88
REPORTER, vol.,57.
gheny county, Pa., about a mUe distant from the works of the Pittsburgh .Q()ntpany, and to 'compel the said Pittsburgh Pl1l.te-Glass Company toptll'chase thesarae, to prev,mt a dlJJlgerous and competition therefrom, for the price of 10,000 sbares of the capital stook of said companY,of the par yalull of $1,000,000, worth then in the market $155 per share, making the real consideration $1,550,000: and that at. the time the !;aid Jobn Pitcairn, Jr., I-Jdward Emory Ford, Artemus Pitcairn. and J. B. FQrd held together '4,350 shares oot of 6,000 shares of the capital stock.: that said sa;Ie Wlll! consummated; that any information as to the actual cost of the;workS was refused to stockholders; and the bill avers that the actual oostot the saJd works did not exceed $647,000. (5) That thereupon the capital stock of the Pit1l>burgh Plate-Glass Company was increased to the amount .of$2,OOO,000, and purchase-money shares, all a.f<oresaid, were issued to' the vendors: and that, a division Of the purchase-money stock having been made, the said J. B. Ford was made to appear as the owner of 4,000 shares, John Pitcairn, Jr., of 8.212 shares, EmQry J.,. Ford of 500 shares, Artemus Pitcairn of :ZOO shares. That the bo:ud of directors at that time consisted of John Pitcail'll, ,Jr., Edward Ford, Emory L. Ford, Artemlls Pitcairn, and JObn Scott, dead,) Edward F.ord being the president, Emory L. I!'or;d, secreW.I,'Y, .I).nd. John Jr., having resigned the vice presidency, A,rtemus Pitcairn succeeded him in that office. (6) The bill furtheravern that the said John Pitcairn, Jr., Edward Ford,E. L. Ford, and Artemus Pitcairn, directors of S,aid, company, entered into' a conspiracy, with J. B. Ford to erect another lJJld additional plate-glass works at Ford Oity, Armstrong county, Pa., and to compel the Pittsburgh Plate-GlassOompany to purohase the same, at suOb price as thelmight see fit to. exact, by reason of the menace which said works so constructed woUld PTesent of disastrous or ruinous. competitionshou).d the Pittsburgh Plate-Glass ComplJJlY not make the putchase' 'of the same; and tMt these perSons -formed It conspiracy, under the name of J. B. Ford & Co., to construot such worl.{S, and at the date of the 1i1ing of 1Jhepill had proposetLto to the Pittsburg1h Plate-Glass bonds lUld $750,000 of the capital stock Company for $750,000 of of the companY;Jo. be lssuedatpa"r, the bonds to mature .in three, four, llJIld five years, with interest at 6 per cent.: and that the capital stock. of the company at that time commaIided a premium of $62.50' per share, so that the price aforesaid in realityamollnted to $1,068,750: and that the said works when completed would not cost mOre than $1,000,000., (i) That said clirectors and J. B. lJ"ord clairred the right to build competitive wor!;:s for ,their own benefit, to be operated by themselves, or to' be sold to others for that purpose; and that said Foro City works were then in partial operation. and constituted a direct threat. and m lIUlce to the Pittsburgh Plate-Glass 'Company to compel them to accede to the demands of the syndicate; and thp,tsaid syndicate contTollf.'d seven-tenths of the capital stock of said Gompany, upon the then capitalization of the eompany. (8) That the directors, together with J. B. Ford, fur pursuance of such conspiracy, by their lIDdue Infiuence and efforts,. had procured a vote authorizing the acceptance of said offer to sell said Olty works, and to that endb-ad taken steps to procure an increase of the capital stock of the company to $2,750,000, and to procure the amendment of their charter powe.rs to enable them to carry on their corporate business in other cOlmties than the county of Allegheny. (9) That'an the members of the board of directors of the PittsQurgh Plate-Glass Company, and all the officers thereof except the treasurer, were members of the syndicate firm of J. B. lJ"ord & Co., and were interested in the consummation of the proPQsed sale of the Ford City works, and that seven-tenths of f!lecapital stock of the company. were hpld. by tllem. , 'Vlle bill then proceeds to that the said directors, acting in concert with the said J.B. he, th.e said J. B. II'ord, knowing their otliC'lal and tnlSt aI'l) prohibited from acting Ini derogation of .the interests they represent as officers and to the. prejudice of the Pittsburgh Plate(}iass Company, and that the works so erected by them were equit'l.bly till" property of said Pittlsburgh plate-Glass Company, for the construction or which they, said COrpQrat!on, should pay the actual cost thereof, with such reasonable profit as the. court might allow to the constructors thereof.
BARR' V.PIT-:I:SBURGH PLATE-GLASS CO.
89
A demurrer was tl;led, whIch was. overruled, and thereafter the defendants made answer, !ldmitting the building and sale of the Tarentum works, and the proposed sale of the Jj'ord City works, and also admitting the withholdingof informattOn from the stockholders as to the cost of either of those works, and deny that the· cost of the Tarentum works was only $650,000, or that the cost of the Ford City works was only $1,000,000. They admit that the stock of the company bore a premium in the market at the time of these transactions, but deny that the premium was as m\lch as is averred in the bill. They also deny that Edward Ford, Emory L. Ford, and Artemus Pitcairn were interested in the building or in the profits derived from the sale of the Tarentum works, but 1!hey admit that the Focd Oity works were built by a partnership consisting of all the directors of the Pittsburgh Plate-Glass Company then living, including therein the president and vice president of said company. The answers set up as justification for the purchase of the Tarentum works that such purchase was the unanimous vote of the stockholders, at a meeting called to consummate the purchase thereof, and, as respects the Ford City works, that the stockholders had refused to build such !works; and aver good faith to the minority stockholders in both transactions, and also aver their legal right to act as they did, '.rhe bill was filed to May term, 1889, prior to the meeting called for the purpose of increasing .the capital stock and the indebtedness of the company to provide means for the purchase of the Ford City works, but that meeting was subsequently held, and a vote taken, and the property conveyed, with full notice of the pendency of this bill. A replication having been filed, testimony was taken before an examiner, The case was argued upon the testimony and the law involved before the circuit judge, presiding in the circuit court of the United States for the western district of Pennsylvania, who adjudged that the blll should be dismissed, at the cost of the plaintiff; and in his opinion filed held that the plaintiff was not entitled to 1!he relief prayed for as to either of the properties; that the defendants in the various transactious had a right t(} build the two works specifically described, and that their action In the premises was In good faith, and thil.t the said had been duly ratified by the stockholders, and that offers of rescission made by the vendors of said works to the sto<:l,holders had been refused.
S. Schoyer, for appellant. D. T. Watson, for appellees. Before DALLAS, Circuit Judge, and BUTLER and WALES, District Judges. WALES, District Judge, (after stating the facts.) The charges of conspiracy and fraudulent oombination made against the defendants, and which are specifically set forth in the plaintiff's bill, involve questions of fact which are to be decided on the proofs. These charges cover two distinct and separate transactions" which will be considered in the order of their occurrence. 1. The sale and purchase of the Tarentum works. It is very clear that J. B. Ford was the original and sole projector of these works, and that he had made all the preparations for building them, by the pUJ:'lchase of land and materials, on his own responsibility, without the knowledge or aid of anyone of his codefendants, and that as soon as his design became known to them. they immediately opposed its further prosecution. At this time-in the year 1885 -the defendants owned a majority of the stook of the Pittsburgh Plate-Glass Company, and, with the exception of J. B. Ford, were di. rectors of the company. Edward and Emory L. Ford, the sons of
90
FEDERAL· RE!>OR'.rSR,
vol. .57.
erection,of;i;he: i'lU'elituiur by their of his advanced llge, and. for fear that he would the other defendants S1llW in ,become ,embarrassed. the a serious rival to the works aire!J,dy in S1).ccessat Creigti.top.; but, finding their remonst.rances to be unav!UUngtQdeter .1:, Ford from the of his plan, it was proposed by John Pitcairn that the Tareiitwn, works should be built, by the Pitts'bupghPlate-,Glass Company, which. would thusha;ve 'the cOlltrolof them and prevent competition. In this hadDQ sup.port from any of his fellow stockholders. The junior, Fo;rQe were unwilling to embark on. such an undertaking, because' it· might stop dividends on their stock, and run iil debt;. 'The majority of the stockholders were opposed, to .theoompany . the work for various reasons. Finally; at the instance .(jn persuasion, of the Ford brothers and others, who together o.wned nearly five-sixths of the outstanding of .the company, "John Pitcairn··formed a partnership with,,)"..'B. Ford by purchasiilg with his own'money one-half of the latter's interest in the Tarentum works . far as they had progressed, .and the pamnersh,ip:thus formed, under the name of J. B. Ford CO., carried ,on 'the 'works to ooIDlpletion,. without further objection or opposition JrOJIU any member of the Pittsburgh Plate· Glass Company. DndeF the terms of the· partnership "agreemen:t betweenJ. B. Ford and John Pitdairn, dated the 6th of October, 1885, Jqhn Pitcairn was to ,contribute $65,000 to the' cllJpital 00: the firm On the. understanding that after thatsu;m had been expended all additionail should be furnished in equal shares by the partners. One, if not the prindpa1., object in view in forming this. partnership was to keep the Tarentum worlf,s. in friendly hands, and to prevent them from being operated to the prejudice or. injury. of the Pittsburgh Plate-Glass Company. In the spring or summer 00: 1886, the. new works being nearly completed, and it being evident that they were of larger capacity, and would mannfacture plate glass cl1eaper and in greater quantities than could be doileat Creighton,Mr. John: Scott, then a large stockholder and a of the Pittsbnrgh<Plate-Glass Company, considered that it would be greatly to the advantage of the company to acqnire Tarentum. There was somediftlculty at first in bringing about that result, and it encountered the opposition of each of the partners of J. B.Ford & Co. J()hn Pitcairn was on the eve of going abroad, and J. B. Ford thought it would be more advantageons to his intereSts not to sell. '..Application, however, being made to J. B. Ford & Co: to state on what terms a sale or consolidation could be effected, the firm thought that the relative capacity of the two works &hould be the oosis.:of' the union, and that, as the Tarentum w<Wks had double the oapacity of th()$e at Creighton, the same proportion should be ;observed in providing for the union of the . two concerns, a reasonable allowance being made for the unfinished condition Off the· TarentUm -Works.· The first plan' of consolidation, & Co., was that the capital stock of the consented tohy
BARR -V. PITTS;BURGHPLATE-GLASS CO.
91
Pittsburgh Phite-Glass Company mould be incJ!eased f1'om'600,000 to $1,920,000, to Mdividedas follows: To J. B. Ford & Co., for Tarentum, $1,120,000; to the'stockholders of the Pittsburgh Plate-Glass Company, $200,000; the Tarentum, 'Works to be finished by J. B. Ford & Co. A meeting of the board of directors of _ Pittsburgh the Plate-Glass Company WIllS held on July 2, 1886, at IWhl,Gh this proposed arrangement was submitted, and 'on :.:notion ,a stockholders' meeting was called for September 6, 1886, to cons-ider the proposal, and the board recommended its acceptance. At the directors' meeting held on July 2, 1886, John Pitcairn asked to be and was excused from voting on account of his personal interest in the transfer of the property. Notice of the stockholders' meeting to be held on September 6, 1886, and of its purpose, was given by public advertisement, and by a circular directed to each stockholder; and on the day appointed for the meeting 5,515 shares out of the whole issue of 5,950 shares were represented. Mr. Barr, the plaintiff, presided at that meeting, and announced to the stockholders present that they had the power to "amend, alter, reject, or affirm the proposition" recommended by the directors. Mter some discussion J. B. Ford & Co. were requested to state the cost of the Tarentum works, which they refused to do, for the reaMn that the basis of the proposed transfer was the relative capacity of the two works. Finally, J. B. Ford & Co. submitted the following terms of consolidation, namely: That the capital stock of the Pittsburgh PlateGlass Company should be increased from $600,000 to $2,000,000, of which Creighton should represent $800,000, subject to a mortgage of $134,000, and Tarentum should represent a capitalstock of $1,000,000; that of this stock increase $200,000 should be distributed among the Creighton stockholders at that date as dividend, and that $1,000" 000 in stock at par should be issued to J. B. Ford & Co., leaving $200" 000 to be issued and sold to the stockholders on September 6, 1886, at par, for a working capital. These terms were approved aDd accepted by the unanimous vote of the stockholders present, and there is no evidence to show that any shareholder who was not represented at the meeting has ever disapproVed of its action. On October 27, 1886, J. B. Ford & Co. ,conveyed the Tarentum works to the Pittsburgh Plate-Glass Company, and received from the latter the entire purchase consideration, $1,000,000 of its stock at par; but, as the Tarentum works were still incomplete, J. B. Ford & Co. pledged $200,000 of the stock at par with the treasurer of the Pittsburgh Plate-Glass Company as security for the completion of Tarentum. The Pittsburgh Plate-Glass Company took possession of Tarentum, and have operated the same ever since. The Tarentum works were completed by J. B. Ford & Co. in the spring or summer of 1887, but it was not until AJpril 17, 1888, that the firm made a formal demand on the Pittsburgh Plate-Glass Company for the return of the pledged stock, whereupon, at a meeting of the board of directors, a resolution was adopted instructing the treasurer to deliver the stock. This resolution was passed over the protest of Mr: John Scott, one of the directors, and the