Durkee v. Askren

• Citation: 40 N.E. 626,155 Ill. 354
• Parties: DURKEE v. PEOPLE ex rel. ASKREN.
• Decision Date: 01 April 1895
• Court: Supreme Court of Illinois

155 Ill. 354

40 N.E. 626

DURKEE

v.PEOPLE ex rel. ASKREN.¹

Supreme Court of Illinois.

April 1, 1895.

Appeal from appellate court, Second district.

Quo warranto by the people, on the relation of M. F. Askren, against Edward H. Durkee to test defendant's title to the office of director of the Toledo, Peoria & Western Railway Company. There was judgment of ouster, which was affirmed by the appellate court. 53 Ill. App. 396. Defendant appeals. Affirmed.Jack & Tichenor, for appellant.

Stevens & Horton, for appellee.

In this quo warranto proceeding the circuit court of Peoria county overruled a demurrer to the information, and rendered final judgment of ouster and for costs against Edward H. Durkee, the defendant. An appeal to the appellate court of the Second district resulted in a judgment of affirmance. This further appeal was then taken.

The opinion filed in the appellate court was as follows (Cartwright, J.):

‘An information in the nature of a quo warranto was filed in pursuance of leave granted for that purpose, upon the relation of M. F. Askren, against Edward H. Durkee, the appellant, to contest the right of appellant to hold the office of director of the Toledo, Peoria & Western Railway Company. A demurrer was interposed to the information, and, the demurrer being overruled, appellant elected to abide by it, and judgment of ouster and for costs was entered against him. The facts appearing in the information, which it is necessary for us to state, are as follows: The Toledo, Peoria & Western Railway Company was organized March 28, 1887, under the general law of this state for the incorporation of railway companies, with a capital stock of $4,500,000, for the purpose of constructing a railroad from the eastern boundary line of the state at a fixed point, westerly through certain counties, to the western boundary line of the state at the city of Warsaw, and also by a branch, from La Harpe to Burlington, in the state of Iowa. At the time of such organization, Charles Moran and Thomas Denny, of the city of New York, owned a railroad, which answered the description of such proposed railroad, and formerly known as the Toledo, Peoria and Western Railroad, which they proposed to sell to the Toledo, Peoria and Western Railway Company. Their proposition was as follows: ‘The undersigned hereby subscribe for 44,991 shares of the capital stock of the Toledo, Peoria and Western Railway Company, amounting to the sum of $4,499,100 (the shares being $100 each), provided always, and this subscription is made only upon one condition: that the manner and terms of payment hereinafter specified are by the board of directors and the incorporators and the remaining stockholders of said company accepted as a part of this contract of subscription.’ The terms of payment hereinbefore referred to are as follows: ‘The subscribers shall convey by proper indenture of deed or bill of sale to the Toledo, Peoria and Western Railway Company the railway now held by the subscribers, constructed in the state of Illinois, commencing at the eastern boundary line of the state of Illinois, in the county of Iroquois, at a point where the present Toledo, Peoria and Western Railroad Company connects with the Toledo, Logansport and Burlington Railway Company, now called the Chicago, St. Louis and Pittsburg Railroad, in the state of Indiana, and to extend thence westerly through the counties of Iroquois, Ford, Livingston, McLean, Woodford, Tazewell, Peoria, Fulton, McDonough, Hancock, and Henderson to the western boundary line of the state of Illinois, at the city of Warsaw, and also at the town of Hamilton, on the Mississippi river, and also by a branch from La Harpe to Burlington, in the state of Iowa; and in consideration therefor shall be paid the shares of stock hereinbefore subscribed for, and also 4,500 of the first mortgage bonds of the Toledo, Peoria and Western Railway Company of $1,000 each, amounting to $4,500,000, having thirty years to run, and bearing interest at 4 per cent. per annum; the said railway and property being estimated, accepted, and taken over by the Toledo, Peoria and Western Railway Companyat the value of $8,999,100, the said amount to be represented by the said 44,991 shares of stock and said 4,500 of first mortgage bonds.’ Said proposition of Moran and Denny was accepted June 25, 1887, by the incorporators, directors, and remaining stockholders of the railway company. The incorporators and first board of directors had before this time, on the day that the articles of incorporation were issued, adopted by-laws, among which were the following: ‘No. 2. At all meetings of the stockholders the owners of bonds of the company which, by the terms of their issue, confer voting power, shall be entitled to vote on their bonds; that is to say, one vote either in person or by proxy on every one hundred dollars of bonds owned for thirty days next preceding such meeting.’‘No. 5. At each annual meeting of the stockholders there shall be elected by ballot three directors to serve for three years to fill the place of office of those whose terms shall then expire, and such further number of directors as shall be necessary to fill any vacancy.’‘No. 16. The stock of the company shall be transferable on the books of the company by the stockholders or their legal representatives on surrender of the certificate, or upon satisfactory proof of their loss, and in case of loss only upon the delivery of a bond of indemnity satisfactory to the executive committee or board of directors.’ Upon the acceptance of the proposition of Moran and Denny, the incorporators, directors, and stockholders provided for the issue of 5,000 bonds of $1,000 each, maturing and bearing interest as stated in the proposition, and for making a mortgage or trust deed securing the same, and providing that the holder of each bond should have the right to vote thereon at all meetings of the stockholders, one vote for each one hundred dollars of said bonds. Afterwards the railroad company issued the capital stock in the sum of $4,500,000, and executed 5,000 bonds of $1,000 each, as provided, and delivered to Moran and Denny $4,499,100 of the capital stock and $4,500,000 in bonds, retaining 500 bonds for future use, and securing all said bonds by mortgage on the railway property, in which mortgage it was provided that the holders of bonds might vote at any and every meeting of the stockholders, one vote for every hundred dollars of bonds held by the person proposing to vote, for a period of thirty days prior to the holding of any meeting. The bonds issued contained a provision that the holders might vote as above stated, and the stock certificates contained a provision as follows: ‘This certificate, and the stock represented hereby, is issued, received, and held subject to five thousand bonds of one thousand dollars each, secured by a mortgage of all the property now owned or hereafter to be acquired by this company, and to said mortgage, and to the right given in each of said bonds to the holder thereof to vote thereon at all the meetings of the stockholders of the company, one vote for each one hundred dollars of said bonds.’ There was also a notation upon the certificate as follows: ‘This stock is subject to bondholder's right to vote at all meetings of stockholders. Countersigned and registered. The Corn Exchange Bank, Registrar of Transfers.’ The relator became the owner of stock of the corporation by purchase in the usual course of business more than thirty days prior to an election held September 11, 1893, and at that election he and appellant were candidates for the office of director. Both were eligible, and votes were cast for each by holders of stock and holders of bonds. If the holders of bonds were entitled to vote, the appellant was elected; but if the agreement that they might vote was invalid, the relator was elected, as he received a majority of the stock vote. The by-laws adopted, as before stated, have ever since remained in force as by-laws of the corporation. The question to be settled is whether the bondholders had a right to vote in pursuance of the by-laws and said agreement.

‘The railway company had power to make by-laws not inconsistent with its charter or the purpose of its creation, nor repugnant to the common law, and was expressly authorized by its charter to establish by-laws for the management of its affairs according to law. It had no power, however, to change or abrogate any provision of the law of its existence by means of a by-law, and, if the by-law empowering bondholders to vote at stockholders' meetings is in conflict with the law under which the corporation is organized, it is necessarily void. In the statute under which this company was organized the following provisions are found: ‘Sec. 8. All the corporate powers of every such corporation shall be vested in and be exercised by a board of directors, who shall be stockholders of the corporation, and shall be elected at the annual meetings of the stockholders, at the public office of the corporation within this state.’‘Sec. 11. In case it shall happen at any time that an election of directors shall not be made on the day designated by the by-laws of such corporation for that purpose, the corporation, for such cause, shall not be dissolved, if within ninety days thereafter the stockholders shall meet and hold an election for directors in such manner as shall be provided by the bylaws of such corporation: provided, that it shall require a majority in value of the stock of such corporation to elect any member of such board of directors, and a majority of such board of directors shall be citizens and residents of this state.’‘Sec. 25. In all elections for directors and managers of such railway corporations every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or...