Hill v. Atl. & N. C. R. Co

• Decision Date: 22 December 1906
• Citation: 55 S.E. 854,143 N.C. 639
• Court: North Carolina Supreme Court
• Parties: HILL et al. . v. ATLANTIC & N. C. R. CO.

55 S.E. 854

143 N.C. 639

HILL et al. .

v.ATLANTIC & N. C. R. CO.

Supreme Court of North Carolina.

Dec. 22, 1906.

1. Corporations—Stockholoers—Meetings.

It is essential to the validity of the acts of stockholders of a corporation that they should be assembled in their representative capacity in a meeting, they not being permitted to discharge any of their duties as stockholders unless so organized, though they may all have severally and individually given their assent to the proposed corporate action.

[Ed. Note.—For cases in point, see Cent Dig. vol. 12, Corporations, § 732.]

2. Same—Notice.

Notice to each of the members of a corporation of the time and place of holding a meeting of stockholders is essential to the validity of the meeting, unless the stockholders are present in person or by proxy, or unless the time and place are definitely fixed by statute, charter, or usage.

[Ed. Note.—For cases in point, see Cent Dig. vol. 12, Corporations, § 734.]

3. Same—Curing Defects.

A railroad corporation voted to lease its road at a meeting of stockholders, which was illegally called. F., a stockholder, was present at the meeting and objected to the lease, and at the subsequent annual or stated meeting ofthe corporation introduced a resolution instructing the officers of the corporation to take action to set aside the lease and recover the corporation's property, which resolution was defeated. Held, that the action at such subsequent meeting constituted a ratification of the lease and cured any defect in tie notice given of the first meeting.

4. Same — Regularity of Meetings — Presumptions.

In the absence of proof to the contrary, It will be presumed that an annual or stated meeting of the stockholders of a corporation was held in accordance with the requirements of the corporation's charter.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, § 743.]

5. Same—Leasing Property—Ratification.

After a lease of the property of a corporation had been authorized at a stockholder's meeting, held pursuant to an insufficient notice, the regular annual meeting of the corporation was held, of which plaintiff had due notice. The president of the corporation at such meeting reported the material facts relating to the lease, and his report was received and adopted. Held, that such action implied that the lease was thereupon ratified without objection.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, § 1554.]

6. Same — Objection by Stockholders — Laches—Waiver.

Where a stockholder of a corporation, with knowledge of the execution of a lease of all the corporation's property to another, maintained silence for over a year, during which time the lessee expended a large amount on the faith of the lease, and others acquired interests in the property, he waived his right to object to irregularities in the execution of the lease.

7. Same—Resolutions—Construction.

A resolution authorizing the lease of corporate property required the lessee to deposit the sum of $100,000, or United States bonds, bonds of North Carolina, or other marketable securities, to secure payment of rents, etc. The lease provided that the lessee should deposit $100,000 in United States bonds, etc Held, that the resolution required a deposit either of $100,000 in money, bonds, or other marketable securities, having a current value of not less than $100,000, and not that the deposit should consist of bonds or securities having a par value of $100,000.

8. Same—Corporate Acts—Waiver.

A resolution for the leasing of corporate property provided for the deposit of securities for the payment of rentals, etc., in the state treasury, but the deposit was, in fact, made with a certain trust company. The change was called to the attention of the stockholders by the president of the corporation at an annual meeting, at which a resolution was passed directing full inquiry into the matter of the deposit, and particularly as to when and where it had been made, etc., after which no further objection was made concerning the deposit. Held, that the stockholders thereby waived any objection to the lease because the deposit was not made with the State Treasurer.

9. Railroads—Leases — Covenants—Breach —Forfeiture.

Where a railroad lease provided that the lessee covenanted during the continuance of the term not to fix or establish rates of local freight at a higher average rate than the average local freight tariff of the lessor at the time the lease was executed, but no clause of forfeiture was annexed, the provision was in the form of a covenant, the breach of which did not entail a forfeiture of the lease, but rather afforded an action against the lessee for damages.

10. Corporations—Leases—Time—Validity. Where the term of a lease of a corporation's assets extended beyond the time of th» lessor's corporate existence as fixed by its charter, the lease was valid for the period of the lessor's corporate life, and to the extent that the lessor's charter might be extended, not exceeding the term of the lease.

11. Railroads—Chakter—Lease of Property.

Acts 1848-49, p. 138, c. 82, incorporating the North Carolina Railroad Company, and conferring on it the right to transport passengers and freight, and authorizing it to "farm out" the right of transportation, authorized the company to execute a valid lease of its property and franchises to another railroad company.

12. Courts — Rules of Property — Stare

Decisis.

Where decisions of the Supreme Court of the state have become rules of property, the court is bound by the doctrine of stare decisis to follow them.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 13, Courts, §§ 336-339.]

13. Corporations — Ultra Vires Acts — Stockholders—Laches.

Where stockholders objecting to a lease of the corporate property alleged to have been executed ultra vires were guilty of laches in taking steps to have the lease set aside, until the rights of innocent third persons had intervened, and such stockholders had participated, at least to some extent, in the fruits derived from the lease, they were not entitled to relief.

[Ed. Note.—For cases in point, see Cent. Dig. vol. 12, Corporations, | 1564.]

Clark, C. J., dissenting.

Appeal from Superior Court, Craven County; Long, Judge.

Bill by W. F. Hill and others against the Atlantic & North Carolina Railroad Company. From a judgment for defendant, plaintiffs appeal. Affirmed.

This suit was brought by the plaintiffs to annul the lease of the Atlantic & North Carolina Railroad Company to the Howland Improvement Company, now the Atlantic & North Carolina Company, one of the defendants. The action was commenced in the name of W. F. Hill, in behalf of himself and all other stockholders of the Atlantic & North Carolina Railroad Company. C. E. Foy and the board of commissioners of Craven county afterwards came in, and by leave of the court were associated with W. F. Hill as plaintiffs.

The lease was attacked upon the following grounds:

First The meeting of the stockholders called by the then president of the company, and at which the resolution was passed which authorized the execution of the lease, was irregularily called; due notice of the meeting not having been given as required by the charter, and the meeting not having been held at the place designated in the call. The facts relating to this objection are as follows: The by-laws of the company provide that the president shall have the power to call occasional meetings of the stockholders at such time and place as he may think proper: first giving 20 days' notice thereof in two o*more newspapers published in Newbern. The president issued a call for an occasional or special meeting of stockholders to be held in Newbern on the 1st day of September, 1904, for the purpose of considering a proposition to lease the property, and so forth, of the company. The notice of or call for said meeting was published in but one newspaper, the Newbern Journal; It being at that time the only one published in said city. No personal notice of the meeting was ever given to any of the plaintiffs. Some of the stockholders assembled in Newbern at the time appointed in the notice and organized by electing a chairman and secretary. A report was made by the proxy committee through its chairman, Henry R. Bryan, and the meeting was then adjourned, to reassemble at Morehead City the same day at 3 o'clock p. m. The stockholders accordingly reassembled at Morehead City, and passed the resolution directing the lease to be executed. The plaintiff W. F. Hill was not represented at said meeting, either in person or by proxy. He was at the time the owner of one share of the stock of the company. The board of commissioners of Craven was represented and voted the stock owned by the county In favor of the resolution authorizing the lease to be made. C. E. Foy was present and formally protested against making the lease, and his protest was entered on the minutes. The lease was not read to the stockholders. The by-laws further provide that "no contract for the assignment, sale, or transfer of any corporate right, franchise, or privilege of the company shall be made till the question of sale or transfer shall have been submitted to a vote of the stockholders and such sale or transfer approved by a majority of private stockholders in the state." At the regular annual meeting of the stockholders of the Atlantic & North Carolina Railroad Company held on September 20, 1905, a resolution was introduced at the Instance of W. F. Hill, one of the plaintiffs, instructing the president and directors of the lessor company to institute an action against the Atlantic & North Carolina Company, the lessee company, to cancel the lease made originally to the Howland Improvement Company, and to recover possession of all the property rights and franchises therein described. This resolution, on motion, was laid upon the table. The same resolution was introduced at a regular meeting of the...