Case ID: app-dc_17/html/0144-01.html
Source: Caselaw Access Project
Author: {"author": "Mr. Justice Shepard", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

WALKER v. JOHNSON.
    Corporations ; Corporate Ejections ; Voting by Proxy ; Bytaws ; Usage ; Equity Jurisdiction ; Fraud ; Restraining Order.
    1. A company incorporated to insure property of its members against loss by fire, its capital stock consisting of premium notes given by the insured who thereby become members, and of the cash paid as interest of such notes, the notes being payable on demand and subject to assessments to pay losses, is to be regarded as a trading or business association in contradistinction to an eleemosynary association, especially if the members are individually liable for the corporate debts, and in event of dissolution are entitled to share in the distribution of the corporate assets.
    2. Where one section of the charter of a mutual fire insurance company, whose members consist of those who are insured therein, provides that in adopting amendments to the by-laws two-thirds of the votes shall decide, but does not declare the method of voting, while another section relating to the election and the duties of the managers, provides that every member of the corporation shall have one vote for every risk held by him, the votes at general meetings upon amendments to the by-laws, when the rule of the charter is demanded, should not be taken per capita, but upon the representation of risks, one vote for every risk held by a member.
    3. The existence of a valid by-law may be established by usage; and a long continued and unbroken practice of voting by proxy in corporate elections will have the effect of a by-law until regularly revoked.
    4. Where the charter of a trading corporation is silent upon the subject, the power to enact a by-law conferring the right to vote by proxy at corporate meetings, is implied.
    5. Resolutions adopted at a corporate meeting for the election of managers, that no proxies should be voted at the meeting which bore date prior to the first day of the current month, and that no member of the board of managers or any officer of the company should vote as proxy for any member of the corporation, were held not to have been regularly and legally adopted, where usage existed having the force of a by-law allowing voting by proxy at such meetings, and the purpose and effect of such resolutions were to disfranchise the holders of proxies of an earlier date representing more than a majority of all the votes, some of which proxies had been given to managers and officers of the corporation.
    6. Where a numerical majority of the members of a trading corporation, . representing a minority of the legal votes, adopt rules relating to voting by proxy at a corporate meeting for the election of managers, in violation of the charter and by-laws, and thereby work the virtual disfranchisement of a numerical minority of the members present, who represent a majority of the votes, such action operates as a fraud upon the latter, such as to give equity jurisdiction, at their instance, to restrain the former from counting the ballots cast and declaring any persons elected as managers as a result of such balloting.
    No. 979.
    Submitted October 10, 1900.
    Decided November 6, 1900.
    Hearing on an appeal by the defendants from an order of the Supreme Court of the District of Columbia restraining them pendente lite from holding a corporate election.
    
      Affirmed.
    
    The Court in its opinion stated the case as follows:
    This is an appeal from a decree granting a preliminary injunction to restrain the holding of a corporate election.
    All of the parties to the suit are members, and some of them officers, of the Mutual Fire Insurance Company, a corporation of the District of Columbia created by special act of Congress, approved January 10, 1855. The object of the corporation is to insure property of members against loss by fire. The capital stock consists of the premium notes given by the insured, who thereby become members, and of the cash paid in as interest on said notes. These notes are payable on demand, and are subject to necessary assessments to pay losses that may occur.
    The officers provided in the charter are a board of managers, who are required to be elected at annual meetings, “ bv ballot, each member having one vote for each risk held by him.”
    The first board of managers were named in the charter to act until the next annual meeting and until their successors should be chosen, and were empowered to elect a president and vice president, adopt by-laws and ' otherwise prepare for the transaction of business. These provisions were followed by this recital: “Provided, That the said bylaws shall only be made by the concurrent vote of at least two-thirds of the whole board of managers, exclusive of the president; and any alteration or amendment shall only be made by a general meeting of the members of the company at any annual meeting; and two-thirds of the votes shall decide; and any alteration thus made shall be binding on all the members of the company.” Sec. 7, Charter.
    It is also provided in section 12, which contains the provision for the election of managers heretofore mentioned, that “the general meeting of this company shall be held annually, the time and place to be determined by the managers; also, it shall be the duty of the president to call a meeting whenever requested to do so by twenty of its members.”
    It is made the duty of the managers to publish, at least two weeks previous to the annual meeting, a statement of the business and condition of the company, and such other matters relating to the business of said company as they may deem proper; and two weeks’ notice, by publication in two newspapers, is required to be given of the said meetings.
    The published by-laws (when adopted does not appear) fix the third Monday in January as the day of the annual meeting. The order of business at said meetings is, first, the appointment of a chairman, who shall conduct the meeting and election in accordance with the act of incorporation, between the hours of 9 o’clock A. M. and 6 P. M.; second, reading and action upon minutes of last annual meeting; third, reports of committees, and action thereon; fourth, unfinished business; fifth, new business proposed, and committees appointed, etc.
    Beyond the reference hereinabove there is nothing in these by-laws respecting the manner of voting at any meeting or upon any matter that might come before the meetings.
    Without setting out the substantial allegations of bill, answer and accompanying affidavits, upon which the injunction was decreed, it is sufficient to say that the following facts seem to be well established:
    The company grew rapidly, and at the time of the last annual meeting had about 4,500 members with policies containing about 15,000 risks. The accumulated property consists of real estate, money, securities, etc., amounting in value to about $360,000, in' which the members, that is to say, the policyholders, are interested in proportion to the sums respectively paid’as premiums on their risks. This property is under the control of the board of managers.
    Whilst the charter and by-laws are silent on the subject, it appears that from the beginning, or shortly thereafter, members have been allowed to vote at the annual election by proxy. It has for many years been practically impossible for all of the members to meet and transact business in person. The room in the general office, where meetings are held, will only hold about two hundred persons, standing. The last annual meeting, in which this controversy arose, was duly called to be held on January 15, 19'00. Less than one hundred and fifty members were personally present at any period during this meeting. The meeting convened at 9 o’clock A. M., and Samuel H. Walker, one of the defendants, was chosen as chairman, and another, J. T. Petty, was made secretary. The minutes of the last meeting were read in due order.
    A question was then raised by a member concerning the attempts of officers of the company to procure proxies, and to prevent their revocation, etc. A postal card Was produced and read, signed by the secretary, reminding a member thai his proxy was then held in the office, and requesting him not to give one to any other person if solicited. An advertisement in The Evening Star was also read, in which policyholders are warned not to give proxies to any person not officially connected with the corporation. A member then moved that the matters under discussion, that was apparently becoming heated, be laid on the table, and that no voting by proxy shall be allowed after the present year.
    There was some confusion in the proceedings, and finally the meeting came to vote upon the two following resolutions: 1. That no proxy dated prior to January 1, 1900, shall be voted in the election of the board of managers. 2. That no manager, officer or employee of the company “shall be permitted to vote proxies, either directly or indirectly, as by assignment or otherwise, for the election of the board of managers,” etc. The first of these resolutions was offered by Jesse B. Wilson, one of the defendants, as a substitute for a similar one that had been offered by Andrew Archer, another defendant. The second was offered by F. A. Tschiffely, also a defendant.
    Among the complainants in this bill, B. Harrison Johnson, William A. H. Church, Timothy Murphy and George O. Walker were then members of the board of managers; George T. Dearing was also a manager as well as treasurer; Franklin Barrett was the assessor, and L. P. Boteler was secretary.
    These complainants, and such members as ranged themselves on their side in the struggle for the management of the corporation, represented in person, and by proxy, a considerable majority of all the risks then covered by the policies of the company. Before the resolutions were submitted to the meeting, complainants demanded that the votes thereon should be by risks with representation by proxies allowed. Proxies were offered by complainants, apparently sufficient in number to have defeated the resolutions. No denial was made of their formality or genuineness. The chairman, defendant Walker, overruled the point and submitted the resolutions to the meeting, recognizing each person present as entitled to one vote and no more. After counting the upraised hands of those present, he declared the first resolution carried by a vote of seventy-eight for, to twenty-eight against, its adoption. The second resolution was then submitted, and the chairman declared it carried, according to the sounds of the voices, “by an almost unanimous vote.” The minutes of the meeting, as recorded under the supervision of the chairman, show that there was much confusion; that some of the appellants demanded tellers so as to ascertain who were policyholders; that they demanded the right to vote the risks for which they held proxies, and that they protested against the rulings of the chairman and the manner of voting persisted in.
    • The minutes show that the chairman then appointed nine commissioners to hold the election and directed it to begin at 9.50 A. M. He also directed them to receive no proxies before twelve o’clock. The election was proceeded with by the commissioners, who rejected all proxies offered by the appellants, some of which. were dated before and others after January 1, 1900. The latter were rejected because they were officers of the company. It appears also that some votes offered by some of the defendants, and others in support of the ticket presented on their side, were received as proxies really given before January 1,1900. It is not necessary to go into the details of the charges made on this account, as they are of no real importance in our view of the proceedings and the rights of the parties.
    There seems no reasonable doubt that the complainants, and the proxies claimed by them, represented á majority of the policy risk-holders of the corporation, and were therefore sufficient, if received, to determine the election in favor of their ticket.
    Before the closing hour of the election the complainants filed their bill and obtained an order restraining the officers of the meeting and election commissioners from counting the votes cast, and directing them to seal up the ballot boxes and keep them safely until further order of the court. The case was further considered on amended bill, answers and affidavits on February 19, 1900, and the decree from which this appeal has been taken was then entered, enjoining the defendants pendente lite from counting the ballots cast and declaring any person elected as manager as a result of the same. The order for the safe keeping of the ballots, proxies, etc., was renewed.
    Under existing regulations it appears that the following yearly salaries are paid to the officers of the corporation: Managers, $200 each; treasurer, $600; assessor, $1,400; and secretary, $1,800.
    Bill and answer teem with charges and countercharges of conspiracies and combinations to control the affairs and assets of the corporation through the election of managers belonging to the respective factions represented in this suit. Without going into these in detail, it seems sufficient for the purposes of the case to say, that the business of the corporation will no doubt suffer injury through the factional strife of which this suit is the result. Its premium receipts will probably be diminished, and its expenses may be materially increased by costs of litigation. It does not appear, however, that the assets of the corporation will be in any real danger through malversation if the faction represented by the complainants remain in, or that represented by defendants succeed to, their management and control under the charter and by-laws.
    
      Mr. D. W. Baker, Mr. Wilton J. Lambert, and Mr. Henry E. Davis for the appellants :
    1. A court of equity has no jurisdiction to declare an election of corporate officers null and void and to oust officei’S from the control of the corporate property, where they are in possession under color of an election, unless there be some other distinct ground of equity jurisdiction, and a court of equity can only consider the question of the election as incidental to the main relief. If, after an election is held, its validity can not be questioned, what right has a court of equity to interfere to determine whether an election is or is not valid, and whether or not votes shall be counted to determine who is legally elected? Certainly in this case there is complete and adequate remedy at law, for the court is merely asked to determine, before the counting of the votes, that which a court of law would have full and ample jurisdiction to determine after the votes had been counted. Thompson on Corp., Sec. 764; Johnson v. Jones, 23 N. J. Eq. 216; Moses v. Tompkins, 84 Ala. 613. A corporation has the untrammeled right to conduct its elections and to declare the result without interference, and where any rights are claimed to have been infringed those rights are of necessity legal ones, for the redress of which complete and adequate remedy exists at law, after the vote is counted and it has been determined whether injury is likely to follow. State v. Board, 13 Fla. 55; Williford v. State, 43 Arkansas, 62, 66, 67; Dickey v. Reede, 78 Ill. 261, 262 ; Perry v. Oil Mill Co., 93 Ala. 364; Pierson v. Wilson, 57 Miss. 848; Railroad Co. v. Elkins, 37 N. J. Eq. 273; Moses v. Tompkins, 82 Ala. 347 ; McHenry v. Jewett, 90 N. Y. 58 ; Reede v. Jones, 6 Wis. 655; Mutual Co. v. Phillips, 141 Mass. 535; People v. Railroad Co., 55 Barb. 344; Hart v. Harvey, 32 Barb. 55.
    2. The resolutions adopted as by-laws were properly passed. Prior to January 15, 1900, at least, all proxy voting was illegal, as being unauthorized by any express provision of either the charter or by-laws. Even if the right existed to adopt an express by-law of such character, it was not until the passage of the very resolution in question that this right can be claimed to have accrued. The common law refused to recognize the claim of right to vote by proxy at a corporate meeting, and it is held by excellent authority that a charter provision is requisite to permit such right. The party claiming it must, therefore, show a special authority for that purpose; otherwise they are met by the barrier of the common law, which can not be lightly brushed aside. There being a total want of express authority, except as created by the resolutions themselves, the appellees can not properly claim to have been deprived of any right guaranteed to them by or under the charter and by-laws of the company. Phillips v. Wickham, 1 Paige, 590; People v. Twadell, 18 Hun, 430; Commonwealth v. Bringhurst, 103 Pa. St. 134. In cases not otherwise provided for by express legislation, or by the charter and by-laws of the corporation, the old rule undoubtedly still prevails that the acts of the majority of the constituent members present at the regular meeting of the body binds the whole, and must govern. Taylor v. Griswold, 14 N. J. L. R. 223; Craig v. Church, 88 Pa. St. 42.
    3. This being a general meeting, the members of the corporation had the unquestioned right to transact any and all business that pertained to the government of the corporation. So when new business was in order these resolutions were offered and voted upon, and, according to the record in this case, were carried by more than a two-thirds majority of the members present. No prior notice whatsoever to members of the corporation was either necessary or usual, for the corporation had the right to amend its by-laws, as had been its unbroken custom, at general meetings in which even the complainants had participated. Scanlon v. Snow, 2 App. D. C. 137, 154.
    4. Where the by-laws or charter fix the time and place of holding a meeting, arid neither charter nor by-laws require a notice to be given, under such circumstances the rule is that the by-laws themselves are sufficient notice to all of the stockholders, and no further notice is necessary, and the right to pass by-laws is a continuous one, and no one has a right to presume that by-laws will not be changed. Supreme 
      
      Lodge v. Knight, 117 Ind. 489; Richardson v. Society, 58 N. H. 187; Wist v. Grand Lodge, 22 Ore. 271.
    5. Unless otherwise provided in the charter or by-laws of the corporation, such of the stockholders as are actually assembled at a properly convened meeting, although a minority of the whole number and representing only the minority of the stock, constitute a quorum for the transaction of business and express the will of the corporation; and all will be bound by their act. Especially is this the case where no point of quorum is made at the time. Rex v. Bellringer, 4 Term R. 810; Rex v. Barlow, Cowp. 248. It can not for one moment be contended that a majority of the members of a corporation should be present, for there is a distinction between a corporate act done by a definite number of persons and one to be performed by an indefinite number. In one case no act can be done unless a majority of the whole body are present. In the second place, the majority of those who appear may act. Craig v. Church, 88 Pa. 42 ; University v. Williams, 9 G. & J. 365; County of Cass v. Johnson, 95 U. S. 360; Ex parte Wilcox, 7 Cowan, 409 ; Madison Ave. v. Church, 28 N. Y. Sup. Ct. 649.
    6. Even where proxy voting is permitted such proxies can not be used on a vote by show of hands, but only the votes of the members present at the meeting ought to be counted .when a poll is demanded. Upon a vote by show of hands no shares ought to be counted. Ernest v. Gold Mines, 75 L. T. Rep. 317 ; In re Caloric Engine & Siren Fog Signals, 52 L. T. Rep. 846; In re Horhury Co., 11 Ch. Div. 109. In this last cited case the court held that it was a majority on show of hands that carried the election, notwithstanding the fact that the minority claim to own a majority of the number of shares.
    7. A mere irregularity in the casting of certain votes, or the fact that certain illegal votes were cast, will not in any way vitiate an election. To have the latter effect it must be affirmatively shown that a sufficient number of improper votes were cast to reduce the majority vote to a minority. Wardens v. Pope, 8 Gray, 140; Ex parte Murphy, 7 Conn. 153; In re Insurance Co., 19 Wend. 635; People v. Tuthill, 31 N. Y. 550.
    8. No demand was made on the part of the appellees to enforce their right to vote these proxies after the decision of the chair against them. They then apparently abandoned their contention and continued to act in the meeting and took no appeal from the decision of the chair. A member of a corporation must pursue his remedy as far as possible in the corporation, and until he has done so he has no right to complain in a court of equity. No such appeal having been taken, the parties tacitly waived their right to object to the ruling of the chairman; nor after having participated in an election can they, because they believe the result unfavorable to them, invoke the aid of the court under color of fraud to perpetuate themselves in office. State v. Chute, 34 Minn. 135.
    9. The cross-bill should have been permitted to stand in the cause, and the defendant Walker should not be required to file the cross-bill as an original bill. Kanawha Lodge v. Swann, 37 W. Va. 176; Brand Co. v. Prime, 14 Blatchf. 371.
    
      Mr. Samuel Maddox, Mr. R. Ross Perry, and Mr. R. Ross Perry, Jr., for the appellees:
    1. Right of suffrage in corporate affairs. When this corporation was formed its members were few. It was a long time ago (1855), and corporation law has greatly changed since then. No proxies are provided for in the charter, but it defines who shall vote. “The election of managers shall be held at the annual meetings and be by ballot, each member having one vote for each risk held by him.” Thus the charter standard for a competent voter is not a man, but a risk. Whenever the risks became so great in number that the persons holding them (now 4,500) could not meet physically, proxies, from the necessity of the situation, had to be used. They were implied in the charter, for every implication shall be made to avoid disfranchisement. Voting by proxy has become necessarily a by-law, and, more than a by-law, a necessary implication of the charter. Archer v. Murphy, 26 Wash. Law Rep. 98. “A by-law, once enacted, is as much a law of the corporation as the charter itself, provided it is in conformity with the latter instrument, and does not contravene public laws or any principles of public policy.” 5 Am. & Eng. Encyc. of Law (2d Ed.), 88, 91 and notes; Weatherly v. Medical Society, 76 Ala. 567; Cummings v. Webster, 43 Maine, 197 ; Kent v. Mining Co., 78 N. Y. 159 ; Thompson on Corp., Par. 943; Lockwood v. Bank, 9 R. I. 308. A proxy need not necessarily be of any prescribed form nor be executed with any particular formality. It is sufficient if it appears on its face to confer the requisite authority, and that it be free from all reasonable grounds of suspicion of its genuineness and authenticity. In re Lawrence Co., 44 N. J. L. 529. The right to vote, being fixed at one vote for each risk, can not be confined to election of directors, but exists as to all corporate functions. 2 Cook on Corporations, Par. 609; Matter of Rochester Co., 40 Hun, 175. The riskholders, having thus become vested with the right to vote by proxy, could not be deprived of it, not even by the legislature. 2 Cook on Corp., Secs. 603, 593; 5 Am. & Eng. Encyc. of Law (2d Ed.), 96 and notes ; Thompson on Corp., Secs. 960, 1019; People v. Phillips, 1 Den. 388; West v. Grand Lodge, 22 Ore. 281; Brewster v. Hartley, 37 Cal. 15; Bank v. Superior Court 104 Cal. 649 ; In re Lighthall Co. 47 Hun, 258. Especially in a mutual insurance company by-laws are contracts between members, and unanimous consent is required to change them. 2 Cook on Corp., Par. 599; Thompson on Corp., Pars. 940, 945; Kent v.Manufacturing Co., 78 N. Y. 182. The right to vote by proxy can not be restricted. 2 Cook on Corp., Par. 610 ; Taylor v. Griswold, 14 N. J. L. 241; White v. Society, 45 Hun, 580. All by-laws tending to restrict suffrage are disfavored. 2 Cook on Corp., Pars. 621, 621a, 622.
    2. Amendment of by-laws. Assuming that the right to vote by proxy is only a by-law, it can be amended, restricted, or abolished, but only by unanimous consent when its effect must be almost total disfranchisement. Usage can operate to work justice, not injustice. 2 Cook, Par. 594. The charter says: “ Any alteration or amendment shall only be made by a general meeting of the members of the company at any annual meeting, and two-thirds of the vote shall decide.” This language is almost identical with that construed in Insurance Co. v. Farquhar, 86 Md. 668, where it was held that the by-laws of the company could not be amended at the annual meeting in January unless notice of the proposed action had previously been given.
    3. Notice. Conceding for argument that for purposes of mere amendment of a by-law no notice previous to the meeting of the proposed amendment was required, yet surely this amendment, restricting suffrage, should have been noticed. Where unusual business is to be transacted even at a regular meeting notice should be given of that business a reasonable time before the meeting. 2 Cook on Corp., Pars. 595, 597, 599. The power of 4,500 to vote, established from necessity for more than a generation, can not be abolished without notice by five or two men who attend a corporate meeting. No usage can establish such a rule. But suppose this may be done, such a by-law can not affect the proceedings of the meetings at which it is passed. A by-law is a rule for future action. Ex post facto laws areno more lawful for corporations than for States. Pulford v. Fire Dept., 31 Mich. 465 ; Thompson on Corp., Par. 946.
    4. Unreasonableness of by-laws. But supposing all things to have been legally done, is this modification reasonable ? The reasonableness of a by-law is a question of law for the court. Thompson on Corp., Pars. 937,1021,1022; 2 Cook on Corp., Par. 606 ; 5 Am. and Eng. Encyc. of Law, 95, note 9. Such by-laws as are vexatious, oppressive, unreasonable, and opposed to common right are inoperative and void. 5 Am. and Eng. Encyc. of Law, 97, note 4; Wells v. Black, 117 Cal. 157 ; Ireland v. Reduction Co., 19 R. I. 180 ; Temple v. Dodge, 89 Texas, 69 ; Bloede Co. v. Bloede, 84 Md. 129 ; Thibert v. Supreme Lodge, 47 L. R. A. 136 ; Comm. v. Gas Co., 12 Pa. St. 321; People v. Medical Society, 24 Barb. 570; Kyd on Corp., 122 (1794); State v. Overton, 3 Pick. 462. But the resolutions in question did not purport to be by-laws. They pretended to extend only to that meeting and election. They were not general rules .to apply in futuro. They were tricks and frauds to determine that election only.
    5. This case was one of conspiracy and fraud, the effect of which, if successful, would have been to deprive a large majority of stockholders of the corporation in question of their votes. A court of equity has jurisdiction to prevent the accomplishment of this fraud. That a court of equity has the right to enjoin officers of a corporation illegally elected is a doctrine supported by respectable authorities. Park Asso. v. Stevene, 34 Nebr. 528 ; Transit Co. v. Trust Co., 36 Atl. Rep. 724; Morris v. Stevens, 36 Atl. Rep. 151; Tunis v. Railroad Co., 149 Pa. St. 70, 83; Clarke v. Banking Co., 54 Fed. Rep. 556 ; Johnston v. Jones, 23 N. J. Eq. 216. But, be this as it may, before an election has been consummated by the counting of votes and the declaration of an election a court of equity has undoubted jurisdiction to prevent the consummation of a wrong. The court will interfere by injunction in case of fraud, suspicion, or deceit in conducting an election. 2 Cook on Corp., Pars. 606, 614/616, 618, 620; 2 High on Injunctions, Par. 1230; Angell & Ames on Corp., Par. 396, note 2; Walker v. Devereaux, 4 Paige, 229; Webb v. Ridgely, 38 Md. 371; March v. Railroad Co., 40 N. H. 549; Brownv. Mail Co.,5 Blatch. 525; People v. Railroad Co., 55 Barb. 344; Campbell v. Poulteney, 6 G. & J. 94; Busey v. Hooper, 35 Md. 27; Scholfield v. Bank, 2 Cr. C. C. 115; Archer v. Water Works Co., 50 N. J. Eq. 33, 50 ; 3 Pomeroy, Rest, and Prev. Rem., Sec. 112; Cannon v. Trask, 20 L. R. Eq. Cas. 669; Pender v. Lushington, L. R. 6 Ch. Div. 70; Perry v. Shipway, 4 De G. & J. 353. An election obtained by a trick or artifice can not be considered a bona fide election. Bwg. Co. v. Blake, 2 Ont. Rep. 185; People v. Rwy. Co., 7 Abb. Pr. ; Johnston v. Jones, 23 N. J. Eq. 216; Young v. South African Co., L. R. 2 Ch. Div. (1896), 268; Brown v. Steamship Co., 5 Blatchf. 525 ; Supreme Lodge v. Simmering, (1898), 88 Md. 276. It is conceded that for obvious reasons political elections are governed by different rules. Dickey v. Reed, 78 Ills. 261 ; 93 Ala. 364; People v. Railroad Co., 55 Barb. 344; Paine on Elections, Pars. 940, 946, 949 ; McCrary on Elections, Par. 316 ; Commrs. v. Aspinwall, 21 How. 539. As to the right of court to order new election, see King v. Barnes, 51 Hun, 550, affirmed, 113 N. Y. 655; 2 Cook on Corps., Par. 620, p. 1172; McNealey v. Woodruff, 13 N. J. L. 352; Ex parte Desdoity, 1 Wendell, 98.
    6. As to the situation before Mr. Justice Cole when he passed the orders technically appealed from, The answers of defendants had then come in, and the general principles of equity practice at that stage of the cause were applicable. All averments of the bill confessed by the answer were to be received as true. But what effect was to be given on that hearing to averments in the nature of confession and avoidance? The reason applicable in such case would seem apparent and conclusive. If the case made by the bill be one in which an injunction as a preventive remedy should issue, then the confession of the answer that such case did in fact exist ought to entitle the plaintiff to this remedy. He ought not to be deprived of a security which he is admittedly entitled to unless and until any new matter of avoidance set up by the defendant be proved true; and this principiéis established by abundant and undisputed authority. 2 Spelling on Extraordinary Relief, Sec. 1061; 2 High on Injunctions (2d Ed.),Secs. 1472,1481; 1 Beach on Injunctions, Secs., 309, 313; Salmon v. Clagett, 3 Bland. 125; The 
      
      Bellona Co.’s Case, 3 Bland. 442; Canal Co. v. Railroad Co., 4 G. & J. 7 ; Hutchins v. Hope, 12 G. & J. 244; Hardy v. Summers, 10 G. & J. 324; State v. Railway Co., 18 Md. 219; Sackett v. Hill, 2 Mich. 183; Coleman v. Hudsfetter, 49 Miss. 566; Robinson v. Cathcart, 2 Cranch C. C. R. 590; Rembert v. Brown, 17 Ala. 667; Railroad Co. v. Wiltesrow, 82 Ala. 194; Wooten v. Smith, 27 Ga. 216; Lawrence v. Philpot, 27 Ga. 585; Armstrong v. Potts, 8 C. E. Green, 92; Vreeland v. Stone Co., 10 C. E. Green 140; Johnston v. Corey, Id. 311; Canal Co. v. Jersey City, 12 N. J. Eq. 227; Railroad Co. v. Thomas, 21 N. J. Eq. 205; Haskins v. McElroy, 62 Iowa, 508. If any amendment be required the court will continue an injunction until the proper amendment can be made in order that right may prevail. 2j High on Injunctions, pp. 1013-1015.
    7. That Mr. Justice Cole’s action with respect to the cross-bill was at least not injurious to the appellants is settled by the following authorities. Shields v. Barrow, 17 Howard, 145; Ayers v. Carver, 17 Howard, 594; Story’s Eq. PL, Par. 401.
   Mr. Justice Shepard

delivered the opinion of the Court:

Whilst the Mutual Fire Insurance Company of this controversy is not a regular private business corporation with fixed capital stock distributed among subscribers thereto and their assignees, it must nevertheless be regarded as a trading or business association in contradistinction to those that are eleemosynary. Its members are actuated by the desire of pecuniary gain. Insurance against fire is a practical necessity and their object is to procure it as cheaply as possible. They do not become members by subscription to stated and permanent capital stock, for there is none in the technical s.ense.

But they execute notes to the corporation, in amounts proportioned to the value of policies received, upon which they pay interest annually. In case of necessity to pay losses to members, each of these notes may be assessed from time to time and the whole may be sued and recovered upon when necessary. Further than this, section 13 of the charter provides that the members “shall each be liable in his or her individual capacity for all debts created by said corporation in favor of persons not members thereof.” Moreover, in case of expiration or dissolution of the charter, existing members would be entitled to the same rights in the distribution of the accumulated assets that the shareholders of a regular joint stock corporation would have under the same circumstances.

Doubtless, in all general public meetings, as well as in those of members of private corporations, where the right to vote is not strictly personal, but representative according to some rule of government prescribed by constitution or law, the common, if not universal, practice is to elect chairmen and adopt ordinary motions and resolutions by viva voce or rising vote, where each person is counted as casting his personal vote. But uniform practice of this kind in proceedings that are formal, or wherein complete harmony of purpose prevails, will not deprive any participant of the right to demand the enforcement of the prescribed rule of voting provided the demand be made in season. Such practice and usage can not be set up to impair the obligation of an express provision of law.

We are of the opinion that the votes at general meetings of this corporation upon amendments of by-laws, when the rule of the charter is demanded, should not be taken per capita, but upon the representation of risks — one vote for each risk held by a member. Section 7 of the charter provides that in adopting an amendment “two-thirds of the votes shall decide.” What shall be the method of voting is not declared; but when we come to section 12, which deals with the important subject of managers, their election and duties, we find that each member shall have one vote for each risk held by him.

The adoption and amendment of by-laws that determine the conduct of all the affairs of the corporation would seem as important to the interests of members in general, as the election of managers from year to year, and it is reasonable to presume that the method of voting prescribed in one case was intended to furnish the rule of the other. Considering the nature of the corporation, this presumption of intention becomes so strong that it ought not to be rebutted save by some expression to the contrary which we do not find anywhere in the act of incorporation. For, as we have seen, this corporation belongs to the class of business or trading corporations having capital stock; and in these, by general and almost universal rule, members have'votes in proportion to their interests.

The act of incorporation neither confers nor denies the right of members to vote by proxy; but, as we have seen, voting by proxy has prevailed for many years in the corporate elections. The right has been questioned but once, and that was in a suit between members to which some of the present litigants were parties. The bill was filed to obtain an injunction against certain managers elected at the meeting of January 17, 1898, to prevent them from interfering with the management of the corporate affairs. Their election was claimed to be illegal because of the receipt of votes cast by proxy. Archer v. Murphy, 26 Wash. Law Rep. 98. Mr. Justice Cox, who heard the cause in special term of the Supreme Court of the District, was of the opinion that this long and unbroken usage had the effect of a by-law until regularly revoked ; and dismissed the bill for that and other reasons. No appeal was taken from that dismissal. The conclusion stated was undoubtedly correct. It is the long established rule in Maryland that the existence of a valid by-law may be established by usage. Union Bank v. Ridgely, 1 H. & G. 324; Miller v. Eschback, 43 Md. 1. And the doctrine is in accord with the weight of authority elsewhere. 5 Am. & Eng. Encyc. L., p. 91, and cases cited.

For the reason that it is not within the power of a corporation to enact by-laws in contravention of law, it is contended, on behalf of appellants, that a by-law permitting voting by proxy in elections of this corporation, whether established by record or long and uninterrupted usage, is without legal effect, because in derogation of the common law, there being no express authorization in the act of incorporation.

Now, it is true, that, at common law, for reasons which have no substantial foundation in so far as they relate to trading corporations, voting by proxy was not permitted in corporate meetings unless expressly warranted by the charter or a statute.

The appellants are hardly in a position to raise this broad question, because the resolutions adopted through their action did not abolish voting by proxy, but simply imposed limitations upon the exercise of the right. Under their own rules, proxies were recognized when executed after January 1, 1900, and presented by others than officers of the corporation. If their contention be maintainable, then the election, as held under their direction, would be irregular.

The point is in the record, however, and its determination is important to all concerned in the controversy either directly or indirectly.

The common law rule in respect of voting by proxy had its origin in reasons peculiarly applicable to the earlier forms of corporations, namely, municipal and charitable corporations. Membership in these was coupled with no pecuniary interest. The voting privilege was of the nature of a personal trust, committed to the discretion of the member as an individual, and hence not susceptible of exercise through delegation. Suffrage, and the right of representation in the elections and other affairs of the modern trading or business corporation, stand upon essentially different foundations.

The stock represents property only — money as an investment — and is transferable as freely as other property. Upon the transfer of a share the transferee becomes a member in the place of the transferrer. In this corporation the transfer by one member to another of property and the policy covering it, would pass the transferrer’s right to vote —one vote for each risk — to the transferee, to be exercised by the latter in addition to any prior right he may have enjoyed.

There is sound reason in favor of, and none opposed to, permitting an owner of property of this character, as in case of other property, to act by agent in all matters affecting his interests when inconvenient to act in person.

Based on these considerations, the great weight of authority in this country sustains the proposition, that where the charter of a trading corporation is silent upon this question, the power is implied to enact a by-law conferring the right to vote by proxy. State v. Tudor, 5 Day (Conn.), 329 ; People v. Crossley, 69 Ill. 195, 197 ; Commonwealth v. Detweiler, 131 Pa. St. 614, 623, 644; Market St. Rwy. v. Hellmon, 109 Cal. 571, 598; Goddard v. Merchants’ Exchange, 9 Mo. App. 290, 295: S. C., 78 Mo. 609.

Our conclusion is that the existence of the by-law has been established by long and continuous usage, and that it is within the powers of the corporation.

The next question in order is, was the unquestioned power to alter, amend or repeal by-laws by a two-thirds vote regularly and legally exercised at the meeting of the members? Was the general by-law relating to proxies actually repealed or substituted by the resolutions declared adopted at that meeting, and in accordance with which the election was being held when restrained by the order of the court?

A by-law proper contemplates a permanent rule for the guidance of future action, and not a mere temporary expedient.

The resolutions under consideration were not offered as by-laws or amendments thereof, and only one of them could be taken as meant for observance in future elections, namely, that denying to officers the right to act as proxies for absent members.

But assuming that they were intended to operate as regular by-laws permanently changing the practice of voting by proxy, we are of the opinion that they were not regularly and legally adopted,' and hence can not bind the protesting members.

This conclusion is the logical result of the propositions before enounced. Any member present had the right to demand a vote according to the rule of the charter — one vote for each risk.

In accordance with usage having the force and effect of a permanent by-law, all members present, whether officers or not, had the right to vote the risks of absent members whose written powers they held; said powers remaining operative as appears from their forms until actually revoked, regardless of dates of execution. Appellees demanded these rights in due season, and had they been accorded, their own votes and those which they represented would have defeated the resolutions. Had those resolutions not controlled the conduct of the election so far as held, the appellees and those acting with them would have cast a majority of the votes of members.

In view of these conclusions it is not necessary to consider at length the arguments addressed to the oppressive and unreasonable nature of the resolutions complained of.

In the first place, whilst the by-law permitting voting by proxy is a most reasonable and proper one considering the number of members and the impracticability of their meeting and acting in person, yet if regularly repealed by the requisite two-thirds vote, we are not prepared to say that such repeal would be unreasonable, in a legal sense, and opposed to common right, or that members had acquired a vested right in the privilege, under a former by-law, beyond the power of recall. There are certain rights arising under by-laws that partake of the nature of contracts, and thereby become irrepealable without consent; but the right to vote by proxy would seem not to be of that kind.

A by-law requiring new proxies to be executed for each election a reasonable time before holding the same, might prove inconvenient, but that alone could not constitute unreasonableness or oppression.

A by-law prohibiting the officers of the corporation from receiving proxies and voting thereon would certainly not be unreasonable. On the contrary, from a point of view enlightened by the proceedings disclosed in this record, we are inclined to the opinion that the regular adoption of such a by-law would not only be a reasonable act, but one appropriate also as having a tendency to prevent their recurrence.

But whether by-laws are unreasonable, oppressive and destructive of common right can not altogether depend upon their substantial operation as rules of action for the future.

A by-law, whose operation might be both reasonable and convenient if made to take effect in the future, might, nevertheless, operate most vexatiously and oppressively, and be so intended to operate by its proposers, if presented without notice or warning and given immediate effect in the control of the pending meeting and election.

Mr. Justice Cole, who granted the preliminary injunction, was of the opinion that the immediate practical effect of the resolutions was unjust, unreasonable and oppressive, in that it worked the disfranchisement of a majority of the legal voters.

In arriving at the conclusion, in which we fully concur, he very aptly said:

“Some of the facts necessary to be considered in deciding the reasonableness of the amendments in question are that the right to vote for managers by proxy had been uninterruptedly exercised for more than thirty years by a very large majority of the members of the company, and there had been a decision of this court affirming such right after the election in 1898. These members had given proxies expecting them to be voted at this election. Some of them 'were given to persons who were, at the time of the meeting, managers of the corporation or held other official positions therein. Proxies had been allowed to be voted at all previous meetings by such managers and officers, and without regard to the date of the proxies, so that they were couched in such terms as to authorize voting until they were revoked, as all, or certainly most, of them were, and many of which were several years old; no notice or intimation of any kind was given prior to the meeting, or at the meeting until the amendments were offered, of any intention to in any way alter, amend, or suspend the by-law in relation to voting by proxy. The persons who had given the proxies were scattered throughout the city and District, and some of them beyond the limits of the District, and very few if any were where they could be notified of the action of the meeting in time to attend personally or to give new proxies. In this situation of affairs the meeting immediately before opening the polls to receive ballots for managers passed two resolutions, one to the effect that no proxy should be voted at that meeting, which bore date prior to January 1, 1900, and the other to the effect that no member of the board of managers or any officer of the company should vote as proxy of any policyholder. The complainants held proxies representing over 9,000 votes, considerably more than a majority of all the votes in the company (which are stated to be about 15,000), all or nearly all of which 9,000 were disfranchised by these resolutions, either on the one ground or the other. No argument need be indulged in to show the unreasonableness of these resolutions.”

The last question for determination is, whether the foregoing conditions present a case within the jurisdiction of equity for intervention and relief.

Now, when an election has been held and the result declared, it is quite clear that the proper tribunal to inquire into its validity and pronounce judgment on the conflicting titles of claimants thereunder, is a court of law. In so far as the rights of such litigants are involved, equity has no jurisdiction because the ancient remedy of the law is plain, adequate and complete.

On the other hand, it is well established that when necessary to the complete adjudication of a cause over which it has jurisdiction on independent grounds, a court of equity will inquire into and determine the validity of a corporate election as it will any other incidental question of fact or law that may arise in the course of a suit. Perry v. Tuskaloosa Cotton Seed Oil Mill, 93 Ala. 364, 373; Johnston v. Jones, 23 N. J. Eq. 216; Moses v. Tompkins, 84 Ala. 613, 617.

Its decree in such case, however, would only determine the-, validity of the election and the title to office dependent thereon in so far as they affect the substantial subject-matter of the suit. It would not extend to amotion of officers elected irregularly, unless indeed that result might be necessary to complete relief in the particular case. Johnston v. Jones, 23 N. J. Eq. 216.

The conditions of this case do not bring it directly within either of the foregoing rules. It is neither a suit to contest an election and determine title to office thereunder between contestants, nor one to enjoin elected officers from exercising the ordinary powers of corporate management on account of irregularity in their election. Nor is it a suit involving a subject-matter within the conceded jurisdiction of equity in which the validity of an election becomes the necessary subject of collateral inquiry and determination. The analogy between it and one of that nature, however, is apparently close.

The situation actually presented is this: A numerical minority of the members in personal attendance at the general meeting preliminary to the election of officers, represent in person and by regular proxy the majority of the votes of the corporation according to the rule of suffrage prescribed in the charter. A numerical majority of the members, representing a minority of the legal votes, take-possession of the meeting and through an unlawful method of procedure, adopt rules to govern the conduct of the election in violation of the provisions of the charter and existing by-laws. By so doing they work the virtual disfranchisement of the majority whose votes would elect the officers proposed by them, and, unless their proceedings be stayed, will deliver the choice of those officers into the hands of the minority.

Into the motives prompting this action it is unnecessary to inquire. It was willfully and deliberately taken, and, if not arrested, would result in securing to the minority the control of the corporation and the exercise of its lucrative offices, a result impossible of achievement if the majority were permitted to vote. Pending this unlawfully conducted election the representatives of the excluded majority appealed to equity to stay it and prevent the consummation of the scheme.

Membership in this corporation, as we have seen, carries with it property interests and value, and rights of suffrage in representation of those interests, according to a fixed standard, is guaranteed by the law of incorporation.

The right, therefore, to vote in all elections involving the administration of the assets and general affairs of the corporation is important to the conservation of those interests, and constitutes a valuable right clearly cognizable in equity when threatened with destruction. The deprivation of this right, no matter what the motives inciting to it, operated as a fraud upon the appellees and those whom they represented and would work an injury for which there is no relief at law — certainly none that is at all adequate. The denial of jurisdiction and relief in such a case, upon application seasonably made, would be in opposition to the fundamental maxim in which the equity jurisdiction had its origin.

The conclusion that the court below did not err in taking jurisdiction in this case and granting the restraining order and preliminary injunction accords not only with principle, as we conceive, but has the support, also, of many well considered decisions in analogous cases. Campbell v. Poulteney, 6 G. & J. 94, 102; Webb v. Ridgley, 38 Md. 364, 371; Supreme Lodge, etc., v. Simering, 88 Md. 276, 287; Schoolfield v. Union Bank, 2 Cr. C. C.115; Brown v. Pacific Mail, etc., Co., 5 Blatchf. 525, 531; Elkins v. Camden, etc., RR. Co., 36 N. J. Eq. 467: S. C. 37 N. J. Eq. 273; Archer v. American Water Works Co., 50 N. J. Eq. 33, 50; Tunis v. Pass. RR. Co., 149 Pa. St. 70, 83. In the last named case the court said that the jurisdiction of equity “ includes that of supervising and controlling the election of directors whenever it is made to appear, that, by means of fraud, violence or other unlawful conduct on the part of a portion of the corporators, a fair and honest election can not be held.” See, also, Morris v. Stevens, 178 Pa. St. 563, 579; Cannon v. Trask, L. R. 20 Eq. Gas. 669; Pender v. Lushington, L. R. 6 Ch. Div. 70, 81.

We find no error in the proceedings below, and the decree awarding the preliminary injunction will be affirmed, with costs. The cause will be remanded for further proceedings. It is so ordered. Affirmed.