Hildreth v. Western Realty Co.
| Decision Date | 16 February 1932 |
| Docket Number | 5987 |
| Citation | 242 N.W. 679,62 N.D. 233 |
| Court | North Dakota Supreme Court |
Rehearing Denied May 31, 1932, Reported at 62 N.D. 233 at 251.
Appeal from the District Court of Cass County, McFarland J.
Modified and affirmed.
Allen W. Wood and Shure & Murphy, for appellants and respondents.
In order to be valid the by-laws of any corporation must be consistent with the law of the land and any by-law that contravenes any portion of the constitution or statutes is void. 1 Fletcher, Corp. p. 990; 14 C.J. 362.
Whenever there is an inconsistency between the statute and the bylaws the statute must prevail. Heller v. Merchants Marine Bank, 45 L.R.A. 439; Jones v. Concord, 38 A 120; Taylor v. Griswold, 28 Am. Dec. 33; Riggs v. Pope Co. 95 P. 5; Burden v. Burden, 40 N.Y.S. 499; People's Home Sav. Bank v. Sadler, 81 P. 1029; Burnstein v. District Grand Lodge No. 4, 84 P. 271; International Bldg., Loan & Invest. Union v King, 48 N.E. 617; 2 Thomp. Corp. 3d ed. § 908 and note 24; Presbyterian Mut. Assur. Fund v. Allen, 7 N.E. 317; Herring v. Ruskin Co-op. Asso. 52 S.W. 327; Baldwin County Produce Corp. v. Frishkorn, 81 So. 862; State v. Day, 121 N.E. 402; Powers v. Marine Engineer's Ben. Asso. 199 P. 353; First Mortg. Bond Homestead Asso. v. Baker, 145 N.W. 876; Francis v. International Travelers Asso. 260 S.W. 938; Brewster v. Hartley, 99 Am. Dec. 237; People's Home Sav. Bank v. Supreme Court, 29 L.R.A. 844.
Where the statute authorizes general voting by proxy, a free and unrestricted authority given by one stockholder to another, in general authorizes the proxy to exercise the same power as the stockholder himself would have were he personally present. 2 Thomp. Corp. 3d ed. § 974; Mobile etc. Co. v. Nicholas, 12 So. 723; McLean v. Bradley, 282 F. 1011; McLean v. Bradley, 299 F. 379; Tilden v. Quaker Oats Co. 1 F.2d 160; Hyams v. Calumet etc. Co., 221 F. 529; Crook v. International etc. Co. 32 App. D.C. 490; Haynes v. Groffith, 101 P. 728; Re Mathison Co. 99 S.W. 502.
The proxy must act in good faith. Lineweaver & Co. v. McFadden (Pa.) 120 A. 402.
It is held that the proceedings are not invalid by the fact that holders give proxies before transferring their stock. Farish v. Cienegquita Co. (Ariz.) 100 P. 781.
As a general rule a stockholder may confer upon his proxy within the scope of his authority any power which he may himself possess as a stockholder to act at corporate meetings. Columbia Nat. Bank v. Mathews, 56 U.S. App. 636, 85 F. 934.
It is a principle of corporate law that the legality of a corporate act will not be inquired into upon the ground that illegal votes were cast unless those votes were challenged at the time when they were cast. 2 Cook, Corp. 7th ed. 1827; People v. Crosley, 69 Ill. 195; Crook v. International Trust Co. 32 App. D.C. 490.
Where there is an actual meeting of the stockholders of a corporation and it appears that the majority of the stockholders were present in person at the meeting it will be presumed in the absence of any evidence to the contrary that the meeting was regular. 14 C.J. 922, § 1438; General Invest. Co. v. Bethelem Corp. 248 F. 303.
Holders of preferred stock entitled to receive a certain dividend out of surplus profits before any dividend was paid on the common stock are not entitled, though such dividends are in arrears, to be paid from the surplus arising from a reduction of the capital stock. Robert v. Roberts-Wicks Co. 77 N.E. 13.
A corporation may provide for the retirement of its preferred stock in its charter and by-laws and such provision will be binding upon the corporation and its stockholders, both common and preferred. Weidenfield v. N.P.R. Co. 129 F. 305; Field v. Goodnow Mfg. Co. 27 L.R.A. 136, note 153; 14 C.J. 424; Hackett v. N.P.R. Co. 73 N.Y.S. 1087; 4 Thomp. Corp. 3d ed. §§ 2825 and 2831.
No matter where the meeting is held or how defectively the members are notified, the proceedings will bind all who appear at the meeting and participate in it without dissent. 14 C.J. § 1373 and notes 56, 57, 58 and 59; 2 Thomp. Corp. 3d ed. §§ 913 and 914.
The management of the corporate business is confined to the board of directors, and in the absence of fraud or bad faith, or the disregard of statutory or charter duties, courts of equity generally will not interfere. 2 Thomp. Corp. 3d ed. § 1297.
The courts will not interfere with the private management of corporations unless some violation of law is charged. 33 N.D. 40, 156 N.W. 556.
It is almost unanimously held that a by-law that is repugnant or inconsistent with the charter, or the statute law is invalid. Taylor v. Griswold, 14 N.J.L. 222, 27 Am. Dec. 33; Re Railway Co. 19 Wend. 37, 32 Am. Dec. 429; 14 C.J. § 460; 1 Fletcher, Corp. §§ 489, 990; 7 R.C.L. § 117.
The rule is that a minority stockholder is only entitled to recover attorneys' fees where it is made to appear that he has rendered services beneficial to the corporation. Beyer v. North America Coal & Min. Co. 43 N.D. 401, 175 N.W. 216.
The reservation of the right of alteration and repeal in the charter of a corporation is not a mere power. Its effect is on the legislative grant itself, to prevent its becoming a contract. 12 C.J. 1026, § 652.
A grant does not except a corporation from the operation of police power, nor preclude the legislature from making reasonable regulations for the exercise of its power. 12 C.J. 1038, § 664; State v. Railway Co. 100 Minn. 445, 111 N.W. 289, 10 L.R.A.(N.S.) 250; Looker v. Maynard, 179 U.S. 46, 45 L. ed. 79, 21 S.Ct. 21.
Statutes regulating the manner of reducing the time of service are not invalid. 12 C.J. 1081; Orvik v. Casselman, 15 N.D. 34, 105 N.W. 1105.
Where a corporation has the power to increase or reduce its capital stock, that power must be exercised by the stockholders. 14 C.J. 504.
One cannot be by virtue of his ownership of stock, both stockholder and creditor. Glass v. VanDyke, 8 F.2d 719.
M. A. Hildreth, pro se and Holt, Frame & Nilles, for respondent and appellant.
The board of directors or trustees have no authority to increase or reduce the capital stock of the corporation under a charter or statutory provision authorizing an increase or reduction, unless the authority to do so is expressly conferred upon them by the charter or statute or by the stockholders. 3 Fletcher, Cyc. Corp. § 3173.
The provision in the by-laws for personal service of the notice of special meetings is mandatory. Davis v. Monroe Waterworks & Light Co. 31 So. 694; Stein v. Marks, 89 N.Y.S. 921; Hodgson v. Duluth H. & D.R. Co. 49 N.W. 197; Van Atten v. Modern Brotherhood, 108 N.W. 313.
Where the directors are interested in the adoption of a proposed scheme for reconstruction of company and are to be remunerated by means of a call on shares, the notice convening the extraordinary general meeting to pass the requisite resolutions must disclose such interest in order that the matter upon which the shareholders are to vote may be fairly brought before them. Tiessen v. Henderson, 68 L.J. Ch. 353; [1899] 1 Ch. 861, 80 L.T.N.S. 483; Simon v. Seiver Asso. 54 Ark. 15; Stowe v. Wyse, 7 Conn. 214; Farrell v. Hoten Cooper Works, 8 F. 66; Harding v. Vandewater, 40 Cal. 77; Doyle v. Mizner, 42 Mich. 332.
A resolution having incorporated therein the words "more or less" is fatally defective. Des Moines L. & A. Co. v. Midland Ins. Co. 6 F.2d 228; Kennedy v. C.B.S. Co. 262 F. 803; Bagley v. Reno Oil Co. 56 L.R.A. 184.
The charter, the stock certificates and the by-laws constitute a vested right which cannot be taken away, and which the state of North Dakota cannot abrogate by statute. Continental Ins. Co. v. M. St. P. & S. Ste. M.R. Co. 290 F. 87; McKee v. H.S. & T. Co. 98 N.W. 609; 1 Morawetz, Priv. Corp. §§ 499 and 500.
In order to authorize an increase of the capital stock of a corporation the notice of meeting must contain notice of that fact. Stern v. Fargo, 18 N.D. 289, 122 N.W. 403; People v. Matthiessen, 269 Ill. 499, 109 N.E. 1056; Warner v. Mower, 11 Vt. 385; Stebbins v. Merritt, 10 Cush. 27; 2 Cook, Corp. 6th ed. 1919; Sutherland v. Olcott, 95 N.Y. App. 93; Koeppler v. Krocker Chair Co. (Wis.) 228 N.W. 130; Booth v. Union Fiber Co. (Minn.) 171 N.W. 307; 7 R.C.L. 204.
It is the contention of the plaintiff in this case that these proxies, being general, did not confer power upon the holders thereof to vote for a reduction of the capital stock, and were, therefore, void. Abbot v. Am. Hard Rubber Co. (N.Y.) 33 Barb. 578; McKee v. Home Serv. Co. 122 Iowa 731, 98 N.W. 609; Conrad v. St. Louis Seed Co. 7 S.W. 176; Ferretta v. De Puy, 17 How. (N.Y.) 418; 2 Pom. Eq. Jur. 4th ed. § 673; Mooers v. White, 6 Johns. Ch. 360.
It became the duty of the company to give notice of all material facts affecting the contract to each holder of stock, so that he might be informed of everything of which he had a right to know. General Invest. Co. v. American Hide & Leather Co. 97 N.J.Eq. 230; Wheeler v. A.N.B. Co. 16 L.R.A.(N.S.) 802.
The right of the plaintiff to maintain this action is upheld by decisions from the different states. Ramsey v. Gould, 56 Barb. (N.Y.) 398; Gibson v. R.C.R. Co. 32 F.2d 658; Victor v. Louise Cotton Mills, 16 L.R.A.(N.S.) 1020, 61 S.E. 648.
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