Hughes v. Parker

The charter of the Manchester and Lawrence Railroad was granted on the 30th day of June, 1847. The grantees are nineteen in number. The first section of the charter provides that these grantees, “their successors, associates and assigns, shall be a body corporate,” &c.

The bill is filed against seven of the grantees, who are the present directors.

The fourth section of the charter enacts that “the immediate government and direction of the affairs of the corporation shall be vested in a board not exceeding seven direc*185tors, chosen by the members of said corporation, at their annual meeting.”

The tenth section provides that Messrs. Bell, Parker and Foster, or any two of them, shall call the first meeting of the grantees.

These persons gave notice, and on the 31st day of July, 1847, the grantees met and voted to accept the charter. Then, “ without having taken or made any associates or assigns,” the grantees elected the defendants as directors.

The first question is, whether the grantees could elect directors without having made any “ associates, successors or assigns ?”

There is nothing in the charter which makes it the duty of the grantees to appoint any associates. It is incident to every corporation to elect members, if the corporation choose, and this power need not be expressly conferred by the charter. 1 Kyd on Corp. 69. The grantees are vested with certain powers, which they may exercise either by themselves exclusively, or in connexion with others whom they elect as their associates. The grantees of' a charter for a bank, a railroad or a manufactory, may, unless restrained by the charter, furnish all the funds necessary for the-purposes of the charter. They may elect the officers and agents of the corporation who may be required in the first instance. This power they derive from the highest authority, that of the Legislature. If they please to elect others, and other persons are willing to become members of the corporation, their numbers may be increased in this way, because their power so to do is an incidental one. But it is a power, and not a duty. If it were supposed that the object of the charter were one impracticable to be attained, or that capital invested under it would be lost on account of its hazardous character, it might be difficult,, perhaps impossible, to induce any others than the grantees to engage in it; and they, although selected by the Legislature for this purpose, would be unable to proceed with' *186their undertaking. But if the investment were supposed to be profitable, associates would readily be found to share the expected profits. But it could never have been the intention of the Legislature that the action of the grantees should depend upon the contingency of their being able to induce other persons to become their associates, and it is believed that in none of the numerous cases in which the powers and duties of incorporations have been investigated, has it ever been supposed that the grantees of a charter had not all the privileges of the charter, unless some addition to their number were expressly required, or unless such addition were necessarily to be inferred from the language of the grant.

It is also to be remarked that successors, associates and assigns are all, by the charter, in the same category. If associates must be made before the grantees can act, so also must successors, which would be a reductio ad absurdum.

The first position taken by the orator is entirely untenable and unsupported by authority or reasoning. The Legislature intended merely to incorporate the grantees, and such persons as should become their associates, successors or assigns.

II. The second position taken by the orator is, that the directors were not elected at the annual meeting of the corporation, in accordance with the provisions of the charter and by-laws, inasmuch as the by-laws were not adopted until after the election of the directors.

The fourth section provides that the directors shall be chosen by the members of the corporation at their annual meeting.

The tenth section enacts that the annual meetings of the corporation for the choice of directors, shall be holden at such time and place in the State as may be provided by the by-laws.

On the last Saturday in July, 1847, the grantees met and transacted certain business in the following manner.

*187L Voted to accept the charter.

II. Elected directors.

III. Adopted by-laws.

In relation to the validity of the election of the directors, the only question is one of time. Because they were elected before the adoption of the by-laws, it is said that their • acts were all illegal, and that they should be restrained from further action. To authorize any tribunal to attach such paramount importance to the precise hour when an act of this kind is done, there should exist some rigid principle which the tribunal cannot disregard, which it is its duty to enforce at all events, and an infraction of which would lead to most dangerous results. There is no complaint in the bill that the acts of the directors are in any way oppressive or improper, except so far as they are illegal. If done by a legally constituted board, they are not assumed to be exceptionable. But there are several grounds well recognized by the decisions, on questions similar to this, upon which the election of directors must be held legal, and their acts valid.

I. The language of the charter, as to the time of the election of the directors, is directory only, and not imperative.

In the case of Rex v. Leicester, 7 B. & C. 12, cited in Dwarris on Statutes 714, a statute for regulating the time of holding the quarter sessions was held to be directory. It was said by the court, “ it has been asked what language will make a statute imperative, if this be not so ? Negative words would have made it so, but those used are in the affirmative only.”

"When the precise time is not of the essence of the thing done, as in this case, the language is often held to be directory only. In Rex v. Loudale, 1 Burrow 447, Lord Mansfield says : “ There is a known distinction between circumstances which are of the essence of a thing required to be done by statute, and clauses merely directory. The pre*188cise time, in many cases, is not of the essence.” See also Allen v. Bruce, 12 N. H. Hep. 418.

II. The acts having all been done at the same meeting, and there being only a question of time, that may be regarded as having been done first, which should have taken precedence. Such a change in the order of the business affords no ground for the interposition of a court of chancery.

III. The vote adopting the by-laws may be regarded as what it was, in substance, a ratification of the previous choice of directors..

IV. Irregular elections, even if this election might be regarded as an irregular one, are voidable only, and not void. If the directors might be considered as irregularly elected, still they may hold their offices until their right is questioned and avoided by quo warranto, or some other suitable proceeding. Until that time, their acts are valid' and binding. Their right to their offices cannot be questioned in this collateral' manner. Bank of United Sates v. Dandridge, 12 Wheat. 79.

Bill dismissed'with costs.