Court Opinion

ID: 8180049
Source: CourtListenerOpinion
Date Created: 2022-09-09 22:31:18.946382+00
Date Added: 2024-06-11T16:40:08.685591
License: Public Domain

Given, Judge,
dissenting:
Being of the very definite view that the Court has unnecessarily struck down a statute of long standing and great usefulness and, in doing so, unnecessarily precludes the use and application in this State of an important principle of corporation law, one that has long been recognized and applied in this State, I must attempt to state the bases of my dissent. To indicate the sharp, abrupt impact that may be expected to the heretofore existing practice of issuing stock with limited voting rights, it may be pointed out that since 1948 approximately one hundred twenty corporations have been granted charters containing provisions authorizing the limiting of rights of stockholders to vote, and that between the time of the adoption of the Constitution and 1948, several hundred other corporations have been authorized by the State to issue such stock. Unless precluded by Section 4 of Article XI of the Constitution, a stockholder may be limited as to his right to vote his stock. “A stockholder has no right to vote at corporate meetings, whether the stock is common or preferred, if it is so stipulated when the stock is issued, for the stipulation is then a term of his contract * * Vol. 3, Private Corporations, Page 1996, Clark and Marshall. See 2 Thompson on Corporations, 3 Ed. Section 949.
It appears unmistakably plain to me that the majority have applied the force of Section 4 of Article XI to a situation not actually dealt with and not actually intended to be covered by the language thereof. By its own terms, that section of the Constitution, quoted in the majority opinion, relates to the “Rights of Stockholders”, not to restrictions placed on the legislative branch of the government with reference to its powers of controlling the organization or constitution of private corporations. The only such restrictions were placed in Section 1 of the same article: “The Legislature shall provide for the organization of all corporations hereafter to be created, by general laws, uniform as to the class to which they relate; but no corporation shall be created *469by special law * * “Rights of Stockholders”, dealt with by Section 4, can not arise until a time subsequent to the creation of the corporation. A stockholder can acquire such rights only by subscribing to the articles of incorporation, as an organizer, or by the purchase of stock, the terms of such purchases being usually set out in the articles of agreement contained in the charter. The matter of the creation of a private corporation is one between the State and the incorporators. The “Rights of Stockholders” among themselves is a wholly different thing, and is what is intended to be regulated by Section 4 of Article XI. I need not, of course, cite authorities to the effect that the power of the Legislature with reference to the chartering of private corporations is limited only by applicable provisions of the Constitution.
The evil sought to be avoided by Section 4 of Article XI, and this is clearly demonstrated in the majority opinion, was to prevent a majority of stockholders depriving a minority of rights and property by prejudicially or selfishly manipulating the business affairs of the corporation. Such evil was attempted to be avoided by Section 4 by guaranteeing unto the minority stockholders the right to vote for directors and managers cumulatively and distributively, in accordance with the rights acquired by them respectively, in the purchase of their shares of stock, and not to prevent the issuance or purchase of shares of stock upon any particular condition or limitation relating to the right to vote. In other words, the intention of Section 4 is to protect the rights of minority stockholders as to such rights as were acquired by them in the purchase of stock, and not to deny them the right to freely contract as to what rights should be or should not be included in the purchase agreement. The language of Section 4, to me, at least, makes this conclusion irrefutably certain. I think, too, that the attempt of the majority to analyze the language of that section clearly demonstrates its lack of application to any question relating to the issuance or purchase of stock, or to the creation or organization of any corporation, but establishes that it relates only to the “manner” *470of voting in accordance with rights inherent in the contract of purchase.
As above noticed, by its own language Section 4 attempts to regulate only “Bights of Stockholders” in the “manner” of voting for directors or managers, and not the “manner” in which the Legislature may exercise its power relating to the creation or organization of corporations. Notice, too, the cautious absence from the language of any limitation on such legislative power. Only the “manner” of the voting, “in person or by proxy”, cumulatively and distributively, of “stockholders”, is mentioned, and that alone can be the purpose or object of the language. Yet the majority read into the section a wholly different purpose, a purpose foreign to the stated object of the section. Only by doing so can they reach the conclusion that the pertinent statutory provision is unconstitutional. Is it not incontestably certain that had the framers of the constitutional provision attempted or intended to limit the right or power of the Legislature in the respect indicated by .the majority, they would have done so in language not involving rights of stockholders to vote cumulatively and distributively, rights entirely foreign to any question of legislative power, and would have made such attempt in the section specifically designed to define such limitations?
Although I agree that the language of Section 4 is clear and unambiguous, I am of the view that the conclusion reached by the majority is not in accord with the plain language used, and that such conclusion can not be reached save on the basis of ambiguous language, for the simple reason that the majority imply or import thereto a meaning not found therein, not related to the subject thereof, but entirely foreign to the matters dealt with. It may also be pertinent to note that the plain intent accorded the language by the majority opinion is not the plain intent accorded it by almost every Legislature of this State since the adoption of the Constitution, as will be hereinafter shown; by every administrative officer heretofore charged with the duty of issuing cor*471porate charters; by at least two prior decisions of this Court; by the hundreds of members of the Bar of this State who have assisted in the organization of numerous private corporations; and by decisions of the highest courts of several jurisdictions. In such circumstance, the rules relating to construction and interpretation of ambiguous language should be applied. One of such rules relates to long-time practical construction and application of such a provision. “3. If this construction of said constitutional provisions could be regarded as being doubtful, the doubt would have to be resolved in favor of such legislative power, and legislative construction thereof, made manifest by the exercise of such power throughout a long period of years, acquiesced in by the people of the State and its courts, would now forbid judicial disturbance thereof.” State ex rel. Hallanan, State Tax Commissioner v. Rocke, Assessor, 91 W. Va. 423, 113 S. E. 647. The “* * * practical construction given to the laws by public officials is entitled to, and has, great weight with us. City of Norfolk v. Bell, 149 Va. 772, 780, 781, 141 S. E. 844; South East Public Service Corp. 1. Com., 165 Va. _, 181 S. E. 448, 452.” Hunton v. Commonwealth, 166 Va. 229, 183 S. E. 873. See State Road Commission v. County Court of Kanawha County, 112 W. Va. 98, 163 S. E. 815.
The petition herein alleges, in effect, and the demurrer thereto admits, that since about 1872, the date of the adoption of the Constitution, of which the questioned provision is a part, it has been the general and universal custom and practice of the State, through its proper officials, to issue corporate charters authorizing the issuance of stock, limiting the rights of holders thereof as to voting rights. In so far as the record in this case is concerned, in not one single instance was that universal administrative practice questioned, between the time of the adoption of the Constitution and the time of the institution of this action. The legislative policy is just as clear and definite.
In 1864, before the adoption of the present Constitu*472tion, the Legislature of the State, by Chapter 43, Section 1, provided that “stockholders of any corporation * * * may, by by-law or regulation * * * provide for the issue of preferred stock, upon such terms and conditions * * *” as the parties “may see fit to prescribe or agree * * Section 16 of Chapter 96 of the Acts of 1882 authorized the issuance of stock “on such terms and conditions * * *” as the stockholders “may deem proper”. This language of Section 16 became part of Chapter 53, Section 16 of the Warth, 1891 Code, and of Chapter 53, Section 16 of the Warth, 1899 Code.
By Chapter 35, Section 16 of the Acts of 1901, the language of old Section 16 was amended to read: “The agreement of incorporation and the certificate of incorporation issued by the secretary of state, or the stock holders in general meeting, by a resolution or bylaw, may provide for or authorize the issuing of preferred stock on such terms and conditions, and with or without the right to vote in stockholders’ meeting * * This language became a part of the language of Section 16 of Chapter 53 of the Code of this State of 1906, of the Code of 1913 and of the Code of 1923, and remained the law of this State until the adoption of the 1931 Code, 31-1-22, the pertinent language of which was then amended to read: “Every corporation * * * shall have power to issue one or more classes of stock or one or more series of stock within any class thereof * * * with such voting powers, full or limited, or without voting powers * * * as shall be stated and expressed in the charter, or in any amendment thereto, or in the resolution or resolutions : * Such change has remained a part of the Code since 1931. Thus, there can be no wondering doubt as to the universal legislative policy relating to the practice of the State, through its administrative officers, in the issuing of corporate charters containing agreements limiting the rights of stockholders to vote, or as to the legislative intent relating to such policy from the time of the adoption of our present Constitution until this date.
The constitutional provision involved, Article XI, sec*473tion 4, was considered by this Court in Germer v. Triple-State Natural Gas & Oil Co., 60 W. Va. 143, 54 S. E. 509, and Cross v. W. Va. Cent. & Pa. R’y. Co., 35 W. Va. 174, 12 S. E. 1071. In neither of these cases was the exact question here involved considered by the Court. The Court, however, clearly treated the constitutional provision as one relating to the manner of the exercise by stockholders of the right to vote, that is, cumulatively and distributively, and not to the limiting of powers of the Legislature. This seems to be made certain by the following language used in the opinion in the Cross case, speaking of the last clause of the constitutional provision : “I see no reason why this latter clause should not be construed as of its own force controlling the manner of electing directors under this charter prospectively. But if it needed legislative enactment to put this constitutional provision in force this was made in the language of the constitution by act of December 20, 1873. See Acts 1872-73, c. 181, p. 535. This was re-enacted in the general law of March 14, 1881. See section 56, c. 17, Acts 1881; also section 67, same act * * Thus, we have had not only a uniform administrative and legislative policy existing from the time of the adoption of the Constitution, but the clear sanction of this Court as to the unquestioned practice of the State, through its administrative officers, to authorize the issuance of corporate stock with limited voting rights, for the same period of the history of our State.
In State ex rel. Frank v. Swanger, 190 Mo. 561, 89 S. W. 872, 2 L.R.A., N.S., 121, in considering the identical question here considered under a constitutional provision to the same effect as the constitutional provision here involved, the Court held: “Under Rev. St. 1899, §§1312, 1332, as amended by Laws 1901, pp. 91, 92, and Section 1333, conferring on the stockholders power to issue preferred stock, and to fix its preferences, priorities, classification, and character, the stockholders of a corporation were entitled to provide that preferred stock should not carry voting power, notwithstanding Const, art. 12, §6, and Rev. St. 1899, §953, providing that at *474all elections for directors of a corporation 'each stockholder’ shall be entitled to cast as many votes as he has shares in the company, and Const, art. 12, §§8 and 12, providing that the stock shall not be increased without the consent of the holders of the larger number in value of the stock, and that preferred stock shall not be issued without the consent of all the stockholders.” In the opinion, the Court said: “* * * Properly understood, we think section 6, art. 12, of the Constitution means only that every stockholder entitled to vote at any corporate election is entitled to vote his share on the cumulative plan, but does not mean that the stockholders themselves in the organization of the company may not voluntarily agree that certain preferred stock shall be issued and that the holders thereof shall not have the right to vote, Wright v. Central California Water Company, 67 Cal., loc. cit. 535, 8 Pac. 70. When we recall the historic setting of this provision in our organic law, and the obvious purpose of its insertion therein, we can discover no intention to take away a long-established right of stockholders at common law to make their own agreements, as long as they did not collide with some settled principle of law, organic or statutory, and which does not contravene public policy, but concerned themselves only. Miller v. Ratterman, 47 Ohio St. 157, 24 N. E. 496; Re Newark Library Ass’n, 64 N. J. Law, 219, 43 Atl. 435. This view is reinforced by the construction placed by courts in the United States upon the nature of preferred stock * * In addition to the cases cited in the above quotation from the opinion in the Swanger case, see E. K. Buck Retail Stores v. Harkert, 157 Neb. 867, 62 N. W. 2d 288; General Investment Co. v. Bethlehem Steel Corp., 87 N. J. Eq. 234, 100 A. 347.
Assuming, however, that the intention of the framers of the Constitution was to prohibit the State from issuing a charter to a private corporation authorizing the issuance of stock possessed of limited voting rights, and that the language of Article XI, Section 4, actually means just that, I think there remains no valid reason why the stockholders of a private corporation can not waive such *475constitutional right, by an express agreement to that effect, either in the articles of incorporation or by a purchase of stock contract. I need cite no authorities to the effect that, with certain exceptions not here pertinent, constitutional rights may be waived, if done with intelligent understanding. Even those charged with serious criminal offenses are usually permitted to do so.
As has often been noticed, any question as to public policy is one for the Legislature, not one for the Courts. No one would contend, of course, that any constitutional provision should be permitted to be whittled away by public or legislative policy, or otherwise, but all authorities agree that long uniform administrative interpretation and practice, concurred in by the public, and clearly approved by legislative policy, with reference to the meaning of a constitutional or statutory provision, should be given great weight by the Courts when faced with the duty of determining the meaning of the language of such provision. I think the rule especially applicable where, as here, the result of a change in the long established practice and policy will almost certainly result in driving corporations from the State, prevent others from coming into the State, and deprive citizens of advantages and profits to which they would otherwise be entitled. The resulting damages to the State and its citizens will be, in quantity, vast and incalculable, and hopelessly irreparable.
Being of the views indicated, I respectfully dissent.