State ex rel. Webber v. Shaw
State ex rel. Webber v. Shaw
Opinion of the Court
The sole question for determination is concerning the legality of the election of February 8, 1921. It is sought to justify this election on the theory that the majority did not intend to hold another meeting for the purpose of electing directors and that the majority in adjourning the meeting of January 11 were not acting in good faith, but were moved by a desire to prevent the minority from, having any representation on the board of directors. The minority proceeded upon the theory that if the majority did not intend to call another meeting the minority had a right to proceed under Section 8647, General Code, to call an annual meeting, and to hold the same by such representation as might attend, whether it amounted to a majority of the outstanding stock or not, arid that such meeting would be valid even though it proceeded in disregard of certain provisions in the regulations of the corporation, which regulations were not in conflict with the provisions of Section 8647, but supplementary thereto. Section 8647 provides as follows: “Except club-house companies, unless the regulations of a corporation otherwise provide, an annual election for trustees or directors shall be held on the first Monday in January' of each year. ■ When for any cause, trustees or directors are not elected at the annual meeting, or other meeting called for that purpose, they may be chosen at a members’ or stockholders’ meeting, if all the members or stockholders are present in person or by proxies,, or at a meeting called by the trustees or directors, or any two members or stockholders, notice of which has been given, in
Acting under the provisions of this section, two stockholders published notice of the meeting in the Grafton Citizen, a weekly newspaper published in Grafton, some distance from the county seat, although the record shows that not a single stockholder of the corporation lived in Grafton and only one stockholder received his mail on a rural delivery line leading out of Grafton. The notice was published in the issue of January 28th, and although another issue of the Grafton Citizen appeared on February 4th the publication did not appear in that issue. The language of the statute is, “by publication for ten. days in some newspaper printed in the county where the corporation is situated.” It will be seen that the statute does not require ten-days notice of the meeting, or that the notice be given ten days before the meeting, but requires “publication for ten days.” This clearly means that the publication is to continue for the period of ten days, and if the paper had been a daily paper it could only continue by keeping the notice in the paper during the entire period of ten days, which would mean ten different insertions. Inasmuch as it was a weekly paper, it could be kept in the paper the entire period of ten days by having it also appear in the issue of February 4th. The statute as to the giving of notice has not therefore
It should also be pointed out in this connection that the regulations of the corporation make ample provision for calling meetings, it being provided that meetings shall be called “whenever so requested by stockholders holding twenty-five per cent, or more of the capital stock.” * Nine hundred and seven shares were more than twenty-five per cent, of the entire outstanding capital.
If it be assumed that two stockholders had the right to call a meeting to elect directors at the time the publication was made, and if it be further assumed that the meeting was otherwise regular in every respect, it ■ becomes pertinent to inquire whether 972 shares out of a total of 3617 shares could hold a valid election. Section 8704, General Code, provides in part: “When no other provision is specially made in this title, a corporation by its regulations may provide —
“1. The time, place and manner of calling and conducting its meetings.
*668 “2. The number of stockholders or members constituting a quorum.”
Section 8647 does not make any provision’as to the place of holding meetings and the power is therefore clearly conferred upon the corporation to make provision by its regulations for the place at which its meetings. shall be held. The regulations are very specific in requiring that all meetings shall be held at the principal office of the company and that its principal office is located at room 206 Ely Block, Elyria, Ohio. Section 8647 is also silent as to the requirement of the number of shares constituting a quorum, and the power is therefore conferred by Section 8704 upon the corporation to stipulate the number which shall constitute a quorum, and it is accordingly provided in the regulations that a quorum shall consist of a Majority of the stock outstanding. It is very clear therefore that the meeting of February 8th was not attended in person or by proxy by sufficient number of shares of stock to hold a legal meeting or to take any valid action except to adjourn,
Much stress has’ been placed in the argument upon the alleged motive or animus which moved the majority to adjourn the annual meeting. It is in all cases difficult to determine motive or a state of mind, but it is proper to observe in this case that the corporation had been proceeding for many years in direct violation of one of the main provisions of the corporation code. This court cannot therefore say that the majority was acting in a want of good faith in adjourning the meeting a few-days to permit their attorney to examine the law. The delay
The rules and regulations of a corporation, when not in conflict with statutory provisions and when made pursuant to authority specifically granted by legislative enactment, have all the force and effect of a contract between the corporation and its members and between the members themselves. When stockholders subscribe to stock in a corporation they are deemed to know the statutory law governing corporations, and they are also deemed to know the provisions of the corporation’s rules and regulations, and they therefore impliedly if not expressly agree to abide by such regulations. Such regulations have been uniformly recognized as essential to orderly action in the business of the corporation and they would become a farce and worse than a plaything if not recognized and enforced. If this court should say that the provision in the regulations requiring that all meetings should be held at the office of the company and that the provision requiring a quorum to consist of a majority of all shares issued and outstanding are not to be recognized and enforced in this case, then it might well be inquired what provisions of rules and regulations would be enforceable ?
The minority stockholders having proceeded in disregard of the by-laws and regulations of the corporation, it is the judgment of this court that their action was illegal and the election held on February
Judgment for respondents.
Reference
- Full Case Name
- The State, ex rel. Webber, Pros. Atty. v. Shaw
- Status
- Published
- Syllabus
- Corporations — Rules and regulations — Constitute contract between corporation and members' — Section 8704, General Code — • Stockholders^ meeting and quorum — Annual meeting adjourned subject to call — Right of stockholders to call meeting — Section 8647, General Code. 1. The rules and regulations of an Ohio corporation made' pursuant to Section 8704, General Code, not in contravention of any other statutory provisions, have all the force of contracts as between the corporation and its members and as between the members themselves, and provisions of such regulations stating the place of holding stockholders’ meetings and the number of shares of stock constituting a quorum are valid and binding. 2. When the annual meeting of the stockholders of a corporation has been regularly convened the stockholders may by action of a majority of the shares of stock represented in person or by-, proxy at such meeting adjourn the same to a future date subject to call, and during the interim between such annual meeting and the adjourned session stockholders may not legally call another meeting by virtue of the provisions of Section 8647, General Code.