owners of the stock respectively “pool certificates” equal in amount to the shares of stock owned by each, and finally, the N.Y., L.E., & W. R.R. Co. guaranteed the holders of the “pool certificates” (which certificates were freely bought and sold in the market) a perpetual semi-annual dividend of three per cent. This contract was made in 1882, and the parties carried out its provisions through the years 1882, 1883, and 1884. In May, 1885, the plaintiff, as owner of a large amount of stock not included in the “pool,” filed his petition against Jewett, the two railroad companies, and the three trustees, alleging the agreement to be unlawful, and praying that Jewett be restrained from delivering to the appointee of the N.Y., L.E., & W. R.R. Co. the proxy to vote the shares at the ensuing or any subsequent election of directors of the C., H., & D. R.R. Co. There seems to have been an understanding between Jewett and plaintiff, for the latter did not ask that the former be himself restrained from voting these shares. The N.Y., L.E., & W. R.R. Co., however, filed a cross-petition, praying, first, that Jewett be restrained from refusing to deliver the proxy to its appointee; or, failing this, second, from giving a proxy to any one else, and from voting the stock himself. The Court granted the relief prayed for by plaintiff and that secondly asked for by the N.Y., L.E., & W. R.R. Co. The Court based its action upon two grounds. The first is that it is settled law in Ohio that one corporation cannot be a stock-holder in another corporation, and that one corporation cannot be permitted indirectly to acquire the control of another which it is forbidden directly to obtain by acquisition of the latter’s stock. The second and more comprehensive ground is, that an agreement by stockholders of a corporation for a pecuniary consideration, to transfer the right to vote upon their stock, is against public policy, illegal, and void.[1]
The second case was that of Griffith against Jewett et al., reported in 15 Weekly Law Bulletin, 419, and like the first related to the stock of the C., H., & D. R.R. Co. The alleged purpose of this second “trust” was beneficent; it was “in order that the stock of said company shall not be liable to be bought up for speculative control, and to secure safe and prudent management in the interest of the public, as well as the stockholders,” and to prevent consolidation or lease of the road, etc., “without full knowledge and due consideration on the part of stockholders.” The trust agreement, which is set out at full length in the report, in substance was as follows: The owners of a majority of the stock, in consideration of one dollar paid to each, agreed to sell their stock to the trustees, each vendor receiving in return a trust certificate for as many shares “of the beneficial interest in the capital stock” of the company as he had furnished shares of stock; the trustees were to collect the dividends on the stock, and distribute them ratably among the trust certificate holders; the trust was to continue for five years, and at the expiration of that time was to be determinable only by the consent of two-thirds of the holders of the trust certificates; the stockholders, parties to the trust, constituted the trustees, by power of attorney irrevocable during the existence of the trust, their proxies to vote the stock. The trust certificates, in terms, enured to the holder “and assigns.” The plaintiff, together with certain cross-petitioners, averring ownership of a large amount of these trust certificates, made a tender of the certificates to the trustees, with the re-
- ↑ Cf. cases collected in Pollock, Contracts, 2d Am. ed. p. 286, note (h).
