

“1 have arranged that all persons who are stockholders of .your company or of the Kanawha Natural Gas, Light & Fuel Company, shall be permitted, if they so desire, to share in ;the purchase of said bonds and stocks, so to be sold, upon .the following terms:

“The stock issuable to your company, and to the Kanawha Natural Gas, Light & Fuel Company, aggregates $1,666,000. .Each person who, at the date of the mailing of the notice ■hereinafter referred to, is a stockholder of either of said com■panies, shall be permitted, in the proportion which the stock ■of the new company issuable to him bears to the total amount ■of $1,-666,000, to subscribe for the bonds and stock issuable to raise said $1,249,000 cash as aforesaid, provided he makes .sutíh .-subscription and payment at the time, place and in the *147manner designated in the notice mailed to him at the" address shown on the books of the old company, stating the amount to which he is entitled to subscribe. Subscriptions for fractional parts of a bond will not be received; but stockholders entitled to such fractional subscriptions may combine their subscription rights. Any such stock and bonds not ratably subscribed and paid for by the stockholders of the old companies, will be subscribed and paid for by other persons, some of whom will be stockholders or directors, or both, of the new and old companies, or one or more of them, and who will be permitted upon making such purchase, to hold and dispose thereof as their own property without accountability to anyone.

“5. The conveyance of the property of your company shall, at my election, be made either to me, or my nominees, or to the new company.

“6. The acceptance of this proposition, in writing, will constitute a contract between us.

“Dated February 6, 1905.

“O. D. Bleakley.”

At said meeting of stockholders the proposition of Mr. Bleakley for the purchase was by resolution accepted by a vote of thirteen-thousand three-hundred and thirty-two shares against four-thousand nine-hundred and seventy-nine shares against the proposition. On the 17th of February, 1905, Edward G. Germer, in his own right and as administrator of the estate of Otto Germer, deceased, and of Otto Germer who sued for and on behalf of themselves and all other stockholders of Triple-State Natural Gas and Oil Company, and on behalf of themselves and all other holders of mortgage bonds of said company who might come in or be made parties to the suit and contribute to the cost thereof, filed their bill in equity in the circuit court of Cabell county against the Triple-State Natural Gas and Oil Company, W. O. Johnson, president and director, and J. B. Moorhead, secretary thereof, O. D. Bleakley, Charles Miller, trustee, and Charles Miller in his own right and as director in the said company, J. E. French, George Miller and George Maloney, directors of said company, the Central Trust Company of New York, a corporation, and all the unknown bondholders and creditors of the Triple-State Natural Gas and Oil Company, alleging *148the attempted sale of all the property and assets of said corporation and the opposition of the minority of the stockholders to such'sale and praying that an injunction might be awarded restraining, enjoining and inhibiting the said Triple-State Natural Gas and Oil Company, W. 0. Johnson, president, J. B. Moorehead, secretary, and said O. D. Bleakley and Charles Miller and all of the directors of the said defendant Triple-State Natural Gas and Oil Company, their agents, officers and servants, each and all of them individually, severally and collectively from in any manner proceeding to carry out the said illegal merger and sale of the said properties of said company to either the said O. D. Bleakley or the said United States Natural Gas Company or either of them, and that the defendants, the Triple-State Natural Gas and Oil Company, its officers and agents be inhibited and enjoined from turning over to the United States Gas Company, the proposed new company, or to Bleakley or any other person or persons the property of the said defendant Triple-State Company, or delivering the same or any part thereof to any person or persons under said scheme of sale, merger or transfer, until the further order of the court or the judge in vacation; that the Triple-State Company, its officers, agents, etc., be restrained and enjoined from doing any act to prevent the full and sufficient amount of gas being supplied by and through its mains to its consumers and from doing any act or acts that lead to or have a tendency to injure the property of the defendant Triple-State Company or to diminish the supply of gas furnished, and that they be affirmatively required to do every and all acts that might be in their power, necessary to carry into effect the purposes of their franchise and supply their consumers with gas, and that they be restrained from dividing or attempting to divide the property, assets, franchises and rights of property among the several stockholders of the Triple-State Company or in any manner interfering therewith, and from carring out any dissolution that might be decided upon or agreed upon at the meeting on the 20th of February, 1905, until the further order of the court and until the rights and interest of the several parties in the property might be, by the court, judicially ascertained and fixed, and the rights of all the stockholders fully protected in the premises; that in case the stockholders *149on the 20th of February should undertake to make such dissolution that no action might be taken thereunder by the officers of the Triple State Company until the rights of all persons interested could be judicially ascertained and determined and the proper distribution agreed; that a receiver be appointed of all the property and property rights, etc., of said Triple-State Company; that said property might be, by and under the direction of this Court, taken care of and preserved, until the final disposition thereof and rights of all parties ascertained under the direction of the court on the final hearing, and for general relief.

The defendants, Triple-State Gas and Oil Company, W. O. Johnson, president and director, and J. B. Moorehead, secretary of said company, O. D. Bleakley and Charles Miller, in his own right and as director of the Triple-State Company, filed their answer denying many of the material allegations of the bill, but admitted the attempted merger and transfer of the said Triple-State Company to the new company called the United States Natural Gas Company, and admitted the protest against such sale and merger on the part of the minority stockholders of the Triple-State Company. Affidavits were filed by the plaintiffs and the defendants and notice of motion was given to dissolve said injunction. On the 28th of February, 1905, the cause was heard in vacation on the bill and exhibits and the said answer which was treated as an affidavit, upon the several affidavits filed by the respective parties and upon the cross-examination of such of the affiants as were cross-examined, and the re-examination, upon which hearing the court dissolved the injunction granted in this cause. From which decree the plaintiffs appeal and say that the court erred to their prejudice in that the notice of the stockholders meeting was not given as provided by the statutes of West Virginia or by the by-laws of the said company and because the statute under which a sale was proposed to be made by section 83 added to chapter 54, by the Acts of 1901, was not passed until after the charter of the Triple-State Natural Gas and Oil Company was granted and after the contract rights between the stockholders had taken effect and because the said act of 1901, permitting the sale of all the property of a corporation organized under the laws of the State of West Virginia upon an affimative vote of sixty *150per cent, of the stockholders after due notice does not permit or allow such sale to be made for anything except cash and the plaintiffs could not be required to accept in payment for their stock in the old company, stock in any new company.

As to the assignment in error, the want of proper notice of the meeting of stockholders at which action was taken, in relation to the sale and merger. The record shows that the plaintiffs were present and participated in the proceedings voting their stock against the proposition and entering their protest against the action of the majority, and none of the stockholders not represented at said meeting are complaining of the majority. “All who participate in a meeting are estopped to question the regularity, and the corporation itself may, as to third persons, be estopped to deny the legality of a meeting.” 26 A. & E. E. L. (2nd Ed.) 995; 10 Cyc. 326; Handley v. Stutz, 139 U. S. 417. This assignment is not well taken.

Did the stockholders have the right, under the laws of West Virginia, to vote and sell all the property of the corporation and take in payment the stock and bonds of another corporation? It is conceded that prior to the Act of 1901, no such power existed under our statute in the stockholders to so dispose of their property, but it is claimed that under section 83, added to chapter 54 of the Code, by chapter 35, Acts of 1901, full power was granted to so sell and dispose of the property of the corporation by the holders of at least sixty per centum of the outstanding stock of the corporation and to transfer the same, taking in payment therefor the stock of another corporation. It will be seen' that the said section 83 provides that holders of sixty per centum of the outstanding stock of the corporation may sell, transfer or assign in good faith all of its property and assets, and while it does not expressly and in terms, authorize the corporation to take in payment therefor the stocks or bonds of' another corporation; yet with the full power to sell, transfer or assign in good faith all of its property and assets under the said new section 83, it would seem clear that under the provisions of section 3, ■ chapter 52 of the Code, as amended by said chapter 35 of the Acts of 1901, the corporation has full power to subscribe for, or purchase the stock, bonds or securities of any joint stock company, this, it can do, upon a. *151majority vote of the stock, by plain implication. Having the right to sell, transfer and assign all its property under section 83, and, under said section 3, chapter 52, as amended,, having the right to subscribe for, or purchase the stock,, bonds, or other securities of any joint stock company, it. would follow as a necessary sequence that it could take the one in payment for the other. In Traer v. Lucas Prospecting Co., 99 N. W. 290 (Iowa), Syl. pt. 4, it is held: “Where the charter of a corporation gave it power to sell all its property, and also authorized it to deal in the stock of other corporations, it had the right to sell all of its property for stock in another corporation.” Sherwin, J., at page 294 says: “The Lucas Company having the power to sell and transfer all of its property, and the power to purchase the stock of another corporation, it follows that it had the power to so invest all of its property.” And in Metcalf v. Furniture Co., 122 Fed. Rep. 115 (Syl. pt. 9), it is held: “Where a corporation-is given by its charter the right to dispose of its property and to discontinue its corporate existence, it has the power to accept stock in another corporation in payment of the purchase price of its property, provided the transaction is Iona fide.” And in the same case (Syl. pt. 5), it is held: “Where the charter and bylaws of a corporation and the, statutes of the state under which it is organized, vest in a. majority of the stockholders the right to sell the property of' the corporation and to discontinue its corporate existence,, every stockholder takes his stock subject to such right; and a minority stockholder must submit to the action of the majority in exercising such power, in the absence of fraud.’” And in Treadwell v. Manufacturing Company, 7 Gray (Mass.) 393, (66 Am. Dec. 490), it is held: “The directors of a manufacturing corporation, as the best means of continuing the business, and pursuant to the votes of a majority of the stockholders, .though against the protest of a minority, may sell the whole property of the corporation to a new corporation, taking payment in shares of the new corporation, to be distributed among those of the old stockholders who are willing to take them.” Section 1, chapter 52, of the Code, provides that, “Every corporation as such shall have succession by its corporate name for the time limited in its charter, or by law; and if no time limited, perpetually. * * * *152Contract and be contracted with, by simple contract or specialty; purchase, hold, use and grant estate real and personal.” It will be seen that the power to sell and convey is as broad as its power to purchase and hold; the word “grant” being the. equivalent of “convey” and similar terms.—9 Cyc. 859; 14 A. & E. E. L., 1111; 4 Words & Phrases, 3151; State ex rel. Orr v. City of New Orleans, 24 Southern Rep. 666, 50 La. Ann. 880. In case of Ditch Co. v. Zellerbach, 37 Cal. 543, 99 Am. Dec. 300, Sawyer, C. J., speaking for the court, says: “The jus disponendi necessarily attached as an incidént to the ownership. The very idea of private property, in which the public has no rights, involves the idea of a right to sell and convey, when the exigencies of the corporation require it. If a corporation could convey a part, it could convey the whole.” Section 1, chapter 54, Code, provides: “Joint stock companies incorporated under this chapter shall be subject to the provisions of the fifty-second and fifty-third chapters of the Code, so far as the same are applicable.”

When the Triple-State stock was subscribed for by the stockholders they did so charged with a full knowledge of the statutory provisions then existing under which the legislature might, at any time, alter, amend or repeal the provisions of the law which were made a part of the charter. The powers reserved to the legislature are plain and distinct and any amendment or alteration made subsequent to the formation of the corporation and made within the scope of the reserved powers were written into the charter as certainly as the restrictions and rights and powers of the stockholders and the corporation itself existing at the time of the incorporation. It is contended by appellants that section 83 added to chapter 54, and the amendment to section 3 of chapter 52 being enacted subsequent to the organization of the Triple-State Company said corporation and the stockholders thereof are not subject to the provisions thereof; in other words, corporations, existing prior to the enactment of chapter 35, Acts of 1901, are not affected by it, or subject to its provisions. If this proposition were correct we should have two classes of corporations operating and subject to two sets of laws. This question seems to be well settled in the case of Cross v. Railway Company, 35 W. Va. 174. By act of the *153Legislature of West Virginia of February 26th, 1866, “The Potomac and Piedmont Coal and Railroad Company” was incorporated. On the 22nd of August, 1872, the Constitution of this State was adopted, which provided in section 4, Article 11: “The legislature shall provide by law that in all elections for directors or managers of incorporated companies every stockholder shall have the right to vote in person or by proxy for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of the shares of his stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner.”

At the election of directors in the winter of 1891 by this ¡system, provided for in the Constitution and the statute made in pursuance thereof, W. Irvine Cross was elected a member of the Board of Directors of the said railroad company, whose name had been changed to that of the West Virginia Central & Pittsburg Railroad Company; while Thos. B. Davis had been declared elected under the old system of voting the stock in vogue at the time of the incorporation of the company, he and the company contending that the new provision did not apply to the corporations which already existed at the time of the adoption thereof. Cross sued out his writ of mandamus nisi to require the company and its officers to recognize him as a director in said company in the place of said Davis, and the court held that the new provision was applicable and that Cross was duly elected thereunder, and the peremptory mandamus was issued accordingly.

The broad reservation to the legislature to “Amend, alter ■or repeal” the provisions of the statute under which corporations operate are as though written into every charter issued thereunder, and every subscriber to the stock of any such corporation is charged with full knowledge of the provisions of the law then existing, under which the legislature might, at any time, amend, alter or repeal the provisions of the law which were so made a part of the charter, and such .subscriber must be held to have given his consent that such *154change might at any time be made by the legislature. This being true, it cannot be claimed, with good reason, that by ' such action the legislature would be impairing the obligation of any contract the subscriber entered into when he became a stockholder.—4 Thomp. on Corp., section 5408. In Allen v. Ajax Mining Company, 77 Pac. Rep. 47, decided in Montana in 1904, a case very similar to the one before us, Holloway, J., in delivering the opinion of the court, says: “It is to be understood, too, that this reservation possesses equal vigor, whether contained in the charter of the particular corporation itself, or in the Constitution or general laws of the state under which the corporation is organized. While there may be some slight conflict in the authorities, the great weight of authority clearly and unequivocally sustains such statutes. Market Street Ry. Co. v. Hellman, 109 Cal. 571, 42 Pac. 225; Looker v. Maynard, 179 U. S. 46, 21 Sup. Ct. 21, 45 L. Ed. 79, and cases cited: Northern Central Railroad Co. v. Maryland, 187 U. S. 258, 23 Sup. Ct. 62, 47 L. Ed. 167; Venner Co. v. Steel Corporation, (C. C.) 116 Fed. 1012. The theory upon which these statutes are upheld is that whatever rules or regulations for the management, operation or control of a corporation which the legislature might have incorporated in the law under which the corporation was organized may afterwards properly be engrafted on its charter by virtue of this reserved power existent at the time of the formation of the corporation. Sinking Fund Cases, 99 U. S. 700, 25 L. Ed. 496;. Spring Valley Water W. v. Schottler, 110 U. S. 347, 4 Sup. Ct. 48, 26 L. Ed. 173; Market Street Ry. Co. v. Hellman, above; McGowan v. McDonald, 111 Cal. 57, 43 Pac. 418, 52 Am. St. Rep. 149; Williams v. Nall, (Ky.) 55 S. W. 706. A review of the authorities citing numerous instances of the enforcement of such statutes is found in 4 Thompson on Corporations, Par. 5411.”

For the reasons herein stated, we conclude there is no error in the decree and the same is affirmed.

Affirmed.