Court Opinion

ID: 7976668
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:00:36.707116+00
Date Added: 2024-06-11T16:34:55.581020
License: Public Domain

Philip E. Brown, J.
(dissenting).
I dissent. Section 2 of article 5 of the defendant corporation's constitution reads as follows:
“Special meetings may be called by the imperial good Samaritan *79whenever he considers it for the best interests of the order to do so, and he shall call a special meeting upon the request of a majority of the members, provided, that such a request shall state specifically the purpose of such meeting.
“The imperial scribe shall notify by mail all members of the time and place of such special meeting at least seven days prior thereto, and also the specific business for which such meeting is called, and no other business shall be transacted except that stated in such notice.”
It is manifest that under these provisions the scribe has no duty to perform in connection with the making of the call; and it seems equally as clear that the imperial good Samaritan has nothing to do with notifying the members of the imperial council, that is, the directors, of the time and place of and the specific business to be done at the meeting. As to the latter it is the duty of the scribe, and of no one else, (1) to “notify by mail all members of the time and place of such special meeting at least seven days prior thereto,” and (2) to advise them, within such time and in the same manner, of the specific business for 'which the meeting is called; and transaction of business other than that stated in the notice is prohibited.
It is elementary that the provision quoted, being contained in the constitution of the order, became a part of the contract between it and all members (Kuhl v. Meyer, 42 Mo. App. 474, 479) and likewise that, as a general rule, the same would have to be at least substantially complied with, in order to constitute a legal meeting of the council, subject, of course to the doctrine of acquiescence and waiver. See 2 Thompson, Comm. on Corp. §§ 1140, 1146, 1147. Since, therefore, it is admitted that three members of the council, and also the scribe, though receiving the notice sent by the imperial good Samaritan, failed to attend, and that the scribe gave no notice of the meeting, and assuming, as is conceded that, aside from the question of authority to give the notice, the contents of the copy of the call sent out by the .imperial good Samaritan was sufficient to constitute due notice, the only question presented is: Was there a sufficient compliance with the constitution of the order in the matter of notice to the members of the special meeting? The mere matter of *80who performed the physical act of mailing is deemed unworthy of consideration.
■ First, then, as to the importance of notice:
In Bank v. McCarthy, 55 Ark. 473, 18 S. W. 759, 29 Am. St. 60, the court, in discussing the essentiality of compliance with the rules of a corporation to the legality of a director’s meeting, and after adverting to a previous case in that court holding that a statute of the state authorized the directors to act only at a meeting legally convened in accordance with the by-laws or rules of the corporation, or upon due and legal notice given to each of the members, said, at page 477:1
“Subsequent investigation has not altered our views as then expressed, but we are convinced that they are in a line with the authority of text writers and adjudged cases. If the rule were otherwise, the rights and interests of minority holders would be liable to great abuse. Even majorities might suffer; for, by absence of some of their number, the minority might become the majority, hold a meeting without notice to the absentees, and change the entire course or policy of the business, or do acts destructive to its prosperity or future existence. Such abuse of corporate power is not unknown to the history of corporations, and its evidence is found in the records of the courts. Buies intended to check or prevent it should be rigidly observed, except where reason requires that they be relaxed.”
The books contain numerous like expressions of the rule, of which see Singer v. Salt Lake, 17 Utah, 142, 161, et seq., 53 Pac. 1024, 70 Am. St. 773, where this matter is discussed at length.
Next, as to the form and manner of giving the notice, said Mr. Seymour D. Thompson, in 10 Cyc. 324, 325:
“Where the time or manner of giving notice is prescribed by statute, by the.charter, or by the by-laws of a corporation, it is necessary, in order to the validity of the acts done at the meeting, that the notice should be given as thus prescribed. * * * The requisites of the notice may be enumerated as follows: (1) It must be issued by one who has authority to issue it. (2) It must state the *81time of the meeting * * * (3)- The place where the meeting is to be held * * * (4) The business to be transacted thereat.”
The rule as thus formulated is stated with reference to stockholders' meetings, but applies equally to those of directors. See 10 Cyc. 784. See also 26 Am. & Eng. Enc. (2d ed.) 990, 992. To this general rule some courts have formulated exceptions which, as stated in Bank v. McCarthy, supra, 478, arise “upon a concurrence of three conditions, first, the impracticability of notice; second, the existence of an emergency for action; and third, a reasonable necessity for the action taken.” In this connection, however, the court carefully outlined the limits of the operation of the exceptional rule indicated, as follows:
“Without committing the court to a full approval of this form of stating the exception we may say that it seems to be substantially correct. Where notice is practicable, it must be given; it can be dispensed with, when impracticable, only to meet an emergency; and the act done must appear reasonably necessary to the welfare of the corporation. If the act is merely proper, but not necessary, or if it appear that it may become necessary, but the necessity is not present, the rule should not yield; for in such cases notice may become practicable, and the presence of the absent director be secured, before the necessity arises or the emergency is present.”
In other words, the exception rests upon necessity growing out of emergency, and not upon the caprice of corporate officers. No claim is made, or can be made under the facts in this case, that there was any impracticability of giving notice or any emergency for action, or any necessity for the course taken, except the scribe’s refusal to send out the notices. The business .sought to be considered at the meeting referred only to the internal affairs of the corporation, and no rights of third parties are involved. In short, there is no evidence in the record of the existence of any emergency for action save the refusal of the scribe to perform his duties, and none that the act done was “reasonably necessary to the welfare of the corporation.” Furthermore, there is no occasion here to invoke the rule of necessity, in view of R. L. 1905, § 3171, subd. 8, to which further reference will be made in the course of this discussion.
*82The claim of the defendants must, therefore, rest upon the proposition that where, in any case, the officer of this corporation designated as the imperial scribe refuses to give notices of special meetings of the council, the imperial good Samaritan may do so in own name and capacity as such, and this without informing the members of the reason for this extraordinary action. Such is the effect of the majority opinion. Two cases are cited as sustaining this conclusion, namely, Ashley v. Illinois, 164 Ill. 149, 45 N. E. 412, 56 Am. St. 187, and Bell v. Standard, 146 Cal. 699, 81 Pac. 17.
With due respect to the opinions of my colleagues, it is submitted that the Illinois case is not in point. It concerned the foreclosure of a mortgage given by the corporation for a large sum to a third person. On pagé 152 of the opinion it is stated that “the only question in the case is whether the note and mortgage were binding obligations of the Ashley Wire Company,” the appellant. In other words, this case involved the effect of irregularities in connection with the calling of the meeting at which the mortgage was authorized, one of which defects was that the name of the secretary, whose duty it was to give notice of the call, was affixed thereto by the president by the use of a rubber stamp. It was held that the mortgage was valid, but the decision was grounded squarely upon the doctrines of estoppel and ratification, and upon the proposition that third parties will be protected as against irregularities in compliance with “rules and regulations enacted for the internal management of the corporate affairs” (pp. 156 — 158).
“It certainly made no difference to anybody,” said the court at page 158, “who held the rubber stamp, and if the secretary did not know when it was done, he attended the meeting, acted as secretary, recorded its proceedings and treated it as regularly called and its directions as binding on him. He ratified the call, and it affected nobody, in any view of the question.”
It is is to be noted, furthermore, that the notice in that case was aot only regular on its face, but also purported to be signed by the secretary, which latter fact involves what appears to the writer to be of the essence of the charter requirement as to notice of the instant case.
*83In the California case the notice was in due form, except that it purported to be signed by the vice president as such, instead of as secretary, which latter office he also held, and it may be that the notice was properly held valid as in fact emanating from the officer known to have due authority to issue it. The court, however, after stating that its code provided that notice of special meetings, when no provision otherwise is made in the by-laws, must be in writing and must be given by the secretary, observed, at page 705:
“It does not, however, nor do the by-laws in question, prescribe any form of notice, nor require that it shall be signed by the secretary. Hence, any form or manner of written notice sufficient to inform the directors that a special meeting of the directors is called, and of the exact time and place where it is to be held, will be valid. (Granger v. Original Empire, etc. Co. 59 Cal. 678, 682). Where the call is signed by an officer authorized to make it, as in this case, and contains in itself all the essential requisites of a notice, it will answer all the purposes of a notice under section 320 of the civil code aforesaid. That section merely devolves upon the secretary the duty of giving the notice. To give a written notice is not to write or sign the paper expressing the information constituting notice. It implies only that the person charged with that duty shall by some means see to it that the necessary notice is delivered to the person who is to receive it. It is the equivalent of the service of papers, and involves only a delivery of sufficient notice to the proper person. This duty Taylor, as secretary, performed when he mailed the notices in question to each director, properly addressed and postpaid.”
It is apparent from this language that the court had in mind throughout its somewhat elaborate statement of the rule, the facts that the person who gave the notice was in fact authorized so to do, and that this was apparent from the notice .itself, or at least known to the recipients thereof; but the rule is so loosely worded that, if taken literally, it would dispense with the prime essential of notice, namely, the giving of authentic advice to the person affected that some act is to be done, so that it might be invoked to sustain the proposition that any writing stating the act to be done, and mailed, no matter by whom, would be held sufficient. It is useless as a workable *84rule. Contrast it with the practical observations of this court in Bausman v. Kelley, 38 Minn. 197, 205, 36 N. W. 333, 335, 8 Am. St. 661.
“Again,” said Mr. Justice Dickinson, in referring to a notice of foreclosure by advertisement, where the mortgagee was dead, “the notice was not, upon its face, and did not purport to be, the act of Galusha (the attorney for an alleged assignee of the mortgage), but of Hall, the mortgagee. It is an essential quality of a notice that it appear to be given by competent authority —Niles v. Ransford, 1 Mich. 338, [51 Am. Dec. 95]; Roche v. Farnsworth, 106 Mass. 509—and a notice which, upon its face, is declared to be the act of a designated person, and which, as such, would be void, cannot be made effectual by proof that it was really the act of another and undisclosed person, not even standing in a relation of privity with the person in whose name the notice was given. A notice by a mere stranger can effect nothing.”
These are a few cases specifically dealing with the precise question in hand; but, as far as I have been able to ascertain, all of them, excepting possibly the California case above referred to, apply the doctrine of notice as stated in Bausman v. Kelley, supra, to notices of corporate meetings, and sustain the proposition that such a notice must at least purport to be given by the duly constituted authority. See Kulinski v. Dambrowski, 29 Wis. 109, 113, 114; Johnston v. Jones, 23 N. J. Eq. 216, 228; Riggs v. Polk County, 51 Ore. 509, 516, 95 Pac. 5; Bethany v. Sperry, 10 Conn. 200, 201, 207. See also 10 Cyc. 324, 784; 26 Am. & Eng. Enc. (2d ed.) 992.
In the Wisconsin case cited it was declared that “the certificate introduced in evidence did not show that the notice of the time and place where the election would be held was given by any person authorized,” and it' was “of the substance of the proceeding that the election be publicly notified by a person having authority under the statute.”
In the New Jersey case it was said: “The notice did not purport to be given by the directors or their authority. It was a notice by three individuals, without any designation, affixed to their names. No stockholder need regard it. Something should have been added *85to show that it was by proper authority.” In the Oregon case the notice was loosely spoken of as the call; but an examination of the case clearly 'shows that the meeting was duly resolved upon, that is, it was called, but was held invalid because the notice designed to put the call into effect was not signed by the “chairman of the board,” as directed by statute, but by the clerk “pro tern.”
And in Reilly v. Oglebay, 25 W. Va. 36, 41, it was declared that notice which is not such as required by statute is no notice. The-reason for this rule is well stated in Troy v. White, 10 S. D. 475, 482, 74 N. W. 236, 42 L.R.A. 549, where the statutory direction as-to the mode of giving notice of a directors’ meeting was held mandatory.
It should be remembered that the call and the notice are separate- and distinct requisites of the validity of the meeting, the call being: the resolution or determination to hold the meeting, and the notice-being the method of enforcing or promulgating the call. Both are required in order to constitute a legal meeting; and as a general rule,, at least, it would seem that the considerations determinative of the-validity of the one should control as to that of the other. See 26 Am. & Eng. Enc. (2d ed.) 990.
Nor does it seem, in view of the two provisions of the charter involved in this case, which are quoted at the outset of this dissent,, that the duties thereby prescribed can be regarded otherwise than as; mutually independent, or that the duty of the scribe can be deemed,, as stated in the majority opinion, to be merely to “mail a notice of' the meeting to each member.” Taken literally, the second paragraph, of section 2, article 5, of the order’s constitution, would require the-scribe himself to give the notice; and it is difficult to perceive any-sound reason why the notice should not at least purport to be authentic, that is, show on its face that it emanates from the proper officer. Why should an alleged notice be held good, when its validity depends upon collateral facts, not disclosed therein, and of which, in .the nature of things, the person to whom it is sent must often be ignorant? Must a director heed such a notice at his peril, when he knows that it was not issued in accordance with the rules of the corporation whose interests he is bound to guard and especially when *86neither it, nor any accompanying document, advises him why the fundamental law of the order has been deviated from? More specifically, should the head of this order be allowed, at his pleasure, to send out copies of the call in lieu of the regularly prescribed notice, and require the directors to attend for the purpose of first ascertaining the validity of the gathering before proceeding with the business for which it is called ? It seems unfortunate, when courts are striving to keep ever multiplying corporations within reasonable bounds and to protect the interests of minority stockholders, that any relaxation of the established rules should be permitted. The result of this case tends to throw the question of the validity of corporate meetings into confusion. If the fundamental law of this order provided, as is often the case, that the failure of a director to attend a duly-called meeting without adequate cause should subject him to amotion, would it be held that such action could be taken under the .state of facts here existing ? I think not. TIow then can it be held that this was a valid meeting ? At least as between the members of the order, it must be either valid or invalid for all purposes.
It may be asked, what is to become of the ordinary affairs of the corporation in the event of the death or disability of the secretary— in this case the scribe — or if he again refuses to act ? And it may be conceded that mandamus is not an altogether adequate remedy in the latter case. Nevertheless, the answer to the whole question may, I think, be found in R. L. 1905, § 3171, which, in my opinion, renders the conclusion reached by the majority opinion, unnecessary. This section provides:
“In any case affecting a corporation the district court may: -x- -x- * g. 0aase a meeting of its managing board, stockholders, or members to be held when deemed necessary for the preservation of its property or protection of its interests.”
This provision is referred to in State v. DeGroat, 109 Minn. 168, 176, 123 N. W. 417, 134 Am. St. 764. No reason is perceived why this statute does not afford an ample basis for a speedy and adequate remedy covering all the contingencies referred to, and which could' be worked out by an ex parte application showing the facts.
. In my opinion the imperial good Samaritan should have obtained *87authority before assuming to act in a matter in which he had none; and I think, therefore, that the judgment appealed from should be affirmed. The importance of the question involved is the apology for this over-long, dissent.

 [18 S. W. 761].