Weinburgh v. Union Street-Ry. Advertising Co.

• Citation: 65 N.J.E. 640,37 A. 1026
• Parties: WEINBURGH et al. v. UNION STREET-RAILWAY ADVERTISING CO. et al.
• Decision Date: 01 July 1897
• Court: New Jersey Court of Chancery

37 A. 1026

65 N.J.E. 640

WEINBURGH et al.

v. UNION STREET-RAILWAY ADVERTISING CO. et al.

Court of Chancery of New Jersey.

July 1, 1897.

Bill by Henry Weinburgh and others against the Union Street-Rallway Advertising Company and others. On application for preliminary injunction. Heard on bill and affidavits and answers and affidavits. Application for injunction denied.

William R. Barricklo and Mr. Horwistz, for complainants.

C. D. Thompson and Mr. Marshall, for defendants.

EMERY, V. C. The bill in this case is filed by three of the six stockholders of the Union Street-Rallway Advertising Company against the company and the other three stockholders, who are also three of the four directors of the company; the fourth director being Henry Weinburgh, one of the complainants. The main object of the bill is to enjoin the defendant directors and the company from acting under certain amendments to the by-laws of the company, which were adopted solely by the vote of the three defendant stockholders. One of the by-laws so adopted confers, or purports to confer, upon the directors of the company increased power of removal of officers of the company, and the other confers upon the president alone powers which are now exercised by him under the supervision or control of the directors. I think there can be no question but that the by-laws in question do regulate the internal affairs and management of the company in such important particulars that, unless they have been legally adopted, the complainants, as stockholders, are entitled to the aid of this court in preventing action under cover of their authority. The jurisdiction of the court for this purpose was not questioned at the argument, the contention of the defendants being that the amendments to the by-laws were lawfully adopted. The disputed amendments to the by-laws were adopted on May 24th, at a meeting of the stockholders, at which the three individual defendants were present and voting for them, being holders of shares as follows: Michael Weinburgh, 666 shares; Robert M. Burnett, 665 shares; Asa W. Dickinson, I share— being 1,332 shares out of a total of 2,000 shares. This is the statement of the vote as given in the answers, although it would seem by other statements in the pleadings that Michael Weinburgh is the owner on record of 732 shares. The complainants are each owners of record of 200 shares (600 in all), and there are no other stockholders than the complainants and individual defendants. The meeting of the stockholders to consider the proposed amendments to the by-laws was a special meeting originally called for May 15, 1897, and at this meeting the complainants were all present in person, and were attended also by their counsel. At this meeting no objection was made by either of the complainants or by their counsel that the special meeting had not been properly called. They presented a protest in writing against the consideration of the proposed amendments, on the ground that they were contrary to law, and interfered with the vested rights of the complainant Henry Weinburgh, who was and is treasurer of the company. A bill had been filed by the present complainants against the present individual defendants (the company not being a party) to restrain the removal of Henry Weinburgh from his office as treasurer, and from passing on the proposed by-laws, to accomplish that purpose; and pending the hearing of an application for preliminary injunction, action on the proposed by-laws was restrained except to adjourn the meeting, which was duly adjourned to May 24th. The restraining order was discharged on the hearing, and the proposed amendments to the by-laws were adopted at the adjourned meeting of May 24, 1897, by the vote above mentioned, none of the complainants being present at the adjourned meeting. The validity of these amendments to the bylaws was attacked at the hearing on three grounds: First, because the special meeting was illegally called; second, because the quorum required by the by-laws for special meetings was not present at the meeting of May 24th, when the amendments were adopted: third, because under the existing by-laws of the company, as is claimed by complainants, an amendment to the by-laws can be made only by the affirmative vote of a majority in number of the stockholders, and cannot be made by a majority in interest. The second ground of objection was not set up in the bill, but was relied on at the hearing.

As to the first objection,— that the special meeting was not regularly or legally called,— the affidavits in reply to the bill show that the requirements of the by-laws in this particular were followed, and in view of the failure of the complainants at the special meeting of May 15th to object to the meeting as irregularly called, and in view also of their protest, which assumed a regularly called meeting, and of the restraining order which they procured as against a regularly called meeting, the objection cannot be considered as affording a ground for preliminary injunction in the present case, even if the irregularity of the meeting was conceded. Under these circumstances, objection to the regularity of the call for the meeting should, for the purposes of the present application, be considered as a matter of form which has been waived by the complainants, and the only objections urged by the bill which I shall consider are the other objections which go to the merits of the case. The claim of the complainants is that under the by-laws in force at the time of the special meeting of May 24th a majority in number of the stockholders of record was necessary to constitute a quorum at the special meeting, and also that by the by-laws an amendment thereto can only be adopted by the affirmative vote of a majority in number of these stockholders. If either of these claims be well founded, the by-laws in question have not been legally adopted, and action under them should be enjoined. The company was incorporated under the general law in 1894, and the provisions relating to amendments and quorums in its by-laws as originally adopted provided (article 13): "These by-laws may be altered or amended at any regular meeting of the stockholders upon the affirmative vote of three-fourths in interest of the stockholders, and at any special meeting of the stockholders, upon the same vote," etc. By these original by-laws, also, it was provided (article 1, § 2) that "seventy-five per cent. In interest of the stockholders present, either in person or by proxy, shall constitute a quorum for the transaction of business at all meetings of stockholders." Article 8 of these original bylaws also provides that "at all meetings of this company each share of stock shall be entitled to one vote either by proxy or in person." By the Revised Corporation Act of 1875, § 21 (Revision, p. 181), it was provided that every company might determine by its by-laws "what number of shares shall entitle the stockholders to one or more votes, what number of stockholders shall attend, either in person or by proxy, or what number of shares or amount of interest shall be represented at any meeting in order to constitute a quorum, and if the quorum shall not be so determined by the company, a majority of the stockholders in interest represented, either in person or by proxy, shall constitute a quorum." By an act of March 9, 1891 (P. L. 113), the section was amended and re-enacted with the insertion of a proviso "that in no case shall more than a majority of shares or amount...