142 W. Va. 451 | W. Va. | 1956
Lead Opinion
Relator, Dewey Portland Cement Company, seeks in this original proceeding in mandamus to compel the respondent, D. Pitt O’Brien, Secretary of State of West Virginia, to receive a certificate of amendment executed by relator’s president, to issue his certificate reciting the resolution set forth in the certificate of amendment and to declare the amendments to the charter, increasing the authorized capital stock as set forth in the certificate of amendment, to be authorized by law.
Relator alleges its incorporation under the laws of the State of West Virginia, on November 19, 1906, and five subsequent amendments to its certificate of incorporation, the last of which, on July 1, 1937, authorized a total capital stock of $12,000,000.00 divided into 800,000 shares of common stock, of a single class of the par value of $15.00 per share. Relator then alleges a meeting of its stockholders on August 27, 1956, at which time, more than 66% of the outstanding common stock, the only class relator is authorized to issue, being represented by the holders thereof either in person or by proxy, a •resolution was unanimously adopted authorizing the amendment of relator’s charter to permit an increase in
This resolution, duly certified by the president of relator, was tendered to the respondent, with the proper fees, who refused to accept and file such, or to take any action in regard thereto.
On petition of relator, this Court issued a rule to show cause why a peremptory writ of mandamus should not be awarded against the respondent commanding that he perform the requested acts, returnable September 25, 1956, at which time the respondent appeared and demurred to the petition on the ground that Sections 22 and 66 of Article 1, Chapter 31 of the West Virginia Code, in so far as they authorize the issuance of nonvoting stock by a corporation, are unconstitutional in that they contravene the plain mandate of Article XI, Section 4 of the West Virginia Constitution.
The pertinent statutory provisions provide as follows:
Code, 31-1-22: “Every corporation, other than a banking institution, shall have power to issue one or more classes of stock or one or more series of stock within any class thereof, any or all of which classes may be of stock with par value or stock without par value, with such voting powers, full or limited, or without voting powers and in such series and with such designations, preferences and relative, participating, optional or other special rights, and qualifications, limitations or restrictions thereof, as shall be stated and expressed in the charter # * 99
Code, 31-1-66: “In all elections of directors of corporations each stockholder shall have the right to cast one.*454 vote for each share of stock owned by him and entitled to a vote, * * *; and on any other question to be determined by a vote of shares at any meeting of stockholders each stockholder shall be entitled to one vote for each share of stock owned by him and entitled to a vote, * * * »
Article XI, Section 4, of the Constitution of West Virginia provides: “The Legislature shall provide by law that in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumu-late said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock, shall equal, or to distribute them on the same principle among as many candidates as he shall think fit: and such directors or managers shall not be elected in any other manner.”
By his demurrer to the petition of the relator, the respondent admits all of the facts well pleaded therein. Code, 31-1-22, authorizes' every corporation, except a banking institution, to issue nonvoting stock such as the Class “A” common stock which, by the amendment to its charter, the relator seeks to issue. Mandamus is a proper proceeding to compel an administrative officer to perform a duty clearly imposed by a valid statute. Thus the issue is squarely presented as to whether the portions of Code, 31-1-22, and 31-1-66, pertaining to the issuance of stock by a corporation, which denies to the owner of shares of such stock the right to vote at stockholders’ meetings for the election of directors or managers of such corporation, is in conflict with Article XI, Section 4, of the Constitution. The respondent contends that the pertinent provisions of Article XI, Section 4, of the Constitution of this State, are plain and unambiguous and not subject to interpretation or construction. The relator says that Section 4 is ambiguous, and that any doubt as to the validity of the pertinent statutes
At common law, each stockholder in a private corporation had but one vote at a stockholders’ meeting, no matter how many shares of stock he owned. Fletcher, Cyclopedia on Law of Private Corporations, 1931, Section 2045. The Legislature of the several states at an early date began to give consideration to this question, and provisions relative to it were later incorporated in some state Constitutions. As early as 1836, the Virginia General Assembly was considering the matter, and in the revised Code of 1849, Chapter 57, Section 10, it was provided that: “In a meeting of stockholders, each stockholder may, in person or by proxy, give the following vote on whatever stock he may hold in the same right, to-wit: one vote for each share of such stock not exceeding twenty, one vote for every two shares exceeding twenty and not exceeding two hundred, one vote for every five shares exceeding two hundred and not exceeding five hundred, and one vote for every ten shares exceeding five hundred.”
By the Code of 1860, Chapter 57, Section 10, the prior Act was reenacted to give “one vote for each share of such stock not exceeding ten,' and one vote for every four shares exceeding ten.” At the first session of the Legislature of this State, by Chapter 83, Section 22, Acts of the Legislature, 1863, the rule was again changed to provide for “one vote for every share of stock not exceeding one hundred; and one vote for every four shares exceeding one hundred.” The Code of 1868, Chapter 53, Section 44, provided that there should be “one vote for every share of stock held in such company.”
Reverting to the Acts of 1864, Chapter 43, we find the first action by the Legislature of this State permitting the stockholders of a corporation to issue more than one type of stock. Therein it was provided that: “The stockholders of any corporation now existing in this state, or which may be hereafter formed therein pur
By the Acts of 1872-73, Chapter 181, approved December 20, 1873, one year after the adoption of the constitutional provision, the Legislature adopted the following provision: “That in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote in person or by proxy for the number of shares of stock owned by him for as many persons as there are directors or managers to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner, and on any other question to be determined at any meeting of stockholders, if a vote by stock be demanded upon such question by any stockholder, every stockholder may in person or by proxy give the following vote on whatever stock he may hold in the same right, that is to say one vote for every share of stock held in such company.” By the Acts of 1882, Chapter 96, the general corporation law of this State was reenacted with the preferred stock Section of 1864, and the above quoted Section of 1872-73, remaining unchanged.
Chapter 35, Section 5, of the Acts of 1901, after repeating the earlier provisions as to the authorization for the issuance of preferred stock, amended Section 16,
Then by Chapter 86 of the Acts of 1925, Regular Session, the right to limit voting power was extended to non par stock with this language: “* * * authorize the issuance of non par value stock on such terms and conditions, and with or without the right to vote in stockholders’ meetings * *
It is evident from the revisers’ note that the Code Commission of 1921 had some difficulty in reconciling the legislation that had been enacted prior to that time with Article XI, Section 4, of the Constitution. The note reads in part as follows: “The weight of modern judicial opinion seems to hold such a provision unconstitutional, but these decisions, while well reasoned in many respects, seem to ignore the flexibility of a state constitution to meet changing public conditions, and for this reason do not seem to give as much weight as we think should be given to the real purpose of the provision, which was to secure the right of cumulative voting. It is thought if its true weight is given the purpose in mind, and the flexibility of state constitutions to meet changing public conditions is not forgotten, that the provision respecting preferred stock is constitutional, especially where there has been a long existing legislative policy in harmony with this statute, which has induced many corporations to adopt its provisions. Attention is also called to the fact that the constitutional provision referred to relates only to voting for directors, and does not relate to the right to vote on other corporate acts.”
Interesting also is an article written by the Chairman of that Commission, approximately two years subsequent to the adoption of the Code of 1931, in 40 W. Va. Law Quarterly 97. He stated inter alia that: “However, the report of the code commission carrying into the revision the provisions of the Acts of the Legislature 1901 was not adopted by the legislative committee or the legislature, but instead the provisions of a recent Delaware
In Cross v. W. Va. Cent. & Pa. R’y. Co., 35 W. Va. 174, 12 S. E. 1071, (1891), this Court held that by the “last clause” of Section 4, Article XI, the owner of shares of stock in a corporation could not be deprived of the right to vote such shares by the cumulative method in an election of directors of the corporation. It was stated in the opinion: “I see no reason why this latter clause should not be construed as of its own force controlling the manner of electing directors under this charter prospectively. But if it needed legislative enactment to put this constitutional provision in force this was made in the language of the constitution by act of December 20, 1873. * * *” (Italics supplied.) There is authority upon this issue in other jurisdictions which we have carefully considered.
The earliest case we find is State ex rel. Frank v.
The principal issue in the Wright case was whether a shareholder could be deprived of the right to cumulate his votes. The court held, upon that issue, that stockholders could not be deprived, by majority action, of the right to cumulate their votes in the election of directors. Article XII, Section 12, of the 1897 Constitution of California, is similar to the provisions of Article XI, Section 4, of our Constitution. The precise question decided by the Missouri court, and the one that is before this Court, was not considered in the Wright case.
Neither is the recent case of E. K. Buck Retail Stores v. Harkert, 157 Neb. 867, 62 N.W. 2d. 288, in point, although certain language in the opinion supports the rela
In 1911, the Supreme Court of Delaware, in Brooks v. State ex rel. Richards, 79 Atl. 790, construed a constitutional provision of that state, adopted in 1897, to determine the validity of a subsequent statute by which the holders of preferred stock in corporations were deprived of voting rights. The Delaware Constitution directed that: “in all elections for directors or managers of stock corporations, each shareholder shall be entitled to one vote for each share of stock he may hold.” It is interesting to compare that constitutional provision with the first part of Article XI, Section 4, of the Constitution of this State: “The Legislature shall provide by law that in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, * *
The Delaware court held the statute unconstitutional and rejected the contention of the defendant in error that the provision of the Delaware Constitution really
The people of the State of Illinois adopted a Constitution in 1870, which contained the following provision: “* * * The General Assembly shall provide, by law, that in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors or managers shall not be elected in any other manner.” A comparison of the provisions of the Illinois Constitution and Article XI, Section 4, of the Constitution of this State, which was adopted two years later, indicates either that Section 4 was taken almost verbatim from the Illinois Constitution, or that both came from a common source. The pertinent provision of the Illinois Constitution was construed by the Supreme Court of that state in 1922 in People ex rel. Watseka Telephone Company v. Emmerson, 302 Ill. 300, 134 N.E. 707, 21 A.L.R. 636. The court rejected the contention that the constitutional provision was primarily a guarantee of the right of stockholders to cumulate their votes, and refused to grant a writ of mandamus directing the Secretary of State to approve an amendment to the corporate charter of the Watseka Telephone Company, which provided that the owners of preferred stock in that corporation should be deprived of the right to vote for directors or managers, upon the ground that such amendment was in conflict with the Illinois Constitution.
In the recent case of Wolfson v. Avery, 6 Ill. 2d. 78, 126 N.E. 2d. 701, the Illinois court, in approving its decision
An examination of the Journal of the Constitutional Convention shows that, while the other Sections of Article XI, which were ultimately approved, were discussed freely, no member commented upon Section 4.
This Court is not unmindful of the weight that must be given to the construction of a constitutional provision by the Legislature, and by an official of the Executive branch of the government. Leonhart v. Bd. of Ed., 114 W. Va. 9, 170 S. E. 418, State v. Harden, 62 W. Va. 313, 58 S. E. 715; Lipscomb v. Nuckols, 161 Va. 936, 172 S.E. 886. Nor are we unmindful of the rule that in construing a statute if there is any doubt as to its constitutionality, that doubt should be resolved in favor of its validity. State v. Harrison, 130 W. Va. 246, 43 S. E. 2d. 214; State v. See, 129 W. Va. 722, 42 S. E. 2d. 31. However, great weight is given to legislative construction of a constitutional provision only when it is contemporaneous with or follows soon after, the adoption of the constitu
Assuming that an ambiguity existed in Article XI, Section 4, then Chapter 181, Acts of 1872-73, which followed approximately one year after the adoption of the constitutional provision, would be entitled to great weight but that Act not only repeated the language of Section 4, but went further and provided that, on questions other than the election of directors or managers, “if a vote by stock be demanded”, every stockholder should have the right to cast “one vote for every share of stock held in such company.” It was not until twenty-nine years after the adoption of the constitutional provision that the Legislature first inserted the phrase “and entitled to a vote.” Furthermore, there is nothing in this record to indicate an administrative interpretation of Section 4 by the Secretary of State by issuing charters to incorporated companies which authorized the denial of voting rights to any person who owned stock therein until thirty-one years after this Section was adopted.
This Court finds that Article XI, Section 4, of the Constitution of the State, is clear and unambiguous, and there is no occasion to resort to the rules of construction in ascertaining its meaning. The Legislature was directed in plain and simple language to “provide by law that in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected,* * *.” There was nothing new in the provision that every stockholder should have the right to cast one vote for every share of stock which he held, since that had been provided generally by the Code of 1868, but, in view of the varied provisions upon this subject prior to that time, the members of the constitutional convention saw fit to secure that right to all shareholders by inserting such a provi
Next follows the disjunctive particle “or”, denoting an alternative choice, not in the right in every stockholder to cast one vote for each share of stock that he held, but to vote in a different manner than the way provided immediately prior to the use of the word “or”. Thereafter, it was provided that the shareholder could “cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock, shall equal, * * *.” By that provision, the shareholder owning ten shares, where ten directors were to be elected, could cast one hundred votes for one candidate if he so desired.
Again comes the disjunctive particle “or”, by which the shareholder could “distribute” the shares of stock which he held in elections for directors or managers of the corporation, and, if he owned ten shares and ten directors were to be elected, he could cast ninety votes for one candidate and ten for another. Following the colon is the emphatic provision “and such directors or managers shall not be elected in any other manner.”
Although the subject matter is different, the issue in this proceeding and the problem considered in C. & O. Railway Co. v. Miller, Auditor, 19 W. Va. 408, are similar. In that case, the Court passed upon the constitutionality of an Act of the Legislature providing that no taxation should be imposed upon the property of the C. & 0. Railway Company by the State until the profits of that company amounted to ten per cent of the capital of the
The rule thus laid down in the Miller case has been approved by this Court many times. Pt. Pleasant Bridge Co. v. Pt. Pleasant, 32 W. Va. 328, 9 S. E. 231; Coal and Coke Co. v. Tax Commissioner, 59 W. Va. 605, 53 S. E.
It should be emphasized that while Article XI, Section 4, of the Constitution, is a clear, emphatic command to the Legislature that every stockholder shall have the right to vote for the number of shares of stock owned by him in all elections for directors or managers of incorporated companies, it makes no provision as to the right of shareholders to vote upon any other action of a corporation. While Chapter 181 of the Acts of 1872-73, went further and gave the right to vote upon other questions, under certain circumstances, Section 4 did not require that the Legislature go that far.
It is apparent from an examination of statements contained in some texts and court opinions in other jurisdictions that some confusion exists between the right of a stockholder to vote his stock in the manner specified in a Constitution or statute, and the right of a stockholder to enter into a bona fide agreement with other stockholders, as to the manner in which he shall or shall not use that privilege. Such an agreement, however, does not change the character of the stock, but affects only the privilege of the person who owns it.
It is undoubtedly true that as a result of the long delay in seeking an adjudication by this Court of the issue presented in this proceeding, there are many charters of incorporated companies in existence providing for limited or no voting privileges by some of their shareholders. If the provisions of Article XI, Section
The language of Article XI, Section 4, being clear and free from ambiguity, no official of the Executive branch of the government, no legislative body, nor this Court, all of which exist only by virtue of the Constitution of this State, has the power to change its provisions. If any should attempt to do so, we repeat, with approval, the language used in C. & O. Railway Co. v. Miller, Auditor, supra, quoting from People v. Purdy, 2 Hill 35: “in this way a solemn instrument — for so I think the Constitution should be considered — is made to mean one thing by one man and something else by another, until in the end it is in danger of being rendered a dead letter; and that too, where the language is so plain and explicit, that it is impossible to mean more than one thing, unless we first lose sight of the instrument itself, and allow ourselves to roam at large in the boundless fields of speculation. For one I do not venture upon such a course. Written constitutions of government will soon come to be regarded as of little value, if their injunctions may be thus lightly overlooked; and the experiment of setting a boundary to power will prove a failure.”
This decision renders invalid the provisions contained in Code, 31-1-22, Code, 31-1-66, and all other Acts of the Legislature, wherein it is provided that any limitation may be placed upon the right of an owner of a share of stock in any corporation, created under the laws of this State, to vote for directors or managers of such corporation, but such Acts are, by this decision, made invalid to that extent only, and all parts of such Acts not in conflict with the provisions of Article XI, Section 4, of the Constitution of this State, remain in full force and effect.
The relator having failed to show a clear legal right to the relief sought, the writ will be denied.
Writ denied.
Dissenting Opinion
dissenting:
Being of the very definite view that the Court has unnecessarily struck down a statute of long standing and great usefulness and, in doing so, unnecessarily precludes the use and application in this State of an important principle of corporation law, one that has long been recognized and applied in this State, I must attempt to state the bases of my dissent. To indicate the sharp, abrupt impact that may be expected to the heretofore existing practice of issuing stock with limited voting rights, it may be pointed out that since 1948 approximately one hundred twenty corporations have been granted charters containing provisions authorizing the limiting of rights of stockholders to vote, and that between the time of the adoption of the Constitution and 1948, several hundred other corporations have been authorized by the State to issue such stock. Unless precluded by Section 4 of Article XI of the Constitution, a stockholder may be limited as to his right to vote his stock. “A stockholder has no right to vote at corporate meetings, whether the stock is common or preferred, if it is so stipulated when the stock is issued, for the stipulation is then a term of his contract * * Vol. 3, Private Corporations, Page 1996, Clark and Marshall. See 2 Thompson on Corporations, 3 Ed. Section 949.
It appears unmistakably plain to me that the majority have applied the force of Section 4 of Article XI to a situation not actually dealt with and not actually intended to be covered by the language thereof. By its own terms, that section of the Constitution, quoted in the majority opinion, relates to the “Rights of Stockholders”, not to restrictions placed on the legislative branch of the government with reference to its powers of controlling the organization or constitution of private corporations. The only such restrictions were placed in Section 1 of the same article: “The Legislature shall provide for the organization of all corporations hereafter to be created, by general laws, uniform as to the class to which they relate; but no corporation shall be created
The evil sought to be avoided by Section 4 of Article XI, and this is clearly demonstrated in the majority opinion, was to prevent a majority of stockholders depriving a minority of rights and property by prejudicially or selfishly manipulating the business affairs of the corporation. Such evil was attempted to be avoided by Section 4 by guaranteeing unto the minority stockholders the right to vote for directors and managers cumulatively and distributively, in accordance with the rights acquired by them respectively, in the purchase of their shares of stock, and not to prevent the issuance or purchase of shares of stock upon any particular condition or limitation relating to the right to vote. In other words, the intention of Section 4 is to protect the rights of minority stockholders as to such rights as were acquired by them in the purchase of stock, and not to deny them the right to freely contract as to what rights should be or should not be included in the purchase agreement. The language of Section 4, to me, at least, makes this conclusion irrefutably certain. I think, too, that the attempt of the majority to analyze the language of that section clearly demonstrates its lack of application to any question relating to the issuance or purchase of stock, or to the creation or organization of any corporation, but establishes that it relates only to the “manner”
As above noticed, by its own language Section 4 attempts to regulate only “Bights of Stockholders” in the “manner” of voting for directors or managers, and not the “manner” in which the Legislature may exercise its power relating to the creation or organization of corporations. Notice, too, the cautious absence from the language of any limitation on such legislative power. Only the “manner” of the voting, “in person or by proxy”, cumulatively and distributively, of “stockholders”, is mentioned, and that alone can be the purpose or object of the language. Yet the majority read into the section a wholly different purpose, a purpose foreign to the stated object of the section. Only by doing so can they reach the conclusion that the pertinent statutory provision is unconstitutional. Is it not incontestably certain that had the framers of the constitutional provision attempted or intended to limit the right or power of the Legislature in the respect indicated by .the majority, they would have done so in language not involving rights of stockholders to vote cumulatively and distributively, rights entirely foreign to any question of legislative power, and would have made such attempt in the section specifically designed to define such limitations?
Although I agree that the language of Section 4 is clear and unambiguous, I am of the view that the conclusion reached by the majority is not in accord with the plain language used, and that such conclusion can not be reached save on the basis of ambiguous language, for the simple reason that the majority imply or import thereto a meaning not found therein, not related to the subject thereof, but entirely foreign to the matters dealt with. It may also be pertinent to note that the plain intent accorded the language by the majority opinion is not the plain intent accorded it by almost every Legislature of this State since the adoption of the Constitution, as will be hereinafter shown; by every administrative officer heretofore charged with the duty of issuing cor
The petition herein alleges, in effect, and the demurrer thereto admits, that since about 1872, the date of the adoption of the Constitution, of which the questioned provision is a part, it has been the general and universal custom and practice of the State, through its proper officials, to issue corporate charters authorizing the issuance of stock, limiting the rights of holders thereof as to voting rights. In so far as the record in this case is concerned, in not one single instance was that universal administrative practice questioned, between the time of the adoption of the Constitution and the time of the institution of this action. The legislative policy is just as clear and definite.
In 1864, before the adoption of the present Constitu
By Chapter 35, Section 16 of the Acts of 1901, the language of old Section 16 was amended to read: “The agreement of incorporation and the certificate of incorporation issued by the secretary of state, or the stock holders in general meeting, by a resolution or bylaw, may provide for or authorize the issuing of preferred stock on such terms and conditions, and with or without the right to vote in stockholders’ meeting * * This language became a part of the language of Section 16 of Chapter 53 of the Code of this State of 1906, of the Code of 1913 and of the Code of 1923, and remained the law of this State until the adoption of the 1931 Code, 31-1-22, the pertinent language of which was then amended to read: “Every corporation * * * shall have power to issue one or more classes of stock or one or more series of stock within any class thereof * * * with such voting powers, full or limited, or without voting powers * * * as shall be stated and expressed in the charter, or in any amendment thereto, or in the resolution or resolutions : * Such change has remained a part of the Code since 1931. Thus, there can be no wondering doubt as to the universal legislative policy relating to the practice of the State, through its administrative officers, in the issuing of corporate charters containing agreements limiting the rights of stockholders to vote, or as to the legislative intent relating to such policy from the time of the adoption of our present Constitution until this date.
The constitutional provision involved, Article XI, sec
In State ex rel. Frank v. Swanger, 190 Mo. 561, 89 S. W. 872, 2 L.R.A., N.S., 121, in considering the identical question here considered under a constitutional provision to the same effect as the constitutional provision here involved, the Court held: “Under Rev. St. 1899, §§1312, 1332, as amended by Laws 1901, pp. 91, 92, and Section 1333, conferring on the stockholders power to issue preferred stock, and to fix its preferences, priorities, classification, and character, the stockholders of a corporation were entitled to provide that preferred stock should not carry voting power, notwithstanding Const, art. 12, §6, and Rev. St. 1899, §953, providing that at
Assuming, however, that the intention of the framers of the Constitution was to prohibit the State from issuing a charter to a private corporation authorizing the issuance of stock possessed of limited voting rights, and that the language of Article XI, Section 4, actually means just that, I think there remains no valid reason why the stockholders of a private corporation can not waive such
As has often been noticed, any question as to public policy is one for the Legislature, not one for the Courts. No one would contend, of course, that any constitutional provision should be permitted to be whittled away by public or legislative policy, or otherwise, but all authorities agree that long uniform administrative interpretation and practice, concurred in by the public, and clearly approved by legislative policy, with reference to the meaning of a constitutional or statutory provision, should be given great weight by the Courts when faced with the duty of determining the meaning of the language of such provision. I think the rule especially applicable where, as here, the result of a change in the long established practice and policy will almost certainly result in driving corporations from the State, prevent others from coming into the State, and deprive citizens of advantages and profits to which they would otherwise be entitled. The resulting damages to the State and its citizens will be, in quantity, vast and incalculable, and hopelessly irreparable.
Being of the views indicated, I respectfully dissent.
