284 Mass. 239 | Mass. | 1933
This petition for a writ of mandamus was heard upon the pleadings and an agreed statement of facts by a single justice, who so far as discretionary with him decided that he should order the writ to issue and at the request of the parties reserved the questions of law for the determination of this court. The petitioners are a Massachusetts corporation and four individuals. Those individuals contend that they are directors of the defendant corporation. The defendants are a Massachusetts corporation and five individuals. These individuals contend that they are the directors of the defendant corporation and deny that any of the individual plaintiffs are such directors. The plaintiffs are all the stockholders of the defendant corporation except the defendant Bean. The point to be decided is whether the four individual plaintiffs and the defendant Bean, or the five individual defendants including Bean constitute the board of directors of the defendant corporation.
The pertinent facts are these: The by-laws of the defendant corporation prior to the meetings hereinafter de
The individual defendants do not assail the validity of the call for the annual meeting. They cannot do so because the validity of their own election as directors rests upon action taken at that annual meeting and its adjournments. Barnes v. Springfield, 268 Mass. 497, 503. The question then is narrowed to the validity of the restrictions imposed in that call. The corporate defendant was émpowered to enact by-laws to govern the method in general of transacting its business, G. L. (Ter. Ed.) c. 156, § 13, but it was required by § 28 that “Notices of all meetings of stockholders shall state the purposes for which the meetings are called.” Both by-law and statute made imperative a statement in the call for the annual as well as for every other meeting of the stockholders of the business to come before such meeting. The limitations stated in the call for the annual meeting of the defendant corporation for 1932 were therefore lawful and binding.
The call for that annual meeting did not mention the calling of a special meeting of stockholders as one of its purposes, nor did it mention the amendment of the by-laws of the corporation as one of its purposes. That call restricted the objects of the meeting to the election of named officers and to all action that properly might come before the meeting “in respect of the above matter.” The only such “matter” was the election of the designated officers. In any event, such an indefinite reference cannot embrace a subject of such importance as changes in the by-laws. People's Mutual Ins. Co. v. Westcott, 14 Gray, 440. Downs v. Bowdoin Square Baptist Society, 149 Mass. 135, 139. The portion of by-law VII of the defendant corporation already quoted prescribed three several methods of calling special meetings of the stockholders in conformity to the provisions of G. L. (Ter. Ed.) c. 156, § 30. No one of these methods was followed in calling the .special meeting in the case at
The defendants rely upon Citizens’ Mutual Fire Ins. Co. v. Sortwell, 8 Allen, 217, where a special meeting of the stockholders was called by the board of directors of a corporation under a statutory power “to manage and conduct all the business” of the corporation. The call was held valid notwithstanding a by-law to the effect that such special meeting “shall be called by the president, or in his absence by the secretary, on application made to them in writing by ten members,” on the ground that this latter provision was mandatory but not exclusive of the general powers vested in the directors. The principle has no bearing upon the case at bar.
In general the control of a corporation is vested in the holders of a majority of its stockholders having voting power. Opinion of the Justices, 261 Mass. 556, 596-597. Albert E. Touchet, Inc. v. Touchet, 264 Mass. 499, 509. There is nothing novel about the control of a corporation being vested in a body of stockholders which has contributed but a small part of its working capital. Crimmins & Peirce Co. v. Kidder Peabody Acceptance Corp. 282 Mass. 367. In any event, the by-laws of a corporation and the controlling statutes, where they cover the subject, must be followed in exercising the rights of majority stockholders in calling meetings and in changing the by-laws. One object of the by-laws of a corporation is to define the duties and powers of stockholders and directors with reference to each other and
The call for the annual meeting in the case at bar was legal. It was not within the power of the holder of a bare majority of the stock at that annual meeting to change that call or to strike out an important part of it. The rights of other stockholders not present could not be affected in that way. There having been no reference in the call for the annual meeting of 1932 to the subject of a special meeting of stockholders, the vote at such annual meeting or any of its adjournments to call a special meeting was not valid. The call for the special meeting was not issued in accordance with the by-law or statute and was therefore invalid. It follows that all action taken at such special meeting was a nullity. American Tube Works v. Boston Machine Co. 139 Mass. 5, 9-10. Gray v. Christian Society, 137 Mass. 329, 331. Downs v. Bowdoin Square Baptist Society, 149 Mass. 135, 139. Since the attempts to amend the by-laws failed, the organic law of the defendant corporation requires that all of its directors be stockholders, and the limitation upon sales of stock requiring that it first be offered to other stockholders is still in force. Longyear v. Hardman, 219 Mass. 405. It follows that none of the individual defendants except Bean are directors of the defendant corporation, and that all the individual plaintiffs continue to be directors because their successors have not been elected, and must be so recognized by the defendant Bean.
Writ to issue.