
133 U.S. 50 (1890)
MASON
v.
PEWABIC MINING COMPANY.
PEWABIC MINING COMPANY
v.
MASON.
Nos. 168, 240.
Supreme Court of United States.
Argued December 17, 18, 1889.
Decided January 13, 1890.
APPEALS FROM THE CIRCUIT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF MICHIGAN.
*56 Mr. Don M. Dickinson (with whom was Mr. Alfred Russell on the brief) for Mason and others.
Mr. Thomas H. Talbot for Pewabic Mining Company and others.
*58 MR. JUSTICE MILLER, after stating the case as above reported, delivered the opinion of the court.
With regard to the main question, the power of the directors and of the majority of the corporation to sell all of the assets and property of the Pewabic Mining Company to the new corporation under the existing circumstances of this case, we concur with the Circuit Court. It is earnestly argued that the majority of the stockholders  such a relatively large majority in interest  have a right to control in this matter, especially as the corporation exists for no other purpose but that of winding up its affairs, and that, therefore, the majority should control in determining what is for the interest of the whole, and as to the best manner of effecting this object: It is further said that in the present case the dissenting stockholders are not compelled to enter into a new corporation with a new set of corporators, but have their option, if they do not choose to do this, to receive the value of their stock in money.
It seems to us that there are two insurmountable objections to this view of the subject. The first of these is that the estimate of the value of the property which is to be transferred to the new corporation and the new set of stockholders is an arbitrary estimate made by this majority, and without any power on the part of the dissenting stockholders to take part, or to exercise any influence, in making this estimate. They are therefore reduced to the proposition that they must go into this new company, however much they may be convinced that it is not likely to be successful, or whatever other objections they may have to becoming members of that corporation, or they must receive for the property which they have in the old company a sum which is fixed by those who are buying them out. The injustice of this needs no comment. If this be established as a principle to govern the winding up of dissolving corporations, it places any unhappy minority, as regards the interest which they have in such corporation, under the absolute control of a majority, who may themselves, as in this case, constitute the new company, and become the purchasers *59 of all the assets of the old company at their own valuation.
The other objection is that there is no superior right in two or three men in the old company, who may hold a preponderance of the stock, to acquire an absolute control of the whole of it, in the way which may be to their interest, or which they may think to be for the interest of the whole. So far as any legal right is concerned, the minority of the stockholders has as much authority to say to the majority as the majority has to say to them, "We have formed a new company to conduct the business of this old corporation, and we have fixed the value of the shares of the old corporation. We propose to take the whole of it and pay you for your shares at that valuation, unless you come into the new corporation, taking shares in it in payment of your shares in the old one." When the proposition is thus presented, in the light of an offer made by a very small minority to a very large majority who object to it, the injustice of the proposition is readily seen; yet we know of no reason or authority why those holding a majority of the stock can place a value upon it at which a dissenting minority must sell or do something else which they think is against their interest, more than a minority can do.
We do not see that the rights of the parties in regard to the assets of this corporation differ from those of a partnership on its dissolution, and on that subject Lindley on Partnership says, Book 3, c. 10, § 6, sub-div. 4, page 555, original edition:
"In the absence of a special agreement to the contrary, the right of each partner on a dissolution is to have the partnership property converted into money by a sale, even though a sale may not be necessary to the payment of debts. This mode of ascertaining the value of the partnership effects is adopted by courts of equity, unless some other course can be followed consistently with the agreement between the partners, and even where-the partners have provided that their shares shall be ascertained in some other way, still, if owing to any circumstance their agreement in this respect cannot be carried out, or if their agreement does not extend to the event which has in fact arisen, realization of the property by a sale is the only alternative which a court of equity can adopt."
*60 The authorities cited by Lindley for this proposition amply support it.
In the case of Crawshay v. Collins, 15 Ves. 218, a commission of bankruptcy had been issued against Noble, one of the members of a partnership engaged in the business of manufacturing pumps and engines. The assignee of Noble filed a bill, asking for a division of the assets, which consisted largely of patents, and upon a very full argument upon the subject, Lord Eldon says: "Another mode of determination of a partnership is not by effluxion of time, but by the death of one partner." The question then is, he says, "whether the surviving partners, instead of settling the account and agreeing with the executor as to the terms upon which his beneficial interest in the stock is still to be continued, subject still to the possible loss, can take the whole property, do what they please; and compel the executor to take the calculated value. That cannot be without contract for it with the testator. The executor has a right to have the value ascertained in the way in which it can be best ascertained, by sale."
In 17 Ves. 298, a case more analogous to the present one came before the court. In that case (Featherstonhaugh v. Fenwick) the parties were engaged as partners in the business of manufacturing glass, and after deciding one of the questions in the case, to wit, that the partnership was dissolved or should be dissolved by decree of the court, the master of the rolls, Sir William Grant, proceeded to say: "The next consideration is whether the terms upon which defendants proposed to adjust the partnership concern were those to which the plaintiff was bound to accede. The proposition was that a value should be set upon the partnership stock, and that they should take his proportion of it at that valuation, or that he should take away his share of the property from the premises. My opinion is clearly that these are not terms to which he is bound to accede. They had no more right to turn him out than he had to turn them out, upon those terms. Their rights were precisely equal: to have the whole concern wound up by a sale, and a division of the produce. As therefore they never proposed to him any terms which he was bound to accept, the *61 consequence is that, continuing to trade with his stock, and at his risk, they come under a liability for whatever profits might be produced by that stock." He then refers to the case of Crawshay v. Collins, just cited, with approval.
In the case of Hale v. Hale, 4 Beavan, 369, Joseph Hale, who carried on the trade of a brewer in partnership with George Hale and two other persons, died leaving a will. The master of the rolls, in discussing the relative rights of the surviving partners and the executor of the deceased, says in regard to the executor: He "is not obliged to submit to the statement of the account which is made by the continuing partners; clearly not, in the absence of all contract to that effect, which is admitted to be the case here. He has a right to say, `I must have the actual value of my partnership assets determined, and though it may be very inconvenient for you to ascertain the value in the mode prescribed by the law, yet if we cannot otherwise agree, I must have it ascertained by the only mode by which it can be ascertained accurately, namely, by a sale for what it will fetch in the market.'"
The next case, Wilde v. Milne, 26 Beavan, 504, was a case bearing a closer analogy to this, because the parties were engaged in the mining business, to wit, working a colliery. In consequence of some disagreements, the plaintiff gave notice to dissolve, and instituted this suit to have the partnership wound up. He did not allege that there were any debts, but prayed that the partnership property might be sold and applied to the payment of the debts, and that the surplus might be divided. This was resisted by defendant Milne alone. On the hearing, the master of the rolls, Sir John Romilly, said: "I am clearly of opinion that this is an ordinary case of partnership, and when it is dissolved or terminated, any one of the partners is entitled to have the whole assets disposed of. In this case it is admitted that any one can put an end to the partnership. The result is, that that which forms the partnership assets must be disposed of for the purpose of settling the account between the partners. I consider this established by Crawshay v. Maule, 1 Swanston, 518, 526." And after pointing out the difficulty in the mode of dividing the property, which consisted *62 partly of real estate, of the use of the shaft, of the machinery and engines, etc., he said: "The court is compelled by the exigency and circumstances of these cases to direct a sale."
The case of Rowlands v. Evans and Williams v. Rowlands, 30 Beavan, 302, arose out of another partnership in mining business very much like the case before us. Some of the partners interested desired that the mining business might be carried on by a miner and receiver, but the plaintiff objected to this. One of the partners had become a lunatic, and his business was in the hands of a committee, and the question was whether the partnership be dissolved and the property sold, or a receiver appointed to conduct the operations of the concern. The master of the rolls said: "I do not think the point is touched by the decisions. The difficulty is this: the court cannot compel persons to be in this situation;  either to carry on business with the committee of a lunatic, subject to all the inconveniences of having a manager appointed by the court, . . . and subject to appeal to the House of Lords. . . . No one would bid for a share in a mine to be carried on with the committee of a lunatic, nor could the value of the share of the lunatic be properly ascertained under such circumstances. I think that the value of the whole must be ascertained by a sale by auction, and that some indifferent person well acquainted with these matters should be directed to sell the property, and that all parties should have liberty to bid."
In the case of Burdon v. Barkus, 4 De G., F. & J., 42, which came before the Lords Justices of Appeal from the Vice Chancellor's Court, Lord Justice Turner, delivering the opinion said: "The next inquiry to be considered is the inquiry as to the valuation of the stock and plant, which is objected to on both sides; by the defendant, as importing that the stock is to be valued; by the plaintiff, as importing that it might be valued as the stock of a going concern. I think that both of these objections are well grounded. There was no agreement between these parties for the stock and plant being taken by either party at a valuation on the termination of the partnership, and in the absence of such an agreement a partner cannot, as I conceive, be compelled to take, nor can he compel *63 his copartner to take, the stock at a valuation. Each is entitled to have it ascertained by sale, and as to the defendant's claim to have the stock dealt with as the stock of a going concern, I do not see how it can be maintained, for the plaintiff is certainly not bound to continue the concern."
These English authorities would seem to be conclusive of the right of the plaintiffs in the present case to have a sale of the property. The same doctrine is very decisively announced in the case of Dickson v. Dickinson, 29 Connecticut, 600. This was a bill in regard to a partnership, the main object of which was to procure the division of certain property which the plaintiffs claimed to belong to the partnership. The court said: "The plaintiff has no equitable claim to a decree in his favor. So far as the bill asks for the division of the property, we had supposed this object could only be effected by a sale of the property and a conversion of it into cash, and then dividing the cash, because as between partners there is no other mode, where they do not agree, of ascertaining the value of partnership property or of disposing of it."
The court then refers to the case of Sigourney v. Munn, 7 Connecticut, 11, and cites the language of Judge Hosmer in that case, as follows: "In every case in which a court of equity interferes to wind up the concerns of a partnership, it directs the value of the stock to be ascertained in the way in which it can best be done, that is, by the conversion of it into money. Every party may insist that the joint stock shall be sold."
In the Supreme Court of Michigan, in Godfrey v. White, 43 Michigan, 171, which is mainly important as showing the concurrence of the highest court of the State under whose laws the Pewabic Mining Company was organized, that court decided that certain lands which constituted a part of the partnership property should not be partitioned between the partners, but should be sold and the proceeds divided. See also Briges v. Sperry, 95 U.S. 401.
We do not say that there may not be circumstances presented to a court of chancery, which is winding up a dissolved corporation and distributing its assets, that will justify a decree ascertaining their value, or the value of certain parts of them, *64 and making a distribution to partners or shareholders on that basis; but this is not the general rule by which the property in such cases is disposed of in the absence of an agreement.
We are of opinion that on the appeal of the defendants from this part of the decree, it must be affirmed.
However honest the directors may be who conducted the business of this corporation for nearly a year after its dissolution without any attempt to wind it up, but who, on the contrary, assessed $88,000 on the shares of the stock and collected it, and did much other of the ordinary business of mining operations, it seems to us eminently proper that in this proceeding, by which the court undertook to wind up the affairs of the corporation, to pay its debts, and to realize its assets and distribute them among the shareholders, these directors should account for what they did in that time. We do not decide, nor do we think it was necessary for the court below to have decided, whether those directors had anything in their hands which should be accounted for in the final liquidation of the partnership affairs, or whether they had not. It is the object of such an inquiry as that sought by complainants in their bill to ascertain this fact. It was not a part of the matter referred to the commissioner in the former reference. We think it is a proper subject of investigation to be made by a master to whom the matter shall be referred, with express directions to ascertain and report upon that subject. See authorities already cited.
That part of the decree, therefore, of the court denying this relief is reversed, and the case remanded to the court below with directions to appoint a master, and to direct such an inquiry and report.
BRADLEY, J. I think the opinion of the court asserts too strongly the right of the minority stockholders to insist upon a sale. In many cases in this country a valuation of the interest of a minority, under the direction of the court, has been deemed a proper method of ascertaining their share in the assets, where a sale would be prejudical to the interests of the whole.
MR. JUSTICE GRAY was not present at the argument, and took no part in the decision of this case.
