Majority
p. 895Roderick Byington, Appellant, v. Amodio F. Piazza and Others, Respondents.
Headnote
Corporation — trust agreement as to stock — voting of trust stock by trustee — injunction..Appeal from an order entered in the Hew York county clerk’s office on the 25th ¿lay of January, 1909, denying a motion for an inj unction pendente lite.
: Plaintiff appeals from an order denying his motion for an injunction pendente lite. It appears from the complaint and moving papers, and is not denied, that the defendant Amodio F. Piazza, having received a certain concession or contract from the government of nicaragua, assigned it to the defendant Central American Growers and ’Transportation Company, a South Dakota corporation, for which said company issued to him 5,100 shares of its capital stock. The said company then offered for sale what it termed the “First Block" of stock, consisting of 900 shares, under what it denominated a “Rule,” which it was provided should govern such sale. This rule provided that each purchaser of stock from the first block should receive a bonus consisting of a pro rata share of sixty per cent of the 5,100 shares issued to said Piazza upon condition that such purchaser agreed to deposit said bonus in a trust company to be selected by
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the board of directors, with instructions for said trust company to vote the entire amount of their bonus stock with the forty per cent belonging to A. F. Piazza and associates, thereby casting the full vote of 5,100 shares at each annual election of stockholders “for the re-election of the present first permanent Board of Directors, namely: E. H. Mayne, Ira L. FetterhofE, A. F. Piazza, W. J. Greacen and W. L. LoefEel each year consecutively for fifteen (15) years, provided none of the said directors shall have been disqualified by violating their trust, in which case the disqualified member will be replaced by unanimous vote of the remaining directors.” In order to carry out this rule Piazza executed to the defendant Title Guarantee and Trust Company a trust deed of the 5,100 shares issued to him. By this deed it was provided that the title company as trustee shall hold said stock for the term of fifteen years, or during the lives of Amodio F. Piazza and of Joseph William Piazza, and of the survivor of them, whichever term should first end; that the trustee shall hold said stock registered in its name as trustee, and shall issue certificates of interest for sixty per cent of said stock pro rata to the owners of 900 shares, known as the first lot of the stock of the Central American Growers and Transportation Company; that the trustees shall collect dividends on said 5,100 shares, paying sixty per cent thereof to the holders of certificates of interest, and the remaining forty per cent to defendant Piazza. The deed then contains the following provision as to voting by the trustee: “Fourth. The said trustee as the owner and holder as provided herein of the said 5100 shares of stock of the said company agrees to vote said stock at the annual meeting of the stockholders in each and every year, of which meeting it shall have due notice from the secretary, and the said trustee agrees to vote said stock for the purpose of re-electing the present Board of Directors in so far as the trustee may legally and in the exercise of its proper discretion vote for the re-election of the present Board of Directors. The foregoing provisions of this paragraph are subject to the right of the Board of Directors in case a vacancy should occur in their Board to name the successor for such vacancy, by a unanimous vote of the remaining directors.” It is further provided that the trust shall exist for the benefit of the party of the first part or his heirs, executors, administrators or assigns, and that upon the termination of the trust period, the trustee shall cause new certificates of stock to be issued and shall turn over forty per cent thereof to Piazza or his successors in interest, and sixty per cent thereof to the holders of certificates of interest in said stock according to their several holdings. The plaintiff is a purchaser of shares of the stock constituting the first block, and holds a certificate of interest in a proportionate amount of the sixty per cent of the 5,100 shares transferred to the trustee by Piazza. The law of the State of South Dakota permits the stockholders of a corporation organized under the laws of that State to increase the number of its directors to any number not exceeding thirteen.[1] The Title Guarantee and Trust Company as trustee, at the request and by the direction of Piazza, now propose to vote the 5,100 shares of stock held by it under the foregoing deed of trust for a proposition to increase the number of directors of the
* Sic. See S. D. Civ. Code, § 434.— [Rep.
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Central American Company to seven, the purpose being as it is stated to elect the five individuals composing the present board, and two additional members. The plaintiff claims that the purpose of this action is to give Piazza more complete and an undue control of the board. The defendants say that the sole purpose is to give proper representation to certain persons who have purchased stock of the compan)7. The injunction sought is to prevent the trustee from voting the 5,100 shares in favor of the proposition to increase the number of directors. Wethink that the motion should have been granted so as to leave matter in statu quo at least until a trial can be had. The effect of such an injunction is not necessarily to prevent the Central American Company from doing that which the laws of the State of its incorporation permit, but merely to prevent the trustee from violating the conditions of its trust. Its distinct agreement was to vote the 5,100 shares for the re-election of the “ present Board of Directors,” not merely for the individuals then comprising that board, and the so-called rule, -which specified the conditions upon which the first block of stock was sold, also provided that the 5,100 shares should be voted annually for “ the present first permanent Board of Directors.” In each case the word “board” was used collectively. To increase the number of directors so as to elect seven instead of five would be to elect a different board, although it might be composed in part of the same persons who composed the original board. It may readily be assumed that the purchasers of the stock constituting the first block made their purchases in reliance upon the agreement that the affairs of the company would be controlled and directed for fifteen years by the identical board mentioned in the rule, and those who held out this representation to them cannot be permitted, upon the state of facts now appearing, to violate their agreement. The order appealed from must be reversed, with ten dollars costs and disbursements, and the motion granted with ten dollars costs. The amount of the undertaking to be given by plaintiff will be determined upon the settlement of the order. Patterson, P. J., Ingraham, McLaughlin and Laughlin, JJ., concurred. Order reversed, with ten dollars costs and disbursements, and motion granted, with ten dollars costs; amount of undertaking to be determined on settlement of order. Settle order on notice.