Smith v. Iron Mountain Tunnel Co.
| Decision Date | 21 June 1912 |
| Parties | SMITH v. IRON MOUNTAIN TUNNEL CO. |
| Court | Montana Supreme Court |
Appeal from District Court, Missoula County; F. C. Webster, Judge.
Action by Edward G. Smith against the Iron Mountain Tunnel Company. Judgment for defendant, and plaintiff appeals. Reversed and remanded.
Maury Templeman & Davies, of Butte, for appellant.
Henry C. Stiff, of Missoula, for respondent.
This cause was tried upon an agreed statement of facts. From a judgment in favor of defendant, plaintiff has appealed.
Omitting all unnecessary details, it appears that the defendant is a domestic private corporation, organized in 1905; that its capital stock was made nonassessable; that plaintiff became a stockholder; that thereafter, on January 24, 1911, an order was entered upon the records of the corporation reciting that on that day the stock of the corporation had been ordered changed from nonassessable to assessable stock, and proper certificates setting forth that fact were filed; that there were then 301 individuals owning stock in the corporation that only 96 of such stockholders consented to the change but that 'these 96 owned more than three-fourths of all the capital stock. This action was brought by a nonconsenting stockholder to enjoin the sale of his stock for delinquent assessments, and the single question presented for determination is: Does it require the consent of at least three-fourths of the whole number of stockholders, regardless of the number of shares owned by them, to change the stock from nonassessable to assessable stock, or is the consent of the owners of three-fourths of the shares of stock sufficient, even though these owners constitute less than three-fourths of the whole number of individuals holding stock in the corporation?
Section 3887, Revised Codes, provides: "Any corporation whose capital stock is not assessable may, with the consent of three-fourths of its stockholders, in writing, spread upon the records of such corporation, make its stock assessable under the provisions of this article." If this language be accepted literally, then clearly it requires the vote of three-fourths of the whole number of individuals owning stock, regardless of the number of shares owned by them, to effect the change. But counsel for respondent insists that the use of the term "stockholders," in the section above, is an inadvertence, and that the Legislature meant that the consent of the owners of three-fourths of the capital stock is sufficient, even though those owners constitute less than three-fourths of the whole number of stockholders. This view was adopted by the trial court, and the question above is presented for our review. The argument in favor of the trial court's conclusion has its foundation in the history of the rise and growth of industrial corporations in England and America. It is insisted that the share of stock has come to be regarded as the unit of voting power, and that our Legislature has recognized the rule in practically every instance where the subject was considered. However, it is conceded that these corporations are the creatures of statute, and that it is within the power of the Legislature to adopt either the share of stock or the individual owning stock as the unit of voting power, unless restrained by the Constitution. The only constitutional provision upon the subject is found in section 4 of article 15 of our state Constitution, which establishes the share of stock as the unit of voting power in the election of trustees or directors of such corporations. Since this restriction is limited to a single purpose, the Legislature is left free to establish either the share or the individual as the unit for any purpose other than the election of trustees or directors. Is there, then, any evidence that the use of the term "stockholders" in section 3887 is an inadvertence? We think not, and the history of the legislation furnishes ample evidence to support our conclusion.
The share of stock as the unit of voting power in the election of trustees or directors of industrial corporations was recognized uniformly in all our territorial legislation upon the subject; but beginning with the Codified Statutes of 1871-72, and continuing down to the present day, we find that the Legislature has not adopted either standard uniformly. Section 23, chapter 18, General and Miscellaneous Laws Codified Statutes above, provides that the consent of the owners of two-thirds of the stock is necessary to increase or diminish the capital stock; while section 43 of the same chapter provides that the consent of two-thirds of the stockholders is necessary to disincorporate. The same provisions are found in the Revised Statutes of 1879, div. 5, c. 15,§§ 266, 286. In the Compiled Statutes of 1887, div. 5, c. 25, the same provisions also are found in sections 468 and 488; and the act of March 5, 1883 (Laws 1883, p. 88, § 18), brought forward therein as section 513, for the first time makes provision for changing nonassessable stock to assessable stock. That section provide that the change may be made "by and with the unanimous consent of its stockholders." The next legislation which throws any light upon the subject under review is found in the Acts of the Third Legislative Assembly. The act of March 2, 1893 (Laws 1893, p. 111), provides that to increase or diminish the capital stock the "vote of at least two-thirds of all the shares of stock shall be necessary." Another act, approved the same day (Laws 1893, p. 93), provides that to alter, change, or amend the name of any existing corporation "a vote of a majority of the stockholders of such corporation duly assembled at any regular meeting or at any special meeting duly called for that purpose" shall be necessary. The act approved March 7, 1893 (Laws...
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