Haynes v. Griffith
| Decision Date | 15 April 1909 |
| Parties | M. J. HAYNES et al., and the BUFFALO HUMP CONSOLIDATED GOLD MINING COMPANY, Limited, a Corporation, Appellants, v. EDWARD M. GRIFFITH et al., and W. G. BROWN, as Sheriff of Idaho County, Idaho, Respondents |
| Court | Idaho Supreme Court |
STOCKHOLDERS-RIGHT TO VOTE STOCK-PROXY-ANNUAL ELECTIONS-FRAUD-CONSPIRACY-SALARY OF SECRETARY.
1. Where an escrow agreement is entered into between S., H. and G., in which it is stipulated that in order to secure a promissory note executed by H. and G. to S., a certificate of stock is to be held by a bank as security for such note, and upon failure to pay such note the bank is authorized and empowered and instructed to deliver such certificate to S., in whose name the same has been issued the bank is authorized and empowered to deliver such certificate to S. upon the failure to pay said note at maturity.
2. Upon the delivery of such certificate by the bank to S. and the transfer of such stock upon the books of the company in the name of S., S. has the right to vote such stock and the right to give a proxy to G. to vote the same.
3. Where a stock certificate is issued by a corporation to H the president of the corporation, and H. and G. execute a promissory note to S. and deposit in escrow a new certificate of stock issued to S. and signed by H. as president and G. as secretary of such corporation, to be delivered to S. upon default in the payment of such note; and it appears from the escrow agreement that such certificate upon the payment of such note shall be returned to H., supported by the evidence of G., that the stock thus pledged belonged to H., the evidence is sufficient to support a finding that the stock thus pledged belonged to H., and should be deducted from the stock previously issued to H.
4. Under sec. 2735, Rev. Codes, every bona fide stockholder "having stock in his own name on the stock books of the corporation, at least ten days prior to the election" of directors, is entitled to vote at such election; and the stock book of the corporation is prima facie evidence of ownership, and sufficient to support a finding of the court that such person was the owner of such stock and entitled to vote the same.
5. Where a corporation has a by-law that "no indebtedness over one thousand dollars shall be incurred by the company," such by-law is not violated by a resolution of the board of directors providing for the compensation of the corporation's secretary at fifty dollars per month.
6. Neither is such by-law violated by the allowance by the board of directors of a claim made by the secretary for salary due him at the rate of fifty dollars per month, aggregating a sum in excess of one thousand dollars.
7. Held, that the evidence in this case supports the findings of the court.
APPEAL from the District Court of the Second Judicial District, for the County of Idaho. Hon. Edgar C. Steele, Judge.
Action to vacate and set aside judgments rendered against a corporation and to annul the election of directors and president, and for an accounting by the secretary. Judgment for defendants. Plaintiffs appeal. Affirmed.
Judgment affirmed. Costs awarded to respondents.
Clay McNamee, and Jas. De Haven, for Appellants.
In a clear case of hypothecation, the pledgor may vote. (Ex parte Willcocks, 7 Cow. 402, 17 Am. Dec. 525; State ex rel. Reed v. Smith, 15 Ore. 98, 14 P. 814, 15 P. 137, 386; Brewster v. Hartley, 37 Cal. 15, 99 Am. Dec. 237; State v. Smith, 15 Ore. 98, 14 P. 814, 15 P. 137, 394.) The secretary of the corporation had no right to make a transfer on the books until the requirements of the laws of this state and the by-laws of the corporation had been complied with. (Tafft v. Presidio etc. R. R. Co., 84 Cal. 131, 18 Am. St. 166, 24 P. 436, 11 L. R. A. 125; Supply Ditch Co. v. Elliott, 10 Colo. 327, 3 Am. St. 586, 15 P. 691.)
"The sale by a shareholder of his shares in a corporation will ipso facto revoke any proxies made or given to vote in respect of such shares." (10 Cyc. 338, 339, citing Ryan v. Seaboard etc. R. Co., 89 F. 397.)
E. M. Griffith, and L. Vineyard, for Respondents.
The person or persons in whose name stock stands on the corporate books of a company are entitled to vote the same. (Sec. 2735, Rev. Codes; Hoppin v. Buffum, 9 R.I. 513, 11 Am. Rep. 291; In re Argus Printing Co., 1 N.D. 434, 26 Am. St. 639, 48 N.W. 347, 12 L. R. A. 781.)
The salary of the secretary being approved and ordered paid by the board of directors at a regular meeting thereof, was an absolute waiver by said corporation of any objections that its by-laws had been violated, and a ratification of said claim. (Underhill v. Santa Barbara etc. Co., 93 Cal. 300, 28 P. 1049; Phillips v. Sanger Lumber Co., 130 Cal. 431, 62 P. 749, and cases cited.)
On September 18, 1907, the respondent, Edward M. Griffith, recovered a judgment by default against the Buffalo Hump Consolidated Gold Mining Company, Ltd., in the district court of the second judicial district, in and for Idaho county, for the sum of $ 1,300. Execution was issued on said judgment and on Jan. 18, 1908, all the property of the said defendant corporation was sold to satisfy said judgment. On Dec. 17, 1907, the respondent, W. H. Casady, recovered a judgment by default against the Buffalo Hump Consolidated Gold Mining Company, Ltd., in the probate court of Idaho county, for the sum of $ 424.15; and on Jan. 18, 1908, said Casady redeemed from the sale to the respondent Griffith.
This action is brought by appellants to restrain the respondent, Brown, as sheriff of said Idaho county, from executing and delivering a deed upon the sale made upon the Griffith judgment, and to vacate and set aside the judgments above described, and to cancel and declare illegal the election of H. L. Herzinger and J. T. McDuffie as directors and J. T. McDuffie as president of said corporation; and for an accounting by Griffith for all moneys received by him as secretary and treasurer of the appellant corporation. The action is based upon the claim that the judgments obtained against the appellant mining company were fraudulent and the result of a conspiracy entered into between Edward M. Griffith, J. T. McDuffie and H. L. Herzinger in attempting to provide by resolution for the compensation of Griffith as secretary, and the election of McDuffie and Herzinger as directors, alleging that in fact no resolution was passed authorizing the payment of a salary as secretary; and that the vote cast for McDuffie and Herzinger as directors was fraudulent and void, in that stock was voted at such election which was not owned or held or authorized by the persons voting the same.
M. J. Haynes, L. C. Staley, J. J. Staley, A. C. Atkinson, C. M. Heater, S. V. Meek, Marion Spawr, Adolphus Briggs. J. N. Snider, E. L. Foreman, N. P. Haynes, F. M. Peck, Henry Murray, George Von Yarf, appellants, are stockholders in the Buffalo Hump Consolidated Gold Mining Company, Ltd., a corporation and appellant, and with the company bring this action.
The answer admits that the plaintiff is a corporation; that the defendant Griffith is the secretary thereof; that the judgments described in the complaint were recovered and the sale of the corporate property; and specifically denies the other allegations of the complaint. The cause was tried to the court and the court made findings of fact and conclusions of law, and upon the issues presented by the pleadings found in substance as follows:
1. That the Buffalo Hump Consolidated Gold Mining Company, Ltd., was an Idaho corporation.
2. That it was organized in the year 1905 with a capital stock of 1,500,000 shares of the par value of one dollar each; and that 600,000 shares of the capital stock was placed in the treasury and designated as treasury stock for the development of the property.
3. That on July 29, 1907, a stockholders' election was held at which there was represented in person and by proxy 527,000 shares of the capital stock which was voted for H. L. Herzinger, J. T. McDuffie, L. C. Staley, F. M. Peck and Edward M. Griffith, as directors; and that the stock voted at such stockholders' election belonged to the persons voting the same or the persons who gave their proxies to vote such stock.
3 1/2. That the 100,000 shares given by Haynes to Staley as security and left in escrow, while not taken down by Staley, yet was entered upon the stock books at the time the stock was given by the secretary in the name of Staley and was voted by Griffith under a proxy given by Staley.
4. That at the time of their election McDuffie, Herzinger and Griffith were the owners of more than 100,000 shares each of the capital stock of the corporation.
5. That at the meeting of the board of directors, at which was present McDuffie, Herzinger and Griffith, three of the newly elected directors who constituted a quorum, McDuffie was elected president, Staley vice-president, Griffith secretary and treasurer.
6. That the stockholders' meeting, at which the above-named directors were elected, was regularly and legally held and free from any fraud; and the election was in all things in due form and pursuant to law and the regulations and by-laws of said corporation.
7. That at a regular meeting of the board of directors on July 23, 1905, the board passed a resolution fixing the salary of the secretary and treasurer at fifty dollars per month and necessary expenses; and that in pursuance of such resolution Griffith performed services as secretary and the same has not been paid.
8. That thereafter at a regular meeting of the board he presented his claim for salary as secretary and the same was allowed by the board in the sum of $...
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