Keetch v. Cordner

• Decision Date: 20 November 1936
• Docket Number: 5826
• Citation: 90 Utah 423,62 P.2d 273
• Court: Utah Supreme Court
• Parties: KEETCH et al. v. CORDNER et al

62 P.2d 273

90 Utah 423

KEETCH et al. v. CORDNER et al

No. 5826

Supreme Court of Utah

November 20, 1936

Original proceeding in mandamus by Alfred G. Keetch and others, as directors of the North Union Irrigation Company and another, against W. J. Cordner and others, as directors of the Provo Bench Canal & Irrigation Company, and another.

Application for writ of mandamus denied.

A. V Watkins, of Provo, for plaintiffs.

Robinson & Robinson, of Provo, for defendants.

M. E. Wilson, of Salt Lake City, and Reeder & Wallace and DeVine, Howell & Stine, all of Ogden, amici curiae.

ELIAS HANSEN, Chief Justice. FOLLAND, EPHRAIM HANSON, MOFFAT, and WOLFE, JJ., concur.

OPINION

ELIAS HANSEN, Chief Justice.

Plaintiffs instituted an original action in this court to obtain a writ of mandamus commanding the defendants to proceed to wind up the affairs of the defendant corporation and distribute its assets to the stockholders thereof. The sole question presented for determination is whether or not within constitutional limitations a corporation may, by amending its articles of incorporation, extend the period of its corporate existence.

Briefly, the material facts upon which this controversy is bottomed are these: On April 16, 1883, plaintiff North Union Irrigation Company was incorporated as an irrigation company pursuant to and under the laws of the then Territory of Utah. Its articles of incorporation contained, among others, the provision that the corporation "shall exist for the term of twenty-five (25) years from and after the date of its incorporation." On March 7, 1908, the foregoing provision was amended so as to provide that the corporation "shall exist for the term of seventy-five (75) years from and after the date of its incorporation." On March 3, 1887, the defendant Provo Bench Canal & Irrigation Company was incorporated as an irrigation company pursuant to and under the laws of the then Territory of Utah. Its articles of incorporation provided that it "shall exist for the term of twenty-five (25) years." On January 10, 1910, the foregoing article of the defendant corporation was so amended as to provide "that the corporation herein provided for shall exist for the term of fifty (50) years."

Each of the corporations, in making the amendment to extend its life, complied with the law affecting the manner in which articles of incorporation may be amended. Both of the corporations which are parties to this proceeding have continuously exercised the powers of a corporation ever since they were originally incorporated. The personal plaintiffs are the directors of the plaintiff North Union Irrigation Company, and the personal defendants are the directors of the defendant Provo Bench Canal & Irrigation Company. The plaintiff corporation owns a substantial number of shares of capital stock in the defendant corporation by reason of which ownership plaintiffs claim the right to maintain this proceeding.

In addition to the briefs filed by the parties herein, other briefs amicus curiae have been filed with leave of court. One of such briefs was filed by Mahlon E. Wilson and Robert C. Wilson, Esqs., and the other by Reeder & Wallace, De Vine, Howell & Stine, and L. J. Holther. We wish to express our thanks for the valuable aid rendered to us by their briefs. None of those who have filed briefs question the remedy adopted by plaintiffs as being appropriate to present the question which divides the parties. They all seek a decision of this controversy upon merits. We shall so dispose of it.

Plaintiffs claim that the laws under which the plaintiff and defendant corporations attempted to extend the period of their corporate existence are unconstitutional, and hence the attempted extension of the life of the corporations is a nullity. The defendants contend to the contrary. That is the only question before us for determination. The first three sections of article 12, Const. of Utah, provide:

Sec. 1. "Corporations may be formed under general laws, but shall not be created by special acts. All laws relating to corporations may be altered, amended or repealed by the Legislature, and all corporations doing business in this State, may, as to such business, be regulated, limited or restrained by law."

Sec. 2. "All existing charters, franchises, special or exclusive privileges, under which an actual and bona fide organization shall not have taken place, and business been commenced in good faith, at the time of the adoption of this Constitution, shall thereafter have no validity; and no corporation in existence at the time of the adoption of this Constitution shall have the benefit of future legislation without first filing in the office of the Secretary of State, an acceptance of the provisions of this Constitution."

Sec. 3. "The Legislature shall not extend any franchise or charter, nor remit the forfeiture of any franchise or charter of any corporation now existing, or which shall hereafter exist under the laws of this State."

By an act of the Legislature of the Territory of Utah passed in February, 1870, it was provided that the duration of a corporation should not, in any case, be less than three years nor more than twenty-five years. Laws Utah 1870, p. 137. In 1880 the law was so amended that corporations may be formed for a period of not less than three years nor more than fifty years. Laws Utah 1880, chap. 17, p. 19. In 1901 the law was again amended so that the duration of a corporation may be fixed at not less than three nor more than one hundred years. Laws 1901, c. 81. Since 1901 the articles of agreement or incorporation must designate the period during which the corporation may exist, which must be not less than three nor more than one hundred years. R. S. Utah 1933, 18-2-5. The act of 1880, which was in effect when the corporations involved in this litigation were organized, provided that the articles of agreement or incorporation may be amended by increasing or decreasing the capital stock, by changing the number of directors, trustees, or officers, and that "the articles of agreement or incorporation may be otherwise changed or amended, Provided, Such amendment does not alter the original purpose of the corporation." Laws Utah 1880, p. 20, § 7; Laws Utah 1884, p. 80, § 7. The law affecting the right to amend the articles of agreement of a corporation has not been, so far as material to our inquiry, changed since 1880. See Comp. Laws Utah 1888, § 2273, § 7, p. 5; R. S. Utah 1898, § 338, p. 163; Comp. Laws Utah 1907, § 338, p. 239; Comp. Laws 1917, § 886, p. 284; R. S. 1933, 18-2-44, p. 300. In this connection it should be noted that,

"All laws of the Territory of Utah now in force, not repugnant to this Constitution, shall remain in force until they expire by their own limitations, or are altered or repealed by the Legislature." Const. Utah, art. 24, § 2.

It will thus be seen that when the corporations involved in this litigation were organized, and ever since that time, corporations have been by statute permitted to amend their articles of incorporation by extending the period of their existence. If such statutes are free from constitutional objection, plaintiffs are not entitled to any relief in this proceeding. The amendments to the articles of agreement of both corporations were made before the period of the existence fixed in the original articles had expired. It is conceded that the articles were amended as by law provided. It is not contended that there is any legal objection to amending articles of agreement of a corporation merely because all of the stockholders thereof do not consent thereto. If such a claim were made, it could not be successfully maintained. The law which was in existence at the time the articles of agreement were entered into became a part thereof. In legal effect, the signers of the original articles of incorporation agreed that they may thereafter be amended in conformity with law. Weede v. Emma Copper Co., 58 Utah 524, 200 P. 517.

As early as the seventeenth century trading corporations, somewhat similar to our modern corporations, came into existence in England. At that early time a corporation could be created only by the will of Parliament or of the Crown. Fletcher's Cyc. of Corpns. vol. 1, pp. 6-8. In America the authority to create corporations is vested in the lawmaking power. Such power is absolute except as restricted by the Constitutions of the various states and the Constitution of the United States. Prior to statehood the Territorial Legislature of Utah granted to natural persons the privilege or right to engage in business as a private corporation. Such practice was not peculiar to Utah. The unrestricted power of the legislative branch of the government to create corporations was calculated to lead to favoritism and to the creation of monopolies. It was to prevent such evils that the provisions here brought in question were made a part of our State Constitution.

One of the cardinal rules applicable to construction of a constitutional provision is that it should be, if possible so construed as to effectuate the purpose sought to be accomplished. Another doctrine to which this court by numerous decisions is committed, is that an act of the Legislature may not be declared unconstitutional unless it is clearly so. In our discussion of the constitutional provisions involved in this controversy, these rules should be kept in mind. At the outset, it should be...