he has appealed to the governing body or the shareholders to prevent such illegal action, and has failed to obtain redress.1 In such a suit averments in the answers that the defendants had, after the resolutions to consolidate were adopted, determined to abandon, and had abandoned, the consolidation, can not be considered on a motion to dissolve the injunction, as such an averment is affirmative matter, and not responsive to any allegation in the bill. In a suit to enjoin the consolidation of two turnpike companies, under an act one provision of which was that, when the agreement between the two companies should be entered into and ratified by a majority of the stockholders of the two companies, the consolidated company should have all the powers previously enjoyed by both, the defendant's answer alleged that the consolidation was made as provided by statute, but failed to allege that this was done with the consent of plaintiffs, thereby showing that the majority consented, and not the whole, and it was decided that the consolidation, not being authorized by the companies' charters, was void. A bill to annul a consolidation made by several railroad corporations, and to have declared void a mortgage executed by the consolidated roads on the aggregate property on the ground that one of the roads taken into the combination had no legal existence, can not be maintained by the stockholders. Such proceedings should be instituted by the State, through its attorney-general. 1 Nathan v. Tompkins, (1887) 82 (Ky. 1889) 10 S. W. Rep. 134; Ky. Ala. 437. Act Feb. 20, 1884. 2 Nathan v. Tompkins, (1887) 82 Ala. 437. 4 Bell v. Pennsylvania &c. R. Co., (1887) 10 Atlan. Rep. 741, not re Botts v. Simpsonville &c. Co., ported officially. § 357. Power to sell property.-Ownership of property, whether real or personal, carries with it the same general power of disposition, in corporations as in individuals, except when that power is restrained by statute, or by considerations of public policy. Except when restricted by law or public policy corporations have an absolute right of disposition, and in its exercise are unlimited as to objects, circumstances or quantity. Therefore a company may sell all its corporate property for a corporate or lawful purpose. Naturally fol 1 Angell & Ames on Corp. § 187; White Water &c. Co. v. Vallette, 21 How. 424. In this case Campbell, J. says: "It is well settled that a corporation without special authority, may dispose of lands, goods, and chattels, or of any interest in the same, as it deems expedient, and in the course of its legitimate business may make a bond, mortgage, note or draft; and also may make compositions with creditors, or an assignment for their benefit, with preferences, except when restrained by law." Partridge v. Badger, 25 Barb. 146; Barry v. Merchants' Exch. Co., 1 Sand. Ch. 280; Burr v. Phoenix Glass Co., 14 Barb. 358; Dater v. Bank of United States, 5 Watts & S. 223; Frazier v. Wilcox, 4 Rob. 517; United States Bank v. Heth, 4 B. Mon. 423; State v. Bank of Maryland, 6 Gill & J. 323; Pierce v. Emery, 32 N. H. 486; Reynolds v. Commissioners, 5 Ohio, 205; De Reuyter v. St. Peter's Church, 3 N. Y. 238; Clark v. Titcomb, 42 Barb. 122; Central Gold Min. Co. v. Platt, 3 Daley, 263; Miners' Ditch Co. v. Zellerbach, 37 Cal. 588. 22 Kent's Com. 281; Burton's Appeal, 57 Pa. St. 213; Reichwald v. Commercial Hotel Co., 106 Ill. 439, 451; Binney's Case, 2 Bland, 142. 3 Miners' Ditch Co. v. Zellerbach, 37 Cal. 543; Sargent v. Webster, 13 lowing from the larger power, a corporation which may sell its property or dispose of any interest in the same as it deems expedient. The general rule of the absolute alienability of corporate property is clearly applicable to private corporations established solely for trading or manufacturing purposes in which the public has no direct interest. But a majority of the shareholders of a prosperous corporation can not sell out the property and invest in other enterprises against the wishes of the minority. Nor may the directors even with the consent of a majority of the shareholders do so. But in case of a failing company the rule is different, and sale of the whole property may be made by the directors." Such a sale, however, and the assignment of all a corporation's property, will not in itself accomplish its dissolution or operate as a surrender of its franchises." § 358. Power to sell entire property. A corporation through a majority of its directors may make a transfer of all its property in payment of one creditor if it be done bona fide. Such a debtor corporation may prefer one creditor to Metc. 498; Treadwell v. Salisbury Mfg. Co., 7 Gray, 393; Hodges v. New England Screw Co., 1 R. I. 347; State v. College of California, 38 Cal. 166, 171; Webster v. Turner, 12 Hun, 264; Ardesco Oil Co. v. N. A. Min. Co., 66 Pa. St. 375, 382. 1 Barry v. Merchants' Ex. Co., 1 Sand. Ch. 280; White Water &c. Co. v. Vallette, 21 How. 424; Clark v. Titcomb, 42 Barb. 122. 2 Webster v. Turner, 12 Hun, 264; Hancock v. Holbrook, 4 Woods, 52; Sheldon &c. Co. v. Eickemeyer &c. Co., 90 N. Y. 607; Dupee v. Boston &c. Co., 114 Mass. 37. 3 Kean v. Johnson, 9 N. J. Eq. 401; McCurdy v. Myers, 44 Pa. St. 535; Boston &c. R. Co. v. New York &c. R. Co., 13 R. I. 260; Clinch v. Financial Co., L. R. 4 Ch. 117. 4 Abbott v. American &c. Co. 21 How. Pr. 193; Barclay v. Quicksilver Min. Co., 9 Abb. Pr. N. S. 284; Middlesex R. Co. v. Boston &c. R. Co., 115 Mass. 347; Balliet v. Brown, 103 Pa. St. 546. 5 Lauman v. Lebanon &c. R. Co., 30 Pa. St. 42; Hancock v. Holbrook, 4 Wood, 52; s. c. 9 Fed. Rep. 353; Sheldon &c. Co. v. Eickemeyer &c. Co., 90 N. Y. 607; Hutchinson v. Green, 91 Mo. 367; Chew v. Ellingwood, 86 Ind. 260; De Camp v. Alward, 52 Ind. 473; Dana v. Bank of United States, 5 Watts & S. 223. 6 Hill v. Fogg, 41 Mo. 563; Kansas &c. Co. v. Sauer, 65 Mo. 279; Bruffett v. Railroad Co., 25 Ill. 353; Reichwald v. Commercial &c. Co., 106 Ill. 439; De Camp v. Alward, 52 Ind. 468; State v. Bank of Maryland, 6 Gill & J. 205, 230. Buell v. Buckingham, (1864) 16 Ia. 284, citing Town v. Bank of River Raisin, 2 Doug. (Mich.) 530; Revere v. Boston Copper Co., 15 Pick. 351; Boston Glass Manuf. v. Langdon, 24 Pick. 49; State v. Bank of Maryland, 6 Gill & J. 205; Union Bank v. Mor another. And generally, a corporation may sell and transfer its property, and may prefer its creditors, although it is insolvent, unless such conduct is prohibited by law; even when all the property of the corporation is conveyed absolutely in payment of a single debt leaving others unpaid. A deed of trust given by a corporation to secure certain of its creditors is valid though it conveys nearly all of its property. Its validity is not affected by the fact that it was the result of a compromise among the directors, who were not harmonious, and favored securing different creditors. So, a corporation may make an assignment for the benefit of creditors. The majority of the stockholders of a co-operative association may sell the property and business; and, even if the sale is voidable by the remainder of the stockholders, after being ratified by them, it can not be avoided by one of those participating in it. The deed of a mining corporation, however, does not pass the title to its mining land, unless it is shown to have been ratified by two-thirds of its stockholders, as is provided by law. Where a statute declares that the revenues of religious corporations shall be applied by the trustees according to the usages of the denomination, and that equity may enforce the law, a trustee may sue in the name of the corporation to restrain his co-trustees from diverting the property. So under the same law the court may, at suit of a minority of the trustees of a religious corporation, enjoin diversion of its property to the uses of any other than its denomination.9 ris, 6 Gill & J. 363; Catlin v. Eagle 1 Sommerville v. Horton, 4 Yerg. 541; Niolon v. Douglas, 2 Hill. Ch. 433; Milburn v. Beach, 14 Mo. 104; Kuykendall v. McDonald, 15 Mo. 416. 2 Bergen v. Porpoise Fishing Co., (1887) 42 N. J. 397. 5 And such assignment is not invalid, when made by a quorum of the directors. Chase v. Tuttle, (1887) 55 Conn. 455; s. c. 3 Am. St. Rep. 64. 6 Berry v. Broach, (1888) 65 Miss. 450. 7 McShane v. Carter, (1889) 80 Cal. 310; Pekin &c. Co. v. Kennedy, (1889) 81 Cal. 356; Cal. Laws 1880, p. 131. 8 Reformed Presbyterian Church v. Bowden, 14 Abb. N. Cas. 356; 3 Lampson v. Arnold, 19 Iowa, New York Laws 1875, ch. 79. 487. 9 First Reformed Presbyterian 4 Rollins v. Shaver &c. Co., (Iowa, Church v. Bowden, 10 Abb. N. Cas. 1890) 45 N. W. Rep. 1037. 1; New York Laws 1875, ch, 79. -- 359. Sale by one corporation to another. A corporation may sell its property to another corporation. Thus a duly incorporated irrigating company having power under its charter to construct and operate a canal for irrigation, water works, and manufacturing purposes, may, with the assent of the stockholders, lawfully sell and convey to another irrigating company its right of way, canal, personal and real property, provided it is done in good faith, and not to delay or defraud creditors. And it is the same where a corporation could not be carried on with profit, and was approaching serious financial embarrassment. A sale, without fraud and in good faith, of all its property to a rival corporation engaged in the same business, whose paid-up stock was given in payment, affords no ground of complaint by a stockholder. But generally when the property of one corporation is sold to another, no shareholder of the former can be required without his own consent to accept the stock of the latter as his share of the proceeds of the sale. The reason is that such a transaction would in effect amount to a consolidation of the two companies. A company may, however, sell its assets for the stock of another company having a fixed money value and 1 Warfield v. Marshall &c. Co., (1887) 72 Iowa, 666; s. c. 2 Am. St. Rep. 263. Here where the first corporation was insolvent, and had executed a mortgage to its shareholders to secure them as creditors, thus preferring them to other creditors, and the second corporation was organized by the shareholders of the first and other persons, all paying value for their stock therein, and the first corporation sold its property to the second corporation so organized, in consideration that the second corporation would pay the mortgage to the shareholders in the first corporation, which was the full value of the property conveyed, and all this was done in good faith, though with knowledge by all the parties that the other creditors of the first corporation would never be able to realize anything on their claims, it was held that the transaction was a valid one, and could not be set aside at the suit of the unsecured creditors of the first corporation. 2 State v. Western Irrigating Canal Co., (1888) 40 Kan. 96; s. c. 10 Am. St. Rep. 166. 3 Even though he was not notified of, nor present at, the meeting at which the transfer was decided upon. Sawyer v. Dubuque Printing Co., (1889) 77 Iowa, 242. 4 Taylor v. Earle, 8 Hun, 1; Frothingham v. Barney, 6 Hun, 366; McCurdy v. Meyers, 44 Pa. St. 535; In re Empire Assoc., L. R. 4 Eq. 341; Clinch v. Financial Co., L. R. 4 Ch. 117; Bird v. Bird's &c. Co., L. R. 9 Ch. 358; Morawetz on Corporations, 212. 5 Morawetz on Corporations, 212. See, however, St. Louis &c. R. Co. v. Fiernan, 37 Kan. 606. |