Cleveland Trust Co. v. Eaton

• Decision Date: 04 March 1970
• Docket Number: No. 69-98,69-98
• Citation: 50 O.O.2d 354,256 N.E.2d 198,21 Ohio St.2d 129
• Parties: , 50 O.O.2d 354 The CLEVELAND TRUST CO. et al., Appellants, v. EATON et al., Appellees.
• Court: Ohio Supreme Court

Page 129

21 Ohio St.2d 129

256 N.E.2d 198, 50 O.O.2d 354

The CLEVELAND TRUST CO. et al., Appellants, v. EATON et al., Appellees.

No. 69-98.

Supreme Court of Ohio.

March 4, 1970.

Syllabus by the Court

1. As to any fiduciary relationship created on and after January 1, 1968, Section 1109.10, Revised Code, specifies whether and how a trust company may vote its own shares held by it in such fiduciary capacity.

2. To the extent that a judgment in an action will provide a declaration of rights as to controversies or an injunction against conduct which can occur only after statutory amendments and repeals become effective during the pendency of such action on appeal, such amendments and repeals should govern the judgment rendered by the appellate court.

3. In determining the present right of an Ohio trust company in elections for its directors to vote its own shares held by it in a fiduciary capacity created prior to January 1, 1968, effect should be given to the statutory sections enacted by the Banking Act of 1967 (132 Ohio Laws S 97) other than the first paragraph of Division (C) and Divisions (C)(2)(a), (b) and (c) of Section 1109.10, Revised Code, and effect should also be given to the part of that Act which repealed statutory sections theretofore existing.

4. Section 1701.47(C), Revised Code, providing that 'no corporation shall directly or indirectly vote any shares issued by it,' does not now apply to a banking corporation or a trust company. (Section 1101.10, Revised Code, construed and applied.)

5. Any common-law rule, against a corporation voting in an election for directors shares issued and owned by the corporation, does not apply to a corporation so voting its own shares held by it as a trustee for others.

6. In the absence of a complaint by anyone interested in or authorized to represent those interested in a trust, commonlaw principles of trust law do not prevent a trust company which holds its own shares as trustee in such a trust from voting those shares in an election for its directors, where the trust company is authorized by the instrument creating the trust to hold and vote such shares.

This action was instituted by the plaintiff, The Cleveland Trust Company, filing a petition in the Common Pleas Court of Cuyahoga County against one of its shareholders, defendant Cyrus S. Eaton, praying for a declaratory judgment (1) that Cleveland Trust, as trustee of the Bartlett Trust, is entitled to vote Cleveland Trust shares held by it as such trustee, (2) that Cleveland Trust is entitled to vote Cleveland Trust shares held by it as trustee of other trusts in compliance in each instance with provisions of the governing instruments setting up the trusts, and (3) for such further relief as may be proper.

Two other shareholders of Cleveland Trust were permitted to intervene as defendants.

In its judgment, the Common Pleas Court held in part that Cleveland Trust, as trustee, did not have the right to vote any Cleveland Trust shares held by it as a fiduciary, and enjoined it from voting such shares, whether or not the governing instruments by their terms purported to authorize the voting of such shares.

Upon appeal to the Court of Appeals, that part of the judgment of the Common Pleas Court was affirmed.

The cause is now before this court as an appeal by Cleveland Trust Company pursuant to the allowance of a motion to certify the record.

Jones, Day, Cockley & Reavis, Victor DeMarco, H. Chapman Rose and George H. Rudolph, Celeveland, for appellants.

Marshman, Snyder & Seeley, William F. Snyder, James J. Schillder and Stokes, Character & Perry, Cleveland, for appellees.

TAFT, Chief Justice.

After the decision of the Common Pleas Court and almost a year before the decision of the Court of Appeals, substantial changes in the laws of Ohio applicable to banks and trust companies became effective with the enactment of a general revision of the Ohio banking laws, which is hereinafter referred to as the Banking Act of 1967.

Those changes, although referred to briefly in the Court of Appeals 'Memorandum to Lawyers' were given no effect in the Court of Appeals judgment affirming the part of the judgment of the Common Pleas Court described in the statement of this case.

In this action, all parties seek a declaratory judgment which will determine the rights of the parties in future controversies. This action does not involve a claim by any party for any relief with respect to anything which occurred before the Banking Act of 1967 became effective.

Defendants sought, and the Common Pleas Court judgment awarded them, an injunction against the voting of all shares held by Cleveland Trust as a fiduciary. Such an injunction will also have a prospective operation only.

By the Common Pleas Court judgment entry, plaintiff is only 'enjoined under existing statutory law.' If interpreted as governing the rights of the parties under statutes which are no longer effective, this injunction of the Common Pleas Court would be useless, as would be the declaratory judgment portion of its judgment, declaring, in effect what the rights of the parties would have been under such statutes. See Johnson v. Preston (1967), 12 Ohio St.2d 100, 233 N.E.2d 132 (recognizing that a change of law may support an application to modify an injunction and holding that such change may even justify acts contrary to the literal provisions of such injunction).

Hence, we must first determine whether the statutes relied upon by the Common Pleas Court as a basis for its judgment may still be relied upon as the basis for a judgment such as it rendered, and whether statutes enacted after that judgment should be considered in determining the judgment which should now be rendered by this court in the instant case.

In its conclusions of law, the Common Pleas Court stated:

'* * * the statutory prohibition of Section 1701.47(C) of the Ohio Revised Code that no corporation shall directly or indirectly vite any shares issued by it, applies to state bank and trust companies and is applicable to the plaintiff * * *. Thus, the plaintiff * * * is prohibited from voting Cleveland Trust stock, title to which is held by it or its nominee * * * in any * * * trust or fiduciary capacity * * * whether or not the governing instruments by their terms purport to authorize the voting of such shares of stock. * * *'

A similar conclusion is found in the judgment entry of the Common Pleas Court.

So far as pertinent, Section 1701.47(C), Revised Code, a part of the General Corporation Act, reads:

'No corporation shall directly or indirectly vote any shares issued by it. * * *'

In reaching its conclusion, the Common Pleas Court relied upon former Section 1103.42, Revised Code, which read:

'A banking corporation shall be created, organized, governed, and conducted, and its directors shall be chosen, in all respects in the same manner as is provided by sections 1701.01 to 1702.58, inclusive, of the Revised Code, for corporations generally, insofar as such manner is not inconsistent with Chapters 1101, 1103, 1105, 1107, 1109, 1111, 1113, and 1115 of the Revised Code.'

The Common Pleas Court found Section 1701.47(C), Revised Code, not inconsistent with anything in those specified chapters of the Revised Code.

By the Banking Act of 1967, effective January 1, 1968, Section 1103.42 was repealed and Section 1101.10, Revised Code, was enacted. The latter statute was apparently intended to replace Section 1103.42. Section 1101.10 reads:

'A banking corporation shall be created, organized, governed, and conducted, and its directors shall be chosen, in all respects in the same manner as is provided by Sections 1701.01 to 1701.46, inclusive, divisions (A) and (B) of Sections 1701.47, 1701.48 to 1701.54, inclusive, divisions (A) and (B) of Sections 1701.55, 1701.56 to 1702.58, inclusive, of the Revised Code, for corporations generally, insofar as such manner is not inconsistent with Chapters 1101, 1103, 1105, 1107, 1109, 1111, 1113, 1115, 1117, 1119, 1121, 1123, 1125, 1127 and 1129 of the Revised Code.' (Emphasis added.)

It is apparent from a reading of this statute that Section 1701.47(C) is no longer applicable to a banking corporation.

Section 1109.10 which was enacted as a part of the Banking Act of 1967, reads, in part:

'(C) Except as otherwise expressly provided by the instrument creating the fiduciary relationship, any trust company may exercise any and all voting, consenting, and dissenting rights, including the right to vote for the election of directors, pertaining to stocks, bonds, or other securities held by it in any fiduciary capacity, including such rights pertaining to stocks, bonds, or other securities issued by the fiduciary in its individual corporate capacity and held by it in any fiduciary capacity, provided:

'(1) In the case of any fiduciary relationship created prior to January 1, 1968, voting rights pertaining to any shares of such trust company's own stock held by it in such fiduciary relationship, if exercised, shall be exercised with respect to the election of directors, only in accordance with any provisions of law applicable thereto and without regard to the first paragraph of division (C) and division (C)(2)(a), (b), and (c) of this section and such portions of division (C) shall not be construed to be determinative of such voting rights nor to be declaratory of a public policy with respect to such voting rights.

'(2) In the case of any fiduciary relationship created on or after January 1, 1968, voting rights pertaining to any shares of such trust company's own stock held by it in such fiduciary relationship shall be exercised by it with respect to the election of directors, only if and as directed in writing by any person described in division (C)(2)(a), (b), or (c) of this section, provided that such person may not be the trust company or a director, officer, or employee (except as to fiduciary relationships in which such director,...