Rogers v. Hill

• Decision Date: 29 May 1933
• Docket Number: No. 732,732
• Citation: 289 U.S. 582,88 A.L.R. 744,77 L.Ed. 1385,53 S.Ct. 731
• Parties: ROGERS v. HILL et al
• Court: U.S. Supreme Court

289 U.S. 582

53 S.Ct. 731

77 L.Ed. 1385

ROGERS

v HILL et al.

No. 732.

Argued May 11, 1933.

Decided May 29, 1933.

Messrs. Richard Reid Rogers and Evan Shelby, both of New York City, for petitioner.

Mr. Nathan L. Miller, of New York City, for respondents.

[Argument of Counsel from page 583 intentionally omitted] Mr. Justice BUTLER delivered the opinion of the Court.

The American Tobacco Company is a corporation organized under the laws of New Jersey. The petitioner, plaintiff below, acquired in 1916 and has since been the owner of 200 shares of its common stock. He also has 400 shares of common stock B. In accordance with by-law XII,¹ adopted by the stockholders at their annual meeting, March 13, 1912, the company for many years has annually paid its president and vice presidents large amounts in addition to their fixed salaries and other sums allowed them as compensation for services.²

Plaintiff maintains that the by-law is invalid and that, even if valid, the amounts paid under it are unreasonably large and therefore subject to revision by the courts. In March, 1931, he demanded that the company bring suit against the officers who have received such payments to compel them to account to the company for all or such part thereof as the court may hold illegal. The company, insisting that such a suit would be without basis in law or fact, refused to comply with his demand. He brought suit in the Supreme Court of New York against the president and some of the vice presidents to require them so to account, and joined the company as defendant. The case was removed to the federal court for the Southern District of New York. In May, 1931, plaintiff brought suit in that court against Taylor, a vice president, not a defendant in the earlier suit, to require him to account and made the company defendant. The cases were consolidated, plaintiff fi ed an amended complaint and defendants answered. The officers of the company now before the court are Hill, the president, Neiley, Riggio, and Taylor, vice presidents. The answer, after admissions, denials, and explanations, asserts several separate defenses.

Plaintiff made a motion on the pleadings for judgment that the separate defenses be stricken, the by-law be adjudged invalid, and defendants Hill, Neiley, and Riggio be required to account for amounts so paid them and that further payments be enjoined; and in the alternative that such payments be restrained pendente lite. After argument upon the motion, the court, without decision upon any other question, granted a temporary injunction. Defendants appealed, the Circuit Court of Appeals reversed the interlocutory order and directed that a mandate issue to the District Court 'in accordance with this decree.' See 60 F.(2d) 109. The mandate directed further proceedings in accordance with 'the decision.' On the coming down of the mandate, the District Court vacated the temporary injunction and dismissed the bills of complaint upon the merits. Plaintiff appealed, the Circuit Court of Appeals affirmed (62 F.(2d) 1079), citing its opinion on the former appeal, and this court granted plaintiff's petition for writ of certiorari (289 U.S. 716, 53 S.Ct. 593, 77 L.Ed. —-).

Defendants, renewing a contention made in opposition to the petition for certiorari, assert that the appellate court on the first appeal determined in favor of defendants all the issues presented by the complaint, and maintain that, no application for certiorari having been made within three months after that decision, the only question that this court now has power to decide is whether the mandate directed dismissal.

We are of opinion that the mandate did not direct dismissal. The granting of temporary injunction involved no determination of the merits. Such a decree will not be disturbed on appeal except for improvident allowance, violation of the rules of equity, or abuse of discretion. National Fire Ins. Co. v. Thompson, 281 U.S. 331, 338, 50 S.Ct. 288, 74 L.Ed. 881; Meccano, Ltd., v. John Wanamaker, 253 U.S. 136, 141, 40 S.Ct. 463, 64 L.Ed. 822; Smith v. Vulcan Iron Works, 165 U.S. 518, 526, 17 S.Ct. 407, 41 L.Ed. 810. The opinion of the Circuit Court of Appeals did indeed deal with matters affecting the merits but the decree did not extend beyond mere reversal of the order from which the appeal was taken. It directed that mandate issue in accordance with 'this decree.' The mandate commanded proceedings in accordance with 'the decision.' A direction for proceedings in accordance with 'the opinion' makes it a part of the mandate. Gulf Refining Co. v. United States, 269 U.S. 125, 136, 46 S.Ct. 52, 70 L.Ed. 195. Here the mandate was to proceed not in accordance with the 'opinion' but with the 'decision.' These words, while often loosely used interchangeably, are not equivalents. The court's decision of a case is its judgment thereon. Its opinion is a statement of the reasons on which the judgment rests. Houston v. Williams, 13 Cal. 24, 27, 73 Am.Dec. 565; Adams v. Railroad Co., 77 Miss. 194, 304, 24 So. 200, 317, 28 So. 956, 60 L.R.A. 33; Craig v. Bennett, 158 Ind. 9, 13, 62 N.E. 273; Coffey v. Gamble, 117 Iowa, 545, 548, 91 N.W. 813. The Judicial Code uses 'decision' as the equivalent of 'judgment' and 'decree.' Sections 128, 238 (28 USCA §§ 225, 345). As a mandate in the words of the decree was unquestionably sufficient to give effect to the ruling of the appellate court, 'decision' may not reasonably be held to have been used for 'opinion.'

Moreover, if the court intended to direct dismissal, it is to be presumed that it would have done so unequivocally and directly by means of language, form of decree, and mandate generally employed for that purpose. But, assuming it included the opinion, the mandate would not prevent the District Court in the exercise of a sound dis- cretion from allowing plaintiff, were adequate showing ade, to file additional pleadings, vary or expand the issues, and take other proceedings to enforce the accounting sought by his bills of complaint. Wells Fargo & Co. v. Taylor, 254 U.S. 175, 182, 41 S.Ct. 93, 65 L.Ed. 205; Metropolitan Co. v. Kaw Valley District, 223 U.S. 519, 523, 32 S.Ct. 246, 56 L.Ed. 533; Mutual Life Insurance Co. v. Hill, 193 U.S. 551, 553, 24 S.Ct. 538, 48 L.Ed. 788; Smith v. Adams, 130 U.S. 167, 177, 9 S.Ct. 566, 32 L.Ed. 895. In any view of the matter, it is clear that the decree of the appellate court was not final and that plaintiff, in order to have the validity of the payments considered here, was not bound within three months after entry to petition this court for a writ of certiorari.

Plaintiff contends that the stockholders were not authorized to adopt the by-law under which the payments were made.

Section 11, General Corporation Act, Laws 1896, c. 185 (2 Comp. St. N.J. 1910, p. 1606, § 11), provides: 'The power to make and alter by-laws shall be in the stockholders, but any corporation may, in the certificate of incorporation, confer that power upon the directors; by-laws made by the directors under power so conferred may be altered or repealed by the stockholders.' The charter empowers the directors to make and alter by-laws. But plaintiff argues that the stockholders having delegated to the directors authority to adopt by-laws lost the power to adopt the one in question. That is inconsistent with the purpose of the statute. Power to prescribe rules for the government of business corporations reasonably is deemed an incident of ownership and the voting power of the shares. It is quite generally conferred by statute or charter provisions upon the stockholders. Here the statutory grant to them is plenary. The charter provision is subordinate and not inconsistent. There are many thousand holders of shares of this corporation. Their annual meetings are the only regular ones, but the directors meet frequently. The company's business is extensive and complex and considerations of convenience may have suggested delegation to directors of authority to make and alter by-laws.

That the statute did not intend to divest stockholders is clear for it expressly makes by-laws passed by directors subject to alteration and repeal by the stockholders. In the absence of statutory provision definitely and clearly disclosing that intention, a charter provision or by-law adopted by incorporators or shareholders delegating power to directors may not reasonably be held to take from the stockholders any of the power conferred upon them by the statute. Plaintiff's contention would leave the stockholders full power to alter and repeal by-laws made by directors but would deny them power to originate or adopt any by-law or to amend or repeal those made by themselves. We find no reason in support of that construction. Moreover, it seems in direct conflict with the decision of the highest court of New Jersey. In the case of In re Griffing Iron Co., 63 N.J. Law, 168, 41 A. 931, affirmed in the Court of Errors and Appeals on the opinion below, 63 N.J. Law, 357, 46 A. 1097, the court declared (page 171 of 63 N.J. Law, 41 A. 931, 932): '* * * That the stockholders had delegated to the directors power to amend the by-laws did not curtail their own power to amend them, and, of course, the later statute (Revision, 1896) removed all possible restriction on such power. * * * It would be preposterous to leave the real owners of the corporate property at the mercy of their agents, and the law has not done so.' The plaintiff cites and quotes from Scott v. P. Lorillard Co., 108 N.J.Eq. 153, 154 A. 515, affirmed 109 N.J.Eq. 417, 157 A. 388. But, when regard is had to the questions considered in that case, there is nothing in the opinion that lends support to his contention. It cannot be sustained.

Plaintiff suggests that, because the by-law purports to direct payments out of profits, it violates charter provisions which he construes to require the directors to apply al profits to the acquisition of property and the payment of...