*1 with- obviously and find that most of them are contentions merit. A of such other contentions out determination however, of the cause, detail to a decision unnecessary will not therefore be considered. they is reversed and the For the reason discussed the decree cause is remanded for a new trial.
Reversed and remanded. (No. 33563 . Avery al., et vs.
Louis Appellee, E. Wolfson, Sewell Appellants.
Opinion filed, April Rehearing denied June 195 5
MacLeish, Spray, Underwood, & Chicago, Price MacLeish, Cushman, E. S. W. Robert (John Joseph Pratt, C. Harsted, Clifford Townsend, John Jess for appellants. F. Swenson, counsel,) Pratt, Brown & Tierney, Friedrich, SpiEss, Mayer, *2 A. Rob- Stephan, of Chicago, Tierney, F. Edmund (Leo Dwight W. Fawcett, Bernstein, Stern, Stuart ert L. and Fla., of Jacksonville, William Gricicstein, M. Joseph for counsel,) appellee. of York, Y., of New N. A. Shea, of and Finn & Van Melr, T. Van Mere, Herman and D. M. Cook, Wilson, Chicago, Edmund Lewis all of Moline, W. Graham & (Sorro, Hawes, Harold of and Moline, Lloyd, Bell, Boyd, & Carifp, Marshall of of counsel,) Fleming, Green, Chicago, ICiricrand, and Thomas (Weymouth Martin Erris, & ICiricrand N. of counsel,) M. Stack, Miller, Thomas, William B. Wescott, Adams, & Gorham, Albert Wescott James S. McIntosh, Barney, Gann, Secord, & Fred- Stead all of and Thomas W. Secord, O’Shaugiinessy, erick amici curiae. Chicago, Kringbier delivered
Mr. of the opinion Justice court: Wolfson filed a in the circuit court complaint
Louis E. of Cook County Ward against Montgomery & Company directors, and its seeking declaratory that sec judgment tion of Illinois Business Rev. Corporation Act, (Ill. 1953, 32, Stat. to au chap. par. 157.35,) purports thorize the classification of directors into not more than three classes and the election of one class only annually, is unconstitutional and and that the void, company’s bylaw thereto is pursuant therefore adopted unlawful. After answer was filed, moved plaintiff on the judgment The court sustained pleadings. the motion and entered judgment prayed Defendants complaint. appeal to this directly on the court, ground that a construction of the constitution and the of a validity statute are in- several addi- heretofore Pursuant to leave granted,
volved. directors have classified tional Illinois having corporations curiae in as amici of appeal. intervened support admitted by From the allegations pleadings that the and the motion for appears answer judgment, con- of directors of Ward & Company board Montgomery three three classes of sists of nine members divided into each annual of the stockholders directors each. At meeting class is for a term three years. elected On August became the shares 20,000 owner appellee later he sent a letter common About two months stock. of the bylaws appellants asserting for the election one third of the directors each year was the rescission unlawful, demanding repeal that.portion bylaws classification relating their election for so-called terms. “staggered” further requested the communication that the Appellee individual forthwith announce shareholders appellants *3 that at the annual to on be held meeting April 22, 1955, full the of the board of directors membership may elected to office. After of the letter failed receipt appellants to rescind or the repeal allegedly portion by- illegal laws, had although they to do ample opportunity so, and appellee instituted the present action on November 1, 1954.
Section Illinois Act, Business Corporation 35 to which the pursuant was company’s bylaw adopted, pro- vides as follows: “When the board of directors shall con- sist nine or more members, lieu of the whole electing number of directors annually, the by-laws may provide the directors be divided into either two or three classes, each class to be as nearly equal number as possible, term of office of directors of the first to class at expire the first annual meeting after shareholders their elec- tion, that of the second class to at the expire second annual after their meeting election, and the third class, if to any, at the third annual expire after meeting their classification after such each annual meeting At election. class number of to directors equal the number of shall be such meeting the time of at term expires whose annual second succeeding until the hold office to elected succeed- third until the classes, if there be two meeting, The sole classes.” if there be three annual meeting, ing classification is whether issue appeal presented and their election statute, of directors permitted XI of the of article violate section staggered terms, stockholders the constitution, Illinois to guarantees directors. to cumulate their in the election of votes enable Under cumulative a method voting, designed on the board minority stockholders to gain representation each directors, equal shareholder is entitled to votes the number of his shares the number multiplied directors to be elected. He cast all his for a may votes candidate single or distribute them two or more among as he fit. sees It not that in an election disputed three members of a nine-member board, approximately cent per many votes are a required elect single director as would be if all nine necessary members were to be elected at the same time. In an election of the full board of nine directors, owners of 10 cent of the per stock voted, one plus share, could elect one out of the nine directors to be elected. On other if hand, board of directors is classified so that only three members are elected each year, would require per cent of the stock voted, plus share, to a gain seat on single board. Where all nine members are elected at once, minority cent of holding per the stock could elect four; and the majority holding cent of per the shares, by cumu- *4 their lating votes in the most advantageous manner pos- sible, could elect no more than five out of the nine directors. If only three members of the board are elected each year, however, holders of cent per would be able to elect only one director at election, each and could never have at one time. directors on the board more than three Sim stock could two an owner cent of the elect ilarly, per if whereas under once, directors all nine were chosen at to such would be unable a shareholder bylaw present evident, therefore, elect ev^en director. It is that one decreases num the number of directors for election up director increases. ber of share votes to elect one necessary Directors, 48-49, Cumulative (See Williams, Voting pp. School, Ballantine, Harvard Business A Critical 1951; Act, Illinois Business 1 Univ. Survey Corporation Rev. The Director 385-386; Corporate L. Chicago 357, National Industrial Conference Board Study No. ship, Note, Rev. Note, 66 (1953) Harv. 532; L. 12 P. Dickinson Rev. Rev. L. 330; L. St.Johns Classification of directors fact even 358-359.) impairs majority to wait representation requiring majority for two or three before it can secure years representation to its proportional strength. is that since the of a minor-
Appellee’s position degree on the ity’s board varies with the representation directly number of directors to be elected, representation pro- to its is if defeated the entire portion holdings board is not elected at time; and that the of the constitu- purpose tional for cumulative elec- voting corporate tions to minority shareholders the give propor- tional on representation boards. The corporate appellants, on the other insist that the hand, of cumulative purpose is not to voting guarantee proportional but representation minorities enable simply secure some representation or voice on boards of corporate directors. It is out pointed that a may reduce the number corporation of its directors to three without constitutional violating any or statutory that in such restriction; event the number of shares re- to elect a director quired single increased; would likewise be constitution does not require any particular num- ber of except use of tire plural con- *5 shares which that the two; at least percentage templates any must have in order to secure repre- a minority group to the directors is therefore left on the board of sentation General and that since Assembly; discretion of the for may lawfully General Assembly provide corporations with three directors it also for may corporations provide with classified boards of directors with three each class. The determination of the issue this case presented a construction arti- of section depends upon proper cle of the constitution, XI which reads as “The follows: shall that in all general assembly by law, elections provide, or managers incorporated companies, every stockholder shall have the to vote, or person for the number of shares of stock owned proxy, by him, for as many there directors or persons managers to be elected, to cumulate said and shares, one can- give didate as votes as the number of directors multiplied number of his shares of stock shall equal, or to distribute them on the same principle can- among many didates as he shall think fit; and such directors or man- shall not be agers elected in other manner.” Although and State many others have had long both mandatory cumulative and voting classifi- permissive cation of no directors, decision reported has been found in which the precise question presented here has been con- sidered. In Central Wright v. Water Co. California Cal. 532, Pac. a constitutional provision for cumu- lative was held voting to be violated where a majority of the shareholders a approved resolution to elect the com- seven directors pany’s in seven consecutive elections, elect- one ing director at each election. The court observed: “We think the thus power conferred a upon corporate elector can only be exercised, to the according constitutional pro- vision, by him allowing to cast his ballot singly, cumu- latively or at distributive^, time, the election of directors, for if but one director at a time be balloted for, of the stockholders cumu could, by a majority combining, their voters each time candidate and late upon single the manner elect thus him, shaping controlling of election it be in the of the majority would power the stockholders to cancel the votes of virtually minority on the them of their rights deprive representation Deneen, In ex People board of directors.” rel. Espey v. this court the soundness of the recognized Ill. *6 in cumu case, decision “there can be no Wright saying lative where there is but officer to elect.” The voting Deneen case involved the constitutional of arti provisions cle sections cumulative in IV, to voting pri 7 in the elections for General mary Assembly. representatives The court to made observation with pertinent respect “The constitution minority representation: guarantees and the has no minority right representation, legislature to law the direct or power opera pass purpose practical tion of which or restricts that defeats, right.” abridges Deneen case were overruled People aspects Some ex rel. that de Emmerson, Ill. but Lindstrand v. 333 that cision reaffirmed the view the cumulative voting pro visions of the constitution must be construed so that their is not and that the purpose defeated, practical operation a law must be considered in it whether de determining feats the of minority right representation. contend the of section of arti-
Appellants language cle XI does not forbid classification of directors and their election for but terms, staggered plainly contemplates General Assembly continue the power practice which was well known at the time the constitution of 1870 was In of the contention it is adopted. support argued that since the section stockholders the to vote gives for as as there are directors “to be many persons elected,” it that less than the whole contemplates possibility number be elected at annual may any particular meeting; and that the construction the circuit court adopted Appellee be elected.” the. words “to renders meaningless neutral, in question that the words takes the position involved and were used to describe merely persons if a elections, clear, example, future to make new in size the board is increased or decreased corporate number. rather than the original number is to chosen We at once the failure of convention may say This forbid classification is not determinative. expressly court has literal an not heretofore taken so approach vacancies the constitutional Neither the provision. filling is ex nor the issuance of stock by directors, nonvoting statutes both pressly forbidden, yet authorizing practices Cohn, have been held ex rel. Weber v. (People invalid. ex 121; People v. Telephone Ill. rel. Watseka Co. Emmerson, Nor do we think the words 300.) Ill. “to be elected” can be given meaning significance ascribed to them by The same appellants. phrase appears in sections of article deal constitution, IV with ing minority the General representation Assembly. after Thus, that three shall be elected stating representatives in each senatorial district two these every years, provisions declare that “each voter cast as qualified may votes *7 for one candidate as there elected, to be representatives or may distribute the same, equal or thereof, parts among the as candidates, he shall see fit.” (Emphasis supplied.) three Since must representatives always be the elected, in phrase was question not used in obviously reference to the number of to be representatives elected, and we would not be warranted in a different attributing or meaning intent to the words as used in section of article XI, unless the context so A careful requires. examination of the entire section fails to disclose any indication that the words “to be in elected,” the first appearing clause, were intended to that less than the imply entire board could be elected at one time. On the the contrary, second clause of the sec tion, deals with expressly cumulative indi- voting, cates rather that all directors must be elected at each regu “to lar election. It confers on each stockholder the right cumulate said candidate as many shares, give votes as the number directors the number multiplied of his shares of stock shall to distribute them on equal, or the same candidates as he shall many principle among think fit.” in effect (Emphasis supplied.) argue Appellants words “candidate” and “candidates” second of the section refer part to the office or offices of “directors or to mentioned in the first managers elected,” part and that section, “number of directors” phrase must therefore mean the number which is only to be elected at the annual The particular not con meeting. argument In our these words should be their vincing. opinion given ordinary the whole number of meaning, namely ex People rel. Watseka Telephone In corporation. Emmerson, Co. v. had Ill. we occasion to construe section of the present constitution whether deciding could corporation provide stock without preferred the owner to vote for right directors. It was con tended that the phrase “every as used stockholder,” in. should be construed to mean “every stockholder entitled to vote.” It was held, however, under this of the constitution provision all stockholders must have to vote for right directors. We observed that “If the convention intended that those stockholders who were given right charter or vote articles of incor poration adopted by were included it company would have been perfectly easy word this section so as to convey but meaning, instead of so it the wording con vention used the language, ‘every stockholder shall have * * * vote, person by proxy, for as there persons are directors or to be managers elected,’ and followed this with a as to cumulat said ing shares.” In the case at bar it should likewise follow that since the convention failed to *8 the words qualify intended their natural directors,” “number of it must have as all the directors of the corporation. meaning that and the amici curiae the rule rely upon Appellants con- is not within some subject any government stitutional inhibition be acted General may upon and that liber- constitutional should be Assembly, provisions construed order that the ally enactment legislative may be sustained. It is true that section about says nothing the number of directors which a must have, corporation that the use of the in connection with cumu- except plural lative there must be voting one; more than that implies it does not in terms require whole number of directors to be elected at each or annual and that regular meeting; the classification of directors and their election for stag- terms is not gered expressly forbidden. It is well settled, however, be found prohibitions may not in the used but also language necessary implications such The language. guaranty minority representation law which in prohibits any effect defeats or nullifies it, even such law though does not in express terms attempt It nullify is not right. elec- disputed staggered tions enlarge of votes percentage to obtain necessary on the representation board, result in may excluding representation minorities which would otherwise be able to elect a director. It is likewise evident that the classification of directors and their election for staggered terms do not to affect the purport of a stock- legal right holder to vote his shares cumulatively, that the right of cumulative does not voting pretend assure a minority representation any event.
It true, defendants that urge, constitutional does provision not insure a which is voting strength pre- cisely proportionate to stock and that the ownership, actual operation of the in a particular situation will depend three upon variable factors: total number of shares, the number held stockholder, and the number
of directors. But these variable factors are inherent in the the of Their does we constitution. language presence not, authorize us to sanction the think, introduction of another variable which is not of directors inherent, —classification terms. by
In whether in the effect of classification determining mathematically the of votes increasing required percentage on the board is a substantial denial of representation the constitutional of cumulative it is appro voting, to consider the mischief to be remedied and priate designed the to be the purpose sought by accomplished provision. the Since to be construed is a language constitutional pro the vision, object of is the inquiry of the understanding voters who the instrument. In this connection it adopted to consider the historical appropriate background the inclusion of section and the debates of the members of the as well as convention, explanations we stated in Burke v. Snively, at the time. As published at 328, Ill. “In constitutional construing 344-345: the true provisions inquiry is, what was the understanding of the of the words meaning used voters who it? adopted Still, practice debates consulting the members of the convention which framed the constitu tion, to a correct determination aiding of the intent of the framers of the has been instrument, in long indulged courts as to a true aiding understanding meaning provisions to be thought doubtful.” n The United Court Supreme States the same employs technique the Federal interpreting In constitution. words of Chief “In Marshall, them expounding Justice words of the Federal constitution], we may per- [the mitted to take into view those considerations to which courts have allowed always great weight exposition The laws. framers of the constitution would naturally examine the state of at things existing time; and their work attests that did sufficiently so.” The they Chief Jus- attached, been always has "Great weight tice continued: attached, exposition. very contemporaneous rightly * * * been has always the Federalist The opinion com It is complete as of authority. considered great all constitution; and is appealed on our mentary has that instrument questions given to which parties rank; Its intrinsic merit entitles it to this birth. high con two its authors part framing performed, stitution, in their put power explain much very vicios with which its was (Emphasis supplied.) framed.” Trans (Cohens Virginia, v. 416-418; Wheat. cf. United portation 280; Co. v. Wheeling, States U.S. *10 Underwriters Ass’n, v. Southeastern 533, U.S. 551.) While there is such no historic source the Federalist in aid the of the Papers Illinois constitu interpretation tion, we do have relevant data in the which explanations appeared the press.
There was prevailing 1860’s throughout popular at the indignation excesses and frauds of certain railroad and the was managements, vehement in its press denuncia- tion of the which “rings” controlled of the railroad which companies defrauded minority stockholders. Prior to the Constitutional Convention, force moving behind idea minority iix representation and cor- political porate elections in Illinois was a known as the group Minority Representation of which Society Mcdill, Joseph publisher Chicago Tribune and one of the framers of the controverted constitutional provision, was a leading member.
A news item in the Chicago Tribune for December 31, reports proceedings annual meeting the Minority Representation at Society which Medill stated that he proposed offer the convention a bill for minority representation, which he referred to as “proportionate rep- resentation” and which would not be confined to political matters but would include which bodies corporate due representation. their have would minority vot- cumulative advocate of the leading
Medill became and intro- elections, and corporate for both political ing election of cumulative voting provision duced In May, assembled. the convention soon after sub- Miscellaneous Corporations on the Committee constitutional the present recommending mitted a report intention debates reported From ensuing language. the framers may gleaned. to the proportional himself referred Medill stated: the proposal, introducing representation is attracting representation “The subject proportional the ablest statesmen and anxious thought the earnest De- (Constitutional as in America.” Europe and writers he de- the section In expounding bates, 563-564.) pp. representation: “Suppose a of proportional scribed system elect ten di- stock of $100,000 a a with capital company method of under the ordinary electing rectors. At present, five hundred and one shares stockholders directors, holding hundred and and those four board, holding the entire elect man to their interests. cannot elect a represent shares ninety elected, these ten directors are thus can they After proceed run the committee,’ an ‘executive institution, to create of which a may quarter the members not or represent Thus have the fifth of the stock. we whole interests of by $25,000 controlled stock. company $30,000 *11 the here holders of On the club- proposed $49,000 plan votes could elect four of the their ten di- together bing if and shares to the amount of rectors, $10,000 were held he elect stockholder could one director by one to protect Debates, interests.” (Constitutional his p. 1666.) in Another Mr. the delegate, Coolbaugh, illustrating pro- also described and proportional representation posal, stated: is If I “The this: am an principle precisely individual of one third of the stock owner of an capital incorporation for it would enable pecuniary profit, me organized to have interest equal my in board of representation if a com- instance, of that For corporation. stock with $100,000, stock of is with organized pany capital one third directors, I am the owner nine and of of that I will have company, privilege capital aggregate of have an directors, three those and electing influence of on interest in the com- board directors equal my can see that it is pany. I can see no but I that, wrong secures, and fair and that it just equitable, beyond any doubt or interests and of minori- peradventure, rights ties these Consti- corporations.” (Emphasis supplied.) tutional Debates, p. 1667.
Contrary of Medill’s appellants’ interpretation posi- tion, from the patent editorial in Tribune Chicago he May 14, did mean that 1870, section of arti- cle XI required the whole number of directors to be elected at one time. The editorial states: “In all incorporated companies every stockholder shall have the privilege for voting heretofore, Directors as are to be or of elected, the whole number of multi- casting his shares, plied the whole number Directors, person, or to otherwise distribute them as he pleases.” (Emphasis supplied.) journals
Other throughout State the con- interpreted stitutional in the same way, quoted with ap- proval of the Tribune. The synopsis Gazette Carthage of May 19, 1870, 2, col. p. 5; Jacksonville Journal Daily of May 18, 1870. An editorial the Bdwardsville Intelligencer of 9, June I,p. col. stated: “No Constitution has ever been
framed in to our country, in knowledge, rights people, and not of the majority but only, a minority, were as thoroughly fairly guarded. The providing [political] minority representation ** * has been much discussed already. The very same is carried principle into government of all corporations, *12 of elect a minority can always of stock that a minority so its provision strength directors proportioned —a so- which use the break swindling rings far to up will go their advantage.” private many corporations ratified took was at the constitution The election which editorial an and on 25, 1870, on July 2, 1870, place June Tribune further in the expounding had Chicago appeared the of “By adoption the constitution: able, by always will minority question, Directors to elect as votes, their concentrating them to. entitle fairly of shares would their proportion elects a if a of $1,300,000 Thus with capital company if control they the minority, board of thirteen Directors, Di- the thirteen can elect six of stock, $600,000 can still elect they If control but $100,000 rectors. they interests in the Director to look after their manage- selfishness, ment the affairs of the The company. and the and bodies rapacity, mismanagement corporate in the of their secrecy, intrigue, corruption proceedings check.” healthy salutary officers will receive a another by Two before ratification days people, in the Tribune to this editorial relating emphatic appeared “The on constitutional third clause proposed provision: will forever the confiscations of the ‘Corporations’ prevent Rail- Directors, of stockholders of which by rights Erie * * * is a and infamous way conspicuous example. if the four-ninths of stock held Now, actually by Erie of Fisk Gould, to the fraudulent opponents prior had been allowed its fair over-issues, representation Board of our new Illinois Con- Directors, provided stitution, Gould-Fislc instead of party, electing whole would have elected five-ninths board, them, while the other have would had four- party immediately ninths of them in the Board of and a Directors, minor- ity the Executive Committee.” The article on goes this example proportional repre- how just explain constitution: be effected proposed sentation would new constitution our “This is effected clause in- of Directors that ‘in the election which provides *13 have the shall stockholder every Companies, corporated number of in for the or proxy, to vote, person as there for as many stock owned by him, persons shares of said elected or to cumulate are to be directors managers them or to distribute candidate, votes’ and all for one cast This as he think fit. them candidates might among enable minority at all the will, times, any holders given of the to elect a of Directors stock number proportionate to their number of shares of stock. This clause was first in these in and and, view of the proposed columns, great and in man- growing importance purity integrity of our and manu- agement railways, insurance, banking, and we facturing, other cannot transporting, corporations, but it one of the most all the re- regard important of forms in the embodied new constitution.” that
The fact the constitutional does not ex provision pressly elections does prohibit staggered not foreclose a construction which invalidates the statute such authorizing elections. The standards which in matters of con apply stitutional interpretation have been frequently out pointed by this As court. we in People observed ex rel. Nelson v. Jackson-Highland Building Corp. Ill. 533, meaning of constitutional “can best be ascertained language by con sidering purposes constitutional in which it and courts appears” should our “construe consti tutional so clauses as to effect to the give in which spirit they were In adopted.” Peabody Russel, v. Ill. 439, we “It is a said: canon of construction well recognized, not in this court but in courts of other jurisdictions, as it relates to statutes, the chief is to purpose give effect to the intention of the legislature. In such seeking intention courts are to consider the used, language object to be attained or the evil to be remedied. This may That more than the literal of the words. meaning
involve intention is the statute though is within the within within the letter not within letter, though if not within nevertheless not within statute likewise in intention. The same be general applied principles in statutes of constitu construction construing apply If tions.” there is distinction between the rules govern the construction of constitutions and the rules ing technical con statutes, less ones apply applied ex (People rel. Rogerson Crawley, constitutions. v. struing 139, 142.) Ill. A constitutional should guaranty a broad liberal Courts should not interpreted spirit. strict a object so construction as to exclude its real apply As we have intent. indicated, general purpose as disclosed the debates constitu provision, tional convention and comments and contemporaneous in the was afford a minority explanations press, protec *14 tion in its In proportion the voting strength. light such and the evil to be remedied, the sec purpose sought tion cannot construed to a authorize method of selecting which directors results the value the impairing right. That section contemplates vote right cumulatively entire the number of directors also evident from the nature of its unqualified The second clause language. section, of the cumulative describing that voting, provides the stockholder shall be entitled to “give candidate as votes as the number directors the multiplied of his number shares.” This (Emphasis un supplied.) reference qualified to “number of directors” on its face means the total number, and in the nothing lan remaining of the guage requires that be construed to refer also a smaller number from resulting classification. It must therefore follow that section which provides the classification of directors and the election of less than the entire number at one election, is in conflict not the with purpose affording proportional represen- of the constitutional effect the natural but with tation as well. language Cohn, 121, we con ex Weber Ill. People rel. v.
In the directors of a statute validity providing sidered in the board which may fill all vacancies happen shall until otherwise, by death, caused resignation directors In holding of the stockholders. next annual meeting of article XI violation of section to be statute we observed: “the constitution provides the constitution, etc., shall be by stockholders, all for directors elections not in any directors or shall be elected managers ‘and such statute manner,’ other while provides fill which in a by death, shall vacancies board happen are or otherwise. The two inconsistent and resignation both be effect. The stockholders have a cannot given right to direct the affairs through directors corporation cannot be they elected of that them, deprived right We under constitution.” think a similar conclusion in the case at must follow bar. Section Business Act, authorizing classification Corporation of di is inconsistent with the rectors, constitutional of a to cumulate his stockholder shares through multiplying them the “number of directors,” cannot be sustained. emphasize
Appellants long period during been in effect. act has Age, however, does not immunize a statute from constitutional attack. This court does not to invalidate hesitate long standing under practices statutes where they challenged found offensive to the con ex People In stitution. rel. Weber v. Cohn, Ill. this court held unconstitutional a statute which authorized *15 directors to fill vacancies on boards without any action by shareholders, the fact notwithstanding that the practice was authorized Act Corporation In People 1872. Bruner, v. 146, Ill. this court invalidated a statute 343 which had been in effect since 1827, that providing jurors were be judges law as well as the facts Dealer’s Trans More Grasse recently, criminal cases. v. a court held unconstitutional this port Co. Ill. Act. section of the Workmen’s Compensation Although it in the statute for almost and had forty years had been on other it declared times, been assailed was grounds many their that section constitutional workingmen deprived in and that there must be a determination of its rights it had even been force for time. validity though long Defendants also on what term a rely they long-continued administrative construction of the statute. Even assuming that the views officers the act were administering its we cannot their failure to authority validity, regard the act as an administrative for the construction, challenge reason that officers are not normally expected question under act. validity legislation they Cf. Brady, Ill. Fergus v. 276.
Reliance is also the fact that a law author- placed upon classification was the first izing passed legislature, this included thirteen members who had legislature served in the Constitutional That is a fact Convention. to be it is some but no means given weight, controlling Madison, 1 (cf. Marbury Cranch. 137,) v.
case must to the evidence the constitu- yield supplied by tional debates and the accounts in the contemporary press. if results this court should
Appellants predict alarming rule to their contentions. It adversely that there appears domestic whose securities are listed corporations on the stock major Only 196, cent, 11.8 exchanges. per have classified boards of directors elected for staggered Of this list of or less than 196, 15, terms. cent, per It further are Illinois six corporations. appears retail have out boards major corporations staggered of directors. we do not believe that Consequently, disturbance envisioned will be by appellants widespread.' also voice serious as to the future misgivings Appellants life and commercial transactions if classified corporate
97 These the constitutional right. held to infringe boards are exercising directors fears unwarranted. Corporate are of an and claim their under the color office functions are nevertheless elected, unlawfully even election, though concerned, de far as third directors. parties So facto cor- de are as the acts directors binding upon facto on if were de Ballantine jure. as the directors poration Cor- 149, 1946; sec. rev. ed. Corporations, Cook, p. 8th ed, sec. porations, 713, p. 2433. un-
The circuit court was correct statute holding and its is affirmed. constitutional, judgment accordingly
Judgment affirmed. Mr. Hersi-iEy, dissenting: Justice I dissent from the because I believe majority opinion, it can be demonstrated that the is to effect decision amend the Illinois judicially constitution.
The issue is not case nor are the deter- complex, minative of law difficult to principles apply.
Section Illinois Business Act Corporation 35 that when provides the board of shall consist of nine or more members they be divided either may into two or three classes and elected terms staggered The office. sole question whether section of XI article of the Illinois constitution prohibits such classification and staggering.
Our most basic constitutional law is that the concept Illinois constitution is anot grant but a limitation of power. (People Dale, v. Ill. 238, 243; Gillespie Barrett, v.
Ill. 612, 615; I.L.P., Constitutional Law, For 33.) sec. this if our reason, constitution does not prohibit legis lation (no Federal constitutional inhibition being urged) its constitutionality be should sustained.
Thus, inquiry should be directed toward ascertain- ing exactly what is prohibited article XI of the Illinois constitution, reads as “The follows: in all elections law, shall assembly provide,
general every companies, for directors or managers incorporated or vote, have the person stockholder shall stock him, of shares of owned by for the number proxy, there are directors managers as many persons one can- shares, cumulate said elected, give or to didate as the number of directors votes multiplied *17 his shares of shall or equal, the number of stock by distribute them on the same can- many principle among didates think and directors or fit; as he shall such managers shall not be in other manner.” any elected
Essentially, prohibits expressly legisla- tion that would a stockholder of the (1) deprive right in vote for or directors, (2) prevent voting person or of cumulative destroy proxy, (3) right voting. Conversely, only constitutional to cor- guarantees are stockholders that there must be at least two porate that stockholders shall have a directors, to vote right at or person every and that proxy corporate election, shall have they to cumulate their right votes.
The use of the plural connection with cumulative must be there more than one voting implies director. How- ever, constitution does not state otherwise anything the number of directors which a about must corporation is a Indeed, have. there absence of striking any provision either as to how directors are (1) elected, to be their terms of or office, how (2) (3) frequently are they to be elected. that all di- there is Finally, no statement rectors must be elected at the same time. Therefore, prohibition classification against of directors and their election for terms as set in this staggered out statute must if at arise, all, by implication.
A fundamental canon of statutory constitutional is that interpretation source for primary ascertaining meaning provision under consideration is the and natural plain meaning language (Cooley, used. Graham Dye, Limitations, ed. v. p. 92; Constitutional 7th 1) 286; (22 Gibbons Wheat. Ogden, Ill. v. U.S. Railroad, Cuba 188; 628, 631.) v. 268 U.S. Edwards must be Where is section clause every given possible, If effect. courts should conflict, there apparent adopt rather construction which will render word every operative, than one which will make some words idle or nugatory. ex Nauert People Smith, 20; rel. Cooley, v. Ill. Constitutional 8th Limitations, 128. ed., p. “every stockholder shall have provides
Section 3 or right number vote, person proxy, of shares of stock owned by him, as many persons or there to be or elected, to cumu- managers * * late said shares, *.” (Emphasis added.) No could be ascribed significance to the “to be phrase if elected” the entire board directors had to be elected at if time. section Clearly, prohibits staggering requires that director at every be elected the same time, “to be elected” For accomplishes the same re- nothing. sult would be if the required provided “every stockholder shall have the to vote, *18 person for the number of proxy, shares of stock owned by for him, as many as there persons are directors or man- * * or to cumulate said agers ('t-e-be-ereeíed), shares, the other if section hand, On does not contemplate 3 or involve of but prohibition staggering, affirmatively the of for contemplates propriety providing staggered boards, the words “to be elected” have They meaning. are and not For accomplish in that purpose surplusage. event are a that all they directors need be recognition not at elected the time. same Thus, every stockholder shall not have the “to vote for as many as are right there persons directors;” he shall have the “to rather, right vote as many as there are directors be persons to elected.” the
Nor can “to be words elected” be of disposed that have no asserting reference to a they number that merely identify but whole, than the be elected less may vote the to matter with respect the subject no at that is to ascribe meaning For is exercised. again elected at one directors are to be words. If all all to the in of the respect “directors” identifies time, “persons” the addition The the assured. whom voting rights then unneces- be completely “to be elected” would words the identify sary “persons.” be elected” the “to The out majority phrase point of the Illinois in and article IV also sections appears in with minority representation which deal constitution, cite as an argument this Assembly, usage the General do not the these words have in conclusion support them or ascribed to appel- the meaning significance this in said sections Actually, the use of phrase lants. sections, These aids the position. appellants’ after that three shall be elected each representatives providing two years every that “each District state quali- Senatorial as fied voter cast as votes for one candidate may to be there are or distribute representatives elected, may or same, equal thereof, candidates, among parts fit.” intent he shall see clear. Under language, Three tzvo every years, must be elected representatives can cast a voter three votes one candidate distribute them or thereof the several candidates equal parts among if he fit. XI neither sees But section article fixes number “to time of their election. be nor the It elected” would seem reasonable to deduce from this that most did same framers of constitution not want type IV; article article all men- hence, XI protection be elected” XI tion number “to was omitted article and said matter left was discretion of the legislature.
In another to render effort words “to inoperative elected,” the majority to the second point part *19 “* * * which reads: or to cumulate said shapes, and candidate as votes give as num- many number of shares directors multiplied ber of same them on the prin- to distribute shall or equal, stock fit; he shall think candidates as as many among ciple in any elected managers shall not be directors or such “number the words state that They other manner.” is, ordinary meaning, must be their directors” given number of directors of corporation. whole in several be shown may The error of this conclusion ways. sec- in the second the critical words portion
First, Inter- Webster’s tion are “candidate” and “candidates.” defines Edition, national Second Dictionary (unabridged,) or is himself, “candidate” as who offers follows: “One an by others, forward a suitable or put aspirant person or contestant for as a can- honor; an or office, privilege, didate In a candidate for orders.” holy governor; orders to be candidate of a cor- for director or manager there must be an or which the can- poration, office offices didate or candidates are As to section seeking. applied offices which candidates seek are the offices of director it is clear Therefore, manager elected. that the of cumulative exists favor of right voting the number of offices or directors or to be filled managers at that particular election.
Second, conclusion is majority’s predicated upon confusion of the two subjects covered sec- separate tion As to this case, the deals applied with language 3. two subjects: whom the (1) stockholder may for, vote how many votes he (2) may cast. The first of these subjects is defined in he vote plain language, is, may “for as as there are directors person or managers to be elected” or he can vote for “one candi- cumulatively date” or distribute his cumulated votes “among many candidates as he shall see fit.” The number of votes the stockholder cast is also may defined A section. stockholder to vote guaranteed “the num- *20 him” or to cast cumu- of owned by ber of shares stock of directors multi- “as as the number votes latively the words the number of shares shall equal.” Since plied the section that of “number directors” appear part is it an unwar- votes, with the number of dealing certainly ranted construction consider them providing to all at the same time. election of directors mandatory it is not Third, necessary although prove point, reference to the constitutional debates makes clear that relat- of this of section interpretation proper portion to the number of votes can be cast cumulatively ing is the of the number of times the number product shares be elected. For directors example, following in the colloquy (Constitutional Debates, debates appears : “Mr. If ten p. 1666) a shareholder owns Browning: ... shares of and there ten stock, to be elected, has he to cast one hundred right votes, according the manner in which these are now things regulated —that is, ten votes for each director to be elected?” Cool- “Mr. I understand he baugh: or can cast all his has, votes for one.” “Mr. I made the because the Browning: inquiry section the number provides held shall shares be multi- by the number plied of directors to be elected. I did not know whether or not the mode of business is doing to give a man a number of votes to the equal number of shares he holds the number multiplied directors to be elected. But that so, the section all being as it is.” right
Fourth, even the number assuming of votes which a stockholder can cast is the product the number of shares times the “number of directors” all '(i.e., the direc- tors), would merely increase the voting strength minority the majority proportionately would not alter the result of the vote in any If way. there ambiguity formula for computing number of votes that may be cast, resolution of that ambiguity should not be seized an upon as opportunity writing sub- on the different altogether the section into that must be voted on. directorships of the number of ject Tele ex rel. Watseka People The majority rely upon Emmerson, 111. The issue in that phone Co. v. 300. case was or not stock could whether nonvoting preferred This held that be issued. court lawfully quite properly a stockholder the to vote for guarantees directors, such stock could not and, therefore, nonvoting be issued. The of whether or lawfully question not whole number or a lesser number of directors are required to be elected at each annual election was not even considered. *21 amI convinced that
Therefore, from a analysis proper of this constitutional it can be dem- conclusively onstrated that the under legislation review is not uncon- stitutional. There is no express the consti- prohibition tution the classification and against staggering provided for in the nor can statute, such be prohibition logically implied.
In my the opinion, words of the constitution, when taken in their ordinary signification, a embody definite which meaning, involves no conflict with other parts the same instrument; the court therefore, should not refer to extrinsic matters to arrive at a proper interpretation. (11 I.L.P., Constitutional Law, section 25.) However, even when use is made of extrinsic matters to aid in arriv- at the ing correct interpretation, can be shown that the appellants’ should position be sustained.
I refer initially to the contemporaneous and long-con tinued legislative administrative construction of sec tion of article XI of the constitution which sustains the 3 of the power legislature provide classification election for terms. The staggered construction which the first legislature places a upon constitution is entitled to great ex weight. (People rel. Badger v. Loewenthal, 93 Ill. 191, 200; American Aberdeen-Angus Breeders’ Ass’n v. Fullerton, Ill. Cohens 323; v. Virginia, 6 Wheat. 325 Laura, The Wis 411, 416; 264, 418; U.S.
(19 U.S.) Knowlton v. Pelican consin Ins. Co. 265, 297; v. U.S. States, United & Hampton Co. v. Moore, 41, 56; U.S. whom the ma Marshall, Mr. 394, 412.) U.S. Justice the Cohens himself as follows also jority quote, expressed case: “A constitution, exposition contemporaneous than that has been authority not less which certainly of act We know is itself. just cited, judiciary eminent mem which that act were many Congress passed bers of convention which formed the Not constitution. a individual, known, so far as single supposed part of the act which Court juris gives Supreme appellate diction over state courts the cases judgments therein unauthorized specified, constitution.”
In first General elected Assembly following constitution were thirteen men who adoption were members of the which convention drafted the consti- tution. That General Assembly enacted a general corpora- tion which both act, provided for cumulative voting classification of (Laws directors. This 1871-2, p. 296.) same General also an Assembly act passed incor- poration railroads. (Laws 1871-2, p. 625.) This act made classification of railroad directors mandatory. also They and loan adopted building corporation act, for the provided classification of directors. *22 (Laws of 1871-2, 173.) p.
Moreover, the construction which the first General As- sembly section of placed upon article XI as permitting classification of directors continued until unchallenged instant a case, period of eighty-three years. since Furthermore, the Illinois General Assembly
has extended the of and classification principle staggered terms to a wide variety of bodies and public commissions. Section of the Revised Cities and Act Villages provides 9-33 for terms for aldermen staggered of cities organized under Cjti,e_s Act mayor tfie Villages city adopting refer- to adopt authorized cities are Such council plan. in the election of minority representation a endum plan not into be divided cities to This plan permits aldermen. three aldermen with districts, six aldermanic to exceed Under plan, each district. be elected from these election of for is cumulative voting provided that even where states However, aldermen. 9-38 coun- is the city this of cumulative voting adopted, system the system staggered continue cil, ordinance, may from alternate aldermen terms for aldermen by electing each districts two years. election or for stag-
Classification and appointment for commissioners aldermen, terms also gered provided man- or trustees cities and which the city villages adopt members of trustees; for school for county ager plan; the board of education of all school districts Chi- (except more than 1,000 inhabitants; cago) having population for commissioners of all districts the Chi- park (except Park for the trustees of the Dis- cago District); Sanitary trict of for directors of districts; for Chicago; hospital directors of for city libraries; directors of libraries commission form fire for trustees of villages; protection districts; for trustees of abatement mosquito districts; members of the Illinois Commerce Commission; for mem- bers of the Industrial Commission; for trustees of the Uni- of Illinois; for trustees of versity Illinois Univer- Southern for trustees sity; of the Teachers’ Board; College than ex trustees of the Retirement Judges’ System (other for trustees members); Police Re- Chicago officio tirement Board; for the trustees of the Municipal Em- ex Retirement ployees’ Board than (other members). officio far So as I have been able to there is find, no reported case in court country the validity of any statute classification permitting requiring of direc- tors and their election for terms has ever staggered been The results of a challenged. made of survey jurisdic- *23 106 and Hawaii, District of Columbia (the
tions plus States 48 disclose the following: per- the Federal government) of and directors, mit or classification more require prob- such classification and election for staggered permit ably cumu- mandatory terms. have Twenty-three jurisdictions either constitu- lative statute by voting and more have tional cumulative provision, permissive if the articles of so And voting incorporation provide. have both and States cumulative mandatory voting permis- sive this not, classification directors. While does itself, statute, it does support constitutionality show classification and election for terms staggered and widely the Illinois statute is similar prevalent, force in the of jurisdictions. majority Also, the Model Business Act Corporation (Uniform Annotated, and 9, p. Laws vol. following), prepared the Commissioners on Uniform and recom State Laws mended for the several adoption States, both provides cumulative mandatory voting (section 28) per missive classification of directors and their election for (section terms also (See Commissioner’s staggered 31). Indeed, a number note, p. of instances classifica 117.) tion directors and their election for terms has staggered been deemed so that such has been important classification made As has been mandatory. already out, classi pointed fication and terms are staggered for railroad mandatory corporations (Ill. in Illinois. Rev. chap. 114, Stat. 1953, Such classification and par. 8.) terms arc also staggered for directors of mandatory Federal Reserve (12 Banks Federal 308), U.S.C. Savings Loan Associations, (Title 24, Code Federal Regulations, par. 142.9, par. 5 Chapter National Farm and K,) Associations Loan (12 U.S.C. 712). turn
I next to that part majority which opinion discusses the to be sought “purpose accomplished by provision” from from garnered excerpts the conslitu- in the “relevant data explanations debates and tional *24 centers of this discussion Much in the press.” appeared of the Joseph Medill, publisher around one individual, Mr. Tribune. Chicago but any question part there can be
I do not believe article XI of to be section of the evil sought suppressed 3 was on corporate the lack of minority representation section boards of directors. The of object purpose 3 could whereby was to method minorities provide have a fair to obtain Such opportunity representation. can from state- only be not Medill’s purpose gathered Mr. editorials and but the lan- ments, articles, from newspaper guage provision itself. of other statements Medill and articles
Actually, Mr. in the Tribune can be cited indi- appearing Chicago which cate it was not that the of section of thought purpose article XI towas prohibit then well-known of practice classification of directors and their election for staggered terms and to require the whole number of a be elected at a corporation or annual election. regular In his in the speech constitutional convention in support of what later became section Medill “I want 3, Mr. said: at least a in minority representation board control and that is all that is here.” his com- sought Moreover, ments on the Corporation Act that he show ap- proved act, of which for cumu- provided both lative and for voting classification of directors and their election for staggered terms. On the next April 5, 1872, after day passage Act Corporation the General Assembly, the news following article appeared in the Chicago Tribune: The for “Corporations. bill organization of corporations pecuniary has at profit last both passed houses a modified form, of its part pro- visions taken from being the Senate and from the part House bill. It is believed to be generally satisfactory.” The day, following 6, an April editorial 1872, appeared Tribune the General Chicago Assembly praising “Ad-
its which reads work, excellent follows: part it is The journment Legislature. Legislature, State its that it has so far business announced, completed now In this con- for the session on Tuesday will next. adjourn it is but an it the justice act of nection, give simple faithful It has done, award of ‘Well servants.’ good all, not to meet consummated necessary legislation but it has little also left but present wants, legislation for a time to come. In accomplished long every respect, has is the most creditable Legislative Assembly convened Illinois for on many years.” Significantly, Tribune one half of the April Chicago printed Act its next on editorial and the Corporation page day the remainder of its editorial printed the act on page *25 without criticism Or comment.
The if not conclusive foregoing strong, evidence, Medill, Mr. of section of article XI Joseph sponsor of the did not constitution, regard classify permission directors and to elect them for terms staggered granted Act of Corporation conflicting with section way of article XI newly adopted constitution.
Finally, state that majority cumulative and voting elections staggered are inconsistent and both cannot be effect. But given this could if only be true staggering were cumulating contradictories or mutually They exclusive. are not inconsistent or as both incompatible, may clearly exist at the same time. Under this where three of statute, a board of nine directors are to elected, a stockholder vote may cumulatively one candidate as give many votes as ishe entitled to cast, distribute his votes among candidates as he shall think fit. This means that if he can vote cent of the per stock he plus share, can be certain of one of the three. electing Cumulating thus coexist. Neither staggering destroys, contradicts nor conflicts with the The other. constitution requires no more.