Reilly v. Oglebay

25 W. Va. 36 | W. Va. | 1884

Snydee, Judge:

The record does not show the grounds on -which the municipal court founded its decrees. The counsel for the appellants, however, state that it decided that no proper notice forthe stockholders’ meetingof Jnly9, 1881, had been given, and, therefore, what was done at said meeting was not binding and on that account perpetuated the injuntion. The first question then to be decided is the sufficiency of this notice.

In the absence of any by-law on the subject, the mode of calling a meeting of the stockholders of a corporation is prescribed by statutes as follows: “A general meeting of the stockholders may be called at any time by the board of directors, or by any number of stockholders, holding together at least one-tenth of the capital.” Code, ch. 53, § 41. In this instance it is admitted that the meeting -was not culled by the board of directors and the law does not authorize the secretary as such to call it. It is, however, shown that Oglebay had authority from stockholders holding more than one-tenth of the capital and that he called the meeting by virtue oí that authority. But the statute declares that the meeting shall be called by the stockholders and not by the secretary by authority from the stockholders. It is admitted that there was no board of ‘ directors for this corporation. This was necessarily known to the stockholders. There being no board of directors there could be no secretary of such board. The fact, then, that Earl W. Oglebay signed the notice as secretary could not imply that he did so as secretary of the corporation. He did not sign it as a stockholder or state that it was given by any authority of any stockholder. The notice, therefore, in my judgment, was not such as the statute plainly requires and it simply amounted to no notice. Any other person, not a stockholder, might have given such a notice and it would have been just as obligatory on the stockholders as this notice which showed on its face no pretense of authority. No stockholder would be under any legal duty to regard the one more than the other. Bo far as appears Oglebay may have been secretary of the insurance company at whose office the meeting was called. lie was certainly not the legal secretary of the corporation in question, because there could in law be no such secretary in the absence of a board of directors. I hold, therefore, that said alleged notice was insufficient. And such being the fact all the proceedings had at the said meeting of July 9, 1881, are invalid. It is the plain dictate of reason that no function existing in a number of persons can be rightfully exercised, in the absence of any of the members composing such body, unless they have had reasonable notice and an opportunity to be present. Field on Corp. § 227; People v. Batchelor, 22 N. Y. 128.

The court did not, therefore, err in holding. that said notice was insufficient, and that the sale about to be made by the said Barr should be enjoined. Nor did it err in overruling the demurrer to the plaintiff’s bill.

It is further claimed by the appellants, that conceding the coi’rectness of the conclusion thus aunonneed, the decree of the court is still erroneous, because by that decree the court perpetually enjoined the defendants to the bill from selling the property of the corporation.

The plaintiffs in the cause hold, in all, fourteen shares of the stock of the corporation, and the defendants hold the balance, 159 shares. From this, it is argued that the plaintiffs, being the holders of less than one-tenth of the capital, could not call a meeting of the corporation for any purpose, and all the other stockholders being perpetually enjoined from selling the property, no meeting could be called by them for that purpose; and, consequently, this corporation which has abandoned the object of its creation, is forever deprived of the power to sell its property and wind up its affairs.

Technically, this conclusion may be legitimate upon a literal interpretation of the decree, but it is evident that such was not the intention of the court. If attention had been called to it the decree would, no doubt, have been modified and the injunction confined to the prohibition of any sale under or by virtue of the pretended authority of the resolution adopted at the meeting of July 9, 1881. The omission to qualify the injunction was, I have no doubt, simply an inadvertence and oversight which the court would not have made if a modification had been requested.

The appellees, the plaintiffs below, claim that the record establishes, that the appellants have entered into a fraudulent scheme to force a disadvantageous sale of the property so that they may become the purchasers at a price below its value and thus defraud the other stockholders. And, assuming this to be the fact, they insist that this Court should not merely affirm the decree of the court below, but that it should pass upon the question of fraud and thus prevent the appellants from carrying out their scheme by calling a new meeting and ordering a sale of the same character attempted at the meeting of July 9, 1881.

Whether this enquiry could be material in any event depends upon the fact whether or not the appellants could in the case assumed legally become purchasers of the corporate property. It is a well settled principle of equity jurisprudence that a party holding a fiduciary relation to trust-property cannot become the purchaser of such property either directly or indirectly; and if he does, the sale is voidable and will be set aside at the mere pleasure of the beneficiaries, although such fiduciary may have paid a iull price and gained no advantage. (Newcomb v. Brooks, 16 W. Va., 32, 59 and cases there cited.)

This rule is not confined to trustees and fiduciaries in the technical sense of those terms, but it extends to every person coming within the reason of the rule. It embraces trustees, guardians, executors, administrators, agents, cashiers of banks, factors, auctioneers, sheriffs, commissioners in bankruptcy and their solicitors, assignees of bankrupts, attorneys at law, directors of corporations and parties bearing many other relations to each other which may not well be clasified. — 16 W. Va. 63, and cases cited.

In Abbott v. American Hard Rubber Co., 33 Barb. 578, a sale of the corporate property was set aside because directors of the company were interested in the purchase. In that case the court held: “A person having a duty to perform for others can not act in the same matter for his own benefit. Hence, a trustee cannot, directly or indirectly, by himself or through the agency of another, become the purchaser of the trust estate. Neither can he purchase an interest in property and hold it for his own benefit, when in respect to such property he has a duty to perform inconsistent with the character of a purchaser on his own account.” The same rule as to purchasers of corporate property by directors has been applied in many cases. Cumberland Coal Co. v. Sherman, 30 Barb. 553; Banks v. Judah, 8 Conn. 145; Hoffman Steam Coal Co. v. Cumberland Coal Iron Co. 16 Md. 456.

The same rule does not generally apply to the stockholders of a corporation which is managed by a board of directors. Whether it does or not must depend upon the special facts of the particular case, the general rule being that a stockholder of such corporation may purchase. Banks v. Judah, supra.

In the case before us, there being no board of directors, the stockholders assumed and preformed the duties which ordinarily belong to a board of directors. The resolution passed at the alleged meeting of July 9, 1881, not only directs the sale of the corporate property, but it appoints the agent who is to make the sale, fixes the time, place, terms and manner of sale, and leaves nothing to the discretion of the agent unless it be the mode of giving the notice of sale. This is as specific as it could have been made by a board of directors and it is well settled that no member of such board could be the purchaser of the propei’ty thus directed to be sold by such board. Do not the stockholders in this case occupy a similar position ? By the act of incorporation a majority of the stockholders have the power to act for the whole. They become therefore, the agents for the whole. ."When they vote as a corporation to sell the corporate property, they do so for all the stockholders and not tor the majority alone. (Moore v. Schoppert, 22 W. Va. 282). Here a majority of the stockholders, by their agent, resolve to sell the corporate property and, if the assumption of the appellants is true, they at the same time have determined to buy it either directly or indirectly for their own benefit. They are then in fact both seller and purchaser. This, of course, would not be permitted without the consent and approval of every stockholder of the corporation. It follows, then, that it is immaterial, whether or not, the appellants intended by the resolution of July 9, 1881, to sacrifice the property in order that they might become the purchasers, or that they intend at a future meeting to do so. For, a purchase by or for them at a sale ordered by them, acting in the capacity of directors, as we have seen, would be voidable and would be set aside at the mere pleasure of any stockholder. I, therefore, regard it as wholly unnecessary to determine whether or not the record establishes any fraudulent intent on the part of the appellants, because such intent, if it existed, could in no respect injure the other stockholders.

In what has been said it is not intened to intimate that any such fraudulent intent has been shown. I have not examined the proofs on that question except in a very casual manner and from that examination it does not appear that any actual fraud was intended.

For the foregoing reasons, I am of opinion that the decree of August 28, 1883, should bo reversed and the decree of September 1, 1883, be affirmed with costs to the appellees, the plaintiffs below, they being the parties substantially prevailing, and instead of said decree of August 28, 1883, it is ordered that a decree be here entered perpetuating the injunction with the modification hereinbefore indicated.

Reversed in part — Aeeirmbd in part.