Case ID: ohio-st_37/html/0251-01.html
Source: Caselaw Access Project
Author: {"author": "White, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The State ex rel. Attorney-Genebal v. John W. Merchant et al.
    1. The right of the stockholders of a railway corporation to elect directors is not affected by the sale of the property of the corporation by a receiver, under an order of court.
    2. At a meeting of the stockholders, called for the election of directors, under section 3246 Revised Statutes, the right to choose the inspectors or judges of election is vested in the stockholders, and the directors, against the will of the stockholders present, cannot appoint such inspectors.
    
      Quo- WAREANTO.
    This is an information in the nature of quo warranto, brought by the attorney-general against John W. Merchant and others, defendants, to oust them from the office of directors of The Columbus, Washington and Cincinnati Railway Company, a corporation organized under the laws of this state.
    The petition sets forth the names of Thomas Smith and-others, who claim to be entitled to the office of directors of said corporation, and avers their right thereto.
    It appears that the defendants were the directors of said corporation, elected at the annual election held on the first Monday of January, 1879. On the first Monday of January, 1880, being the day for the annual election, no election was held; and that afterwards due notice was given in accordance with the statute by certain stockholders of the holding of an election for directors at a time and place specified. A meeting of stockholders was lield’in accordance with the notice. After organizing, the stockholders present elected inspectors, or judges of the election, and also a clerk, who were all duly sworn. Whereupon the judges declared the election open and proceeded to receive the votes of stockholders. The election thus held resulted in the election of Smith and others, who are averred in the petition, as above stated, to be entitled to the office of directors of said corporation.
    There were present at the meeting a quorum of the directors elected in 1879, who claimed the right to hold the election. Before the inspectors, or judges and clerk, elected as above stated were sworn, John W. Merchant, president of the board of directors, appointed from the members of the board judges to hold the election ; he also appointed a clerk, and then declared the election open. At this election stockholders voted. The election thus held by the directors resulted in the election of the defendants. Both sets of directors took the oath of office.
    It does not appear from the pleadings that any election has since been held.
    It also appears that on September 9, 1878, the court of common pleas, on the application of certain bondholders, appointed a receiver, who took possession of the assets of the company, and subsequently, under an order of said court, the railroad of said company, with its equipments and appurtenances, was sold as an entirety.
    
      George K. Nash, attorney-general, and Nesbitt & Martin, for plaintiff.
    
      Charles Darlington, for defendant.
   White, J.

The appointment of the receiver, and the sale of the property of the railway company, have no bearing on the question before us. These facts did not work a dissolution of the corporation, and while the corporation continued it was competent for the stockholders to elect directors.

The only other question for determination is, whether the election held by the directors or that held by the stockholders is the valid one.

The statute on the subject is as follows: “ Unless the regulations of the corporation otherwise provide, an annual election for trustees or directors shall be held on the first Monday in January of each year; if the trustees or directors are, for any cause, not- elected at the annual meeting, or other meeting called for that purpose, they may be chosen at a members’ or stockholders’ meeting, at which all the members or stockholders are present in person or by proxies, or at a meeting called by the trustees or directors, or any two members or stockholders, notice of which has been given, in writing, to each stockholder, or by publication in some newspaper printed in the county where the corporation is situate, or has its principal office, for ten days ; and trustees and directors shall continue in office until their successors are elected and qualified.” Rev. Stat. § 3246.

There were no regulations of the corporation governing the election of directors. The claim of the attorney-general is, that at the meeting of the stockholders for the election of directors, the right of choosing the inspectors or judges of the election was vested in the stockholders ; while the defendants claim that the right was vested in the directors. We think the position of the attorney-general is correct; and that the directors, in assuming that function against the will of the stockholders present, mistook their duty and exercised a function not warranted by law. The election, therefore, which they undertook to hold is invalid. The election held under the authority of the stockholders was legal; and the persons declared elected at the. election last named, having been duly qualified, were entitled, under the statute, to hold the office until their successors were elected and qualified. The pleadings show no subsequent election.

Judgment of ouster rendered against the defendants; and the persons chosen as directors at the election last mentioned adjudged entitled to the office under such election.