Court Opinion

ID: 5448475
Source: CourtListenerOpinion
Date Created: 2022-01-08 18:15:09.168726+00
Date Added: 2024-06-11T08:32:17.341177
License: Public Domain

Beatty, C. J., dissenting.
I dissent from the judgment and from the conclusions of the court on both of the principal points decided.
The contract between Smith, Markham, and Foster was, in my opinion, void as against the policy of the law giving to the holders of a majority of the stock of a corporation the right of control. Its sole purpose and object was to give to a minority of the stockholders the power to control the affairs of the corporation against the will of the majority, and that object is secured by means of this judgment. There is not time at my command to go over the decisions, but I am satisfied that the weight of authority is against the validity of any contract by which the sole owner of stock parts irrevocably with the 'right to vote it, with the effect of putting a minority in control of the corporation. As to the power of the chairman of a stockholders’ meeting to refuse the vote of a registered stockholder upon the ground that he is not the bona fide owner of the stock standing in his name, I deny that it exists. As I construe sections 307 and 312 of the Civil Code, the registered stockholder must be allowed to vote; and if there is a claim that he is not the real owner of the stock which he has voted, that claim must be asserted and the remedy sought in the proceeding defined in section 315. To hold otherwise is to invest the chairman of the meeting with a power capable of the grossest abuse, and in its nature purely arbitrary; for there is neither time nor means of trying the question of ownership at the meeting. Nor is there any necessity for investing the chairman or the members present with any such power. The real owner of stock can always have it properly transferred and registered, and the failure to .do so is his own fault. Or, if a case may sometimes arise in which the right of the owner.to have the stock transferred on the books is delayed or impeded, he may enjoin the apparent, owner from voting it. In other words, he has his remedy in his own hands in most *610cases, and in the rare instances in which it is otherwise the courts will afford him a remedy. But there is no adequate remedy for the registered stockholder whose vote is excluded merely because the chairman of a stockholders’ meeting may choose, without notice; without pleading, and without evidence, to sustain an objection of some other stockholder that he is not really the owner of stock which appears to be his.
In this case, however, the objection was made by parties who themselves had no claim to the stock offered to be voted. It had been legally issued and regularly trans-' ferred by the owner to the persons in whose name it stood on the books, and the objection was that they were dummies to whom it had been transferred for the purpose of avoiding the stockholders’ liability to creditors, etc. This was not, in my opinion, a valid objection to the right of the holders of the stock to vote it. The owners had a right to put it in the hands of trustees, and their motive for so doing was not open to inquiry for the purpose of this election. Creditors of the corporation could not be deprived of their action against the real owners by the transfer, nor could the corporation be deprived of its right to collect assessments; but only the creditors and . the corporation coujd question the transaction, and they only in a proper proceeding for the enforcement of their rights.
liehearing denied.