84 Ala. 613 | Ala. | 1887
The appeal in each of the above stated cases, is taken from a decree of the chancellor, overruling a motion to dissolve a temporary injunction, the motion being rested on want of equity in the bill, and o.n the denials of the answer. The appeals were submitted, and will be considered together, involving mainly questions in common. The bills are -filed by appellees, as shareholders of the Sheffield & Tuscumbia Street Railway Company, and seek to enjoin appellants, who claim to be directors of the corporation, from selling the stock of complainants for the payment of assess
It is insisted, that there is no independent equity in the bill, separate from the question of the legality of the election of the defendants. As a general rule, courts of equity will not take jurisdiction for the mere purpose of inquiring into the legality of the election of officers of a private corporation, nor of moving from office an officer in actual possession. In such case, a complaining shareholder must resort to the remedies at law — an action of quo tvarranlo, or the special proceedings provided by statute. But when an independent and special ground of equitable interposition, on which the court may take rightful jurisdiction, exists and is shown, it will inquire into the legality of the election, coming in question collaterally and incidentally. — Nathan v. Tompkins, 82 Ala. 437.
The bills, as we interpret them, do not solely and primarily invoke the jurisdiction of the court to inquire into the legality of the election of the directors, nor to vacate their offices. The first special equity is to prevent the sale of the stock of the complainants for the payment of an assessment and call made and ordered by the defendants in the capacity of directors, who it is alleged, were not legally elected or appointed, to prevent a threatened injury to a pecuniary right, which, if consummated, will subject complainants to a multiplicity of suits, and to litigate their title to the stock under the disadvantages of embarrassment and complication
The company was incorporated in January, 1887, under the general laws; and at the first meeting of the stockholders, seven directors, being the number provided for by the bylaws, were elected, consisting of McMillan, Hull, Swartz, Bussell, Almon and the defendants A. H. Moses and A. H. Kellar. By the by-laws and the statutes, their terms of office continued until the annual meeting of the stockholders in April, 1888, and until their successors were elected and qualified. — Code, 1876, § 1923. The by-laws further provide: “No person shall be elected, and if elected, shall serve as a director, who does not own in his own name and right
The next question is, does the ratification of their election by the stockholders, at the meeting in August, 1887, legalize and validate their appointment? It is unnecessary to inquire, whether or not the meeting was called by proper authority, and in a legal manner, or whether or not the requisite majority of stock was represented; in either event 'the result is the same. It was a special, as distinguished from an annual meeting. By the statutes, the stockholders are authorized to elect directors at the meeting called, in the first instance, for the organization of the company, and annually thereafter at such time and place, as • the stockholders at their first meeting shall determine, or as the by-laws of the corporation may require. — Code, 1876, §§ 1924, 1925. Vacancies occurring in the board of directors, in the meantime, are to be
'It is further insisted, that though the persons appointed to fill the vacancies were not legally elected, they are actually holding and exercising the powers and functions of the office, and are directors da facto; and inasmuch as the power to make assessments and calls is vested in the board of directors, a call made by directors da- facto can not be collaterally called in question by a stockholder. To constitute an officer da facto, there must be a color of election or appointment, or an exercise of the functions of the office under such circrimsiances and for such length of time without interference, as to justify the presumption of a due election or ap
The bill filed by Tompkins, referring to the defendants, alleges: “That said individuals claiming to be and to constitute the directory of said company, have resolved to build a branch road or track from the Memphis & Charleston Bail-road in Tuscunibia, Alabama, via Dickson & Fourth streets, using certain property of the corporation in its construction. Orator avers that the said parties are not the directors of said company, nor are they authorized to use or expend the property or effects of the corporation in constructing such branch, or in any other manner. He avers, that such action is against the will and approbation of the holders of the majority of such capital stock, and is not beneficial to said corporation, or the stockholders thereof.” The other bill contains substantially the same averments. It will be observed, that it is not charged that such acts are ultra vires, or in violation of the chartered privileges and powers, or constitute a breach of trust. In this aspect, the bill merely presents a case of internal disputes and unfortunate and injurious dissensions. Admitting the truth of the allegations, such use of the property and effects of the corporation is a conversion, an injury to the company, fastening a personal liability on the defendants, and redress for which should be primarily sought in the name of and by the corporation, and for which adequi he legal remedies are provided. Equity will not interfere, a"u the instance of a stockholder, with the internal business management of a corporation by the directors, whether da jura or da fado, so long as it is kept within the scope of the chartered powers and the purposes of its creation, unless such administration of its affairs is destructive or injurious to the corporation, and the corporation itself refuses, or is
The bill filed by Tompkins alleges, that he purchased .the twenty shares of stock subscribed by Scott, paying therefor a valuable consideration, and had the same transferred to him on the stock-book of the company. This makes a case of prima, facie ownership, and of the incidental right to vote the stock. The defendants set up in their answer an agreement between Scott and others, by which this stock was to be voted by trustees. The character of this contract was considered at the present term, in another case between A. H. Moses and Tompkins, and was held to be voidable, and to have been avoided by Scott, when he sold and transferred the stock. The bill further, alleges the purpose of the trustees to vote the stock in a particular way, and that the effect of the vote will be to control the election of the directors. Under the circumstances, we think the injunction as to this matter should be retained until the final hearing of the case.
The decree of the chancellor is modified so far as it continues in force the injunction against using the property and effects of the company in constructing the branch road; and a decree here rendered dissolving the injunction to this extent. The decree of the chancellor, as thus modified, is affirmed.
My own opinion is, that when the board of directors was reduced to two out of seven members, the corporation was without power to discharge any corporate function, save, perhaps, to convene the stockholders, for the purpose of electing other directors, or making provision therefor. I am clearly convinced, and do not think my brothers differ with me in this, that the attempt made to fill the board of directors by the remaining two, was utterly without authority, and confers on the persons attempted to be appointed, no legal power to act as such. — People v. A. & S. R. R. Co. 55 Barb. 344; Stale ex rel. v. Smith, 48 Vt. 266. I further hold, that any disposition made of the funds of the corporation, by this irregularly constituted board, is a conversion by them, and, if done in obedience simply to the orders of such board, it will fasten a personal liability on them.
Taking the averments of the bill to be true, I think they present a sufficient execuse for not appealing for relief to the corporate authorities, if' corporate authorities there be capable of rendering relief. To ask the only two remaining directors to take steps to prevent themselves from doing authorized acts, would certainly present an anomaly. Injunction is the only efficient remedy, and I think it should be retained, until the rehabilitation of the corporation can be perfected by legitimate methods. I dissent from so much of the ruling of my brothers, as modifies the injunction. — Pender v. Lushington, L. R. 6 Ch. Div. 70.