Phoenix Finance Corp. v. Iowa-Wisconsin Bridge Co.

• Decision Date: 12 April 1939
• Citation: Phoenix Finance Corp. v. Iowa-Wisconsin Bridge Co., 5 A.2d 664, 24 Del.Ch. 71 (Del. Ch. 1939)
• Court: Court of Chancery of Delaware
• Parties: PHOENIX FINANCE CORPORATION, a corporation of the State of Delaware, v. IOWA-WISCONSIN BRIDGE COMPANY, a corporation of the State of Delaware, H. A. SCHREMSER, HENRY G. FOOTE, JR., FRED BIERMAN, T. H. BACKWELL, DR. FAYETTE D. KENDRICK, DR. GEO. C. DITTMAN and IRENE M. BELL

5 A.2d 664

24 Del.Ch. 71

PHOENIX FINANCE CORPORATION, a corporation of the State of Delaware, v. IOWA-WISCONSIN BRIDGE COMPANY, a corporation of the State of Delaware, H. A. SCHREMSER, HENRY G. FOOTE, JR., FRED BIERMAN, T. H. BACKWELL, DR. FAYETTE D. KENDRICK, DR. GEO. C. DITTMAN and IRENE M. BELL

Court of Chancery of Delaware, New Castle

April 12, 1939

PETITION FOR REVIEW OF ELECTION OF DIRECTORS. Petition under Section 31 of the General Corporation Law of the State of Delaware, Section 2063 of the Revised Code of 1935, to determine the validity of the election of the individual defendants as directors of the Iowa-Wisconsin Bridge Company.

Case heard on a motion for a decree notwithstanding the defendants' answer to the complainant's petition.

Section 31 of the General Corporation Law, Sec. 2063, Rev. Code of 1935, provided:

"Upon the application by any stockholders, the Chancellor shall have power to hear and determine the validity of any election of any director or officer of any corporation organized under this Chapter and the right of any person to hold such office and in case any such office is claimed by more than one person may determine the person entitled thereto; * * *."

Other essential facts will appear in the opinion of the court.

Arthur G. Logan, of Marvel, Morford & Logan, for petitioner.

Daniel F. Wolcott, of Ward & Gray, for respondents.

OPINION

THE CHANCELLOR:

This is a petition, under Section 31 of the General Corporation Law, Sec. 2063, Rev. Code 1935, to determine whether the individual persons, now holding the offices of directors of the Iowa-Wisconsin Bridge Company, a corporation of this State, are, in fact, the legally elected directors of that corporation; or whether, at the time they were declared elected, they were ineligible for such offices. Both the corporation and the individual defendants, claiming to be the directors of it, filed an answer to the complainant's petition, and the case is before the court on a motion of the complainant for a decree notwithstanding the answer.

Section 97 of the Revised Code of 1935 provides:

"Annually on or before the first Tuesday in January, it shall be the duty of every corporation * * * by its President, Secretary, Treasurer or other proper officer thereof, or by any two of its directors * * * to make an annual report to the Secretary of State," setting out certain prescribed facts.

The same section of the code, also, provides:

"If such report shall not be so made and filed, all the directors of any such corporation, who shall wilfully refuse to comply with the provisions herein set forth and who shall be in office during the default, shall at the time appointed for the next election, and for a period of one year thereafter, be thereby rendered ineligible for election or appointment to any office in the corporation as director or otherwise; * * *."

It further provides, however, that "no director shall be thus disqualified for the failure to make and file such report, if he shall file with the Secretary of State, before the time appointed for holding the next election of directors after such default, a certificate stating that he has endeavored to have such report made and filed, but that the officers have neglected to make and file the same," and, also, setting out the facts required to be stated in an annual report, so far as he is able.

As the question before the court is raised on a motion for a decree notwithstanding the defendants' answer to the complainant's petition, the truth of all the properly pleaded allegations of the answer is admitted. (Rule 44.) From the petition and the answer thereto, it, therefore appears that the petitioner is the record owner of voting stock in the Iowa-Wisconsin Bridge Company, one of the defendants; that no annual reports were filed by that corporation with the Secretary of State in the months of January, 1936, 1937 or 1938; that the individual defendants received the requisite vote and were declared re-elected directors of the Bridge Company at a special meeting of the stockholders of that company, held on December 6, 1938; that prior to that time no meeting for the election of directors had been held since 1936, though the by-laws provide for such elections on the second Saturday of July in each year; that prior to December 6, 1938, no certificates had been filed by any of the individual defendants with the Secretary of State, pursuant to the provisions of Section 97 of the Revised Code of 1935; that on September 26, 1933, proceedings to foreclose a mortgage given to secure certain bonds, purporting to have been issued by the Iowa-Wisconsin Bridge Company, were instituted by the petitioner in the United States District Court for the Northern District of Iowa, Eastern Division; that in that proceeding, and as an incident thereto, a receiver was appointed of all of the property and assets of the Bridge Company, including the bridge owned by it, and its books and records, of every kind and description, were turned over to the receiver, pursuant to a general receivership order, of broad scope to that effect, entered by the court; that in the order appointing the receiver the defendants were restrained and enjoined from interfering with any of the property belonging to the Bridge Company; that on October 14, 1938, by a petition filed under Section 31 of the General Corporation Law, Sec. 2063, Rev. Code 1935, this petitioner pointed out that it was the duty of the Bridge Company to file annual reports, pursuant to the provisions of Section 97 of the Revised...