Case Name: DAVIDSON v. AMERICAN PAPER MFG. CO., Inc., et al.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1937-06-21
Citations: 175 So. 753
Docket Number: No. 34377
Parties: DAVIDSON v. AMERICAN PAPER MFG. CO., Inc., et al.
Judges: ROGERS, J., absent.
Reporter: Southern Reporter
Volume: 175
Pages: 753–763

Head Matter:
188 La. 69
DAVIDSON v. AMERICAN PAPER MFG. CO., Inc., et al.
No. 34377.
Supreme Court of Louisiana.
June 21, 1937.
Rehearing Denied July 8, 1937.
Claude L. Johnson and Severn T. Darden, both of New Orleans, for appellants.
St. Clair Adams & Son, of New Orleans, for appellee.

Opinion:
ODOM, Justice.
This is a mandamus proceeding brought by Mrs. Evelyn M. Davidson (Whitehurst), 'individually and in her capacity as admin-istratrix of the succession of Clarence E. Davidson, against the American Paper Manufacturing Company, Inc.', and against Percy R. Davidson, secretary, Norman L. Davidson, president, and Mrs. C. L. Johnson, each being a stockholder in the said corporation, and against C. L. Johnson, who holds a voting trust agreement signed by certain persons who at one time owned shares of stock in the corporation but who later sold it to Clarence E. Davidson, to compel the calling and holding of a meeting of the stockholders of the said corporation for the purpose of electing a board of directors; to compel the said officers and stockholders to recognize her right to vote at such meeting the shares of the capital stock owned by her .individually and to vote in her capacity as administratrix the shares of stock which belong to the succession of Clarence E. Davidson; and to have declared illegal and of- no effect the election of the present board of directors, which election took place on October 16, 1933, in which meeting of the stockholders she was not permitted to participate.
Plaintiff alleged that she individually and the succession of Clarence E. Davidson, of which she is administratrix, owned a majority of all the outstanding stock of the corporation; that the minority stockholders had illegally taken possession of the corporation, its books, papers, and effects; had elected a board óf directors and officers at a meeting in which she was not permitted to vote or participate either in her individual capacity as a stockholder or in her capacity as administratrix. She brought the suit under the provisions of Act No. 250 of 1928 (page 409), which is an act, according to its title, to provide for the "Incorporation, Regulation, Merger, Consolidation and Dissolution of Certain Corporations for Profit." She alleged that she had requested the secretary, the president, and the other stockholders, who are conducting the affairs of the corporation, to call a special meeting of the stockholders, and that they had refused to do so.
The American Paper Manufacturing Company, Inc., is a Louisiana corporation having its domicile and place of business in New Orleans.
Defendants filed exceptions of no cause or right of action, misjoinder of parties, improper cumulation of causes of action, and an exception to the jurisdiction of the court, ratione materia;. All these exceptions were overruled by the court, and defendants answered.
They admit in answer that according to the corporation's stock book and other records of the corporation, plaintiff owns individually stock certificate No: 15 for 10 shares of the capital stock, and that the same records show that at the time of his death on. September 30, 1933, Clarence E. Davidson, whose succession is being administered by plaintiff, owned stock certificate No. 24 for 35 shares, certificate No. 23 for 5 shares, certificate No. 22 for 15 shares, certificate No. 21 for 5 shares, No. 17 for 50 shares, No. 14 for 15 shares, No. 16 for 30 shares, No. 27 for 15 shares, No. 26 for 35 shares, and No. 25 for 35 shares, or in all 240 shares of stock. Plaintiff claims that Clarence E. Davidson owned also certificate No. 20 for 5 shares, issued to George J. Gueno, Jr., which certificate was indorsed by him in blank, attached to which is a draft drawn to the order of the said Gueno on Clarence E. Davidson in part payment for the said 5 shares. So that, as shown by the records of the corporation and according to the admissions, plaintiff owned at the time this suit was filed 10 shares of the stock, and the succession owned 240 shares. If it be true that C. E. Davidson owned the '5 shares issued to Gueno, then plaintiff and the succession owned 255 shares, or all the 300 issued and outstanding shares of the stock of the corporation except 45 shares, these being owned by defendants as follows: Certificate No. 8 for 15 shares owned by Percy R. Davidson; certificate No. 11 for 15 shares owned by Norman L. Davidson; and certificate No. 10 for 15 shares owned by Mrs. C. L. Johnson.
But defendants in. their answer say, in sum, that even though the books and records of the corporation do show ownership of the stock as alleged by plaintiff, and even though the certificates were issued in the names of plaintiff for 10 shares and of C. E. Davidson for 240 shares, the stock was not, as a matter of fact, owned by them for these reasons:
1. That certificate No. 15 for 10 shares in the name of plaintiff individually ahd certificate No. 16 for 30 shares in the name of Clarence E. Davidson, deceased, were issued under false representations of C. E. Davidson that he was due credits in that amount from the corporation.
2. That certificate No. 17 for 50 shares of the capital stock issued to Clarence E. Davidson was issued under false representations made to the board of directors by the said Clarence E. Davidson, and that no legal consideration was given for said stock.
3. That certain shares of the stock purchased-by Clarence E. Davidson from Mrs. A. F. Davidson, Mrs. Mignonne Davidson Brown, Bernice G. Terrell, Mrs. T. I. St. Martin, Sarah Gueno, 'and George Gueno were illegally purchased by the said Ciar ence E. Davidson with funds of the corporation which he misappropriated to his own account; it being alleged in the answer that •these shares of stock should be returned and surrendered to the corporation.
4. That the purchase of 105 shares of the capital stock of said corporation from Mrs. A. F. Davidson by C. E. Davidson was made with knowledge of the existence of a voting trust agreement in favor of Claude L. Johnson signed by the said Mrs. A. F. Davidson.
5. That certificate No. 15 for 10 shares of stock issued to Mrs. Evelyn M. Davidson was issued without authority of the board of directors and without legal or valid consideration, and is therefore void.
6. That certificate No. 14 for 15 shares of the stock issued in the name of Clarence E. Davidson is rightfully the property of Percy R. Davidson, Norman L. Davidson, and Mrs. Claude Johnson, and the children of a deceased sister, for the reason that Clarence E. Davidson was indebted to the estate of his father and that said shares of stock were subject to collation.
The trial of the case on its merits extended over a long period of time and the record is voluminous. There was judgment for plaintiff as prayed for, commanding the secretary of 'the corporation and the minority stockholders who claimed to have been elected as directors to call a special meeting of the stockholders to be held on a date fixed by the court, for the purpose of electing a board of directors; recognizing plaintiff to be the owner individually of the 10 shares of stock standing in her name and recognizing the succession of Clarence E. Davidson as the owner of 245 shares of the capital stock of the corporation, including certificate No. 20 for 5 shares issued originally to George J. Gueno, Jr.; and decreeing that plaintiff as admin-istratrix was entitled to vote the shares of stock owned by the succession.
It was further ordered that defendants, who are now in possession of the corporate property, books, and records, etc., and who are conducting the affairs of the corporation, permit the plaintiff in her individual and representative capacities to vote the said stock at a stockholders' meeting; and it was decreed that all proceedings, actions, and deliberations had at a special meeting of the stockholders of the corporation on October 16, 1933, were illegal and null, and the election of a board of directors at said meeting was set aside. Defendants appealed.
On Exception of No Cause of Action.
The basis of this exception is twofold. First, it is pointed out by counsel that plaintiff in her individual capacity claims to own only 10 of the 300 outstanding shares of the capital stock of the corporation, which is less than one-fifth; , and that if it be conceded that she owns that stock, it is not the ministerial duty of the secretary to call a special meeting of the stockholders at her request, because paragraph 2, § 30, Act No. 250 of 1928, provides that it is the ministerial duty of the Secretary to call a special meeting when requested by "any shareholder or shareholders holding in the aggregate one-fifth of the voting power of all shareholders."
The second ground is that if it be conceded that the succession of Clarence E. Davidson owns 245 shares of the stock, a majority of it, plaintiff as administratrix has no right to vote that stock at a stockholders' meeting.
This contention of counsel is based upon the proposition that an administrator does not own the property of the succession which he administers and that the adminis-tratrix in this case, not being the owner of the stock, cannot vote it because section 32, par. 1, of the above cited act provides that "each shareholder of record shall have the right at every shareholders' meeting to one vote for each share standing in his name on the books of the corporation." Article 4 of the charter of this corporation contains a similar provision.
It is true, as counsel say, that an administrator does not own the property of the succession which he administers. State v. Brown, 32 La.Ann. 1020; Tulane University v. Board of Assessors, 115 La. 1025, 40 So. 445.
But from the fact that it is provided both in the act of the Legislature and in the charter of this corporation that shareholders shall be entitled to vote the stock standing in their names, and the further fact that administrators do not own, in a strict legal sense, the property of the succession, it does not necessarily follow that they cannot vote the shares of stock owned by the succession at a stockholders' meeting.
Administrators of successions have only administrative powers. But where a succession owns capital stock of a corporation, the voting of such capital stock by the administrator at a stockholders' meeting is an administrative act which the administrator not only may, but must, perform. An administrator has the same powers and has imposed upon him the same duties as are granted and imposed upon curators of vacant estates. Civ.Code, art. 1049. And article 1147 of the Civil Code says that: "Every curator of a vacant succession or of absent heirs is bound to take care of the effects intrusted to him as a prudent administrator, and to render an exact and faithful account of the fruits and revenue they produce. He is responsible for all damages caused by his misconduct."
It is not suggested by counsel that any person other than the administrator would have a right to or could vote the stock of the corporation owned by the succession at a stockholders' meeting of the corporation. Their contention seems to be that no one can exercise that authority. If that were true, the succession as a stockholder would be without representation in the business and affairs of the corporation during the entire period of the administration, which is frequently long drawn out; and if the succession happened to own a majority of the stock, as in the present case, the corporation, if it could function at all, would necessarily go into the hands of and be controlled by. a minority of the stockholders. This could and might result in loss and damage to the succession, which the administrator is "bound" to prevent if he can. Every stockholder of a corporation is given a voice in the conduct of its affairs. If the administrator cannot vote the stock owned by the succession, the succession has no voice and, as in this case, where the succession owns a majority of the stock, the corporation would necessarily have to function, if it functioned at all, through a minority of the stockholders, and that cannot be done under the law.
Section 31, par. 1, Act No. 250 of 1928, provides that: "A shareholders' meeting duly called can be organized for the transaction of business whenever a quorum is present," (italics ours), which means, of course, that it cannot be organized for the transaction of business without a quorum. And paragraph 2 of the same section provides that: "Except as otherwise provided in the articles or by-laws of this Act: (a) the presence, in person or by proxy, of the holders of a majority of the voting power shall constitute a quorum."
" 'Voting Power' means the right vested, by law or by the articles or the by-laws of the corporation, in the shareholders, or in one or more classes of shareholders, to vote in the determination of any particular question or matter coming before meetings of the shareholders." Paragraph 16, § 1 of the act.
The charter of this corporation says • nothing about what shall constitute a "quorum" of the shareholders, and the bylaws are not in evidence. Therefore, the act itself controls, and it follows that if the administratrix cannot vote the stock owned by the succession, no business can be transacted at a shareholders' meeting for lack of a quorum.
It is further provided in section 31 of the act, paragraph 2 (b), that the shareholders present "at a duly organized meeting" may continue to do business until adjournment even though a quorum is broken by the withdrawal of stockholders. But that is in a case where a stockholders' meeting is "duly organized," and one cannot be "duly organized" without a quorum, which is a majority of the stockholders. This section of the act further provides (c) that "if a meeting cannot be organized because a quorum has not attended, those present may adjourn the meeting," etc. This clearly means that a shareholders' meeting cannot be organized without a quorum. Therefore, under counsel's theory, if a succession owns a majority of the stock of the corporation, the corporation cannot function under the law because there could never be a quorum of stockholders to elect officers.
The question squarely presented by counsel for defendants is whether the administrator of a succession may vote the shares of stock standing in the name of and owned by the succession which he administers. So far as we know, this question has never been passed upon by this court; the reason probably being that no one has heretofore questioned the right of the administrator to do so. The question has, however, been decided by courts of other jurisdictions, and apparently they have uniformly held that an administrator or an executor of a succession may vote the stock owned by the succession at a stockholders' meeting.
Under the general heading, Corporations, 10 Cyc. p. 334, the following text appears:
"Executors and administrators have the right to vote with respect to stock standing on the corporate books in the name of the testator on exhibiting an exemplified copy of their letters testamentary or of administration ; and this without any formal transfer of the shares on the books of the corporation to them."
A similar statement of the rule is found in 7 R.C.L. 346; 14 C.J. 903, § 1397; Fletcher's Cyclopaedia of the Law of Corporations, vol. 3, p. 2807, § 1667. See, also, the case of Billings v. Marshall Furnace Co., 210 Mich. 1, 177 N.W. 222, 9 A.L.R. 1239. Many other cases might be cited, but we think it unnecessary.
On this point counsel for the defendants cite two cases: Monsseaux v. Urquhart, 19 La.Ann. 482, and State ex rel. Martin v. New Orleans & Carrollton Railroad Co., 30 La.Ann. 308. Neither of these cases is in point, because the question whether an executor or administrator may vote corporate stock owned by the succession was not passed upon.
We hold, therefore, that the ruling of the trial court that the administratrix was entitled to vote the stock of this corporation at shareholders' meetings was correct.
On Exception of Misjoinder of Parties.
This exception was properly overruled. Under the act of the Legislature above referred to, it is provided in section 30, par. 2:
"At any time, upon written request of any director, or of any shareholder or shareholders holding in the aggregate one-fifth of the voting power of all shareholders, it shall be the ministerial duty of the Secretary to call a special meeting of shareholders to be held at the registered office at such time as the Secretary may fix."
It is argued by counsel for defendants that inasmuch as it is made the ministerial duty of the secretary to call a meeting and not the ministerial duty of the other officers or of the shareholders to do so, it was improper to join them in this proceeding. If the sole purpose of plaintiff's suit were to compel the holding of a stockholders' meeting there might perhaps be merit in counsel's argument, although the other defendants cannot be prejudiced by being made parties. But plaintiff coupled with her demand for a stockholders' meeting an action to have it decreed that she was entitled to vote in her capacity as administra-trix the stock belonging to the succession, and also to have it decreed that certain proceedings had by the minority stockholders were null and void. It was, therefore, necessary for plaintiff to make the alleged de facto officers of the corporation parties to the suit.
We think there is no merit in the exception of improper cumulation of causes of action. If the minority stockholders have taken possession of the corporation and are conducting its affairs, plaintiff has the right not only to set aside the election of the board of directors and the election of officers by the board of directors, but has also the right to compel the holding of a stockholders' meeting composed of a quorum.
The exception to the jurisdiction of the court seems to have been abandoned, as it is not mentioned in counsel's brief.