Procter Coal Company v. Finley, &C.
| Citation | 98 Ky. 405 |
| Parties | Procter Coal Company v. Finley, &c. |
| Decision Date | 05 December 1895 |
| Court | Kentucky Court of Appeals |
APPEAL FROM JEFFERSON CIRCUIT COURT, CHANCERY DIVISION.
WM. LINDSAY FOR APPELLANTS.
DODD & DODD ALSO FOR APPELLANTS.
BLAIN & KINKEAD AND O'NEAL, PHELPS, PRYOR & SELLIGMAN OF COUNSEL FOR APPELLANTS.
HUMPHREY & DAVIE, WM. H. HOLT AND W. O. HARRIS FOR APPELLEES.
JUDGE EASTIN DELIVERED THE OPINION OF THE COURT.
This action was brought by appellants, Procter Coal Company, W. E. Grinstead, claiming to be its president, H. C. Grinstead, claiming to be its secretary and treasurer, and various individuals claiming to be members of its board of directors, against the appellees, seeking to enjoin the latter from interfering in any manner with the possession and control of the books, papers or property of the Procter Coal Company, and from molesting in any manner the individual appellants in the exercise of their alleged rights and duties as the president, secretary and treasurer, and board of directors of said Coal Company. The requisite bond having been given, a temporary injunction was granted by the court below in accordance with the prayer of the petition.
An answer was filed by appellees denying that W. E. Grinstead is the president, or that H. C. Grinstead is the secretary and treasurer, or that the individual appellants, or any or either of them, are directors of the Procter Coal Company, and alleging that the appellees constitute the duly elected and qualified board of directors of said company.
To this answer, which was made a counterclaim against appellants, a reply was filed and on the same day an amended petition was tendered, alleging in substance that, as an inducement to appellants to subscribe for the stock of said company, it was proposed and represented to them by appellees and their associates that they, appellants and their associates, should have the control and management of the said corporation until the money contributed by them should be refunded in the shape of dividends or otherwise, or until they disposed of their stock to other parties.
The amended petition so tendered was afterwards ordered to be filed, and having been controverted of record, and proof having been taken, the chancellor adjudged on the trial below that the petition be dismissed, that the temporary injunction be dissolved, and that appellees be awarded the relief asked for by their counterclaim; but, an appeal being desired and bond having been executed, the injunction was continued in force during the pendency of this appeal, which is prosecuted from said judgment.
The contention, therefore, as will be seen, is between these two different sets of persons — the individual appellants on the one side and the appellees on the other — each claiming to be the legally elected and duly authorized board of directors of the Procter Coal Company, and each claiming to have been so elected at the regular annual meeting of the stockholders of said company, held on the 17th day of April, 1894. In passing upon these claims, therefore, it is necessary to consider carefully and with some detail the proceedings of this stockholders' meeting, and, in order to do this more intelligently, it is well to understand something of the attitude toward each other of the respective parties to this litigation prior to the date of the meeting in question.
It appears, then, from facts disclosed in this record, that the mining property of the Procter Coal Company is located in Whitley county, Kentucky, where all or nearly all of the appellees reside; that it originally belonged to two or more of the appellees who, together with perhaps two others of their number, organized the corporation by which the property has been developed and is now owned, while the individual appellants, all of whom reside in the city of Louisville or its vicinity, by the purchase of stock in the corporation, actually furnished the greater part of the money capital which has been used in the development of the property. Without going into the details or striking any balance of the accounts between these parties it is sufficient to say that the greater part of the stock held by appellants, who, for the sake of convenience, will be denominated the Louisville people, was paid for in cash at fifty cents on the dollar, while that held by appellees, whom we shall call the Whitley county people, represents, to a large extent, the mining property and property rights that went into and now belongs to the corporation, and the services rendered in organizing and launching the same.
Notwithstanding the fact that the Whitley county people seem to have owned a majority of the stock, yet, from the organization of the company in 1887, a majority of the board of directors and the chief executive officers of the corporation have been chosen, from year to year, from the Louisville stockholders, without protest or objection on part of the Whitley county stockholders, up to the annual meeting of stockholders which occurred April 17, 1893. At that time it appears from the record that an attempt was made by the Whitley county people to elect a majority of the board from their own body, but that, notwithstanding the fact that they controlled a majority of the stock, they failed in their purpose, by reason of some of the proxies under which they attempted to vote some of this stock having been declared to be invalid.
A full board of directors from the Louisville stockholders was elected at that meeting, and from that time forward at least there seem to have been two well defined and somewhat antagonistic sets of stockholders.
Before the arrival of the day for holding the next annual meeting, on April 17, 1894, it seems to have been well understood that the effort on part of the Whitley county stockholders to elect at least a majority of the board of directors from their own number would be renewed, and, therefore, both sides were, to some extent, prepared for the contest which arose in that meeting and out of which this litigation has come, though perhaps neither anticipated it in the exact form in which it has arisen.
The record discloses that on the day before this annual meeting was held, to-wit, on April 16, 1894, the appellees, H. F. Finley and A. Gatliff, who are the largest stockholders and the leading spirits among the Whitley county people, called upon the appellant, W. E. Grinstead, who was then and now claims to be president of the company, and who has been recognized as the leader among the Louisville stockholders, and proposed to said Grinstead, in the interest of harmony, that the Whitley county stockholders be allowed to select four, and the Louisville stockholders select the other three, of the seven directors of the company at the meeting on the following day. This proposition was not acceded to by Mr. Grinstead for the reason, as substantially given in his testimony, that he saw nothing to be gained by such an arrangement, inasmuch as the Louisville people controlled enough of the stock to enable them, by the system of cumulative voting authorized by the constitution, the provisions of which had been accepted by the company, to elect three of the seven directors in any event, and for the further reason that, while he knew the majority of the stock was controlled by the Whitley county people, yet, as the Louisville people had a majority in number of stockholders, it was thought that they could in that way gain control of the meeting and thereby get the appointment of the committee to pass on proxies. The importance of this matter seems to have been fully appreciated by both sides, and, therefore, the contest which arose over the organization of the stockholders' meeting is not to be wondered at.
The hour for the meeting, as fixed in the notice, was 4 o'clock p. m. In the city of Louisville, where the meeting was held, most of the business is conducted by what is known as standard time, which is about eighteen minutes slower than what is known as sun time, and the hour of the day, as generally understood and used there, is accepted as referring to standard time.
But promptly at four o'clock, by sun time, on the day of this election, most of the Whitley county stockholders and some of the Louisville stockholders having gathered in the designated place of meeting, the appellee Finley arose and having called for order, placed in nomination the name of Dr. Gatliff for chairman of the meeting. A protest was at once made by the Louisville stockholders, who claimed that, as the meeting was to be held by standard time, the hour had not arrived and the Louisville stockholders were not yet present. The name of Mr. Grinstead seems also to have been placed before the meeting for chairman, but subsequently withdrawn, and, in the confusion which followed, a conference between the attorneys representing the respective factions was suggested and agreed on. The result of this conference was an agreement that no further steps should be taken towards organizing the meeting until 4 o'clock by standard time, but that appellee Finley should still hold the floor until the arrival of that hour, when he should have the right to renew his motion for the election of Dr. Gatliff as chairman, and when Mr. Kinkead, who seems to have nominated Mr. Grinstead, should have the right to again put him in nomination for chairman.
This arrangement was carried out, and the meeting having been again called to order by Judge Finley, who still held the floor, the names of the two gentlemen above referred to were placed in nomination. At this point great confusion seems to have arisen, and there is much conflict in the great volume of testimony in the record as to what immediately followed and as to the manner in which the division or separation of the stockholders into two factions or parties, which soon ensued, was actually brought about. The testimony of appellees conduces to show that Judge Finley, who...
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