Seward v. American Hardware Co.

• Decision Date: 16 November 1933
• Court: Virginia Supreme Court
• Parties: HATCHER S. SEWARD v. AMERICAN HARDWARE COMPANY, INC., AND OTHERS.

Page 610

161 Va. 610

HATCHER S. SEWARD v. AMERICAN HARDWARE COMPANY, INC., AND OTHERS.

Supreme Court of Virginia, Richmond.

November 16, 1933.

Present, Holt, Epes, Hudgins, Gregory and Browning, JJ.

1. CONTRACTS — Construction — Plain Letter of the Contract. — Courts should not undertake to construe away the plain letter of a contract.

2. CONTRACTS — Construction — Intention of the Parties. — The intention of the parties, as they write a contract, must prevail, but this intention is not always plain. When this is true we look to the situation of the parties, the subject matter of the agreement, and its purpose.

3. CONTRACTS — Construction — Just Construction. — That construction of a contract which is most obviously just is to be favored as most in accordance with the presumed intention of the parties.

4. CONTRACTS — Construction — Provisions Construed Together — Conflicts. — All of the provisions of a contract should be construed together and those which appear to conflict should be harmonized whenever it is reasonably possible.

5. CORPORATIONS — Election of Directors — Voting Trust Agreement — Interpretation and Construction — Case at Bar. — The instant case was a statutory proceeding under section 3804 of the Code of 1930. The petitioner prayed that an election of the directors of the defendant be vacated and annulled; that a certain voting trust agreement be construed; that a new election of the directors be ordered; that the trustees in the voting trust agreement be directed to vote for certain named gentlemen, and that the trustees themselves be removed as directors and others substituted. Three contracts dealt generally with the subject, namely, a preliminary contract between the constituent members of defendant corporation to merge of date October 4, 1927, and the merger agreement dated March 28, 1928, and a voting trust agreement of date March 20, 1928. These contracts must be read together before any satisfactory understanding of the issues is possible. The preliminary contract provided that the board of directors should consist of eight named members, and that a voting trust agreement should be netered into whereby the respective interests were at all times to be represented on the board by the same number of directors therein provided. The purpose iterated and reiterated everywhere made it perfectly plain that the balance of power in the board should be maintained and the representation of the respective interests merged into the defendant corporation should be the same; and this purpose was not wiped out by an addendum to the section, providing that should the preferred stock become entitled to equal voting power with the common stock, the trustees should vote the stock deposited in favor of such persons as might be nominated by a majority of the preferred stockholders for directors. No limitation in terms was put upon the choice of preferred stockholders, but this apparently unfettered discretion should be exercised in the light of the preservation of the balance of power.

6. CORPORATIONS — Election of Members — Director Seconding Motion to Amend By-Law of Corporation as to Election of Directors Cannot Complain of Adoption of By-Law — Case at Bar. — The instant case was a statutory proceeding under section 3804 of the Code of 1930. The petitioner prayed that an election of the directors of the defendant be vacated and annulled. Petitioner, who seconded a motion to amend the by-law as to the election of directors, cannot complain of the adoption of the by-law. He waived his rights.

7. CORPORATIONS — Stock and Stockholders — Voting Power of Preferred Stockholders. — Where the voting power which rested in the preferred stockholders is fixed by the charter, by-laws and statute, that power could neither be altered nor abridged by any trust agreement assented to or executed by common stockholders.

8. CORPORATIONS — Stock and Stockholders — Voting Trust — Trustees Directed to Vote for Persons Nominated by a Majority of Preferred Stockholders — Case at Bar. — In the instant case the trustees in a voting trust were directed to vote for directors nominated by a majority of the preferred stockholders.

Held: That by a majority of the preferred stockholders was meant the majority in interest of the preferred stockholders and not in numbers.

9. STOCK AND STOCKHOLDERS — Majority of Stockholders — Meaning of Majority of Stockholders. — A by-law or a charter or statutory provision requiring the affirmative vote of a majority of the stockholders, or of a majority of those present at the meeting, means a majority in interest rather than a majority in number only. The computation should be based on the amount of stock outstanding at the time of the meeting rather than on the amount of capital authorized.

10. DURESS — Contract Reluctantly entered into by One Badly in Need of Money. — A contract reluctantly entered into by one badly in need of money without force or intimidation and with full knowledge of the facts is not a contract executed under duress. Duress is not readily accepted as an excuse.

11. STOCK AND STOCKHOLDERS — Pledgor and Pledgee — Assignment of Voting Privilege to Pledgee — Case at Bar. — In the instant case a stockholder in a corporation assigned his stock to a bank as security for a loan. When the stock was first hypothecated the stockholder retained his voting privilege. Afterwards the bank asked that the voting privilege be assigned also and it was assigned.

Held: That this stock was properly voted by one under a proxy which he held from the bank.

12. CORPORATIONS — Stock and Stockholders — Voting Trust — Trustees Voting for Themselves as Directors — Case at Bar. — The instant case was a statutory proceeding under section 3804 of the Code of 1930. The petitioner prayed that an election of the directors of the defendant be vacated and annulled. Two of the directors were trustees in a voting trust created by the stockholders of the corporation. They were also bank officers. Their banks were depositories of the corporation and were anxious to retain its accounts. It was their duty to serve impartially every interest and in this instance it is possible that the interest of their banks might not coincide with the interest of the company.

Held: That these two trustees should not have voted to nominate themselves, and should have declined to serve if elected; that their nomination and election should be set aside and there should be a new election of all directors.

Appeal from a decree of the Circuit Court of the city of Petersburg. Decree for defendant. Complainants appeal.

The opinion states the case.

Charles Hall Davis and William Old, for the appellant.

J. Gordon Bohannan, for the appellee.

HOLT, J., delivered the opinion of the court.

This is a statutory proceeding. Code, section 3804. The petitioner prays that an election of the directors of the defendant company, held on February 14, 1933, be vacated and annulled; that a certain voting trust agreement be construed; that a new election of directors be ordered; that the trustees in said voting trust agreement be directed to vote for certain named gentlemen and that these trustees themselves be removed and others substituted.

The defendants named in the said petition, with the exception of S. West Holden, moved the court to dismiss it, assigning the general ground that the allegations of the said petition were not sufficient in law to impeach the validity of the election or to justify the court or judge in ordering a new election or in granting any relief within the contemplation of section 3804 of the Code of Virginia. On motion of the petitioner, the defendants were required to state more specifically the grounds of their motion. This was done.

For the purposes of this motion the defendants admit and concede that they admit all averments of material facts. Of course, they do not admit inferences or conclusions of law.

Many years ago petitioner's father made trunks in Petersburg. His business was highly successful. Afterwards, in 1895, it was incorporated under the name of Seward Trunk and Bag Company, and was operated exclusively by the founder and members of his family. About twenty years ago he retired from active business and transferred it to his sons, three of whom, including the petitioner, thereafter directed, managed and controlled it. Certain other bag and trunk companies were acquired and in 1912 the American Hardware Company, Inc., was organized as a holding company, and operations under the same management were continued until 1928, when it was merged or consolidated with three other trunk and bag companies.

Three contracts deal generally with this subject, namely, a preliminary contract of date October 4, 1927, an agreement dated March 28, 1928, and a voting trust agreement of date March 20, 1928. The last two are part and parcel of one transaction and were executed practically simultaneously, although that of March 28th must have been drafted before March 20th.

They set out in much detail what was done, and although voluminous they must be read in full and together before any satisfactory understanding of the issues here is possible, and for that reason are copied into a footnote.¹

"Witnesseth: That in consideration of the mutual covenants and agreements of the parties, the said corporation agrees as follows:

"(1) That on or before December 31, 1927, to merge or consolidate the several corporations into one corporation, or to sell to a corporation to be organized the assets of the respective corporations named above, upon the following basis:

"An appraisal by disinterested parties, to be agreed upon by the parties hereto, of the tangible assets of the respective corporations, the intangible assets to be taken at the face value thereof and to be guaranteed by the corporation to which they are due.

"(2) The tangible and intangible assets are to be conveyed and delivered to the merged corporation...