Shepaug Voting Trust Cases

Citations

• 60 Conn. 553

Syllabus

<p>A syndicate purchased a majority of the capital stock of the Shepaug Railroad Company, which was placed in a voting trust to continue for five years, or until a consolidation was effected with some other railroad company, or it should be dissolved by agreement. A trust company was to act as trustee, and was to take the title and issue certificates to the members of the’syndicate of the shares in it held by each, and was to vote on the stock as directed by a committee of the syndicate. The apparent object of the arrangement was simply to extend the railroad to tide-water and form a connection there with a certain other road, but there was a secret purpose to make a profit for themselves out of the construction contracts which they as directors of the railroad company would be able to make. After they had purchased the majority of the stock they made themselves directors and officers of the road and one of their number its president. The syndicate made S, one of their number, their financial agent, and, it being necessary to borrow money to pay for the stock purchased, had a large portion of the trust certificates issued directly to him and they were pledged by him in raising the money. They were by their terms transferable and had powers of attorney printed upon them which were signed in blank by S. Before the connection at tide-water could be effected S failed and went into insolvency. The loans were not paid and the pledged certificates were sold at public sale and most of them were bought by the plaintiffs. The certificates thus bought covered 7000 shares of the capital stock. The plaintiffs also purchased 3300 shares of the stock which had not gone into the trust, making their entire holdings 85 per cent of the whole capital. After the plaintiffs had acquired these trust certificates and this stock they notified the trust company that they revoked the powers given by the trust agreement and demanded that the stock represented by the certificates should be tran