Appeals, Nos. 230 and 231, Jan. T., 1950, from decree of Court of Common Pleas of Lancaster County, in Equity, No. 10, in case of W. W. Bechtold et al. v. Coleman Realty Company et al. Decree reversed; reargument refused May 2, 1951.
Robert T. McCracken, with him Harris C. Arnold and Arnold, Bricker & Beyer, for appellants.
Paul A. Mueller, with him Ralph M. Barley, for appellees.
Before Drew, C.j., Stearne, Jones, Bell, Lander and Chidsey, JJ.
OPINION BY MR. JUSTICE LADNER
The plaintiffs (appellants) being minority stockholders of the Coleman Realty Company, filed a bill in equity to have adjudged as invalid the repeal by a majority stock vote of certain by-laws of the company which imposed restrictions on the right of stockholders to sell the company's stock. The court below entered a final decree dismissing the bill, and directing plaintiffs to surrender their respective certificates for reissue as required by the repeal resolution. From that decree we have this appeal.
There is little if any dispute in the essential facts and the question resolves itself into one of law. From the fact findings of the court below and the undisputed evidence we gather the following material facts: M. T. Garvin (now deceased) was originally the sole owner
of a large department store business in the City of Lancaster, and of the building in which the business was carried on. In 1916 he incorporated his enterprise under the name of M. T. Garvin & Company: see Garvin's Estate, 335 Pa. 542, 6 A.2d 976 (1939). In the fall of 1930 he incorporated the Coleman Realty Company with a capital of $300,000 divided into six thousand shares of $50.00 each for the purpose of separating the real estate ownership from the mercantile business. After organization of the Coleman Company the title to the real estate occupied by Garvin & Company was conveyed by that company to the Coleman Company in exchange for all of the (6,000)*fn1 shares of stock of the latter company. At the organization meeting of the Coleman Company, by-laws were adopted by unanimous vote of the incorporators in which Article VIII, section 4, imposed, inter alia, the following restrictions on the transfer of stock, viz., "Section 4. No stock shall be sold or transferred by any stockholder to any person not already a stockholder until an offer has first been given to the corporation or the remaining stockholders in proportion to their interest in the corporation, to purchase said stock at its book value as appearing on the books of the company, except that stock may be transferred by any stockholder to an employee in recognition of his service and ability in behalf of the corporation."
This provision of the by-laws was also printed on the stock certificates, as directed by section 5 of Article VIII of said by-laws. Two days after the organization meeting, viz., January 2, 1931, M. T. Garvin &
Company distributed 4,000 shares of its 5,998 shares to its shareholders who were also the employees of M. T. Garvin & Company in the nature of a dividend on the Garvin stock made payable in Coleman stock. M. T. Garvin personally received by way of this stock dividend 3280 of the 4,000 shares and immediately purchased the remaining m20 shares from those who had received these shares so that thereafter M. T. Garvin owned individually 4,000 shares of the Coleman Company stock. Until his death Mr. Garvin remained the principal shareholder of both companies and was the president ...