Citations
- 15 F.2d 157
Full opinion text
STONE, Circuit Judge.
These are appeals from dismissal of a bill in equity.
This is a bill by several stockholders of tbe Independent Coal & Coke Company against that company and John H. Tonkin, to cancel an option and contract for tbe sale of all of tbe assets of the company to Tonkin and to enjoin tbe company and Tonkin from carrying out such contract.
To tbe amended bill, separate motions to dismiss were filed. Tbe one as to tbe company was based upon tbe grounds following:
“(1) That it affirmatively appears from tbe face of tbe complaint that if any cause of action is stated in favor of tbe plaintiff and against this defendant that it is a cause of action relating to tbe internal affairs and management of this corporate defendant; that this corporate defendant is shown by tbe face of tbe complaint to be a corporation organized and existing under tbe laws of tbe state of Wyoming, and is as to tbe state of Utab, and as to tbe federal District of Utab, a foreign corporation; that this court has no jurisdiction to in any wise regulate, supervise, manage or interfere with tbe internal affairs of this defendant; and that neither any of tbe plaintiffs nor < this defendant are or ever have been, inhabitants of this District.
“(2) That it is shown upon tbe face of tbe said bill of complaint that tbe transaction which is sought to be annulled and canceled by tbe complaint, is one that was ratified by vote of more than two-thirds of tbe outstanding capital stock of tbe corporation defendant, which ratification and vote was made and taken at the office of the company at Evans-ton, Unitab county, state of Wyoming; and for that reason this defendant says that tbe annulment or cancellation of said transactiou, if any, is to be had by a court, must be made pursuant to some judicial proceedings in either the state courts of the state of Wyoming or the federal courts for the district of Wyoming; and that this court for the district of Utah is without jurisdiction .to hear and determine such proceedings.”
That of Tonkin was based on the grounds following:
“(1) That it affirmatively appears from the face of the bill of eomplaint that there is a defect and nonjoinder of necessary and indispensable parties to the maintenance and determination of this action, which defect and nonjoinder consists in this, to wit, that said bill of complaint shows upon its face that this corporate defendant is, and at all times mentioned in the eomplaint was under the management and control of a board of directors, eleven in number; that only three of said directors, to wit, W. G. MeRoberts, one of the plaintiffs, and W. B. Reed, one of the plaintiffs, and this defendant are or have been made parties to this action; that the other eight directors have not been made, and are not, parties to this action; that before this action can proceed to a final determination in this court it is necessary and indispensable that said eight directors who have not been made parties shall be made parties, either p. or d. [plaintiff or defendant].
“(2) That there is a nonjoinder and defect of parties in this, to wit, that it appears from the face of the bill of eomplaint that the Royal Coal Company, a corporation organized and existing under the laws of' the state of Utah, is a necessary and indispensable party defendant to a cancellation and annulment of the transaction set forth in the complaint.
“(3) That said bill of complaint does not state facts sufficient to constitute a cause of action against this defendant.”-
The motion of the company was sustained because “the court is without jurisdiction to hear the ease under the provisions of section 57 of the Judicial Code (Comp. St. § 1039), and consequently is without jurisdiction to hear the said cause as against the Independent Coal & Coke Company.”
At the time the above order or decree was entered, Tonkin was given' leave to file amendments to his motion. Sueh amendment added to the original motion the ground following :
. “That the court, having heretofore dismissed said bill of complaint against the Independent Coal & Coke Company on the ground that said court is without jurisdiction of said defendant, and it appearing, from the face of the bill of eomplaint that the Independent Coal & Coke Company is a necessary and indispensable party to the maintenance and determination of this action, and that this court has no jurisdiction of said Independent Coal & Coke Company or of the acts as to said company, the said defendant, John H. Tonkin, now moves to dismiss said bill on the ground that this court has no jurisdiction of said Independent Coal & Coke Company’ or the action against said company, and that therefore it has no jurisdiction to hear and determine this action as against this defendant.”
The Tonkin amended motion was sustained without statement of the ground therefor.
These appeals are from the two decrees or orders sustaining these motions and dismissing the bill with prejudice.
The motions, one or both, raise jurisdictional. questions as to parties (both present in and absent from the bill) and the sufficiency of the statements of the bill to entitle to equitable relief. The bill states, in substance, as follows:
The complainants are citizens and residents of Illinois and of Kentucky, the company of Wyoming and Tonkin of Utah. The company was organized, in 1906, under the law of Wyoming (with its principal office in that state) for the purposes of doing a general coal and coke mining business. Substantially the entire business of the company, since its organization, has been developing 1968 acres of coal land in Utah and in selling and marketing coal mined therefrom. The business has always been profitable, paying dividends, and the assets, as of January 31, 1925, were over $4,200,000 with about $345,-000 total indebtedness and over $376,000 Undivided profits. Besides the coal acreage and appurtenant mining machinery, the company owned all of the capital stock of two subsidiary corporations, organized* in Utah (one of which was the selling agency and the other the company store) and $200,000 capital stock of a spur railroad connecting the mines with a shipping point. There were eleven directors. The capitalization was 2,500,000 one dollar shares, of which plaintiffs owned 454,-480 shares (something over 18 per cent, of the entire stock). Two of the plaintiffs are directors.
Tonkin is a large stockholder, a director,general manager and “during all of said times down to the present time dominated and conducted all the practical administration of the affairs of the^defendant corporation, and has been in control of its board of directors.”
On December 18, 1924, the board of directors (the two who axe plaintiffs being absent) .adopted a resolution that “an option be given to John H. Tonkin covering the property of the Independent Coal & Coke Company for a period of six months from date, at a price of $2,500,000 payable, 50 per cent, in cash and 50 per cent, in preferred stock of a new corporation, or, if necessary, 40 per cent, in cash and 60 per cent, in preferred stock of a new corporation.”
Within the six months, Tonkin accepted the option in a letter as follows:
“Salt Lake City, Utah, May 18,1925.
“The Board of Directors, Independent Coal & Coke Company, Salt Lake City, Utah ■ — Gentlemen: Pursuant to the terms of an option granted me by you upon December 18, 1924, for the purchase of the property and assets of your company for the sum of $2,-500,000. I beg to advise you that I am prepared to accept the same, and to pay for it in the following manner, upon the completion of the necessary legal and business formalities to enable them to effect a valid transfer of the title to same:
In cash, the sum of one million dollars.... $1,000,000 In the first preferred 7 per cent, cumulative stock of a company to he organized for the purpose, one million five hundred thousánd shares of a par value of one dollar each................................... 1,500,000
Total ......................................$2,500,000
“The proposed company referred to is simultaneously with the acquirement of yonr property to purchase the physical property (free and clear of indebtedness) of the Royal Coal Company of Utah, for the sum of one million dollars ($1,000,000) payable as follows :
In cash the sum of four hundred thousand dollars ................................$ 400,000
In the first preferred 7 per cent, stock above referred to six hundred thousand' shares of the par value of one dollar each 600,000
Total ...................................... $1,000,000
“For the purpose of effecting the above stated objects the company referred to will be capitalized and financed as follows:
“First preferred 7 per cent, cumulative stock (nonvoting), interest payable semiannually, to he protected ’by the usual safeguards placed upon preferred stoeks, including a voting right at any time when two interest installments thereon shall he due and unpaid.
“Five million shares of a par value of $1.00 each, of which- there shall be issued two million six hundred and forty thousand shares; common stock, one hundred and eighty-seven thousand five hundred shares, of a par value of $1.00 each, of which there shall be issued one hundred thousand shares.
“A first mortgage bond issue, running for twenty years, drawing interest at six and one-half per cent, per annum, payable semi-annually for the sum of $3,000,000, of which there shall be issued $1,600,000.
“The above plan will provide the new company with the following new cash resources :
$1,600,000 bonds sold at 92 cents on the dol-
lar ...........................................$1,472,000
240,000 shares of preferred stock to be purchased by myself and associates at par.. 240,000
Total ......................................$1,712,000
“To be used as follows:
Purchase of Independent Coal & Coke Company ......... 1,000,000
Purchase of Royal Coal Company........... 400,000
Provision for mortgage to stalte of Utah.... 112.000
Promotion ...... 200,000'
$1,712,000
“The preferred stock issued will he used as follows:
Shares.
Purchase of Independent Coal & Coke Com-
pany ........................................ 1,500,000
Purchase of Royal Coal Company........... 600,000
Purchased by myself and associates for cash 240,000 Promotion ..................................... 300,000
Total ...................................... 2,640,000
“The common stock issued of one hundred thousand shares to go to myself and associates for their services and expenses.
“The annual fixed charges of the new company will be as follows, based upon first year:
Interest upon $1,600,000 bonds at 6% per cent $104,000
Amortization of discount on same, 20-year basis .......................................... 6,400
Sinking fund 2VZ per cent............ 40,000
Sinking fund 8 cents per ton on coal mined and shipped (average 7 years, 1918 to 1924, inclusive, 557,000 tons)....................... 44,560*
Interest upon 2,640,000 shares preferred stock at 7 per cent.,.................................. 184,800
Total........................................$379,76