State ex rel. Daubenspeck v. Day
| Decision Date | 27 May 1919 |
| Docket Number | No. 23508.,23508. |
| Citation | 189 Ind. 243,123 N.E. 402 |
| Parties | STATE ex rel. DAUBENSPECK v. DAY et al. |
| Court | Indiana Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Hamilton County; Ernest E. Cloe, Judge.
Quo warranto on the relation of George B. Daubenspeck against Elbert H. Day and others. From the judgment rendered, relator appeals. Reversed and remanded, with instructions.
Frederick Van Nuys and Elias D. Salsbury, both of Indianapolis, and Gentry & Campbell, of Noblesville, for appellant.
Emsley W. Johnson and Joseph W. Hutchinson, both of Indianapolis, for appellees.
This is a proceeding in quo warranto brought by the relator, George B. Daubenspeck, against appellees to determine the right of each appellee to the office of director of the Union Telephone Company of Carmel, Ind. Issues were formed, trial had, special finding of facts made, and conclusions of law stated thereon in favor of appellees, and judgment against appellant. The errors assigned question: (1) The ruling of the trial court on relator's demurrer to the second paragraph of answer; and (2) each conclusion of law.
The assignments of error present the same question. The following facts taken from the special findings will suffice to indicate the question for decision: The Union Telephone Company was incorporated on August 19, 1903, under an act of the General Assembly of this state approved April 7, 1881 (Acts 1881, c. 101), and acts amendatory thereof and supplemental thereto. From then until now the board of directors has been composed of five stockholders. It was the custom of the company to elect annually three, one for the term of one year and two for the term of two years. 96 1/2 shares is a majority of all the shares of stock issued and outstanding. Appellees are now acting as directors of the company, claiming to have been elected at a regular annual stockholders' meeting. The facts pertaining to their election are as follows:
Three directors were to be elected. Tellers were chosen, and six persons, appellees and three others, all qualified for the office of director, were nominated to be voted for. Appellees each received 68 votes and all counted for them. The other three nominated received 96 1/2 votes each, but the tellers only counted for them 28 1/2 votes, and rejected and refused to count the other 68 on the sole ground that these votes represented 68 shares of stock of the company owned and controlled by the relator over and above the 5 shares voted by him, and that to count the 68 votes would be in violation of, and contrary to, article 11 of the articles of association, which reads as follows::
“No person, firm or company can ever at any one time own or control more than five shares of the capital stock of this company, and every such person, firm or company shall be entitled to only one telephone connection for each paid-up share of stock so owned.”
That said 68 shares were not in the name of the relator on the books of the company, and never had been, but were held by others in blocks of 5 shares or less, under an agreement with the relator that said stock should be voted as directed by him at all stockholders' meetings, and for the purposes by him of controlling the corporation and its policies notwithstanding article 11.
Appellees claim that article 11 has the force and effect of a by-law, and also that it amounts to a stipulation between the stockholders as to their holdings of stock.
The by-law contention of appellees cannot be sustained. The power to adopt by-laws for the government of a telephone corporation and the management of its business, and to determine the manner in which the stock of the company shall be held and assigned, is by statute conferred exclusively upon the board of directors. Sections 8 and 11, Acts 1881, p. 698; sections 5794, 5800, Burns 1914; Manufacturers', etc., Co. v. Landay, 219 Ill. 168, 76 N. E. 146.
Ordinarily by-laws are made by the stockholders, but, where the statute gives that power to the board of directors, the stockholders cannot change it or interfere with the board in this particular so long as such by-laws are reasonable and do not interfere with the vested and substantial rights of the stockholders, or is not contrary to public policy or the established law of the land. State v. Anderson, 31 Ind. App. 34, 67 N. E. 207; Manufacturers', etc., Co. v. Landay, supra; Van Atten v. Modern Brotherhood of America, 131 Iowa, 232, 108 N. W. 313;Farmers' & Merchants' Bank v. Wasson, 48 Iowa, 336, 30 Am. Rep. 398. In this case the board of directors has never assumed to pass any by-law other than to define the duties of the president, secretary-treasurer, and manager. Neither of these by-laws have any reference to the holding, transferring, or assigning of the stock from or to stockholders. If only the board of directors had power to pass by-laws, and none were passed by that body, limiting the number of shares of stock an individual person might own or control in the corporation, then it cannot be said that a by-law on that subject was passed by any authorized authority. This is not a case where the corporation has exceeded its authority or is in any manner guilty of criticizable conduct. Consequently the question before us does not involve any act of the corporation, but relates alone to the power of the incorporators to limit the number of shares of stock which may be held at any one time by an individual stockholder.
It will be noticed that articles of incorporation under the telephone act require only three affirmative statements, namely: (1) The name assumed by the company; (2) the counties or places within which such company proposes to establish, maintain, and operate telephones and telephone exchanges; and (3) the amount of capital stock and the number of shares into which it is divided. Acts 1881, p. 698, § 2; section 5790, Burns 1914, Other provisions of this act provide:
“The board of directors shall adopt by-laws for the government of the corporation and the management of its business.”
Section 5800, Burns 1914.
Section 5 requires the principal office of the company to be maintained in this state. Section 7 limits the life of corporations organized under this act to 50 years, and section 4 as amended (Acts 1899, p. 124):
“The stockholders shall elect, from among their number, not less than three directors.”
It thus appears that this act contains no provision expressly restricting stock ownership or any provision relative to the voting of the stock of such company. The title of the act is:
“An act concerning telephone companies, and supplemental to an act for the incorporation of manufacturing and mining companies and companies for mechanical, chemical and building purposes, approved May 20, 1852, and all acts amendatory thereof and supplemental thereto; and declaring an emergency.”
At this point we meet the question: Is the telephone act a part of the manufacturing act, and, if so, must they be construed together and as applicable to telephone companies?
Appellees insist that the telephone act is independent legislation, and to it alone the corporation must respond, and to which it must look for its limitations. True, this act does not purport to be an amendment, and for that reason it is suggested that these acts must be construed separately, because there is no power in the General...
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