there cannot be a de facto consolidated corporation if there has been no attempt at all to comply with the requirements of the statute, or if there is not at least a colorable compliance therewith.50 § 4789. Power to enforce subscriptions to stock. It has been held, however, that a merely de facto consolidated corporation, although it may be entitled to sue on its contracts, cannot enforce a subscription to the stock of one of its constituent corporations, but that, in order to do this, it must show compliance with all the requirements of the statute authorizing the consolidation.51 X. RIGHTS OF DISSENTING STOCKHOLDERS § 4790. In general. The necessity for consent of all or a certain part of the stockholders of both or all the constituent companies, to a consolidation, has already been noticed.52 If a stockholder, although not consenting to the consolidation, is nevertheless bound thereby under the rules above stated, his only rights are those provided for by the statute, if any,53 except in case of fraud or bad faith.54 The right to object to consolidation is "an equity or right of a purely personal character, belonging only to the persons who were members or shareholders before the power to consolidate was given," and does not pass to a transferee after the power to consolidate was conferred by statute.55 A dissenting stockholder may compel an accounting by his company of the profits and earnings of the business, it seems, notwithstanding the sale of the stock of the company, without a merger, where his company remains in business.56 § 4791. Injunction against consolidation. Minority stockholders, in a proper case, where their rights would be injured by a consolidation, may enjoin such a consolidation.57 But consolidation cannot be enjoined unless it is actually threatened and may be expected with v. Feight, 41 Ind. App. 416, 84 N. E. 15. 50 See § 289, supra. 51 Tuttle v. Michigan Air Line R. Co., 35 Mich. 247; Mansfield, C. & L. M. R. Co. v. Drinker, 30 Mich. 124; Mansfield, C. & L. M. R. Co. v. Stout, 26 Ohio St. 241; Mansfield, C. & L. M. R. Co. v. Brown, 26 Ohio St. 223. See, generally, §§ 586, 587, supra. 52 See § 4685, supra. 54 See § 4793, infra. 55 Colgate v. United States Leather Co., 73 N. J. Eq. 72, 67 Atl. 657. 56 Logan v. New York Sugar Refining Co., 176 N. Y. App. Div. 660, 163 N. Y. Supp. 214. 57 Boyd v. New York & H. R. Co., 220 Fed. 174. reasonable certainty.58 A preliminary injunction to restrain a consolidation should not be granted where there will be no irreparable injury.59 § 4792. Grounds for enjoining or setting consolidation asideGeneral rule. A dissenting stockholder may sue to enjoin or set aside a consolidation or merger on the ground that there is no statutory authority therefor,60 just as he may maintain such a suit to enjoin any other ultra vires act by the corporation; or when the circumstances are such that the corporation has no right to consolidate without his consent, although there may be statutory authority for consolidation; 61 or where the consolidation or merger is otherwise illegal; 62 provided he has not been guilty of such delay as to amount to laches.63 On the other hand, if the merger or consolidation is authorized by law, and it is legal notwithstanding his dissent,64 the general rule is that he cannot attack it unless he can show fraud or unfairness.65 Dissenting stockholders cannot attack the consolidation merely on the ground that it is in effect a sale to a company which is the majority stockholder.66 So the fact that the corporations consolidated had common directors does not render the consolidation subject to attack,67 since common officers, wholly or in part, of the two or more consolidating corporations, does not necessarily render the consolidation invalid at the suit of a dissenting stockholder.68 § 4793. Fraud or unfairness. Dissenting stockholders may attack a consolidation on the ground of fraud of the corporate officers 58 Venner v. Chicago City R. Co., 258 Ill. 523, 101 N. E. 949. 59 De Koven v. Lake Shore & M. S. Ry. Co., 216 Fed. 955. 60 William B. Riker & Son Co. v. United Drug Co., 79 N. J. Eq. 580, Ann. Cas. 1913 A 1190, 82 Atl. 930; Knapp v. Supreme Commandery, United Order of Golden Cross of World, 121 Tenn. 212, 118 S. W. 390. 61 Mowrey v. Indianapolis & C. R. Co., 4 Biss. 78, Fed. Cas. No. 9,891; Nathan v. Tompkins, 82 Ala. 437, 2 So. 747; Botts v. Simpsonville & B. C. Turnpike Road Co., 88 Ky. 54, 2 L. R. A. 594, 10 S. W. 134; Lauman v. Lebanon Valley R. Co., 30 Pa. St. 42, 72 Am. Dec. 685. 62 Consolidation may be enjoined where it will violate the Sherman Act or the state anti-trust laws. De Ko- 63 See § 4794, infra. 65 Norton v. Union Traction Co. of Indiana, 183 Ind. 666, 688, Ann. Cas. 1918 A 156, 110 N. E. 113; Colby v. Equitable Trust Co., 124 N. Y. App. Div. 262, 108 N. Y. Supp. 978; Morse v. Equitable Life Assur. Society, 124 N. Y. App. Div. 235, 108 N. Y. Supp. 986. 66 Colgate v. United States Leather Co., 73 N. J. Eq. 72, 67 Atl. 657. 67 Colgate v. United States Leather Co., 73 N. J. Eq. 72, 67 Atl. 657. 68 Dady v. Georgia & A. Ry., 112 Fed. 838. 69 [§ 4793 or majority stockholders in regard thereto, although it is held that minority stockholders cannot attack a consolidation as amounting to a constructive fraud, but must show actual fraud.70 If the terms of the proposed merger or consolidation, in regard to the exchange of stock or the relative rights of the holders of preferred and common stock, are unfair and inequitable, the combination may be enjoined or set aside." Thus, a proposed consolidation agreement which inequitably affects the rights of preferred stockholders in relation to the accumulated dividends upon their stock may be enjoined.72 So a minority stockholder in a constituent corporation is entitled to a restoration of the property of his company from the consolidated company where the consolidation was effected by a combination of the holders of a majority of the stock in fraud of the rights of the minority stockholders and where the combination was for the benefit of a corporation owned by such majority stockholders at the expense of such minority holders.78 Generally, whether a consolidation agreement is fair to all the stockholders depends upon the facts of each case. 74 On the other hand, courts will not interfere with a consolidation agreement on the ground that it is unfair in its terms, as favoring the stockholders in one corporation at the expense of the other, in regard to the basis of exchanging stock, except in a clear case.75 And a consolidation will not be enjoined at the suit of minority stockholders before consummation where the fairness of the terms of consolidation can only be properly determined after the plan is put in operation.76 So where majority stockholders voted to sell its assets to another company for shares of stock in the purchasing company on the basis of the market value of the shares in both companies, Jones v. Missouri-Edison Elec. Co., 199 72 Colgate v. United States Leather 74 See Beling v. American Tobacco Co., 72 N. J. Eq. 32, 65 Atl. 725; Colby v. Equitable Trust Co., 124 N. Y. App. Div. 262, 108 N. Y. Supp. 978. 75 Colby v. Equitable Trust Co., 124 N. Y. App. Div. 262, 108 N. Y. Supp. 978. 76 Simon Borg & Co. v. New Orleans City R. Co., 244 Fed. 617. and the stockholders in the selling company were given the option of receiving the market value of their stock, minority stockholders could not have the sale set aside because the market value of the assets of the selling company was considerably in excess of the market value of its stock.77 A consolidation agreement as proposed by directors must be fair to stockholders, and a stockholder is not required to exercise his option to have his stock appraised, as provided for by statute, until he has had an opportunity of joining in the consolidation under terms and conditions which as to him are legal and equitable.78 The rule that the existence of a corporation cannot be collaterally attacked by a private individual is no bar to a suit by a minority stockholder to avoid for fraud or breach of trust a contract of consolidation and to restore the property of the corporation injured to its former owner.79 In other words, while a consolidation of corporations may result in extinguishing the original constituents, such result will not be deemed to have taken place where the consolidation was brought about by the fraud of the majority so as to bar a suit by minority stockholders in behalf of a constituent company 80 to have restored the property wrongfully diverted by the illegal consolidation. § 4794. Effect of delay in suing. The right of a dissenting stockholder to attack the consolidation may be barred by laches,81 Beling v. American Tobacco Co., 72 New York. Venner v. New York Cent. & H. River R. Co., 177 App. Div. 296, 164 N. Y. Supp. 626; Drake v. New York Suburban Water Co., 26 App. Div. 499, 50 N. Y. Supp. 826, five years. North Carolina. Spencer v. Seaboard Air Line R. Co., 137 N. C. 107, 1 L. R. A. (N. S.) 604, 49 S. E. 96, two years. Ohio. Chapman v. Mad River & L. E. R. Co., 6 Ohio St. 119. Rhode Island. Boston & P. R. Corporation v. New York & N. E. R. Co., 13 R. I. 260, 264, twelve years. A delay of over two months has been held, under particular circumstances, to be such laches as to preclude the right of a dissenting stock as where the rights of innocent third persons have intervened, 82 and this is true as to a suit to recover the value of his stock.83 However, the fact that the position of the parties has not changed may save a stockholder, in some cases, from loss of right through delay in objecting to the merger of his corporation with another.84 Thus, where a shareholder had no actual notice or knowledge of a merger of the corporation of which he is a member, and the rights of third persons have not intervened, his rights will not be deemed lost by failure to act immediately after consummation of the union,85 But stockholders may be barred by laches, in a proper case, from attacking the consolidation where they had either actual notice of the consolidation or notice of facts sufficient to put them on notice.86 There is no laches where a stockholder waits the result of suits by other stockholders to restrain the consolidation.87 holder to set aside a consolidation. Dana v. American Tobacco Co., 73 N. J. Eq. 736, 69 Atl. 223. 82 Where minority stockholders have delayed so long in objecting to a consolidation or sale that the granting of an injunction requested will inflict serious injury on innocent parties, the injunction will be refused. Tanner v. Lindell R. Co., 180 Mo. 1, 103 Am. St. Rep. 534, 79 S. W. 155. 83 A stockholder in a constituent company is barred by laches from recovering from the consolidated company the value of his stock in the constituent company where over thirty years have elapsed since the consolidation which was open and notorious. Auten v. St. Louis, I. M. & S. R. Co., 110 Ark. 24, 160 S. W. 873. Delay held not fatal, see Southern Mut. Aid Ass'n v. Blount, 112 Va. 214, 70 S. E. 487. In Texas, it is pointed out that delay may be such as to bar setting aside the consolidation without precluding relief by way of compensation for stock of a dissenting stockholder. International & G. N. R. Co. v. Bremond, 53 Tex. 96, 119. 84 Douglass v. Concord & M. R. R., 72 N. H. 26, 54 Atl. 883, holding also that under the statutes of New Hampshire a stockholder does not lose his rights by failing to attend a meeting at which a merger of corporations was arranged for the purpose of opposing a contract by reason of which the member was deprived of the value of his stock. 85 Douglass v. Concord & M. R. R., 72 N. H. 26, 54 Atl. 883. A stockholder of a constituent company who is ignorant of the consolidation is not precluded from asserting his right to shares of stock in the consolidated company, or their value, by a delay of several years where no one has been injured by the delay. Douglass v. Concord & M. R. R., 72 N. H. 26, 54 Atl. 883. 86 Cole v. Birmingham Union R. Co.. 143 Ala. 427, 39 So. 403. It has been held, however, that stockholders in the merged company do not waive the right to attack the invalidity of the merger by lapse of time where they had no knowledge of the merger. Richards v. Robin, 178 N. Y. App. Div. 535, 165 N. Y. Supp. 780. 87 Jackson Co. v. Gardiner Inv. Co., 200 Fed. 113. |