Court Opinion

ID: 9861807
Source: CourtListenerOpinion
Date Created: 2023-09-25 00:36:07.038316+00
Date Added: 2024-06-11T11:29:07.094897
License: Public Domain

Mr. Justice Hersi-iEy, dissenting: I dissent from the majority opinion, because I believe it can be demonstrated that the effect of the decision is to judicially amend the Illinois constitution. The issue in the case is not complex, nor are the determinative principles of law difficult to apply. Section 35 of the Illinois Business Corporation Act provides that when the board of directors shall consist of nine or more members they may be divided into either two or three classes and elected to staggered terms of office. The sole question is whether section 3 of article XI of the Illinois constitution prohibits such classification and staggering. Our most basic constitutional law concept is that the Illinois constitution is not a grant but a limitation of power. (People v. Dale, 406 Ill. 238, 243; Gillespie v. Barrett, 368 Ill. 612, 615; 11 I.L.P., Constitutional Law, sec. 33.) For this reason, if our constitution does not prohibit this legislation (no Federal constitutional inhibition being urged) its constitutionality should be sustained. Thus, the inquiry should be directed toward ascertaining exactly what is prohibited by section 3 of article XI of the Illinois constitution, which reads as follows: “The general assembly shall provide, by law, that in all elections for directors or managers of incorporated companies, every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers 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 or managers shall not be elected in any other manner.” Essentially, this provision expressly prohibits legislation that would (1) deprive a stockholder of the right to vote for directors, (2) prevent voting in person or by proxy, or (3) destroy the right of cumulative voting. Conversely, the only constitutional guarantees to corporate stockholders are that there must be at least two directors, that stockholders shall have a right to vote in person or by proxy at every corporate election, and that they shall have the right to cumulate their votes. The use of the plural in connection with cumulative voting implies there must be more than one director. However, the constitution does not otherwise state anything about the number of directors which a corporation must have. Indeed, there is a striking absence of any provision either (1) as to how many directors are to be elected, (2) their terms of office, or (3) how frequently they are to be elected. Finally, there is no statement that all directors must be elected at the same time. Therefore, any prohibition against the classification of directors and their election for staggered terms as set out in this statute must arise, if at all, by implication. A fundamental canon of statutory and constitutional interpretation is that the primary source for ascertaining the meaning of the provision under consideration is the plain and natural meaning of the language used. (Cooley, Constitutional Limitations, 7th ed. p. 92; Graham v. Dye, 308 Ill. 283, 286; Gibbons v. Ogden, 9 Wheat. (22 U.S. 1) 188; Edwards v. Cuba Railroad, 268 U.S. 628, 631.) Where it is possible, every section and clause must be given effect. If there is apparent conflict, courts should adopt the construction which will render every word operative, rather than one which will make some words idle or nugatory. People ex rel. Nauert v. Smith, 327 Ill. 11, 20; Cooley, Constitutional Limitations, 8th ed., p. 128. Section 3 provides that “every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers to be elected, or to cumulate said shares, * * *.” (Emphasis added.) No significance could be ascribed to the phrase “to be elected” if the entire board of directors had to be elected at one time. Clearly, if section 3 prohibits staggering and requires that every director be elected at the same time, “to be elected” accomplishes nothing. For the same result would be required if the section provided that “every stockholder shall have the right to vote, in person or by proxy, for the number of shares of stock owned by him, for as many persons as there are directors or managers ('t-e-be-ereeíed), or to cumulate said shares, * * On the other hand, if section 3 does not contemplate or involve any prohibition of staggering, but affirmatively contemplates the propriety of providing for staggered boards, the words “to be elected” have meaning. They accomplish a purpose and are not surplusage. For in that event they are a recognition that all directors need not be elected at the same time. Thus, every stockholder shall not have the right “to vote for as many persons as there are directors;” rather, he shall have the right “to vote for as many persons as there are directors to be elected.” Nor can the words “to be elected” be disposed of by asserting that they have no reference to a number that may be elected less than the whole, but merely identify the subject matter with respect to which the right to vote is exercised. For again that is to ascribe no meaning at all to the words. If all directors are to be elected at one time, “directors” identifies the “persons” in respect of whom the voting rights are assured. The addition of the words “to be elected” would then be completely unnecessary to identify the “persons.” The majority point out that the phrase “to be elected” also appears in sections 7 and 8 of article IV of the Illinois constitution, which deal with minority representation in the General Assembly, and cite this usage as an argument in support of the conclusion that these words do not have the meaning or significance ascribed to them by the appellants. Actually, the use of this phrase in said sections 7 and 8 aids the appellants’ position. These sections, after providing that three representatives shall be elected in each Senatorial District every two years state that “each qualified voter may cast as many votes for one candidate as there are representatives to be elected, or may distribute the same, or equal parts thereof, among the candidates, as he shall see fit.” Under this language, the intent is clear. Three representatives must be elected every tzvo years, and a voter can cast three votes for one candidate or distribute them or equal parts thereof among the several candidates if he sees fit. But section 3 of article XI neither fixes the number “to be elected” nor the time of their election. It would seem most reasonable to deduce from this that the framers of the constitution did not want the same type of protection in article XI as in article IV; hence, all mention of the number “to be elected” was omitted in article XI and said matter was left to the discretion of the legislature. In another effort to render inoperative the words “to be elected,” the majority point to the second part of section 3, which reads: “* * * or to cumulate said shapes, and give one candidate as many votes as the number of directors multiplied by the number of 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 or managers shall not be elected in any other manner.” They state that the words “number of directors” must be given their ordinary meaning, that is, the whole number of directors of the corporation. The error of this conclusion may be shown in several ways. First, the critical words in the second portion of section 3 are “candidate” and “candidates.” Webster’s International Dictionary (unabridged,) Second Edition, defines “candidate” as follows: “One who offers himself, or is put forward by others, as a suitable person or an aspirant or contestant for an office, privilege, or honor; as a candidate for governor; a candidate for holy orders.” In orders to be candidate for director or manager of a corporation, there must be an office or offices which the candidate or candidates are seeking. As applied to section 3, the offices which the candidates seek are the offices of director or manager to be elected. Therefore, it is clear that the right of cumulative voting exists only in favor of the number of offices or directors or managers to be filled at that particular election. Second, the majority’s conclusion is predicated upon a confusion of the two separate subjects covered by section 3. As applied to this case, the language deals with two subjects: (1) whom the stockholder may vote for, and (2) how many votes he may cast. The first of these subjects is defined in plain language, that is, he may vote “for as many person as there are directors or managers to be elected” or he can vote cumulatively for “one candidate” or distribute his cumulated votes “among as many candidates as he shall see fit.” The number of votes the stockholder may cast is also defined in this section. A stockholder is guaranteed the right to vote “the number of shares of stock owned by him” or to cast cumulatively “as many votes as the number of directors multiplied by the number of shares shall equal.” Since the words “number of directors” appear in that part of the section dealing with the number of votes, it certainly is an unwarranted construction to consider them as providing for the mandatory election of all directors at the same time. Third, although it is not necessary to prove the point, reference to the constitutional debates makes it clear that the proper interpretation of this portion of section 3 relating to the number of votes which can be cast cumulatively is the product of the number of shares times the number of directors to be elected. For example, the following colloquy appears in the debates (Constitutional Debates, p. 1666) : “Mr. Browning: ... If a shareholder owns ten shares of stock, and there are ten directors to be elected, has he the right to cast one hundred votes, according to the manner in which these things are now regulated — that is, ten votes for each director to be elected?” “Mr. Coolbaugh: I understand he has, or can cast all his votes for one.” “Mr. Browning: I made the inquiry because the section provides the number of shares held shall be multiplied by the number of directors to be elected. I did not know whether or not the mode of doing business is to give a man a number of votes equal to the number of shares he holds multiplied by the number of directors to be elected. But that being so, the section is all right as it is.” Fourth, even assuming that the number of votes which a stockholder can cast is the product of the number of shares times the “number of directors” '(i.e., all the directors), that would merely increase the voting strength of the minority and the majority proportionately and would not alter the result of the vote in any way. If there be any ambiguity in the formula for computing the number of votes that may be cast, resolution of that ambiguity should not be seized upon as an opportunity for writing into the section a provision on the altogether different subject of the number of directorships that must be voted on. The majority rely upon People ex rel. Watseka Telephone Co. v. Emmerson, 302 111. 300. The issue in that case was whether or not nonvoting preferred stock could lawfully be issued. This court quite properly held that section 3 guarantees a stockholder the right to vote for directors, and, therefore, such nonvoting stock could not lawfully be issued. The question of whether or not the whole number or a lesser number of directors are required to be elected at each annual election was not even considered. Therefore, I am convinced that from a proper analysis of this constitutional provision it can be conclusively demonstrated that the legislation under review is not unconstitutional. There is no express prohibition in the constitution against the classification and staggering provided for in the statute, nor can any such prohibition be logically implied. In my opinion, the words of the constitution, when taken in their ordinary signification, embody a definite meaning, which involves no conflict with other parts of the same instrument; therefore, the court should not refer to extrinsic matters to arrive at a proper interpretation. (11 I.L.P., Constitutional Law, section 25.) However, even when use is made of extrinsic matters to aid in arriving at the correct interpretation, it can be shown that the appellants’ position should be sustained. I refer initially to the contemporaneous and long-continued legislative and administrative construction of section 3 of article XI of the constitution which sustains the power of the legislature to provide for classification and election for staggered terms. The construction which the first legislature places upon a constitution is entitled to great weight. (People ex rel. Badger v. Loewenthal, 93 Ill. 191, 200; American Aberdeen-Angus Breeders’ Ass’n v. Fullerton, 325 Ill. 323; Cohens v. Virginia, 6 Wheat. (19 U.S.) 264, 418; The Laura, 114 U.S. 411, 416; Wisconsin v. Pelican Ins. Co. 127 U.S. 265, 297; Knowlton v. Moore, 178 U.S. 41, 56; Hampton & Co. v. United States, 276 U.S. 394, 412.) Mr. Justice Marshall, whom the majority also quote, expressed himself as follows in the Cohens case: “A contemporaneous exposition of the constitution, certainly of not less authority than that which has been just cited, is the judiciary act itself. We know that in the Congress which passed that act were many eminent members of the convention which formed the constitution. Not a single individual, so far as is known, supposed that part of the act which gives the Supreme Court appellate jurisdiction over the judgments of the state courts in the cases therein specified, to be unauthorized by the constitution.” In the first General Assembly elected following the adoption of the constitution of 1870 were thirteen men who were members of the convention which drafted the constitution. That General Assembly enacted a general corporation act, which provided for both cumulative voting and classification of directors. (Laws of 1871-2, p. 296.) This same General Assembly also passed an act for the incorporation of railroads. (Laws of 1871-2, p. 625.) This act made classification of railroad directors mandatory. They also adopted a building and loan corporation act, which provided for the classification of directors. (Laws of 1871-2, p. 173.) Moreover, the construction which the first General Assembly placed upon section 3 of article XI as permitting classification of directors continued unchallenged until the instant case, a period of eighty-three years. Furthermore, since 1870 the Illinois General Assembly has extended the principle of classification and staggered terms to a wide variety of public bodies and commissions. Section 9-33 of the Revised Cities and Villages Act provides for staggered terms for aldermen of cities organized under tfie Cjti,e_s and Villages Act adopting the mayor and city council plan. Such cities are authorized to adopt by referendum a plan of minority representation in the election of aldermen. This plan permits cities to be divided into not to exceed six aldermanic districts, with three aldermen to be elected from each district. Under the plan, the right of cumulative voting is provided for in the election of these aldermen. However, section 9-38 states that even where this system of cumulative voting is adopted, the city council, by ordinance, may continue the system of staggered terms for aldermen by electing aldermen from alternate districts each two years. Classification and election or appointment for staggered terms is also provided for aldermen, commissioners or trustees of cities and villages which adopt the city manager plan; for county school trustees; for members of the board of education of all school districts (except Chicago) having a population of more than 1,000 inhabitants; for commissioners of all park districts (except the Chicago Park District); for the trustees of the Sanitary District of Chicago; for directors of hospital districts; for directors of city libraries; for directors of libraries in commission form villages; for trustees of fire protection districts; for trustees of mosquito abatement districts; for members of the Illinois Commerce Commission; for members of the Industrial Commission; for trustees of the University of Illinois; for trustees of Southern Illinois University; for trustees of the Teachers’ College Board; for trustees of the Judges’ Retirement System (other than ex officio members); for trustees of the Chicago Police Retirement Board; and for the trustees of the Municipal Employees’ Retirement Board (other than ex officio members). So far as I have been able to find, there is no reported case in any court in this country in which the validity of any statute permitting or requiring classification of directors and their election for staggered terms has ever been challenged. The results of a survey made of 51 jurisdictions (the 48 States plus Hawaii, District of Columbia and the Federal government) disclose the following: 36 permit or require classification of directors, and 4 more probably permit such classification and election for staggered terms. Twenty-three jurisdictions have mandatory cumulative voting for directors either by statute or by constitutional provision, and 20 more have permissive cumulative voting if the articles of incorporation so provide. And 13 States have both mandatory cumulative voting and permissive classification of directors. While this does not, of itself, support the constitutionality of this statute, it does show that classification and election for staggered terms is widely prevalent, and the Illinois statute is similar to that in force in the majority of jurisdictions. Also, the Model Business Corporation Act (Uniform Laws Annotated, vol. 9, p. 52 and following), prepared by the Commissioners on Uniform State Laws and recommended for adoption by the several States, provides both for mandatory cumulative voting (section 28) and permissive classification of directors and their election for staggered terms (section 31). (See also Commissioner’s note, p. 117.) Indeed, in a number of instances classification of directors and their election for staggered terms has been deemed so important that such classification has been made mandatory. As has already been pointed out, classification and staggered terms are mandatory for railroad corporations in Illinois. (Ill. Rev. Stat. 1953, chap. 114, par. 8.) Such classification and staggered terms arc also mandatory for directors of Federal Reserve Banks (12 U.S.C. 308), Federal Savings and Loan Associations, (Title 24, Code of Federal Regulations, par. 142.9, par. 5 of Chapter K,) and National Farm and Loan Associations (12 U.S.C. 712). I turn next to that part of the majority opinion which discusses the “purpose sought to be accomplished by the provision” as garnered from excerpts from the conslitutional debates and “relevant data in the explanations which appeared in the press.” Much of this discussion centers around one individual, Mr. Joseph Medill, publisher of the Chicago Tribune. I do not believe there can be any question but that part of the evil sought to be suppressed by section 3 of article XI was the lack of any minority representation on corporate boards of directors. The object or purpose of section 3 was to provide a method whereby the minorities could have a fair opportunity to obtain representation. Such purpose can be gathered not only from Mr. Medill’s statements, editorials and newspaper articles, but from the language of the provision itself. Actually, other statements of Mr. Medill and articles appearing in the Chicago Tribune can be cited which indicate it was not thought that the purpose of section 3 of article XI was to prohibit the then well-known practice of classification of directors and their election for staggered terms and to require that the whole number of directors of a corporation be elected at a regular or annual election. In his speech in the constitutional convention in support of what later became section 3, Mr. Medill said: “I want at least a minority representation in the board of control and that is all that is sought here.” Moreover, his comments on the Corporation Act of 1872 show that he approved the act, section 3 of which provided both for cumulative voting and for classification of directors and their election for staggered terms. On April 5, 1872, the next day after the passage of the Corporation Act of 1872 by the General Assembly, the following news article appeared in the Chicago Tribune: “Corporations. The bill for the organization of corporations for pecuniary profit has at last passed both houses in a modified form, part of its provisions being taken from the Senate and part from the House bill. It is believed to be generally satisfactory.” The following day, April 6, 1872, an editorial appeared in the Chicago Tribune praising the General Assembly for its excellent work, which reads in part as follows: “Adjournment of the Legislature. The State Legislature, it is now announced, has so far completed its business that it will adjourn for the session on Tuesday next. In this connection, it is but an act of simple justice to give it the award of ‘Well done, good and faithful servants.’ It has not only consummated all, the legislation necessary to meet present wants, but it has also left but little legislation to be accomplished for a long time to come. In every respect, it is the most creditable Legislative Assembly which has convened in Illinois for many years.” Significantly, on April 9, 1872, the Chicago Tribune printed one half of the Corporation Act of 1872 on its editorial page and the next day printed the remainder of the act on its editorial page without criticism Or comment. The foregoing is strong, if not conclusive evidence, that Mr. Joseph Medill, the sponsor of section 3 of article XI of the constitution, did not regard the permission to classify directors and to elect them for staggered terms granted by section 3 of the Corporation Act of 1872 as conflicting in any way with section 3 of article XI of the newly adopted constitution. Finally, the majority state that cumulative voting and staggered elections are inconsistent and both cannot be given effect. But this could only be true if staggering and cumulating were contradictories or mutually exclusive. They are not inconsistent or incompatible, as both may clearly exist at the same time. Under this statute, where three of a board of nine directors are to be elected, a stockholder may vote cumulatively and give one candidate as many votes as he is entitled to cast, or distribute his votes among as many candidates as he shall think fit. This means that if he can vote 25 per cent of the stock plus one share, he can be certain of electing one of the three. Cumulating and staggering thus coexist. Neither destroys, contradicts nor conflicts with the other. The constitution requires no more.