Court Opinion

ID: 6669562
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:08:32.796368+00
Date Added: 2024-06-11T16:00:27.658209
License: Public Domain

Lelknap, J.,
dissenting:
In order to have been eligible to the directorship, Gulling must have been a stockholder, and this fact should have been determined by the same rules of evidence as in general govern courts in the determination of controverted questions of fact. The rule of evidence upon this subject has been changed in some states by express provision of statute or authorized by-law making the entries in the transfer books conclusive evidence of the right of a person to vote the shares standing therein in his name (as was the case in Hoppin v. Buffum, referred to in the opinion of the court), but when this 'express authorization does not exist no case has gone farther than to hold the entries in the transfer books prima facie, evidence of ownership.
Nor do I think the statute of this state was intended to *255change the general rule of evidence upon the subject: Section 5 of the corporation act contains a provision that the trustees of the corporation shall be “.stockholders in the company.” The same section provides that “each stockholder * * * shall be entitled to as many votes as he or she may own * * * shares of stock,” etc., and section 12 provides that the pledger of stock may nevertheless represent and vote his stock at all corporate meetings. These .provisions indicate an intention' on the part of the legislature to intrust the owners of the stock of the corporation with the control of its elections and its general management, in accordance with a principle-which has the sanction of long continued usage, and which is so firmly engrafted into the law of corporations that it may be said to be a part of their common law.
In the absence of an intention on the part of the legislature to alter or define the meaning of the word “stockholder,” as used in the statute, it should be assumed to have been used in its universally accepted sense, and to mean the owner of the shares. If, therefore, Gulling did not own the shares, he was ineligible to the directorship.
The question whether one in whose name stock stood upon the books of the corporation was from that fact to be treated as a stockholder for the purpose of voting at corporate elections, arose in Yermont, under a statute which, among other matters, provided that “ each stockholder shall be entitled to a number of votes proportional to the number of shares which may have been held by such stockholder at least three months before the time of voting,” etc., and which further provided that no stockholder residing out of the state should be entitled to vote at corporate meetings. The facts were that a citizen of another state, in order to obtain the control of the directory of a banking corporation of the state of Yermont, caused certificates of stock of which himself was the true owner, to be placed in the names of citizens of the latter state, friendly to his plan, and who voted the stock so transferred to them in accordance with his wishes. The court held that the votes so cast should have been rejected, because the citizens of the state of Yermont were not in fact *256the owners of the stock, tbe transfer to them having been made simply for the purpose of enabling them to vote upon it. (State v. Hunton, 28 Vt. 594. )
The analogy between this case and the one under consideration appears to be very close. In both cases it was claimed that the transfer was simply colorable and for the purpose of conferring air apparent eligibility to the positions of stockholder and director. If importance is to be attached to the word “held” as against the word “owned,” . the Yermont statute authorized the stockholder to vote the shares held by him, whilst the statute of this state entitles him to vote the shares owned by him.
In Ohio, when the charter of a banking corporation provided that stockholders only should be elected directors, it was held that the transfer of shares to persons for tbe purpose of making them eligible to the directorship, who had no interest in the stock, neither made them eligible for directors nor qualified stockholders. (Bartholomew v. Bentley, 1 Ohio St. 37). The same principle ivas decided in the case of Vowell v. Thompson, 3 Cranch’s C. C. 428, where it was held that the mortgagor of stock in an insurance company, who had transferred his stock to another as collateral security for a debt, was entitled to vote upon the stock at an election of directors, he being considered the owner thereof, and the court compelled the mortgagee to give the mortgagor a prosy for this purpose. To the same effect is Merchants’ Bank v. Cook, 4 Pick. 405.
In New York, under a statute providing “in all cases where the right of voting upon any share or shares of the stock of any incorporated company of this state, shall be questioned, it shall be the duty of the inspectors of the election to require the transfer books of said companjr, as evidence of stock held in said company, and all such shares as may appear standing thereon in the name of any person or persons, shall be voted on by such person or persons, directly by themselves, or by proxy,” courts have allowed parties to go behind the entries in the transfer books for the purpose of determining the ownership of shares for the purpose of voting. This was the ruling in Ex parte *257Holmes, 5 Cow. 428, and also in tbe Matter of the Long Island Railroad Company, 19 Wend. 37. In tbe latter case one Lord was tbe owner of a large number of shares of stock of tbe company by assignment from individuals, in whose name tbe shares stood upon the transfer books. He applied to the company to have the stock transferred to himself, but was refused for the reason that the stock, under a by-law of the company, had been declared forfeited for non-payment of calls. At the election he offered to vote the shares and was refused. If his vote had been received it would have changed the result of the election. The court, being of opinion that the by-law was invalid and that Lord’s vote was improperly rejected, ordered a new election.
And in a late case the supreme court of New York held that the provision of the statute of that state above set forth was intended to be conclusive only upon the inspectors of election, and that courts had the power, and it was their duty, to .go back of the entries in the transfer book and inquire into the rights of holders of disputed shares to vote upon them. In that case the shares stood upon the transfer books in the name of one to whom they had been pledged. The judge who held the special term considered that this fact precluded all inquiry as to whether the transfer was an absolute sale or a mere pledge, but the general term reversed the judgment, saying: “We are of opinion that the special term erred in holding that it had not power to determine the question whether the transfer of the shares was a sale or a pledge, and whether the appellant had the right to vote upon them, notwithstanding they stood upon the transfer book in the name of the respondent.” (Strong v. Smith, 15 Hun, 222.) The judgment of the general term was subsequently affirmed by the court of appeals. (80 N. Y. 637.)
The corporation act of this state was adopted from the state of California, and before its adoption had received a judicial construction from the supreme court of that state. When a statute has received a judicial construction, and is afterwards adopted by another state, the construction as well as the terms of the statu,te wilhbe deemed adopted. In *258such cases it is presumed that the legislature intended to adopt the- received construction; different language would have been employed had the intention been to exclude it.
In Allen v. Hill, 16 Cal. 114, certificates of stock owned by the firm of Hill & Devane, stood in the name of Devane. After Devane’s death, the question arose whether the surviving partner or the administrator had the right to vote the shares. The estate being unsettled, the surviving partner had the right to continue in possession of effects of the partnership under the statute of that state regulating the settlement of the estates of deceased persons, but the question was whether his right to vote the stock was affected by the fact that it stood in the name of Devane alone. Upon this point the court said: “ We think that no consequence is to be attached to the circumstance' that a portion of the stock represented by Hill stood upon the books of the corporation in the name of Devane alone. This was prima facie evidence that it belonged to the separate estate of Devane, but it was competent for the defendants to show that it was in fact the property of the partnership. The cases cited from New York proceed entirely upon a statute of that state, and the reasoning in some of these cases indicates very clearly that in the absence of the statute the conclusion would have been different. * * * It would seem, upon principle, that the real owner of stock should be entitled to represent it at the meetings of the corporation, and that the mere fact that he does not appear as owner upon the books of the company should not exclude him from the privilege of doing so.”
In the subsequent case of Brewster v. Hartley, 37 Cal. 15, the court allowed the plaintiffs to go behind the entries in the certificate book for the purpose of ascertaining the ownership to certain shares, and upon determining that the corporation itself was the real owner of the shares which had been voted by a trustee in whose name they stood, ordered the election set aside.
Section 8397, touching transfers of stock and providing that no transfer shall be valid, except between the parties thereto, until the same shall have been entered upon the *259books of the corporation, does not affect the question presented by this case. A similar provision is contained in the corporation statutes of other states, and is intended for the protection of the corporation in the enforcement of its lien for assessments or other debts. Under it nó transfer, unless entered upon the company’s books, can affect its rights.
The legislature did. not intend by this clause that all transfers, except as between transferrer and transferee, should be invalid unless entered upon the .books of the company, but that such transfers should be valid as against the whole world except the corporation or subsequent purchaser in-good faith without notice. (Parrott v. Byers, 40 Cal. 614; Com. Bank of Buffalo v. Kortright, 22 Wend. 362; Bank of Utica v. Smalley, 2 Cow. 778; Gilbert v. Manchester Iron Co., 11 Wend. 628.).
The requirement of sec. 3404, that the trustees shall keep a transfer book containing the names of the stockholders, which shall be accessible to stockholders and creditors, was contained in the original corporation act of 1862, of which the present law is amendatory. Under that law a personal liability was imposed upon stockholders, and this section appears to have been intended for the protection and information of the creditors of the corporation as well as the stockholders, who were liable to become creditors in case of corporate insolvency. This section now contains the only express requirement relative to the keeping of the trausfer book, and whatever other purpose it may perform it bears no relation to the question of the evidence that shall be received to establish the' fact whether one is or is not a stockholder.
I am of opinion that the parol evidence touching Gulling’s ownership of .the shares should not have been withdrawn from .the consideration of the jury, and, therefore, dissent from the judgment of the court. ■