Case ID: ohio-st_61/html/0497-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Schwartz v. State ex. rel Schwartz.
    
      Cumulative voting of shares — In election of directors — Section 3245, Rev. Stat.
    
    In the election of directors of a corporation the cumulative voting of shares is authorized by Section 3245, Revised Statutes, as amended April 23,1898 (93 O. L., 230), and one receiving a majority of the votes so cast is elected a director, though he does not receive the votes of the holders of a majority of the shares.
    (Decided January 9, 1900).
    Error to the Circuit Court of Hamilton county.
    An action in quo warranto was brought against the five plaintiffs in error to oust them from the directory of the Pape Brothers’ Moulding Company, a corporation organized under the laws of the state of Ohio and doing business in Hamilton county, they having been elected in August, 1898, and 'continuing to hold notwithstanding the alleged fact that at an election in August, 1899, five others named were elected over them as directors of the board, which consists of nine members. Issues were joined for the purpose of determining which candidates for the directory were elected. The cause was submitted in the circuit court on an agreed statement of facts which shows that at the election in August, 1899, the holders of a majority of the shares cast their full votes for the plaintiffs in error and four others, whose election as directors is not disputed. A minority voted their shares cumulatively for the five persons whose induction is claimed, except that one vote was given to each of the four whose election is not disputed. It resulted that the plaintiffs in error received the votes of the holders of a majority of the shares, but did not receive a majority of the votes; and that those whose induction is sought received a majority of the votes, but did not receive the votes of the holders of a majority of the shares. The circuit court rendered a judgment of ouster and induction, holding that those who by cumulative voting had received a majority of the votes were elected.
    
      Burton P. Hollister, for plaintiffs in error.
    The language of the act is plain and unambiguous. The first sentence of said act, as amended, provides that stockholders of a corporation may vote for directors of the corporation by casting the number of shares owned by them for as many persons as there are directors to be elected (which was the method of voting for stockholders given by Sec. 3245 R. S., before this amendment was passed), or he may cumulate said shares. The second sentence says that a majority of the number of shares shall be necessary for a choice. Which means that whatever the number of votes cumulatively cast a stockholder may receive, he is not elected a director unless, at the same time, he receives a majority of the number of shares. This second provision of the statute in regard to the number of shares necessary for a choice does not take away the right given to a stockholder to vote his shares cumulatively, though it may, under certain circumstances, take away the advantages to be gained by thus voting cumulatively. As the language is plain and unambiguous, the court would not be warranted by a change of words or in any other strained construction or interpretation to draw a different conclusion than that expressed in the words used. Brown v. Hunt, 18 Ohio St., 311; Gardner v. Collins, 2 Pet. 93.
    Nor can an obvious meaning be abandoned, though the court is convinced that the legislature intended differently. Woodbury v. Berry, 18 Ohio St., 456; Ohio St., 65; Hathaway’s Will, 4 Ohio St., 383; Sedgwick on Statutory and Constitutional Law, 231; Smith on Statutory Construction, 714.
    Courts are not to alter words though the legislature may not have contemplated the consequence of using them. When, by the use of • Olear and unequivocal language, capable of only one meaning, anything is enacted by the legislature, it must be enforced, even though it is absurd or mischievous . though it defeat the object of the act. Endlich on Interpretation of Statutes, Pars. 6, 7, 8. Bruner v. Briggs, 39 Ohio St., 478; Burgett v. Burgett, 1 Ohio St., 469; McCormick v. Alexander, 2 Ohio St., 65; Hathaway’s Wills, 4 Ohio St., 383; Smith Bridge Co. v. Bowman, 41 Ohio St. 37; Henry v. Trustees, 48 Ohio St., 671; Rex v. Ramsgate, 6 B. & C., 712.
    If the second provision of said act, as to the number of shares necessary to a choice, so destroys the effect of the first provision as to cumulative voting, that the second provision is in direct conflict with, the first, and the two provisions cannot be reconciled, then it is our contention that the second provision as to the number of shares necessary to a choice is the law, and the first provision as to cumulative voting is therefore invalid. For the reason that, if several clauses are unreconcilable and conflict, the last in local position must prevail. State ex rel. v. Hamilton, 47 Ohio St., 52.
    The second clause, which requires a majority of the number of shares for a choice, is in its nature a proviso and limits the operation and effect of the first clause permitting cumulative voting. The particular intent expressed in a proviso or exception will control the general intent of the enactment. The proviso is the later expression of the legislative will. The generally accepted rule with regard to the construction of a proviso in an act which is repugnant to the purview of the act, is that laid down in Attorney-General v. Water Works, Fitzgibbon, 195; Packer v. Railroad Co, 19 Pa. St., 211; Brown v. Commissioners, 21 Pa. St., 37, 42; Quick v. White Water Trustees, 7 Ind., 570; Ryan v. State, 5 Neb., 276.
    
      Stallo, Richards & Shaw, for plaintiffs in error.
    Counsel for defendants in error seem to find solace in the unctious reflection that the legislature did not mean what is expressed in the words set forth in section 3245, as amended April 23, 1898; that the closing sentence, requiring “A majority of the number of shares shall be necessary for a choice,” was either a mistake or an accident.
    Is this view tenable? Let us turn to section 3245 before the amendment in question was passed. What do we find are the words descriptive of the condition or result necessary to be accomplished or brought about by the expression of the preference of shareholders in order for a director to be legally chosen? We find these words: “A plurality of votes shall be necessary to a choice.”
    Can it be seriously urged or argued for a moment that the words “plurality of votes” were accidentally, unintentionally or mistakenly laid aside and substituted by the words “A majority of the number of shares?”
    Do the words “plurality of votes” mean the same thing as the words “the majority of the number of shares?”
    We urge and insist that these two phrases are not synonymous; that they can in no sense be said to mean the same thing. We urge and insist, further, that the substitution of the one for the other was intentionally and designedly made by the legislature, and that the legislature meant what it said in the, amendment — no more and no less.
    There is no fraud here, and certainly the final sentence of section 3245, as amended, is but declaratory of what has been the legal and moral right of shareholders since the creation of corporations. Cook on Stock and Stockholders, 3d edition, page 814.
    The statute in question requires neither construction nor interpretation, for the language is plain and free from doubt and can have but one meaning. The statute means just what it says. American & English Ency. of Law, Yol. 23, page 298, and the numberless cases cited in foot note No. 2; Sedgwick on Stat. & Const. Law, page 231; Cooley Const. Limita* tion (5th edition), page 197.
    But we are not compelled to go beyond our own state to substantiate the foregoing rules with reference to the province of the judiciary where the statute is plainly expressed. Woodbury v. Berry, 18 Ohio St., 456; Smith v. The State, 66 Md., 215; Doe v. Considine, 6 Wall. (U. S.), 458; Koch v. Bridges, 45 Miss., 259; Vol. 23, Am. & Eng. Ency. Law, pages 298 to 304.
    There can be no dispute of the legal proposition that “statute law is the will of the legislature,” nor can the further legal proposition be disputed that “the object of all judicial interpretation of statute is to determine what intention is conveyed by the language used.” 1 Kent’s Commentaries, page 468; Lieber Legislative Herm., page 88; Brewer v. Blougher, 14 Peter’s (U. S.), 178; Robinson v. Schenck, 102 Ind., 307.
    
      J. Shroder and Fred Hertenstein, for defendant in error.
    'The statute (R. S. 3245) is not vague. It is transcribed from statutes and constitution of other states, which, under judicial scrutiny have passed muster. Morowitz Corp., Sec. 476a; Beach Corp., Sec. 302; Taylor Corp., Secs. 580, 581; California Constitution, 1879, Art. 12, Sec. 12, Dier Code, V. 2, Sec. 307; Illinois Constitution, 1870, Art. 2, Sec. 3, Stairr & C. Stat., Sec. 3, p. 610; Missouri Constitution, 1875, Art. 12, Sec. 6; Idaho Constitution, 1889, Art. 2, Sec. 4; Montana Constitution, 1889, Art. 15, Sec. 4; Nebraska Constitution, 1875, Art. 11, Sec. 5; West Virginia Constitution, 1872, Art. 11, Sec. 4; Pennsylvania Constitution, 1874, Art. 16, Sec. 4; Gen’l. Statutes of Kansas, 1889, Sec. 1185; Civil Statutes of Texas, 1888, Art. 4128; Michigan Statutes, 4885 (a); Kentucky General Statutes, 552, Sec. 207.
    The passage from • Revised Statutes, section 3245, may (if necessary for the effective operation of the section) be considered surplusage. Without it, a majority of the voted shares would anyhow elect a director. The section 3246, which was passed on in The State ex rel. v. Merchant, 37 Ohio St., 251, does not prescribe what proportion of the vote was necessary to a choice, yet the court decided the case on the presumption that a majority was sufficient.
    If this quoted passage was to be read as contended for by plaintiffs in error, it would in practical effect lead to the absurd result of defeating the manifest object of the amendment. Where the literal or metaphysical construction of a part of an act would lead to a reductio ad absurdum, it is clear that the legislature did not intend such construction to be given to it.
    The law puts such construction to the words used, as is natural, and as will in practical application accomplish the purpose evidently designed by the legislature. This sentence in question is but the short form of a declaration to the effect that the majority of the voted shares cast by shareholders shall be necessary to an election. This is agreeable to custom, which the legislature is presumed to have followed. Morowitz Priv. Corp (2nd Ed.), Secs. 476a, 477.
    (A) There is no valid objection to shareholders cumulating or otherwise combining their votes, so long as the shareholder retains the power of controlling his vote. The pooling of votes and the creation of voting trusts furnish instances of this kind of combination. Griffith v. Jewett, 15 W. L. B., 419; Railway v. State ex rel., 49 Ohio St., 668.
    There is no rule of law which would necessarily limit the shareholders’ franchise of voting to one vote for each share. It would be competent to authorize two or more votes for each share; and the shareholder, being possessed of the right of casting a certain number of votes, may be permitted to exercise this right according to his own interest among the various candidates. And no notice was required from the shareholder of his intention to vote cumulatively. Pearce v. Commonwealth, 104 Pa. St, 150.
    
      (B) The amendment of April 23, 1898, to section 3245 (authorizing cumulative voting) is not in conflict with the constitution.
    1. (a) There is, in respect of the subject matter of this section no constitutional prohibition placed upon the legislature.
    (6) The constitution does not prescribe or require a particular mode of election.
    (c) This court in State ex rel. v. Stockly, 45 Ohio St., 304, took no exception to cumulative voting.
    2. This amendment does not impair a contract or any vested right. The act of incorporation of the company (here in question) was subject to the right to alter or repeal it, reserved under Article XIII, section 2, of the constitution. The following cases support this proposition: Lorain Plant Rd. Co. v. Colton, 12 Ohio St., 263; State v. Cinti. Gas Light Co., 18 Ohio St., 262; Harper v. Ampt, 32 Ohio St., 291; Sandusky City Bank v. Wilber, 7 Ohio St., 481; Shields v. State, 26 Ohio St., 86; 95 U. S., 319; State v. Sherman, 22 Ohio St., 411; Ry. v. Moore, 33 Ohio St., 392; State v. Hamilton, 47 Ohio St., 74; Ry. v. Sharpe, 38 Ohio St., 150; Miller v. N. Y., 14 Wall, 478; Spring Valley Waterworks v. Schottler, 110 U. S., 347; Hamilton Gas Light Co. v. Hamilton, 146 U. S., 258; The State ex rel. v. Merchant, 37 Ohio St., 251.
   By the Court:

The correctness of the judgment depends upon the construction which should be given to section 3245, revised statutes, as amended April 23, 1898 (93 O. L., 230). The material portion of the section is as follows:

“Every stockholder shall have the right to vote in person or by proxy the number of shares owned by him for as many persons as there are directors to be elected, or to cumulate said shares and give one candidate as many votes as the number of directors multiplied by the number of his shares of stock shall equal, or to distribute them on the same principle among as many candidates as he shall think fit; and such directors shall not be elected in any other manner. A majority of the number of shares shall be necessary for a choice.”

Before the amendment of the statute is was held in State v. Stockley, 45 Ohio St., 304, that the statute did not authorize cumulative voting at elections of directors of corporations. For the plaintiffs in error it is contended that although the amended statute plainly authorizes cumulative voting, the result of the election must in all cases be the same as before such voting was authorized. This is said to be the necessary result of the requirement that “a majority of the' number of shares shall be necessary for a choice.” We cannot suppose that the general assembly amended the statute to the end that it should remain unchanged. 'The amendmént clearly authorizes two modes of voting, that is, either by or without cumulating shares. The requirement of a majority of shares must, in order that the clearly-defined purpose of the legislature be not defeated, be regarded as applying only when the shares are voted without cumulating. The statute affords no reason for the conclusion that votes were authorized for any purpose except to influence the result of the election.

Judgment affirmed.