State v. Swanger

• Citation: 190 Mo. 561,89 S.W. 872
• Parties: STATE ex rel. FRANK et al. v. SWANGER, Secretary of State.
• Decision Date: 25 October 1905
• Court: United States State Supreme Court of Missouri

89 S.W. 872

190 Mo. 561

STATE ex rel. FRANK et al. v. SWANGER, Secretary of State.

Supreme Court of Missouri.

October 25, 1905.

CORPORATIONS — ARTICLES — PREFERRED STOCK — VOTING POWER — STATUTES.

Under Rev. St. 1899, §§ 1312, 1332, as amended by Laws 1901, pp. 91, 92, and section 1333, conferring on the stockholders power to issue preferred stock, and to fix its preferences,

priorities, classification, and character, the stockholders of a corporation were entitled to provide that preferred stock should not carry voting power, notwithstanding Const. art. 12, § 6, and Rev. St. 1899, § 953, providing that at all elections for directors of a corporation "each stockholder" shall be entitled to cast as many votes as he has shares in the company, and Const. art. 12, §§ 8 and 12, providing that the stock shall not be increased without the consent of the holders of the larger number in value of the stock, and that preferred stock shall not be issued without the consent of all the stockholders.

In Banc. Mandamus by the state, on relation of Nathan Frank and others, against John E. Swanger, Secretary of State. Peremptory writ granted.

J. C. Harper, D. W. Voyles, and Silver & Brown, for relator. Jno. Kennish, Atty. Gen., and W. C. Irvin, for respondent.

GANTT, J.

This is an original proceeding brought by the plaintiffs in this court at its April term, 1905, to obtain a peremptory writ of mandamus directed to Hon. John E. Swanger, Secretary of State, requiring him to issue a certificate of incorporation to the Star-Chronicle Publishing Company. The petition, omitting caption, is in the words following: "Your petitioners, Nathan Frank, Milton A. McRae, J. C. Harper, Robert F. Paine, F. W. Hunsicker, August Frank, and John M. Hertel [relators herein], state and say as follows: That John E. Swanger is now and has been since on or about January 1, 1905, the Secretary of the State of the state of Missouri, duly qualified and acting as such officer. That on the 2d day of June, 1905, last past, your petitioners did execute articles of agreement for the incorporation of a business corporation (pursuant to and under article 9, c. 12 of the Revised Statutes of 1899 of this state), under the name and style of the `Star-Chronicle Publishing Company.' That said article of agreement duly set forth the said name of the contemplated corporation, the place of its location, viz., in the city of St. Louis, Missouri; the names and places of residences of the several shareholders; the number of the board of directors [consisting of seven shareholders], and their names for the first year after the incorporation; the duration of the corporation, viz., for a term of fifty years; the purpose of the corporation, viz., `The printing and publishing of one or more newspapers, magazines, and other publications and all business usually connected therewith'; amount of capital stock of the intended corporation, viz., $500,000, divided into shares of the par value of one hundred dollars each; that the same was bona fide subscribed and all thereof actually paid up in lawful money of the United States; and that the same was in the custody of the persons named in said articles of agreement as the first board of directors of said proposed corporation, they being the same persons as your petitioners herein. That said articles of agreement further provide that 2,500 of said shares shall be preferred stock, and that the remaining 2,500 shares shall be common stock. That the holders of said common and preferred stock shall have the preference, classification, character, and rate of dividends as follows: `The holders of the preferred stock shall be entited to receive out of the surplus or net earnings, and the corporation shall be bound to pay thereon as and when declared by the board of directors, a dividend at the rate of six per centum per annum, cumulative from and after the issue of such stock, payable monthly unless otherwise ordered by the board of directors, before any dividend shall be set apart or paid on the common stock; provided, however, that after the payment in full of all dividends on the preferred stock, and so long as a dividend of six per cent. is paid each year on the preferred stock, the directors shall have the power then and thereafter to declare and pay from the net earnings dividends on the common stock until it has received the same amount of dividends as have been paid on the preferred stock, and no further dividend shall be paid on the preferred stock until the common stock has received an equal amount of dividends, calculated cumulatively from the date of the issue of the stock, and thereafter the preferred and common stock shall be entitled to share ratably in all dividends declared in excess of the preferential dividend of six per cent. to be paid on the preferred stock and a like amount on the common stock; provided, always, that dividends may be declared from the net earnings only, and from such net earnings the preferred stock shall receive preferentially and cumulatively a dividend of six per cent. per annum, and the common stock shall at no time be entitled to a dividend until all arrearages of such dividends have been paid to the holders of the preferred stock. The voting power shall be vested exclusively in the common stock, and at all meetings of the stockholders, and at all elections for directors, each holder of common stock shall be entitled to one vote for each share of common stock held by him and registered on the books of the company; and the preferred stock shall have no voting power, the holders thereof expressly waiving any right to vote the preferred stock at elections for directors or on any question, or to participate in stockholders' meetings.' That said articles of agreement were on the 2d day of June, 1905, last past, duly subscribed and acknowledged by your petitioners, before Laura L. Sutton, a notary public for and within the city of St. Louis aforesaid, and, after being so subscribed and acknowledged, said articles were, on June 5, 1905, filed in the office of Paul Young, Jr., recorder of deeds for the said city of St. Louis, and were, by said recorder on said day last aforesaid, recorded in Corporation Book 28, page 207, of said recorder's office. That a duly certified copy of said articles of agreement, as recorded in the office of said recorder of deeds of the city of St. Louis, are attached to this petition, marked Exhibit A. That thereafter, and on June 5, 1905, your petitioners did present to and file in the office of said John E. Swanger, Secretary of State aforesaid, a copy of said recorded articles of agreement, duly certified to by the recorder of deeds of the city of St. Louis, and did tender at the same time the sum of $277.50, as the necessary incorporation fees in the premises, and did request the said John E. Swanger, as Secretary of State aforesaid, to issue a certificate that said corporation, contemplated in the articles of agreement aforesaid, viz., of the Star-Chronicle Publishing Company, was duly organized, with the amount of its capital stock. That, notwithstanding the premises herein and the provisions of section 1314 of the Revised Statutes of 1899 of this state, the said John E. Swanger, as said Secretary of State aforesaid, did decline and refuse to issue, and does still decline and refuse to issue, said certificate of corporation as requested by your petitioners. That under and by virtue of the provisions of article 9, c. 12, of the Revised Statutes of 1899, and of other provisions of said statutes and of the Constitution of the state applicable to the premises herein, it was the legal duty of said John E. Swanger, as said Secretary of State aforesaid, to issue said certificate of incorporation as required by your petitioners. Wherefore your petitioners, being without other adequate remedy, pray the issuance by the honorable Supreme Court of Missouri of an alternative writ of mandamus directing the said John E. Swanger, as said Secretary of State aforesaid, to issue said certificate of incorporation hereinbefore referred to or to show cause at some early day, to be named by this court, why he has not done so, and your petitioners pray for such other and further relief to which, by reason of the premises, they may be entitled."

The respondent entered his voluntary appearance by the Attorney General and filed a demurrer to the alternative writ, on the ground that the petition and alternative writ did not state facts sufficient in law or equity to entitle the petitioners to the relief sought. The cause was heard orally and by briefs at the April term, 1905, and a judgment rendered awarding a peremptory writ of mandamus, but for want of time no written opinion was filed, and this opinion is now handed down, expressing our reasons for granting the writ.

1. The refusal of the Secretary of State to grant a certificate of incorporation is based upon the following provision in the third clause of the articles of incorporation, to wit: "The voting power shall be vested exclusively in the common stock, and at all meetings of the stockholders and at all elections for directors each holder of common stock shall be entitled to one vote for each share of common stock held by him and registered on the books of the company, and the preferred stock shall have no voting power; the holders thereof expressly waiving any right to vote the preferred stock at elections for directors or on any question or to participate in stockholders' meetings." It is insisted by the Secretary of State that the above provision in the articles is in violation of the Constitution and laws of this state. The sections of the Constitution and of the Revised Statutes of this state invoked by the Secretary in justification of his refusal to approve the articles are these: Section 6, art. 12, of the Constitution, provides as follows: "In all elections for directors or managers of any incorporated company,...