Sutton v. Globe Knitting Works

• Decision Date: 16 June 1936
• Docket Number: No. 21,Oct. Term, 1935.,21
• Citation: 276 Mich. 200,267 N.W. 815
• Parties: SUTTON v. GLOBE KNITTING WORKS.
• Court: Michigan Supreme Court

276 Mich. 200

267 N.W. 815

SUTTON

v.GLOBE KNITTING WORKS.

No. 21, Oct. Term, 1935.

Supreme Court of Michigan.

June 16, 1936.

Action by R. E. Sutton against the Globe Knitting Works. From a judgment for the defendant, the plaintiff appeals.

Remanded, with directions.

Appeal from Circuit Court, Kent County; William B. Brown, judge.

Argued before the Entire Bench.

Seth R. Bidwell, Butterfield, Keeney & Amberg, and Travis, Merrick, Johnson & McCobb, all of Grand Rapids, for appellant.

Warner, Norcross & Judd, and Joseph Shulsky, all of Grand Rapids, for appellee.

NORTH, Chief Justice.

Plaintiff and appellant is the owner of 100 shares of preferred stock of the par value of $10 per share in the defendant company, Globe Knitting Works, a Michigan corporation. The certificate issued for such preferred stock contains the following provision: ‘This stock is subject to redemption and shall be redeemed at par on January 25, 1932, provided the same is then outstanding.’ At the time plaintiff purchased his stock in the defendant company its articles of association contained the following provision: ‘The preferred stock shall be subject to redemption and shall be redeemed at par on January 25, 1932.’ The plaintiff tendered his stock for redemption on January 25, 1932, and demanded payment of $1,000, the par value thereof. Notwithstanding the corporation's ability to redeem the stock without prejudice to the rights of its creditors, it refused to redeem in compliance with plaintiff's demand. Thereafter plaintiff instituted this suit for the recovery of the $1,000 alleged to be due him in accordance with the provision contained in the stock certificate. The circuit judge before whom the case was heard without a jury entered judgment in favor of the defendant, and plaintiff has appealed.

The defense is based upon an amendment to defendant's articles of association in consequence of which the corporation claims the redemption date of plaintiff's stock has been extended to January 25, 1957. The amendment was made subsequent to plaintiff's becoming the owner of his 100 shares of preferred stock, but prior to the date (January 25, 1932) it was tendered for redemption; and the amendment is asserted to have been made under the authority of and in accordance with section 43 of Act No. 327, Pub.Acts 1931, said act being the socalled Michigan General Corporations Act. The portions of Act No. 327 pertinent to decision are as follows:

‘Sec. 43. Any corporation formed or existing under this act may at a meeting of the shareholders duly called and held amend its articles without limitation so long as the articles as amended would have been authorized by this act as original articles, by the vote of the holders of the majority of its shares entitled to vote; Provided, That if any such amendment shall change the rights, privileges or preferences of the holders of shares of any class, such amendment shall be approved by the vote of the holders of a majority of the shares of each class of shares entitled to vote and a majority of shares of each class whose rights, privileges or preferences are so changed.’

‘Sec. 59. Liability of Corporations and Rights of Others Unimpaired by Sale, Increase or Decrease of Capital Stock, or by Consolidation or Merger. The liability of any corporation or of the shareholders or officers thereof, or the rights or remedies of the creditors thereof, or of persons doing or transacting business with such corporation, shall not in any way be lessened or impaired by * * * any change or amendment in the articles of any such corporations.’

‘Sec. 189. Existing Corporations; Applicability of Act. Every corporation heretofore organized and incorporated under any law of this state, which if now incorporated would be required to incorporate under and subject to this act, shall hereafter be subject to the provisions of this act without formal reorganization hereunder and such corporations shall be deemed to exist under this act, and, except where otherwise provided in the act under which any such particular corporation is incorporated, the provisions of this act shall govern all corporations heretofore or hereafter incorporated in this state.’

‘Sec. 192. Saving Clause. This act shall not impair or affect any act done, offense committed or right accruing, accrued, or acquired, or liability, penalty, forfeiture or punishment incurred prior to the time this act takes effect, but the same may be enjoyed, asserted, enforced, prosecuted or inflicted, as fully and to the same extent as if this act had not been passed.’

It is conceded by plaintiff that the amendment to defendant's articles of association by which the redemption date of its preferred stock was changed from January 25, 1932, to January 25, 1957, was adopted by more than a majority of the holders of such stock. It is admitted by the pleadings that plaintiff's shares of stock were not voted in favor of this amendment to defendant's articles of association. It is plaintiff's contention that since he became the owner of this 100 shares of preferred stock prior to the effective date of Act No. 327, Pub.Acts 1931, it was not within the power of the corporation or of the other holders of preferred stock to vote to postpone the redemption date of the stock held by plaintiff, he having withheld consent to such postponement. Plaintiff asserts that postponement of the redemption date of his stock is an impairment of his contract right and deprives him of his property without due process of law; and if the Legislature by said Act No. 327 sought to empower the corporation to do this, the act is unconstitutional.

As to whether Act No. 327 empowers the defendant corporation by action of those holding a majority of the preferred stock to extend the time of redemption of such stock held by one of the minority not consenting thereto, we quote appellant's contention as set forth in his brief: ‘We freely concede that from and after September 18, 1931-the date when the new corporation code went into effect-Globe Knitting Works automatically came under the terms of Act 327 by virtue of the provisions of section 189 hereinbefore quoted. Section 189, however, goes no farther than this and it is clear from the provisions of sections 59 and 192, as we shall show, that the legislature had no intention, in providing for continued corporate existence subject to Act 327, to disturb, or to permit destruction of, existing property rights. Likewise we concede that section 43, if it stood alone, would permit, by its terms, an amendment postponing a redemption date. But section 43 does not stand alone. It must be construed to harmonize with sections 59 and 192, since effect must be given, if possible, to every word, clause and sentence in a statute.’

In determining whether the Legislature by passing Act No. 327, Pub.Acts 1931, intended to empower corporations to alter, in the manner herein asserted by defendant, the rights of those holding corporate stock issued prior thereto, we should read the statute as a whole and make reasonable application of each of its separate sections.

‘No rule is better settled than, in construing a statute, effect must be given to every part of it. One part must not be so construed as to render another part nugatory, or of no effect. * * * People v. Burns, 5 Mich. 114.’ City of Grand Rapids v. Crocker, 219 Mich. 178, 189 N.W. 221, 222.

When read entirely by itself, section 43 of Act No. 327 seems to contain provisions which are extremely broad. It is not necessary to decision herein to determine to what extent the rights of minority stockholders are subject to action by majority stockholders in cases where the rights of such minority stockholders were not vested prior to the statute becoming effective. But reading the whole act together and giving effect to each section makes it clear that the Legislature had not intention of attempting to give to then existing corporations the power through action of a majority of its stockholders to take from the minority stockholders vested or accruing property rights. By virtue of the quoted provision contained in the certificate of stock held by plaintiff, he certainly had, immediately upon receiving it from defendant, a vested or accruing right to have it redeemed at par on the 25th day of January, 1932. This was a...