In re Petition of Gulla

• Decision Date: 23 August 1921
• Citation: 13 Del.Ch. 23,115 A. 317
• Parties: In the Matter of the Petition of Pasquale Gulla', for Election of Directors of ITALIAN STAR LINE, INCORPORATED, a corporation of the State of Delaware
• Court: Court of Chancery of Delaware

115 A. 317

13 Del.Ch. 23

In the Matter of the Petition of Pasquale Gulla', for Election of Directors of ITALIAN STAR LINE, INCORPORATED, a corporation of the State of Delaware

Court of Chancery of Delaware, New Castle

August 23, 1921

PETITION FOR AN ORDER FOR AN ELECTION OF DIRECTORS of a corporation by Pasquale Gulla' a stockholder of Italian Star Line, Inc. An order was entered appointing a master to hold a meeting of stockholders of the corporation for the purpose of electing directors. The master reported to the court his proceedings and recommendations respecting the result of the stockholders' meeting, to which exceptions were filed on behalf of other stockholders of the corporation, and the cause was heard on the master's report and exceptions thereto. Order declaring no election and refusing to confirm report, without prejudice.

Caleb E. Burchenal and Aaron Finger, for the exceptants.

Wilbur L. Adams, for the petitioner.

OPINION

THE CHANCELLOR

The petition in this case was presented under Section 31 of the General Corporation Law of this state (Revised Code 1915, § 1945), which reads as follows:

"Section 31. Election of Directors on Failure to Elect on Regular Day; Election Ordered by Chancellor; When.--If the election for directors of any corporation shall not be held on the day designated by the by-laws, the directors shall cause the election to be held as soon thereafter as conveniently may be; no failure to elect directors at the designated time shall work any forfeiture or dissolution of the corporation, but the Chancellor may summarily order an election to be held upon the application of any stockholder and may punish the directors for contempt of court for failure to obey the order."

The petition was filed on the fifteenth day of June last. It alleged that the petitioner is a stockholder in said corporation; that under the by-laws of the corporation the time for the holding of the annual stockholders' meeting for the purpose of electing the eleven directors of the corporation was on the first Monday of February, A. D. 1921; and that the officers and directors had failed, omitted and neglected to call and hold said annual meeting.

Because of special circumstances which the petition set forth, the Chancellor summarily ordered an election of directors to be held, and appointed a master in the first instance to hold and conduct the election. It was later objected that this course was unwarranted, that the court should first attempt to hold the election through the incumbent directors and should resort to the employment of a master only after the directors had failed to act in obedience to the court's order. This objection was disposed of, and is reported ante p. 1.

The master proceeded to act under the authority of the Chancellor to conduct the election. The order, in that part thereof which is at all material to the present phase of the controversy, directed the master, as follows:

"It is, therefore, ordered by the Chancellor that Victor Barsky, Esquire, of the city of Wilmington, State of Delaware, be and he is hereby appointed master to hold said election in accordance with the by-laws of said corporation, as set forth in the exhibit attached to said petition, at a time and place to be fixed by said master. * * *

"And further, that no shares of stock of said corporation transferred on the books of the corporation within twenty days prior to said election shall be voted thereat.

"And further, that said master shall be the judge of the qualifications of stockholders to vote at said election; and he may employ such assistants as he may deem necessary, and fix the compensation, if any, to be paid to them for their services, which shall be included as part of the costs of this proceeding. * * *

"And further, that at 10 o'clock a. m. on the third day after the holding of said election the said master shall make report of his proceedings hereunder to the Chancellor, at his Chambers, in the County Courthouse, in the City of Wilmington, Delaware, setting forth the names of the stockholders of said corporation, the number of shares held by each of them and the names of those who voted and the number of shares of stock voted by each of them at said election, with all proxies and powers of attorney used at said election; and also declare the result of said election."

The by-laws of the corporation which govern the holding of the annual meeting provide, as follows:

"5. Stockholders may vote at all meetings either in person or by proxy in writing.

"6. A majority in amount of the stock issued and outstanding represented by the holder in person or by proxy shall be requisite at every meeting to constitute a quorum for the election of directors or for the transaction of other business. * * *

"9. The annual meeting of stockholders after the year 1919 shall be held on the first Monday of February in each year, at the general office of the company in the city of New York, at 3 o'clock p. m. when they shall elect by a plurality vote by ballot, a board of eleven directors, to serve for one year and until their successors are elected or chosen and qualify each stockholder being entitled to one vote, in person or by proxy, for each share of stock standing registered in his or her name on the twentieth day preceding the election, exclusive of the day of such election.

"12. All proxies shall be filed with the secretary of the meeting before being voted upon."

The master now makes return of his proceedings under the order appointing him, and the question is on the confirmation of his return.

It appears that the election was attempted to be held in New York City, on July 23 last. No question is made concerning the compliance by the master with all the requirements of the by-laws touching things to be done as preliminary to the holding of the meeting. At the argument many matters were discussed at length, to which I shall not advert, for I do not deem them relevant to the real point at issue, which is whether there has been a lawful election of directors by the stockholders at the meeting held by the master.

The relative merits of the contending factions within this corporation who are manifestly struggling with each other for its control can be of no value in determining the question of whether there has been an election by the stockholders. Certainly this is not the sort of proceeding in which it is proper to consider the manner in which the internal affairs of this corporation have been managed. The sole question is whether or not the stockholders at the meeting did duly choose eleven directors in the manner provided by the law of the State and the by-laws of the corporation. The fitness or unfitness of individuals to become directors of the corporation was a matter for the stockholders to pass upon at the meeting, and it would be highly improper, in this proceeding, for the court to pay any heed whatever to charges and countercharges concerning the fitness of either one group or the other of the two factions.

I, therefore, come to a consideration of the narrow question of whether there was a lawful election by the stockholders of eleven directors, as required by the by-laws.

The master reports that there was such lawful election, recommending that the Chancellor--

"decree that a legal meeting was held, and that at the election a plurality of votes was cast for the Gulla' ticket (the report in another part names the individuals composing this ticket), thereby electing a new board of directors which would hold office until the next annual meeting of the stockholders in February, 1922."

Exceptions have been...