Opinion
01-16-1925
GENERAL INV. CO. v. AMERICAN HIDE & LEATHER CO. JOEL et al. v. SAME.
Hudspeth & Demarest and Elmer W. Demarest, all of Jersey City, for complainant General Inv. Co. McCarter & English and Arthur F. Egner, all of Newark, for complainants Joel and others. Pitney, Hardin & Skinner, John R. Hardin, and Waldron M. Ward, all of Newark, for defendant.
Consolidated suits by the General Investment Company and by Jacob B. Joel and others against the American Hide & Leather Company. On bills for injunction. Decree in accordance with opinion.
Hudspeth & Demarest and Elmer W. Demarest, all of Jersey City, for complainant General Inv. Co.
McCarter & English and Arthur F. Egner, all of Newark, for complainants Joel and others.
Pitney, Hardin & Skinner, John R. Hardin, and Waldron M. Ward, all of Newark, for defendant.
BENTLEY, V. C. Application for preliminary injunction, heard on bills and affidavits, defendant's affidavits, and examination of officers of the defendant company by complainants' counsel.
The bill was filed on behalf of the complainant General Investment Company, and all other 7 per cent. preferred stockholders of the defendant company. After an order to show cause had been allowed, the restraint therein was. modified so as to permit the stockholders' meeting to proceed to that point where a vote could be taken, and all other proceedings preliminary to the filing of a certified copy of the amendments in the office of the Secretary of State, there appeared to be facts in this bill distinguishing the situation from those in Grausman v. Porto Rican-American Tobacco Co. (N. J. Err. & App.) 122 A. 815; but, after the stockholders' meeting had been held, there was filed another bill, containing practically the same facts, and seeking the same relief on behalf of five other stockholders. The two suits have subsequently been consolidated and heard together.
The defendant is a corporation, organized in 1899 under our General Corporation Act of 1896 (P. L. p. 277). It is engaged in the business of manufacturing leather, leather products, and similar commodities. Its total authorized capital stock is fixed at $35,000,000, divided into 350,000 shares, one-half thereof being preferred, with cumulative, 7 per cent. dividends, and the remaining half common. There are now 125,483 shares of preferred stock worth $12,548,300 at par, issued and outstanding, and 4,517 shares of such preferred stock held in the treasury of the defendant company. The total common stock outstanding is 115,000 shares, with a par value of $11,500,000. The preferred stock has the usual qualities to be found in shares so designated, entitling the owners thereof to the dividend indicated, if and when declared, before the payment of any dividend upon the common stock, and it is then provided that accumulations of such dividends when deferred shall also be paid in advance of any dividend on the common stock, and that the preferred shall take precedence in the usual manner upon liquidation or dissolution. The accumulated arrears of dividends on the preferred stock now amount to $140 per share, although the surplus reserved by the company amounts to approximately $5,000,000. In this connection it should be said that neither of the bills is framed to compel a declaring of dividends, and no facts are alleged to bring the case within the language of Mr. Justice Swayze, in Murray v. Beattie Mfg. Co., 79 N. J. Eq. 604, 82 A. 1038, showing the right of the stockholders to such relief.
For the purpose, it is said, of reducing the capital debt of the defendant and make it more in reasonable proportion to the earning powers of the company, there was issued, on October 23, 1924, a notice of a special meeting of the stockholders of the defendant, for the purpose of passing upon a resolution of the board of directors designed to accomplish the same. It was proposed, according to the tenor of this notice and resolution, to seek an amendment of the certificate of incorporation of the company so that a new issue be created by changing 35,000 shares of unissued preferred into 35,000 shares of a new class of preferred stock, denominated "cumulative prior preference stock," of a par value of $100 each, with an 8 per cent. dividend, and to have priority both as to dividend and liquidation value over the preferred stock already described, and redeemable at 115 per cent. after three years; also to reduce the authorized capital by canceling the remaining 10,000 shares of unissued preferred stock of the 7 per cent. variety then remaining unissued. It was then proposed to cancel 60,000 shares of the unissued common stock. Thus the new capital would consist of $3,500,000 par value of 8 per cent. cumulative prior preference stock; $10,000,000 par value of the 7 per cent. preferred stock; and $11,500,000 par value of the common stock. And, finally, the stockholders were to be asked to permit the purchase of 30,000 shares of the outstanding 7 per cent. preferredstock for retirement, 15,000 shares thereof to be purchased from "a large banking corporation of New York City," which it now develops was the Chase Securities Corporation, a subsidiary of the Chase National Bank. The remaining 15,000 shares of such preferred stock it was proposed to purchase from the remaining stockholders, pro rata, based upon their respective holdings, at a price of $70 a share, in which connection it should be said that, under an agreement of August 13, 1924, the price to be paid the Chase Securities Corporation was to consist of a fee of $25,000, a premium of $5 for each share of stock so secured, or $75,000, the administrative expenses of the Chase Corporation in fulfilling its part of the contract, and such legal expenses as the last-named corporation should be put to in the premises. The average cost to the Chase Corporation of accumulating such shares of stock amounts to $63.65, making the price due to the Chase Corporation from the defendant $68.65, plus the pro rata portion of the other charges to each share of stock, or, roughly, $70 per share.
The effect of the proposed plan, in the matter of reduction of capital indebtedness, may be synoptically expressed thus:
| Mode of payment. | ||
| To be extinguished tor cash Accrued dividends thereon | $ 3,000,000 $ 4,200,00 | $2,100,000 in cash. |
| In exchange for new 8 per cent. stock Accrued dividends | $ 3,500,000 $ 4,900,000 | $ 3,500,000 in new 8 per cent stock. |
| Totals | $15,600,000 | $5,600,000 |
| 5,600,000 | ||
| Reduction | $10,000,000 |
The vote at the stockholders' meeting showed a total of 91,990 shares of preferred and 88,645 shares of common stock in favor of the plan, or 8,335 shares of preferred and 11,979 of common stock over the necessary amount. The value of the stock on the open market advanced from $29.75 per share in August, 1923, to $59 per share in August, 1924, when the contract between the defendant and the Chase Corporation was executed, and subsequently advanced to $62.50 on October 10, 1924.
Many of the points made by the complainants were presented to this court for decision in General Investment Co. v. Bethlehem Steel Corporation, 88 N. J. Eq. 237, 102 A. 252, when Vice Chancellor Lane commented on their novelty and importance. Because of the exigencies of the World War, he declined to pass upon them, but expressly based his determination upon a balancing of conveniences.
The complainants say that to permit preferred stock to be issued with an 8 per cent. dividend, and redeemable at any time after three years at 115, exceeds the statutory maximum return upon such a class of stock and converts it into preferred stock bearing a dividend at the rate of 13 per cent. per annum. This, clearly, cannot be so, because the language at the very eighteenth section of the Corporation Act as amended by Act March 21, 1901 (P. L. p. 245), which limits the yield to 8 per cent., contains the further provision that it may "be made subject to redemption at any time after three years from the issue thereof, at a price not less than par." The twenty-ninth section, it is true, says that the company may decrease its capital stock "by the purchase at not above par of certain shares for retirement." As Vice Chancellor Lane pointed out in General Investment Co. v. Bethlehem Steel Corporation, 88 N. J. Eq. 237, at page 241, 102 A. 252, the Legislature had two different objects in mind in framing the two different sections. It must be clear that in the eighteenth section it was its purpose to permit the company to impress upon such shares an Option in favor of itself to compel a shareholder to surrender up his stock at the end of three years, or such further period as might suit its convenience, for a sum designated; while in the twenty-ninth section it conferred upon the company authority to bargain for the purchase of stock upon which no such option existed but, for obvious reasons, fixed par as the maximum it should be permitted to pay. There is no repugnance.
It is also objected that, included in the stock voted in favor of the director's plan were the blocks acquired by the Chase Securities Corporation of 15,000 shares, and 20,600 shares of preferred, and 7,730 shares of common voted by a company named Livingston & Co. It is said as to the former holding that, while the stock voted by the Chase Securities Corporation must be counted in the gross stock outstanding, it should not be permitted to be counted in favor of the defendant, because it was stock owned by the defendant and therefore, under the act, without voting power. The answer to this, as the defendant points out, is the opinion of the Court of Errors and Appeals, in U. S. Steel Corporation v. Hodge, 64 N. J. Eq. 807, 54 A. 1, 60 L. R. A. 742. But, the complainants say, in addition, if these shares be considered as the property of the Chase SecuritiesCorporation, then they are not countable, because that company was voting its stock in favor of a contract for its own benefit. The answer to such objection is that a stockholder is' under no fiduciary relations, either to the company or to his fellow stockholders, and he votes his holdings in any way most advantageous to himself. Mr. Justice Van Syckel dealt with a like objection in the Hodge Case, at page 813 of the opinion (54 A. 1). So far as the other holdings of stock are concerned, Livingston & Co. is a stockbroker which had purchased, for various of its customers, the number of shares of stock mentioned for those customers' accounts, but had taken the legal title in its own name, and so registered the shares on the books of the company. Sections 33 and 40 of the Corporation Act, and the many cases decided under it, gave to Livingston & Co. the privilege of voting as it did. Section 20, providing for a notation on the books of the company in case of hypothecating of stock, has nothing to do with the matter; that provision being intended to permit a transfer as collateral security without the owner parting with his right of franchise.
The main question raised and argued involves the matter of statutory authority to create a new class of preferred stock superior in its preference to the preferred stock now outstanding. The language of the resolutions refers to "reclassifying" 35,000 shares of the unissued authorized stock but, in effect, it would amount to inventing an entirely different creation than had been dreamed of when the certificate of incorporation was filed. It seems a most circuitous and awkward proceeding to go to the pains of reconstructing these nebulous, unissued shares into something entirely new, and neglect the direct proceeding of canceling them and then creating the new ones in the way presently to be pointed out. Call them what you may, they are an entirely new class of stock. The Standard Dictionary defines "create," in its secondary meaning; "To produce, as a new construction out of existing materials." If a narrow construction is to be given the word "create" in the twenty-seventh section, then that is exactly the action contemplated, namely, to produce the prior preference stock out of the existing unissued preferred stock. But I prefer to consider these as a new class.
It cannot be questioned that, in the absence of fraud, ultra vires action, illegality, or immorality, our courts will not substitute their respective judgments for that of the directors and stockholders in matters of business, and that this has been the policy pursued from the case of Elkins v. Camden & Atlantic R. R. Co., 36 N. J. Eq. 241, to date. Thus, the resolution of the difficulty depends upon a construction of the pertinent provisions of the Corporation Act of 1896, as it stood before the amendment of 1901. The language of section 18 provided that every corporation should have power "to create two or more kinds of stock, of such classes, with such designations, preferences and voting powers or restriction or qualification thereof, as shall be stated and expressed in the certificate of incorporation." Standing by itself, and considered as if there were no other provisions to be regarded, this would foreclose any corporation so circumstanced from subsequently creating any other class of stock after the organization of the corporate entity. But in the interpretation of statutes there is no rule better established than that the entire act, and every part thereof, shall, if possible, be given effect and, so far as practicable, every provision thereof reconciled. James v. Dubois, 16 N. J. Law, 285; Morris & Essex R. R. Co. v. Com'r R. R. Tax., 37 N. J. Law, 228. In 1899, when the defendant was incorporated, the twenty-seventh section of the same act read as follows, so far as germane to this case:
"Every corporation organized under this act may change the nature of its business * * * create one or more classes of preferred stock, and make such other amendment, change or alteration as may be desired, in manner following. * * *"
These were the things it might do, even though the original certificate made no provision for them. As to these things, the shareholders were at liberty to change their minds. It then provided the familiar machinery of amendment, upon a vote of not less than two-thirds in interest of each class of stockholders. The amendment of 1901, referred to above, added to the language of the eighteenth section I have already quoted, fixing the power of the incorporators to provide for the various classes of stock, the following words: "Or in any certificate of amendment thereof." Prom this amendatory language the complainants draw the conclusion that such power of change was forbidden to the stockholders of the company under the law as expressed when the company was formed, and therefore on constitutional grounds not subject to change, for the reasons dealt with in Allen v. Francisco Sugar Co., 92 N. J. Eq. 431, 112 A. 887, and cases therein reviewed. As just intimated, if one were to close his eyes to everything in the act except the eighteenth section, this position assumed by the complainants would be impregnable; but when read in light of the twenty-seventh section it becomes apparent that the Legislature had no such thought or purpose in mind. The history of the act as originally drawn, and the scope and purposes apparent from a consideration of the entire instrument, show that the intention was to confer upon corporations organized pursuant to its provisions the broadest grounds of self-government consistent with safety to the public and fairness to all the stockholders. This being so, the unqualified permission granted by the twenty-seventhsection to amend its certificate of incorporation, so as to "create one or more classes of preferred stock," is to be read without qualification, except as otherwise expressed in the act, or required by established rules and principles of law. Of course, such stock could not be issued under the original certificate, unless provided for therein. But then the twenty-seventh section pointed out the means of amendment to remedy the oversight in the original certificate, or to confer a power not thought necessary at first. The complainants say that this is authority only for the creation of a new class of preferred stock, subordinate in preferences to preferred stock already outstanding. The act does not say so, nor do the rights of the existing preferred stockholders make such a construction necessary. The twenty-seventh section in clear and unambiguous language provides for an amendment such as the one now under attack, and, construing the eighteenth section amendment in light of this permission, it can be nothing more than this, that, as the language stood in 1899, every corporation should have the power to fix the qualities of its various classes of stock "as stated and expressed in the certificate of incorporation," with the understanding, however, that the certificate meant was the certificate in its form at the time of the issuance of the new class of stock. In contemplation of law the original form of certificate of a corporation is no longer the certificate of the company after an amendment has been made. When any amendment of a document is effected, whether that document be a pleading in a cause, a contract, a statute, or otherwise, the amendment becomes incorporated in and a part of the document from that time forth, just as if included in the terms of the original language, and it was in this sense that the Legislature spoke when it used the phrase, "certificate of incorporation," in the original language of the eighteenth section of the act. It is illustrated by what is said in Daniell's P. & Pr. (6th Am. Ed.) § 402:
But, although it is the practice to call a bill thus altered an amended bill, the amendment is in fact esteemed, but a continuation of the original bill, and as forming a part of it; for both the original and amended bill constitutes but one record, so much so that, where an original bill is fully answered, and amendments are afterwards made, to which the defendant does not answer, the whole record may be taken, pro confesso, generally, and an order to take the bill pro confesso as to the amendments only will be irregular.
To the same effect is the opinion in Equitable Life Assurance Society v. Laird, 24 N. J. Eq. 319, affirmed in 26 N. J. Eq. 531. Why the amendment to the eighteenth section was adopted, I do not know. Perhaps, as counsel for the defendant intimates, at the instance of some overcautious attorney who wished to "take a bond of fate." At any rate, it was unnecessary, and a surplus use of language. Not a rare mistake.
Pronick v. Spirits Distributing Co., 58 N. J. Eq. 97, 42 A. 586, does not support the argument of the complainants, but, in fact, is direct authority against them, under my reading of the Corporation Act. In Smith v. Eastwood Wire Mfg. Co., 58 N. J. Eq. 331, at page 333, 43 A. 567, 568, Vice Chancellor Emery, after referring to the act becoming a part of every charter, says, in construing his own opinion in the Pronick Case:
"And in Pronick v. Spirits Distributing Co. * * * it was said that the same rule was to be applied to the general powers of amendment of certificates authorized at the time of organization."
Allen v. Francisco Sugar Co., supra, and all cases cited therein, and in the briefs for complainants, dealt with attempts to carry out schemes declared to be an unconstitutional invasion of property rights, and to attempt to apply them to the one at bar would be to argue in a circle. I referred to Chicago City Ry. v. Allerton, 18 Wall. 233, 21 L. Ed. 902, in the Grausman Case. But there there was an attempt without authority from the Legislature to increase the capital stock from $1,250,000 to $1,500,000 by the directors, without permission from the stockholders. Day v. U. S. Cast Iron Pipe & Foundry Co. (N. J. Err. & App.) 126 A. 302, dealt with the right of a preferred stockholder to prevent payment of dividends on the common stock until withheld, available, and earned dividends for previous years on the preferred stock should have been paid. There was no consideration of the company's right to amend for the purpose of creating a new kind of stock.
This being the state of the law, it became a part of the charter of the company, subject to which every one is presumed to have purchased his stock. Meredith v. N. J. Zinc & Iron Co., 55 N. J. Eq. 211, 37 A. 539, affirmed 56 N. J. Eq. 454, 41 A. 1116; Schwarzwalder v. Tegen, 58 N. J. Eq. 319, 43 A. 587; Smith v. Eastwood Wire Mfg. Co. (supra). Therefore the complainant of the minority stockholders is overborne by the statutory majority in favor of a change of the capital indebtedness sanctioned by law. For the reasons to which I have already adverted, I do not feel that I can give effect to the elaborate argument to show that the best methods have not been pursued to effect the desired result. It would be intolerable if this court should be charged with supervising the policies of every corporation as to their soundness, and, from the standpoint of the public, would be utterly subversive of the principle of majority rule. The complainants may suffer as they fear (only time can tell), but if, as I have decided, the law allows the change to be made, and did when the company was formed, then they should not expect assistance from this court, especiallyin view of their representing a rather small minority.
Much has been said of the abuse to which such a scheme as the one under consideration might be used to unfairly deprive preferred stockholders of their property by a continuance of the proceedings from time to time, until individual stockholders would become "tired out," so as to dispose of their individual holdings at great disadvantage. I have no apprehension of any such proceeding, and I am positive that there is no such motive now existing. If, in the future, the fears of the complainants in this respect are realized, any such attempt can be promptly and effectively suppressed. No extensive argument has been attempted here to show that the plan devised will be to the substantial benefit of all the stockholders of the company, for the reason that an examination of the condition of the company, and the saving to be effected, as displayed in the statement of facts, must make it apparent to any disinterested person.
There has been expressed a further fear that the pre-emptive right of the present stockholders may not be observed in the distribution of the new class of preferred stock. As I said, in answer to a like objection in Grausman v. Porto Rican-American Tobacco Co. (N. J. Ch.) 121 A. 895, the stockholders will have their remedy in that event.
There has been shown, however, a fact that places an entirely different aspect on the matter and must operate to render nugatory all that was done at the meeting of stockholders. In the notice calling the meeting of stockholders, the latter were acquainted with the fact that it was proposed, among other things, to reduce the capital liability, provide for the issuing of a new class of stock, and the authorization to the board of directors to purchase for retirement at not above par 30,000 shares of the then outstanding preferred stock at a price not above par, in one of several different methods. There was nothing said—and "there's the rub"—or any intimation given about the source from which the block of 15,000 shares were to be procured. There was, in the president's letter to the stockholders, information that the directors of the company had "made arrangements with a large banking corporation of New York City for the purchase from it by your company of 15,000 shares of preferred stock at a price of approximately $69, per share." No further information was given at any time to the stockholders of the identity of the banking corporation referred to, or any of the officers or directors thereof. Upon the return of the order to show cause, there was filed, on behalf of the defendant, the affidavit of Claude Douthit, one of its directors, in which it was revealed that the banking corporation in question was the Chase Securities Corporation, and at page 8 of his typewritten affidavit it is said:
None of the directors of the American Hide & Leather Company have any connection whatever with Chase Securities Corporation, or with the contract referred to, except Mr. Edward R. Tinker, who is president of Chase Securities Corporation and a director of American Hide & Leather Company. Mr. Tinker, however, attended no meetings of the directors of the American Hide & Leather Company at which said contract or the said plan were considered.
Thus it is made to appear by a part of the defendant's own proofs that Edward R. Tinker, at the time the contract was made with the Chase Securities Corporation, occupied the dual capacities of a director in the defendant corporation and an officer in the company that was the other party to the contract providing for the acquiring of one-half of the 30,000 shares to be purchased and retired. Mr. Justice Van Syckel, in United States Steel Corporation v. Hodge (supra) at page 813 (54 A. 3), said:
"The rule that directors cannot lawfully enter into a contract, in the benefit of which even one of their number participates without the knowledge and consent of the stockholders, is so firmly entrenched in our jurisprudence that it is not open to debate." (The italics are mine.)
It is true that later, in showing that the illegal act had been ratified, and after demonstrating that such a contract is not void but merely voidable, he said:
"A fortiori, when the contract is entered into by the stockholders with the directors, or when the stockholders expressly authorize the directors to enter into a contract, when the stockholders have notice of the directors' interest, the agreement will be unassailable in the absence of actual fraud or want of power in the corporation." (The italics are again mine.)
In that case, however, it was pointed out that, not only might it be fairly presumed that the stockholders knew that J. P. Morgan was a director of the steel company, but, in addition, that the circular letter which accompanied the call of the stockholders in that case expressly informed the latter, not only that the contract was with J. P. Morgan & Company, but that a syndicate had been formed, "including some directors which will receive four-fifths" of the compensation to be paid the bankers. Then, applying the rule stated by Mr. Justice Dixon, in Gale v. Morris, 30 N. J. Eq. 285, it was pointed out that the stockholders were acquainted with all proper information long before they met and were in a position to have made up their minds whether they would ratify the contract or denounce it by voting down the proposed resolutions. In the case at bar, a very different situation is made to appear. It is disclosed that the plan under consideration was the fifth thathad been devised, all previous ones having failed of approval, and, as Mr. Douthit says, this was the first one formulated "which proved to be satisfactory to the directors, counsel, and bankers for the company." Of course, it requires small experience to know that projects of this importance are never launched without submission to counsel and his favorable opinion, yet, notwithstanding the rule of law "so firmly intrenched in our jurisprudence," and the emphatic expressions used by Mr. Justice Van Syckel in the leading case of U. S. Steel Corporation v. Hodge (supra), there would appear to have been some reason for suppressing and withholding from the stockholders the Information that one individual joined hands on the one side with the directors in their fiduciary relations to the stockholders (Marr v. Marr, 73 N. J. Eq. 643, 70 A. 375. 133 Am. St. Rep. 742). and, on the others, with the syndicate which was dealing at arm's length with the corporation in which the shareholders had invested their money. It is true that Clarence Venner, the president of the complainant, General Investment Company, in his quest for particulars about the circumstances surrounding the scheme, met with many obstacles and some rebuffs at the hands of the defendant's officers. Some allowance must be made, however, for the weakness of human nature, and I can conceive of no monster of the jungle, or the most vivid imagination, that could unsettle the nerves of a corporation director when engaged in rejuvenating an embarrassed company, as the appearance of Mr. Venner in search of information (observation of Vice Chancellor in Bethlehem Steel Corporation Case, supra). There is nothing to make it appear that any other stockholder was so treated. I do not believe the information about Tinker was withheld by any active fraud. Whether so or not, to permit such a violation of so salutary and necessary a rule of law would be, if consistently followed, to throw open the savings of investors to practices that would destroy all public confidence in the value of corporate stock.
It is established in Stewart v. Lehigh Valley R. R. Co., 38 N. J. Law, 505, that courts will not inquire whether a contract such as this seems a fair one. "Fraud is too cunning and evasive for courts to establish a rule that invites its presence." The same case and the many authorities there cited are also an answer to the protestation that the director took no part in the negotiations under attack. Mr. Justice Dixon, in the last-named case, says:
"Nor is it proper for one of a board of directors to support his contract with his company, upon the ground that he abstain from participating as director in the negotiations for and final adoption of the bargain by his codirectors, the very words in which he asserts his right declare, his wrong; he ought to have participated, and in the interest of the stockholders, and if he did not, and they had thereby suffered loss, of which they shall be the judges, he must restore the rights he has obtained—he must hold against them no advantage that he has got through neglect of his duty towards them."
It is true that in that case the director in question dealt with himself as a member of a partnership, but the principle would apply equally had he been an officer of a corporation with which he was contracting in his quasi trust capacity. No one can read the opinion of Mr. Justice Dixon in the Stewart Case, or consider the reason for the rule, and not regard as puerile any such transparent effort as to attempt concealment behind the form of incorporation. The rule is one of a stern morality. "The rule is rigid, and applies equally to cases of fair and of unfair dealing, and where the principal would have been no better off if the agent had strictly pursued his powers, and where the principal was not in fact injured by the agent's act." Mechem on Agency, § 469. As an officer of the Chase Securities Corporation he would have profited, it is immaterial whether much or little, directly or indirectly, by a hard bargain with the defendant.
However, in face of the large majority in favor of the new plan of capitalization, the otherwise apparently hopeless condition of the company, the advantage to be obtained for the great mass of stockholders by bringing the finances of the company at least one step nearer to the resumption of. dividends, and the fact that I do not believe there was any conscious attempt to suppress information from stockholders, I feel that an opportunity should be afforded the defendant to repair the neglect with which I have just dealt. Therefore I will withhold action for a period of 10 days from the mailing of this opinion, so that, if the defendant shall desire, it may give notice to the stockholders of another special meeting, for the purpose of again passing upon the resolution of the board of directors which have given rise to this suit. With such notice, or incorporated therein, there shall be given the information already withheld, to wit, the name of the Chase Securities Corporation, and the fact that Mr. Tinker was a member of the defendant's board of directors and the president of the Chase Securities Corporation at the time the contract was executed, as was done in the Hodge Case (pages 814, 815 ). Of course, new proxies must be obtained after this information shall have been conveyed to the stockholders, and no proxy executed prior thereto shall be voted. Should the stockholders again adopt the resolutions of the board, I shall refuse any preliminary injunction. It may be said that the defendant will be placed at some disadvantage in again securing proxies to adopt the resolutionby the necessary majority. If that be so, it has itself to blame for a failure to perform its duty, and it would perhaps be strong proof of the strength of the position of the complainants.
On the other hand, if the defendant shall not have availed itself of this opportunity within the time limited I will advise a preliminary injunction in accordance with the prayers of the respective bills.