In re Glen Salt Co.

45 N.Y.S. 568 | N.Y. App. Div. | 1897

Merwin, J.:

The appellants -claim that the injunction orders were not before the court for determination, and that, therefore, the orders made in the actions should he reversed. By the stipulation made and notice given at the election, which are above set forth, it is clear that botli parties then intended that both injunctions should be passed upon .if possible. The stipulation is that “ review of the entire proceedings should then be haa as provided by statute,” and the notice given was “ for the purpose of reviewing both proceedings and the election in general.” By the statute (§ 27 of the General Corporation Law [Laws of 1890, chap. 563, as amended by chap. 687 of the Laws of 1892]) the application is to be made to “ the Supreme Court.” So that in agreeing to review as provided by the statute, it must be assumed that the parties by their stipulation agreed to appear before Justice Smith as sitting at Special Term at his chambers. It may. be that the formality of petition and answer was not then contemplated. To the petition as made a copy of the entire proceedings at the election, including the stipulation and notice, was attached, and the correctness of these was not disputed in the answer. And when on the ninth of July the parties appeared before the justice with the petition and answer and the papers on which both in junctions were granted, he had a right to assume that the proceeding was a continuation of the proceeding noticed for hearing before him on the sixth of June previous, and’that the application was to him as at Special Term at chambers. That is what their conduct meant, if the design was, as it then appeared to be, that there should be an effectual consideration of all the matters involved. Unless the injunctions could be considered, the hearing might be practically useless. The couyt at Special Term had full jurisdiction of the subject-matter, and all the parties in the injunction actions were before the court. The justice, himself, had granted one of the injunctions and the other wás granted by a county judge. The court had, we think, the right to treat the proceedings before it 'as. including a notice by the defendant in each action to vacate the injunction therein. The position of the appellants is that “ the court had the power, in the matter instituted by the petition, to determine which' claimant had the right to vote the 140 shares and which claimant had the right to vote 150 shares.” This-power would not be com- ■ píete unless the in junctions were under control. The orders should not be reversed by reason of any want of power in the court.

We, therefore, proceed to the consideration of the main ques-tions, which are (1) whether Bradley, at the day of the election, was entitled to vote the 150 shares, and (2) whether Otis had the right to vote the 140 shares.

1. The decision at Special Term as to the 150 shares was placed by the court in its opinion upon the ground that the coiqo oration was negligent in failing to obtain from the post office the registered letter in time to make the transfer ten days before the election, and that, therefore, the corporation, and the stockholders. were estopped from claiming that the transfer was not in time.

Mr. Bradley lived at Meriden, 'Conn. .He was the treasurer of the Bradley Salt Company, which was located at Warsaw, N. Y. ■ The letter was registered and mailed by him in New York city on the 15th of May, 1896. It reached Watkins on the sixteenth of. May. The Glen Salt Company have at the post office in Watkins a box or locked drawer where the mail for the company is deposited. Upon the arrival of the registered letter on the sixteenth, the postmaster or his assistant, according. to the custom of the office, deposited in- the box dr drawer of the company, a card, upon which was a request to call “ for registered letter to your address in this office.” The card did not indicate where the letter came from or who sent it. The letter was not called for until the twenty-first, and there is evidence that the secretary of the company then stated to the assistant postmaster that he saw the notice in the box, but supposed it was a notice to pay box rent, and did not take it out. It was not shown that the company, or any of its officers, knew that there was any such letter in the office, or that any transfer was contemplated by the Bradley. Company. The postmaster had no authority to deliver the letter, except upon the giving of a receipt therefor.

It is claimed that the case of Robinson v. Nat. Bank of New Berne (95 N. Y. 637) sustains the view of the Special Term. That was an action against the corporation for dividends upon stock, the certificate of which had been' transferred by the owner, to the plaintiff, and the corporation, 'after actual request of the plaintiff, had ■refused to make the transfer upon the books without any valid reason for such refusal. It was held that the corporation had waived the requirement of a transfer upon its books, and could not take advantage of its own wrongful act in refusing to make the transfer. In Chemical Nat. Bank v. Colwell (132 N. Y. 250) there was an actual request to the corporation for a transfer, but there was no transfer book, and the party was told that it was not necessary. These cases do not reach the present question. There was here no request until the corporation received the letter on the twenty-first. Bradley, in sending the certificate by registered letter, in effect gave the direction to the postmaster that the certificate must not be delivered to the corporation until it gave a receipt therefor. He .took the chances of such delivery being made in time. In the absence of any information that such a letter was at the post office, we fail to see how the corporation is chargeable with any negligence, or how there is any basis for an estoppel.

It is further claimed by the respondents that it was not necessary that the transfer should be made upon the books ten days before the election ; that ownership as between Bradley and the former owner for more than ten days before the election, accompanied by an actual transfer at any time before the election, was sufficient .to authorize him to vote.

By section 29 of the Stock Corporation Law (Laws of 1890, chap. 564, as amended by chap. 688 of the Laws of 1892) it is provided that no transfer of stock shall be valid as against the corporation, its stockholders and creditors for any purpose, except to render the transferee liable for the debts of the corporation according to the provisions of this chapter, until it shall have been entered in such book, as required by this section, by an entry showing from and to whom transferred.” . By section 20 of the General Corporation Law (Chap. 687 of 1892) the stock book is made the evidence of the right of a person challenged to vote at á stockholders’ meeting, and by the same section it is provided that every member shall be entitled “ to one vote for every share of stock held by him for ten days immediately preceding the election or meeting.” These provisions are referred to in the case of Matter of Petition of Argus Co. (138 N. Y. 557, 578), and it is evidently there assumed that it was necessary for the transfer to be made on the stock book ten days before the election. As between the holder of the certificate and his assignee the transfer may operate to pass the title, but it does not determine -the right of voting at elections. (McNeil v. The Tenth Nat. Bank, 46 N. Y. 325, 331; Thompson Corp. § 730.) In Strong v. Smith (15 Hun, 222) the question here involved was not considered.

The plain object of the ten-day provision was to enable parties interested in the elections to ascertain, during that period, who were •stockholders and entitled to vote. This could only be doné by an examination of the stock book, and naturally, therefore, the expression “ held by him for ten days ” would refer to a holding, as indicated •by the stock book. The provisions of the General Corporation Law and the Stock Corporation Law should be construed together. . If stock registered upon the morning of the election could be voted upon, the usefulness of the ten-day provision, if not its main purpose, would be practically destroyed.

The transfer .should, we think, be entered on the stock book ten days' prior to the election. Bradley, therefore, was not entitled to vote at the election.

2. The 140 shares of stock held by Clute on the 4th of March, 1896, were in three certificates. On the back of each there was an assignment of the same to- Otis with authority to the company to make the necessary transfer on the books of the corporation. These are dated the 4th of March, 1896, and were signed by Clute on that day at the office of Mr. Reynolds. They were annexed to an agreement of the same date under seal between Clute and Otis, executed upon the .same occasion. By this agreement Clute, for value received^ sold and assigned and transferred to Otis. the 140 shares of stock referred to as being annexed to and forming part of the instrument, and Otis agreed to account for and pay over to Clute all dividends and profits received by him, Otis, on the stock from that date to the 4th day of March, 1899, as fast as received by him. To this agreement there was attached a guaranty, to be thereafter signed by •Buxton, to the effect that Otis should, on his part, perform the agreement. There was also executed by -Clute and Otis, and attached to the agreement made between Otis, Clute and Buxton on the 20th of August, 1894, a writing in and by which the agreement of 1894 was modified by making, the price at which the stock might be sold (under that agreement seventy cents on the dollar with interest on •the amount from May 15, 1893. There was also in this writing the following clause:

“ Third. That a certain instrument dated this 4th day of March, 1896, shall not be construed to affect the interest of the said John A. Clute in his stock mentioned therein, or in anywise operate as a termination of his interest in said contract, but for all the purposes of said contract he shall be still considered the owner of the stock therein described as belonging to him. In all other respects said annexed contract is to remain the same.”

Upon the same occasion there was executed by Otis, and after-wards by Buxton, an agreement by which Otis and Buxton agreed, to sell to Clute all their 360 shares of stock at any time withih twenty days thereafter upon the payment to them by Clute of the sum of $29,358, it being stated that it was intended simply to give Clute the option of buying the stock of Otis and Buxton at the price named, and that Clute was not bound to buy unless he so elected.

These papers, when signed by Clute and Otis, were left with Mr. Reynolds, and the option, the writing attached to the agreement of 1894, and the guaranty were subsequently signed by Buxton. The option to purchase was not accepted by Clute within twenty days, and thereafter the papers passed into the hands of Otis, and the transfer on the books to Otis was made on 25th of March, 1896.

The claim of Otis is that, upon the failure of Clute to accept the option, he, Otis, became the absolute owner of the stock of Clute, subject only to the obligation of accounting for the dividends and profits for the period of three years, and that this was the understanding aj; the conclusion of the negotiations on the fourth of March. In other words, the claim is that Clute, in consideration of having the option for twenty days of purchasing the stock held by Otis and Buxton at the price fixed in the agreement of 1894, as modified on March 4, 1896, agreed that, in case the option was not accepted, Otis should become absolute owner of the 140 shares that day in form transferred to Otis, excepting only the dividends for three years.

A large amount of evidence upon this subject was taken by the referee, and the conclusion reached by him, as well as by the Special Term, was adverse to the claim of Otis. On the contrary, it was, in substance, found that Otis, in consideration of receiving from Clute the power to vote upon his stock for the term of ■ three years, agreed to give him the option of purchasing the stock of himself and Buxton at the rate fixed by the modified agreement between the three, and that there was no agreement by which Otis was to become the owner of’ Clute’s stock; that in order to carry out this arrangement the papers were drawn, a provision for the return of the stock at the end of three years being inadvertently omitted.

The papers drawn and executed on the fourth of March, and as subsequently signed by Buxton, are to be read together for the purpose of arriving at the intention of the parties. The clause above quoted from the writing attached to the agreement of 1894 is ■quite persuasive of the absence of any intention to have, in any event, an absolute transfer to Otis. The evidence, we think, authorized the conclusion that, :as between Olute and Otis, Olute -was the owner of the stock, and that the transfer to Otis, though absolute on its face, was only designed to confer upon Otis the power to vote upon it for the period of three years, and was, therefore, in substance, a proxy given for a-consideration. We find no good reason for disturbing this conclusion.

This being the nature of the transfer, it was void under- section 20 of the General Corporation Law, where it is provided that “ no-member of a corporation shall sell his vote, ór issue a proxy to vote, to any person for any sum of money, or anything of' value.” (Matter of Germicide Co., 65 Hun, 606.)

It is, however, claimed by the appellants that no one but Olute, who is not a party to these proceedings, can question the legal title of Otis to the stock, and that, whatever may be the rights or equities of Olute, the, corporation or stockholders cannot question the right of Otis to. vote on the stock. .

If. the legal ownership of Otis is the result of an illegal transaction connected with an effort to control the election and continue in Otis the control of the corporation, it would seem as if any stockholder would have the right to raise the question and obtain the benefit of a statute designed to protect the rights generally of stockholders. Every stockholder has an int’erost in having only legal votes cast. The same principle that gives relief to stockholders against illegal combinations would be applicable. Ordinarily motives are. not inquired into, but if the purpose is illegal or the transaction is in violation of law a different rule may well apply. (See Thomp. Corp. §§ 2494, 2495; Hafer v. N. Y., L. E. & W. R. R. Co., 19 Abb. N. C. 454.)

Under the statute (§ 20, Geni. Corp. Law) the fact that stock stands in the name of a certain person on the books of the corporation is not conclusive as to his right to vote, for it is provided that if he has not in fact been the owner for at least ten days next jireceding the meeting he cannot vote, although' the stock stands in his name on the books of the corporation. If this disqualification could be asserted only by some adverse claimaht, and not by the corporation or any other stockholder, the object of the statute would hardly be accomplished. ■

We are referred by the learned counsel for the appellants to numerous cases, but they do not seem to be controlling here. In Hey v. Dolphin (92 Hun, 230) the stock in controversy was held by parties as joint owners or as partners. In Matter of Petition of Argus Co. (supra) it was held that a person having the legal title to stock could vote thereon, notwithstanding the existence of an executory contract which, upon certain conditions which had not been fully performed, required its transfer to another party. That is not this case.

We think that the respondents have the right to take advantage of the infirmity of the transactions between Otis and Clute, so far as they relate to the right of Otis to vote on the stock, and that the Special Term was right in its determination that Otis had no right to vote upon the 140 shares.

Upon the hearing before the referee the testimony of Mr. Reyholds, who drew the writings on the fourth of March, was taken subject to objection under section 835 of' the Code of Civil Procedure. Upon the hearing at Special Term all the testimony of the witness was received . and considered, except the conversations. between the witness and Otis and Clute. The appellants claim that the whole was admissible. Mr. Reynolds was not simply a scrivener, but, as the Special Term had a right from the evidence to find, was in the position of counsel to Otis and Clute. We think the ruling was correct within the case of Root v. Wright (84 N. Y. 72). The rule laid down in Hurlburt v. Hurlburt (128 N. Y. 420) does not apply here.

The foregoing conclusions as to the respective rights of Bradley and-Otis lead also to the conclusion that the election should not have been set aside and a new one ordered. If Bradley did not then have the right'to vote on the 150 shares, the petitioners cannot complain of the result of the election.

The order should be reversed so far .as it determines that Bradley had the right to vote on the 150 shares at the day of the election* and also- so far as it sets aside the election and provides for a new one, and awards costs; in other respects affirmed.

All concurred.

Order reversed so far as it determines that Bradley had the right to vote on the 150 shares at the day of election, and also so far as it sets aside the election and provides for a new one, and awards costs j in other respects affirmed.