Zachary v. Milin

• Decision Date: 09 September 1940
• Docket Number: April Term, 1940.,No. 67,67
• Citation: 294 Mich. 622,293 N.W. 770
• Parties: ZACHARY et al. v. MILIN et al.
• Court: Michigan Supreme Court

294 Mich. 622

293 N.W. 770

ZACHARY et al.

v.MILIN et al.

No. 67, April Term, 1940.

Supreme Court of Michigan.

Sept. 9, 1940.

Quo warranto proceeding by Theodore Zachary and another against Charles Milin and another, to test the right of the defendants to office of directors of the Great Lakes Champagne Wineries, Incorporated, a Michigan corporation. From an adverse judgment, plaintiffs appeal.

Affirmed.Appeal from Circuit Court, Wayne County; Allan Campbell, Judge, deceased, Frank Day Smith, Judge, successor.

Argued before the Entire Bench.

Chester P. O'Hara, of Detroit, for relators and appellants.

Miller, Baldwin & Boos, of Detroit, for defendant and appellee Ernest C. Wunsch.

Fildew & DeGree, of Detroit, for appellee Charles Milin.

POTTER, Justice.

This is an information in the nature of quo warranto filed by Theodore Zachary and William N. Phillips to test the right of Ernest C. Wunsch and Charles Milin to hold, use, exercise and enjoy the office of directors of the Great Lakes Champagne Wineries, Inc., a Michigan corporation.

The result depends upon the validity of the directors' meeting at the company's laboratory December 8, 1937. If Zachary was legally removed as president of the company, then the trial court should be affirmed. But, if that meeting be considered as an informal one, not in the nature of a directors' meeting, then the case should be reversed.

In the absence of statutory authority no decision or act done by any number of the board of directors while not duly assembled as a board is a valid corporate act. Smith v. Dorn, 96 Cal. 73, 30 P. 1024. To hold that certain directors could form a quorum by coming upon another in a room, or in the street, and, despite the protests of that other, could, by merely declaring the body of persons so gathered together to be a meeting, actually give it that complexion, would be illegal. Harris v. English Canadian Co., 3 West.L.R. 5. A director of a corporation is not to be trapped into attendance of a meeting against his will. The directors of a corporation have no authority to act as a board of directors except at a regularly constituted meeting in the absence of a consent in writing, Act No. 327, § 13, subd. 4(d), Pub.Acts 1931, Comp.Laws Supp.1940, § 10135-13, subd. 4(d); Stat.Ann. § 21.13. But if all of the members of the board of directors are present and participate in the meeting or proceedings, then the meeting may be said to be duly and legally held.

Zachary claims he was not given notice of the meeting of December 8, 1937, and, therefore, its action was void. On the other hand, the defendants claim that notice was waived by Zachary's appearance at the meeting.

Section 39 of the general corporation law, Act No. 327, Pub.Acts 1931, as amended by Act No. 194, Pub.Acts 1935 (Comp.Laws Supp.1940, § 10135-39, Stat.Ann. § 21.39), provides that ‘shareholders' and directors' meetings shall be called in the manner provided in the by-laws.’

Section 4 of the bylaws provides: ‘Special meetings of the board of directors may be held by giving one day's notice thereof to each director, but no notice shall be necessary as a prerequisite to any meeting of the board at which all directors are present.’

All three of the directors were present at the meeting of December 8, 1937. The validity of the meeting may not be affected by failure to give notice as required by the bylaws, providing the parties were personally present. If all of the directors were present at the meeting of December 8, 1937, and understood that the meeting was to be a directors' meeting, then the action taken is final and may not be avoided by an informality in connection with its being called.

‘Of course if directors are willing to hold a meeting they may do so under any circumstances, but one of them cannot be made to attend the board or to convert a casual meeting into a board meeting.’ Barron v. Potter [1914] L.R., 1 Ch.Div. 895.

In Stobo v. Davis Provision Co., 54 Ill.App. 440, two directors in New York came to Chicago and walked into the office of the third director who was secretary of the company. They moved to oust the third director as secretary of the corporation. It was contended that, no notice having been given, it required, not only the third person's physical presence in the room, but his assent to the holding of the meeting. The court found there was no fraud, and stated:

‘At the meeting in question, every director was present and participated until such action was proposed as was distasteful to one, who then withdrew, but the rest, constituting a majority, remained.

‘Under such circumstances, to set aside the action of the board, so lawfully convened and acting within its powers, would be subversive of all lawful control by directors over the affairs of a private corporation.’

The record is sharply conflicting as to whether plaintiff Zachary agreed that the meeting of December 8, 1937, in the company's laboratory, was a directors' meeting or whether the defendants then voted to remove him from office. The testimony consists of the statements of the three directors themselves. The trial judge found that Zachary attempted to have Milin ousted as an officer of the company and...