text:
    THE STATE ex rel. FRANK et al. v. SWANGER, Secretary of State.
    In Banc,
    October 25, 1905.
    1. CORPORATION: Preferred Stock: Voting Power. It is competent for the articles of association of a corporation to provide that one-half the stock shall he common and the other half preferred, and that the voting power shall he vested exclusive- . ly in the common stock, the holders of the preferred “expressly waiving any right to vote the preferred stock at the election of directors or on any question or to participate.in stockholders’ meeting's.” Incorporation cannot he denied to a company because its articles contain such a provision.
    2. -: -: Public Concern. Such a provision is hut an arrangement between two classes of stockholders that does not concern the public. It does not violate any rule of the common law or any rule of public policy.

      3. —--: -: Reasonableness. Nor is such an arrangement unreasonable. The promise being first to award to the preferred stockholders the net earnings, the holders of the common stock to share in such of the net earnings as they might by good management be able to make over and above the given dividend, the burden is upon them to make the business a success, and the power of management may fairly be left with them, and their interest in the success of the corporation and their liability to first satisfy the preferred stockholders are a sufficient guaranty that they will manage its affairs to the best advantage.
    4. -: -: Mattel-of Agreement. Such an arrangement being a matter of convention between the stockholders, and not being violative of any rule either of the common law or of public policy, will not be held to 'be illegal unless it violates some express provision of the organic or statutory law.
    5. -: -: Constitution. A provision in the articles of association vesting the holders of the commiQ)k_stock of a corporation with the exclusive power of voting and excluding the holders of preferred stock, though one half of the whoJ^, from any participation in the election of directors and from participating in stockholders’ meetings, is not prohibited by the clause of the Constitution that says “that each stockholder shall haveKthe right to cast as many votes as shall equal the number of iys shares.” The purpose of that clause was to introduce thS principle of cumulative voting in the election of directors, so ’> as to secure to the minority stockholders a voice in the management of its affairs, in the proportion to the number of shares held by each, thereby supplanting the common law right of a stockholder to vote one vote irrespective of the number of shares held by him. That clause means that every stockholder entitled to vote may. vote his stock on the cumulative plan. It has no reference to the contractual right of the stockholders inter sese.

      ' 6. -: : : Life of Law. The reason for a law is its life.
    7. -: : : Purpose. In construing a law, courts look to the purpose had in view when it was enacted.
    Mandamus:
    PEREMPTORY WRIT AWARDED.

      J. G. Harper, D. W. Voyles and Silver & Brown for relators.
    (1) The Constitution recognizes preferred stock, hut provides that it shall not he issued without the- consent of all the stockholders. Art. 12, sec. 10. This requirement is complied with in the case at har. (2) At common law, it was well recognized that the voting power might he withheld from the preferred stock and vested exclusively in the common stock. In England and in this country the limitation of its voting power was one of the well-recognized characteristics of preferred stock. Cook on Corp. (5 Ed.), sec. 622b; Clark & Marshall, Priv. Corp., sec. 652; Campbell v. Poultney, 6 Grill & J. 94; Webb v. Ridgley, 38 Md. 364; Mack v. DeBardleben, etc., Co., 90 Ala. 410; Com. v. Detweiler, 131 Pa. St. 614; State v. Hunton, 28 Vt. 594; In re Steel Co., L. R. 39 Ch. Div. 603; Miller v. Ratterman, 47 Ohio St. 157. In Ohio there existed the same cumulative-voting law as is found in Missouri. Sec. 3245, R. S. Ohio, as amended April 23, 1898 — 61 Ohio St. 497. (3) In order to deprive stockholders of their common-law right to contract as to which class of stock and under what conditions it shall possess the voting power, there should be a clear and express legislative intention to take away such right. On the contrary, the Missouri statute of 1901 expressly recognizes the right of the stockholders to determine the “character” of the stock, whether voting or non-voting. Laws 1901, p. 91. (4) The cumulative-voting provisions of the Constitution and statutes of Missouri in nowise militate against this view. Clark & Marshall, Priv. Corp., sec. 655; State ex rel. v. McGann, 64 Mo. App. 232; "Wright v. Water Co., 67 Cal. 535. (5) This court has recently had before it the question whether another section of the article of the Constitution dealing with corporations should be given a literal application in every case, or whether it should be given a common sense meaning and made to subserve the purpose of its being. Section 8 requires that sixty days’ notice must be given before a corporation can increase its stock or bonded indebtedness. It was contended that this provision was for the public benefit and could not be waived by the stockholders. This court, though, held that the provision was for the benefit of the stockholders alone, and could be waived by them. Riesterer v. Land & Lumber Co., 160 Mo. 141, overruling State ex rel. v. McGrath, 86 Mo. 241; State ex rel. v. Cook, 178 Mo. 189. (6) “The method of voting prescribed in the charter is part of the contract between stockholders. It relates to the manner of controlling the association and its property represented in then-shares as between themselves. It in nowise affects the public.” Re Newark Library Assn., 64 N. J. L. 219; State ex rel. v. Greer, 78 Mo. 188; Printing, etc., Co. v. Sampson, L. R. 19 Eq. 465; Besant v. Wood, L. R. 12 Oh. Div. 605; Smith v. Railroad, 115 Cal. 600; State v. Tie and Timber Co., 181 Mo. 536; Rumsey v. Railroad, 154 Mo. 246. (7) Mandamus is the proper remedy. State ex rel. v. Cook, 178 Mo. 189.

      Herbert 8. Hadley, Attorney-General, John Kennish, Assistant Attorney-General, and W. C. Irwin for respondent.
    (1) This is not a question solely of the rights of the incorporators inter sese, in which the public is not concerned, but rather a question in which the public is vitally concerned and has rights that cannot be overlooked. Secs. 1, 8 and 10, art. 12, Const.; sees. 947, 953,. R. S. 1899. (2) Thequestion arises, Can a majority of the stockholders set aside and annul the plain provisions of the statute (sec. 953, R. S. 1899), and thereby deprive any of its shareholders, whether the holders of common or preferred stock* of the right to participate in the business affairs of the corporation? Tomlin v. Bank, 52 Mo. App. 430; State ex rel. v. McG-ann, 64 Mo. App. 225; Gregg v. Granby Min. & Smelt. Co., 164 Mo, 625; Clark & Marshall, Corp., p. 1997. (3) The Secretary of State should not he required to pass upon the legality of any contract interested parties may seek to insert in the articles of association for the incorporation of any company, hut he must see that the law is complied with.
   GANTT, J.

This is an original proceeding brought by the plaintiffs, in this court at its April term, 1905, to obtain a peremptory-writ of mandamus directed to Hon. John E. Swanger, Secretary of State, requiring him to issue a certificate of incorporation to the “Star-Chronicle Publishing Company.” The petition, omitting caption, is in the words following; “Your petitioners Nathan Frank, Milton A. McRae, J. C. Harper, Robert F. Paine, F. W. Hunsicker, August, Frank and John M. Her tel (relators herein), state and say as follows: That John E. Swanger is now and has been, since ’ on or about January 1,1905, the Secretary of the State of the State of Missouri, duly qualified and acting as such officer. That on the 2nd day of .June, 1905, last past, your petitioners did execute articles of agreement for the incorporation of a business corporation (pursuant to and under article 9 of chapter 12 of the Revised Statutes of 1899 of this State), under the name and style of the ‘ Star-Chronicle Publishing Company. ’ That said articles of agreement duly set forth the said name of the contemplated corporation, the place of its location, viz., in the city of St. Louis, Missouri; the names and places of residences of the several shareholders; the number of the board of directors (consisting of seven shareholders) and their names for the first year after the incorporation; the duration of the corporation, viz., for a term of fifty years; the purpose of the corporation, viz., the printing and publishing of one or more newspapers, magazines and other publications and all business usually connected therewith; amount of capital stock of the intended corporation, viz., $500,000, divided into shares of the par value of one hundred dollars each, that the same was bona fide subscribed and all thereof actually paid up in lawful money of the United States, and that the same was in the custody of the persons named in said articles of agreement as the first board of directors of said proposed corporation, they being the same persons as your petitioners herein.

“That said articles of agreement further provide that 2,500 of said shares shall be preferred stock, and that the remaining 2,500 shares shall be common stock.

“That the holders of said common and preferred stock shall have the preference, classification, character and rate of dividends as follows: ‘ The holders of the preferred stock shall be entitled to receive out of the surplus or net earnings, and the corporation shall be bound to pay thereon as and when declared by the board of directors, a dividend at the rate of six per centum per annum, cumulative from and after the issue of such stock, payable monthly unless otherwise ordered by the board of directors, before any dividend shall be set apart or paid on the common stock; provided, however, that' after the payment in full of all dividends on the preferred stock, and so long as a dividend of six per cent is paid each year on the preferred stock, the directors shall have the power then and thereafter to declare and pay from the net earnings, dividends on the common stock until it has received the same amount of dividends as have been paid on the preferred stock, and no further dividend shall be paid on the preferred stock until the common stock has received an equal amount of dividends, calculated cumulatively from the date of the issue of stock, and thereafter the preferred and common stock shall be entitled to share ratably in all dividends declared in excess of the preferential dividend of six per cent to be paid on the preferred stock and a like amount on the common stock'; provided, always, that dividends may be declared from the net earnings only, and from such net earnings the preferred stock shall receive preferentially and cumulatively a dividend of six per cent per annum, and the common stock shall at no time be entitled to a dividend until all arrearages of such dividends have been paid to the holders of the preferred stock. The voting power shall be vested exclusively in the common stock, and at all meetings of the stockholders, and at all elections for directors, each holder of common stock shall be entitled to one vote for each share of common stock held by him and registered on the books of the company; and the preferred stock shall have no voting power, the holders thereof expressly waiving any right to vote the preferred stock at elections for directors or on any question, or to participate in stockholders’ meetings.’

That said articles of agreement were on the second day of June, 1905, last past, duly subscribed and acknowledged by your petitioners, before Laura L. Sutton, a notary public for and within the city of St. Louis aforesaid, and after being so subscribed and acknowledged, said articles were, on June 5, 1905, filed in the office of Paul Young, Jr., recorder of deeds for the said city of St. Louis, and were, by said recorder on said day last aforesaid, recorded in corporation book 28, page 207, of said recorder’s office. That a duly certified copy of said articles of agreement, as recorded in the office of said recorder of deeds of the city of St. Louis, are attached to this petition, marked ‘ Exhibit A. ’

“That thereafter, and on June 5, 1905, your petioners did present to and file in the office of said John E. Swanger, Secretary of State, aforesaid, a copy of said recorded articles of agreement, duly certified to by the recorder of deeds of the city of St. Louis, and did tender at the same time the sum of $277.50, as the necessary incorporation fees in the premises, and did request the said John E. Swanger, as Secretary of State aforesaid, to issue a certificate that said corporation, contemplated in the articles of agreement aforesaid, viz., of the Star-Chronicle Publishing Company, was duly organized, with the amount of its capital stock.

“That notwithstanding the premises herein and the provisions of section 1314 of the Revised Statutes of 1899 of this State, the said John E. Swanger, as said Secretary of State aforesaid, did decline and refuse to issue and does still decline and refuse to issue said certificate of corporation as requested by your petitioners. That under and by virtue of the provisions of article 9, chapter 12, of the Revised Statutes of 1899, and of other provisions of said statutes and of the Constitution of the State applicable to the premises herein, it was the legal duty of said John E. Swanger as said Secretary of State aforesaid, to issue said certificate of incorporation as required by your petitioners. "Wherefore, your petitioners, being without other adequate remedy, pray the issuance by the Honorable Supreme Court of Missouri of an alternative writ' of mandamus directing the said John E. Swanger, as said Secretary of State aforesaid, to issue said certificate of incorporation hereinbefore referred to or to show cause at some early day, to be named by this court, why he has not done so, and your petitioners pray for such other and further relief to which, by reason of the premises, they may be entitled. ’ ’

The respondent entered his voluntary appearance by the Attorney-General and filed a demurrer to the alternative writ, on the ground that the petition and alternative writ did not state facts sufficient in law or equity to entitle the petitioners to the relief sought.

The cause was heard orally and by briefs, at the April term, 1905, and a judgment rendered awarding a peremptory writ of mandamus, but for want of time no written opinion was filed, and this opinion is now handed down, expressing onr reasons for granting the writ.

I. The refusal of the Secretary of State to grant a certificate of incorporation is based upon the following provisions in the third clause of the articles of incorporation, to-wit: ‘ ‘ The voting power shall be vested exclusively in the common stock, and at all meetings of the stockholders and at all elections for directors, each holder of common stock shall he entitled to one vote for each share of common stock held by him and registered on the hooks of the company; and the preferred stock shall have no voting power, the holders thereof expressly waiving any right to vote the preferred stock at elections for directors or on any question, or to participate in stockholders’ meetings.”

It is insisted by the Secretary of State that the above provision in the articles is in violation of the Constitution and laws of this State. The sections of the Constitution and of the Revised Statutes of this State invoked by him in justification of his refusal to approve the articles are these:

Section 6 of article 12 of the Constitution provides as follows: “In all elections for directors or managers of any incorporated company, each shareholder shall have-the right to cast as many votes in the aggregate as shall equal the number of shares so held by him or her in the said company.”

Section 8 of article 12 of the Constitution provides, in part, as follows,:

“The stock and bonded indebtedness of corporations shall not be increased, except in pursuance of general law, nor without the consent of the persons .holding the larger amount in value of stock first obtained at a meeting called for that purpose.”

Section 10 of article 12 of the Constitution provides as follows:

“No corporation shall issue preferred stock without the consent of all the stockholders. ’ ’

Section 947, Revised Statutes 1899, provides, in part, as follows:

“And all shares that may appear standing thereon in the name of any person or persons shall be voted by such person or persons, directly by themselves or by proxy. Persons holding stock as executors, administrators, guardians or trustees, or who have pledged their stock, shall be entitled to vote upon such stock. ’ ’

Section 953, Revised Statutes 1899, provides as follows:

' “In all elections of directors or managers of any incorporated company, each shareholder shall have the right to cast as many votes in the aggregate as shall equal the number of shares of stock so held by him or her in said company. ”

An examination of these several provisions of our organic and statutory laws and others in pari materia in the light of accepted common-law principles, must determine this controversy.

“At common law it was and is legal, upon issuing preferred stock, to impose a condition that such stock shall not have a right to vote. There is no rule of public policy which forbids a corporation and its stockholders from making any contract they please in regard to restrictions on the voting power. ’ ’ [2 Cook on Corporations (5 Ed.), sec. 622b; Clark & Marshall, Private Corporations, p. 1320.]

The decided cases support this statement of the law. In In re Barrow Haematite Steel Co., L. R. 39 Ch. Div. 582 (1888), at p. 603, North, J., said:

“Again, it is said to be unfair that preference shareholders should be affected by the passing of resolutions [to reduce the capital stock] by the votes of ordinary members of the company, the preference shareholders themselves being excluded by contract from any power of voting. I think the answer is, that it is by contract that they are excluded — it is part of the bargain with them. They were content to take their shares subject to the regulations of the company, although they knew that those regulations might be altered by the votes of the persons whose votes they could not influence — at any rate directly — by taking part in the voting themselves. I do not, therefore, see that what is proposed is in 'any way inequitable or unjust, and my view is confirmed by this fact, that a very large majority of the preference shareholders themselves are of the same opinion. ’ ’

In Miller v. Ratterman, 47 Ohio St. 141 (1890), at p. 157, the court said: “It [the resolution authorizing the preferred stock] further stipulates that the holders of the certificates of stock shall not have or exercise the right to vote the same at the meeting of the stockholders of the company, thus indicating that it was stock they intended to authorize the issue of, and not certificates of indebtedness, for the inhibition against voting would be wholly useless had it been intended that the holders should become creditors. The provision is not unusual. Nor is it in this instance unreasonable. The promise to the preferred stockholders was to award them the first net earnings, the holders of the common stock to share in such of the net earnings as they might, by good management, be able to make over and above eight per cent. As the burden was upon the common stockholders, the power to manage might fairly be left with them. In cmy view} it is fair to treat the proviso as but an arrangement behveen two classes of stockholders which did not concern the public. It is true that one characteristic of stock generally is that it can be voted upon. But this is not essential. Indeed, instances may arise where it is good policy to prohibit the voting upon the stock. [Ryan v. Railroad, 10 A. L. Rec. 263; Ex parte Holmes, 5 Cowen 426; Railway Frog Co. v. Haven, 101 Mass. 398; State ex rel. v. Hunton, 28 Vt. 594.]

In that case there was no express statutory authority to withhold the voting power (see the act in full, 47 Ohio St. 145 and 146). In the case at bar, as in that case, the common stock gets no part of the net earnings until the preferential dividend, cumulatively, is paid to the preferred stock. ‘ ‘ As the burden was upon the common stockholders, the power to manage might he left fairly to them. In any vieiv, it is fair to treat the proviso as but an arrangement between two classes of stockholders which did not concern the public.” In Ohio, there existed the same cumulative voting law as is found in Missouri. [Sec. 3245, R. S. Ohio, as amended April 23, 1898-61 Ohio St. 497.]

By an act of the General Assembly of this State, approved April 9, 1901 (Laws 1901, p. 91), section 1312, Revised Statutes 1899, was amended so as to provide: ‘ ‘ Section 1312. Any three or more persons who shall have associated themselves, by articles of agreement, in writing, as provided by law, for any of the purposes- included under section 1319, may he incorporated under any name or title designating such business. The articles of agreement shall set out: First, the corporate name of the proposed corporation, which shall not be the name of any corporation heretofore incorporated in this State for similar purposes, or an imitation of such name; second, the name of the city or town and county in which the corporation is to be located; third, the amount of the capital stock of the corporation, the number of shares into which it is to he divided, and the par value thereof, that the same has been bona fide subscribed, and one-half thereof actually paid up in lawful money of the United States, and is in the custody of the persons named as the first board of directors or managers; fourth, the names and places of residence of the several shareholders, and the number of shares subscribed by eacb; fifth, tbe number of tbe board of directors or managers, and tbe names of those agreed upon for tbe first year; sixth, tbe number of years the corporation is to continue, which in no case shall exceed fifty years; seventh, the purposes for which the corporation or company is formed: Provided, that if upon organizing a corporation under this article it is desired that any portion of the stock shall be preferred, the articles shall further set out the.amount of such preferred stock, the number of shares thereof, the names of the subscribers therefor, the number of shares of such stock subscribed by each subscriber therefor, and the preferences, priorities, classifications and character thereof as provided in section 1332 of the Revised Statutes of Missouri 1899, as amended by section 2 of this act.”

Section 1332, Revised Statutes 1899, was amended so as to provide: ‘ ‘ Section 1332. Whenever any corporation shall desire to call a meeting of its stockholders for the purpose of increasing the amount of its capital stock, and the directors thereof shall deem it advisable for the best interest of said company to submit, at the time and place of said meeting, to the stockholders, whether any part of said stock so proposed to be increased shall be preferred, and the amount, number of shares, the price per share, in case an increase shall be determined, and also the priorities, preferences and character thereof, and the different classes of preferred stock, if any, and in case additional notice to such effect shall have been given for the time as required by this article, for the purpose of increasing said capital stock, then, if on canVassing the votes of the said stockholders, as required by this article, it shall appear that all the stock of said company shall have been cast for the increase of the stock, and that all the stockholders have voted that any part of the said increased stock shall be preferred, the said stockholders shall also, at said time and place, by like vote, determine the character, amount, the number of shares, and the price per share of said increase, and what rate of dividend, not exceeding eight per cent per annum, shall be paid on said preferred stock out of the net earnings, and whether such dividends shall be cumulative or not, and what priority, if any, any class of such preferred stock shall have over the common stock or other preferred stock out of the assets of the corporation in case of its dissolution or liquidation. ’ ’

Amended section 1333 reads as follows: ‘ ‘ Sec. 3. That section 1333, Revised Statutes 1899, be and the same is hereby amended by striking out in line five thereof, the word ‘increase’ and by inserting in line five thereof, between the wprds ‘ stock’ and ‘ and, ’ the following: ‘And the preferences, priorities, classification and character thereof;’ so that said section, as amended, shall read as follows:

‘ ‘ Section 1333: The statement required by section 1329 of this article, in case said capital stock shall be increased in the manner provided in the foregoing section, shall also set forth the amount and the number of shares, the price per share of such preferred stock and the preferences, priorities, classification and character thereof, and also the rate of dividend to be paid thereon.”

By the express provisions of these sections as thus amended, power is conferred upon the stockholders in forming a corporation in the first instance, or after-wards upon a call for that purpose, to issue preferred stock, prescribe the number of shares of such stock and fix the preferences, priorities, classification and character thereof. With this ample power conferred upon them, why may not the stockholders in determining for themselves fix the character of preferred stock as nonvoting 1 By so doing they are not violating any rule of the common law and if the preferred stockholders voluntarily agree to such a limitation on their stock such an agreement between the parties sui juris cannot be said to violate any rule of public policy. Bnt, as said by the Supreme Court of Ohio in Miller v. Eatterman, 47 Ohio St. l. c. 158 (1890): “Nor is it unreasonable. The promise to the preferred stockholders was to award them first the net earnings, the holders of the common stock to share in such of the net earnings as they might, by good management, be able to make over and above eight per cent.” As the burden is upon the common stockholders the power to manage may fairly be left with them, and their interest in the success of the corporation and their liability to first satisfy the preferred stockholders is a sufficient guaranty that they will manage the affairs of the corporation to the best advantage. But, in any event, it is a matter of mutual convention between the two classes of stockholders voluntarily entered into, and as no rule of common law or public policy is contravened thereby, we can perceive no objection tb the arrangement unless it violates some express provision of our organic or statutory law.

The Attorney-General lays much stress upon section 6 of article 12 of the Constitution which ordains that “each shareholder shall have the right to cast as many votes as shall equal the number of his shares.” The object and purposes of this provision in our Constitution is well understood and has been judicially expounded on several occasions. Its purpose was to introduce the principle of cumulative system of voting in elections of stockholders so as to secure to the minority of stockholders a voice in the management of the affairs of the company in proportion to the number of their shares, in lieu of the common law right to vote one vote irrespective of the number of shares held by him. [Gregg v. Granby Co., 164 Mo. 625; State ex rel. v. McGann, 64 Mo. App. 225.]

If this section is to be construed literally, the Secretary’s contention has much force in it. A construetion lias nowhere been given to section 6 of article 12, within our knowledge or research, so as to constitute it a prohibition or restriction on the right of stockholders to make their contracts which violate no rule of the common law and which affect no rights except their own. The reason of a law is its life. In construing it, courts look to the purpose in view, and when we consider the object of the people in incorporating section 6 of article 12 into our organic law, in our opinion they had no intention of changing the long-established right of stockholders to make certain stock a preferred lien on the dividends of the business, and to agree that the holders of such stock should have no right to vote in the management of the business, but should content themselves with the preferences and priorities given them of first receiving the profits of the business.

Properly understood, we think section 6 of.article 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. l. c. 535.] 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 did not contravene public policy, but concerned themselves only. [Miller v. Ratterman, 47 Ohio St. 157; In re Newark Library Assn., 64 N. J. L. l. c. 219.]

This view is reinforced by the construction placed by courts in tbe Unitéd States upon the nature of preferred stock.

Thus, in Ryan v. Railroad, 10 A. L. Rec. l. c. 267 (Hamilton County Court of Com. Pleas), the learned judge remarks: ‘‘ The objection finally is that the right of voting was suspended, or, at least, only given under condition, and that it is essential to the character of stock, that it should be voted upon. But it is not essential to the character of stock that it should be voted upon. There may be cases arising where the policy of the law itself, in the absence of legislation, would prohibit voting upon stock, although the stock itself would be left in its character as stock.”

Redfield on Railways (6 Ed.), vol. 2, sec. 237, treating of this subject, says: “The company, where the capital is not limited in the charter, may from time to time issue new shares, and probably give them a preference, as a mode of borrowing money, where they have the power to borrow on bond and mortgage, as preferred stock is only a form of mortgage.” [Ex parte Holmes, 5 Cow. 426; Railway-Frog v. Haven, 101 Mass. 398; State ex rel. v. Hunton, 28 Vt. 594.]

In view of these principles we think that the General Assembly of Missouri, in the enactment of the amended sections 1312 and 1332 (Laws 1901, pp. 91 and 92), did not act beyond the pale of its constitutional authority in permitting the stockholders themselves in their articles to issue preferred stock and fix “its preferences, priorities, classification and the character thereof, ’ ’ and that the petitioners in this case had the power in defining character of the preferred stock to be issued by the corporation to provide that it shall be nonvoting. The “character thereof” is broad enough to authorize the “not-unusual” provision characteristic of preferred stock as used by the law-writers and courts at common law, as to its voting or non-voting power.

We hold then that the evident purpose of section 6 of article 12 of onr Constitution was to guarantee to stockholders having the right to vote, of cumulating their votes, and has no reference to the contractual right of the stockholders, inter sese, of providing that preferred stockholders shall or shall not have the right to vote such stock, and to hold that it has taken away this well-recognized common law right would be to distort its obvious purpose.

We have carefully considered the able argument of the Attorney-General, but we find ourselves unable to concur in his conclusions, and accordingly we are satisfied that we correctly directed the peremptory writ of mandamus to issue, for the reasons herein assigned, and this opinion will be filed now as of the date the writ was ordered issued.

Brace, C. J., Marshall, Valliant, Fox and Lamm, JJ., concur; Burgess, J., absent at hearing.


source: Caselaw Access Project

author: VALLIANT, J.

license: Public Domain

text:
    THE STATE ex rel. BENTLEY v. REYNOLDS, Judge, et al.
    In Banc,
    October 25, 1905.
    1. PRIMARY ELECTION: Count of Vote by Court: Act of 1901: Certiorari. Section 23 of the Act of 1901 in reference to primary elections in cities of over 300,000 inhabitants, which says that “any action or neglect of the officer or members of a political convention or committee, or of any judge or clerk of primary election, or of any public officer, or board, with regard to the right of any person to participate in a primary election, convention or committee, or to register or with regard to any right given to, or duty prescribed for, any elector, political committee, political convention, officer or board by this act, shall be reviewable by the appropriate remedy of mandamus or certiorari”, does not authorize the circuit court by certiorari to direct the election commissioners and judges and clerks to bring into court, after an election has been held and before a certificate of election has been issued to the successful’ candidate, the ballot boxes, ballots, poll books and returns in order that the count may be made by persons appointed by the court. That section does not purport to coyer a case of contested election with either mandamus or certiorari, and hence neither writ is “appropriate.”
    2. -: Certiorari: Ministerial Officer. The writ of certiorari is not the appropriate remedy to review and correct errors in the ministerial acts of ministerial officers.
    3. -: -: Count by Court. The laws of Missouri do not authorize the circuit court, by use of the writ of certiorari, to turn itself into a judicial returning board, canvass the vote cast at an election, and determine who was elected or nominated at such election;
    4. -: Contests: Power of Courts Over. There is nothing in the primary election law of 1901 relating to cities of 300,000 inhabitants or over, that undertakes to confer on the courts authority to try and determine a primary contested election case.
    Prohibition.
    Writ awarded.

      Crcuivley & Jamison for relator.
    The acts of judges of primary election in receiving and counting ballots are ministerial. “The writ of certiorari is appropriate only to review the judicial action of inferior courts, or public officers, or bodies exercising judicial functions. It is not available to review the action of a public officer or body which is merely legislative, executive or administrative, although it may invoke the exercise of discretion.” People ex rel. v. Bush, 22 App. Div. 363; Matter of Many, 10 App. Div. 451; People ex rel. v. Austin, 20 App. Div. 1. Judges and clerks of election, under primary election law, do not exercise judicial functions and are bound to accept vote if elector makes the statutory affidavit. ‘ ‘ The voter is judge of his own qualifications, and his conscience for the occasion takes the place of every other tribunal.” McCrary on Elections (4 Ed.), sec. 296; Spragins v. Haughton, 3 Ill. 377; Walcott v. Halcomb, 97 Mich. 361. Judges and clerks of election are ministerial officers, and are bound to accept votes of electors who subscribe to statutory oath, and must then count them. Stapleton v. Bell, 119 N. Y. 175; Sherwood v. State, 129 N. Y. 372. Certiorari brings up records and uot evidence. People v. Police Board, 39 N. Y. 509. The Supreme Court has no power to issue a writ of certiorari to a board of election commissioners which is not a court in the sense of the Constitution. Carson’s case, 5 S. C. 117. Members of political committees, elected under the primary election law, are public officers. People ex rel. v. Kings Co., 164 N. Y. 337. If under the primary election law of Missouri there is any remedy for the recount of the ballots, it is by mandamus to compel the judges and clerks of election to recount the ballots. Matter of Rabbit v. G-arrand, 89 App. Div. 119 (construing section 11 of the primary election law of New York, which section is identical with section 23, of the primary law of Missouri). Under said law inspectors of election are public officers. Mandamus and not certiorari has always been resorted to in New York where a recount of the ballots has been had. People ex rel. v. Way, 92 App. Div. 82; People ex rel. v. Ward, 62 App. Div. 531; People ex rel. v. Board, 88 App. Div. 185; People ex rel. v. Unger, 85 App. Div. 249. The court by mandamus will compel the board of convassers to reconvene and publicly take from the ballot boxes ballots rejected as void. People ex rel. v. Ward, supra. At common law contests were tried in courts having general common law jurisdiction through the agency of quo warranto. People v. Pease, 30 Barb. 583. In Missouri, the law regulating contests is a code within itself. State ex rel. v. Spencer, 164 Mo. 23.

      Thos. P. Bashaw and P. T. Barrett for respondent.
    While there is no other ease in this State where a writ of certiorari was awarded nnder the section relied on in this case, yet onr coorts have issned snch writ in a number of cases of the same general nature. In the case of State ex rel. v. Moore, 84 Mo. App. 11, it was held, in a dramshop license case, that although no remonstrance was filed in the county court, tax-paying citizens who did not sign the petition for the license, should, in the sound discretion of the court, be permitted to make application for a writ of certiorari to test the legality of the license. It goes without saying that in such a case the writ would bring up the petition as a record in the case for review. So in the case at bar the ballots will be brought up for review under such writ. In State v. Dowling, 50 Mo. 134, it was held that the action of the board of appeals from the assessment of taxes may be reviewed by such writ. In State ex rel. v. Springer, 134 Mo. 212, it was held that such writ is the proper remedy to annul an increased tax assessment if made without jurisdiction. In Ward v. Board, 135 Mo. 359, it was held that an erroneous assessment may be quashed under such writ. It is plain that an assessor keeps no “records” of his proceedings, within the meaning of that term contended for in this case. And the same is true of the officials and tribunals in all of the above eases. But they have books, papers and documents which are records in legal contemplation. And so are, undoubtedly, the poll books, ballots, returns, etc., of the election in controversy records of the election commissioner’s office. Relator submits that such records will show that he was fairly nominated, as will appear from a recount of the ballots, and he is entitled to such recount, if nothing more. If he is not so entitled the statute relied on is a mere nullity.
   VALLIANT, J.

This controversy arose over the result of a primary election held in St. Lonis, March 4, 1905, wherein Bentley, the relator, and John R. Mc-Carthey, one of the respondents herein, were rival candidates for the nomination by the Democratic party for the office of member of the House of Delegates from the 23rd ward. The election was held under the Statute of 1901 (Laws 1901, p. 149) relating to primary elections in cities of 300,000 inhabitants and over. The result of the election, according to the returns of the judges and clerks made to the election commissioners, was that Bentley was nominated, but before the election commissioners issued the certificate of election to him McCarthey filed a petition* in the circuit court against the election commissioners and the judges and clerks of the election averring, in substance, that the returns were false, and that he had in fact received the majority of the votes and was entitled to the certificate of nomination.

The prayer of the petition was that “a writ of certiorari, or review according to law” issue directed to the election commissioners and the judges and clerks of the election requiring them to bring into court the ballot boxes, keys, ballots, poll books and returns, etc., to be reviewed and recounted and the judgment of the court to be rendered showing which of the two rival candidates was elected or nominated. Thereupon, after due notice to the defendant officials, the circuit court made an order requiring the election commissioners to bring into court, on a day named, the ballot boxes, keys, ballots, poll books, returns, etc., of the election judges and clerks and also made an order appointing four unofficial persons as referees to whom the ballot boxes and keys should be delivered and who were ordered by the court to open the boxes, count the ballots, observing certain directions as to detail and make report to the court of the result. Bentley was not made a party to that suit in the circuit conrt, hut after those proceedings he came to this conrt with his petition setting np in general the facts above stated with other facts of more specific detail and prayed that the circnit conrt he prohibited from fnrther proceeding in that canse. On filing his petition a preliminary rule to show canse was entered, and after retnrn the canse came on for final hearing in this conrt on the petition, retnrn and motion of relator for judgment on the pleadings, and final judgment was entered on March 21, 1905, ordering that a writ of prohibition issue as prayed. As this proceeding was had so shortly before the city election to which it related, there was not time enough to write an opinion and therefore the announcement was made when the judgment was rendered that the opinion would be delivered later as the business of the conrt would permit.

The case involves a consideration of the primary election law of 1901 applicable to. cities of over 300,000 inhabitants (Laws 1901, p. 149), particularly of section 23 of the act, which respondents think confers on the circuit court jurisdiction to do what it did in this case.

That act appears to have been, in the main, copied from a statute of New York of 1896, which has been carried into Revised Statutes of New York, 1901, volume 4, page 4331, and following. But in copying that statute our lawmakers followed the original so closely that they failed to make provision for the difference that exists between the system of election laws and the control of the courts over elections in New York and the system and coutrol, in that respect, in Missouri. Section 9 of article 8, of our State Constitution declares that: “The trial and determination of contested elections of all public officers, whether state, judicial, municipal or local, except Governor and Lieutenant-Governor, shall be by the courts of law,.or by one or more of the judges thereof. The General Assembly shall, by general law, designate the court or judge by whom the sevéral classes of election contests shall he tried, and regulate the manner of trial and all matters incident thereto.” Under that mandate the General Assembly has enacted statutes designating the court or judge by whom the several classes of election contests shall be tried, and regulating the manner of trial and matters incident thereto. Those statutes, however, do not cover contests of primary elections, and unless section 23 of the act of 1901 now under discussion covers the case there is no law for the trial of a contested primary election.

That section is as follows:

“Sec. 23. Jurisdiction of and Review by the Courts. Any action or neglect of the officer or members of a political convention or committee, or of any judge or clerk of primary election, or of any public officer, or board, with regard to the right of any person to participate in a primary election, convention or committee, or to register, or with regard to any right given to, or duty prescribed for, any elector, political committee, political convention, officer or board, by this act, shall be reviewable by the appropriate remedy of mandamus or certiorari, as the ease may require. In addition thereto, the Supreme Court of this State, or any justice thereof, or the court of appeals having jurisdiction over any city to which this act is applicable, or any judge of such court of appeals, or the circuit court of any such city, or any judge of such circuit court, shall have summary jurisdiction, upon complaint of any citizen, to review such action or neglect. Such complaint shall bo heard upon such notice as the said court or justice or judge thereof shall direct. In reviewing such action or neglect, the court or justice or judge shall consider, but need not be controlled by any action or determination of the regularly constituted party authorities upon the questions arising in reference thereto, and make such decision and order as, under all the facts and circumstances of the case, justly [justice] may require. For any of the purposes of this section, service of a writ of mandamus, certiorari, order or other process of such court, or justice or judge thereof, upon the chairman or secretary of such convention, committee or hoard shall be sufficient.”

It is in the first sentence of that section that the attempt is made to subject certain acts of the election officers to review, “by the appropriate remedy of mandamus or certiorari. ’ ’ The act recognizes that the remedy afforded must be appropriate to one or the other of the writs named; it authorizes the use of either of those writs only when it is appropriate and it does not undertake to amend the law in reference to either of those writs by giving it a function it did not before possess. Therefore, when the nature of the case is such that the common-law writ of mandamus or certiorari is appropriate, the statute says it may be used, but the statute goes no further.

But section 23 does not purport to cover a case of contested election with either of those writs or to bring every action of the election officers under review; the language is: “Any action or neglect of the officers . . . . with regard to the right of any person to participate in a primary election, convention or committee, or to register, or with regard to any right given to or duty prescribed for any elector, political committee, political convention, officer or board, by their act, ’ ’ etc. In other words, if a party has been denied the right to vote at the primary, or denied a seat in the convention, or in the committee, or denied the right to register, or any such specific right or duty given to or prescribed for him by that statute, he may have the remedy of mandamus or certiorari when it is appropriate. The next succeeding sentence, which essays to confer summary jurisdiction on certain courts and judges, is limited, also, in its scope to “review such action or neglect,” that is, the action or neglect already mentioned. That is all there is in section 23 on which the claim is made of authority for the circuit court to do what it was asked to do in this case, and it falls far short of conferring such authority.

The plaintiff in the suit in the circuit court does not complain that he has been denied the right to register or to vote at the primary, or to sit in a convention, or in a committee, or to exercise any particular right that is conferred on him by the primary election statute. The substance of his complaint is that he was counted out, notwithstanding he had a majority of the votes, and his prayer is that the court recount the ballots and declare him elected. There is no authority in section 23 for that procedure, and neither mandamus nor certiorari is appropriate to such case. But, even if we should say that the Legislature intended to bring the entire election proceedings .into review by the courts, the means provided by the statute are ineffectual to accomplish that purpose, because the remedy is limited to what is appropriate under a writ of mandamus or certiorari.

Section 23 of our act is almost a literal copy of section 11 of the New York act. It attempts to make the action of the election officers reviewable “by the appropriate remedy of mandamus or certiorari.” That language indicates that the law-writer understood that mandamus would be appropriate in some cases and certiorari in others, but it leaves the subject without direction as to when one writ should be used and when the other; we have, therefore, to look elsewhere for the law defining the scope of those two writs.

In New York they have another statute which is found at page 390, volume 1, Revised Statutes 1901, which confers on the Supreme Court of that State (which is a court of general original jurisdiction) authority to issue a writ of mandamus to the election officers, and in the proceedings thereupon to determine whether certain ballots were marked for the purpose of identification, and if fonnd to he so, to order that they he excluded, and also, to determine whether certain ballots which the inspectors had rejected as void should be counted; and it was provided in that statute that the boards of canvassers or inspectors of election should continue in office pending that proceeding. Thus we see that in that State a special function is given by statute to the writ of mandamus in certain election cases, and it may be that the words “appropriate remedy of mandamus,” in section 11 of. the New York statute, which we have so literally copied into our section 23, had reference to this other New York statute which we have not copied and of which there is nothing like it in our books. Yet, even under the statute above referred to, giving especial office to the writ of mandamus, the New York courts do not undertake to try a contested election case, but they limit the questions to the particular points expressed in the statute. [In re Hart, 159 N. Y. 278; Kortz v. Canvassers, 30 Hun 217; People ex rel. v. Earley, 40 N. Y. Supp. 587; People ex rel. v. Canvassers, 64 How. Pr. 334.] In the case last cited it was held in a proceeding by mandamus against the commissioners to compel the canvass and certification of the vote, that the only question was whether the returns before the board were the original returns of the inspectors of election.

As to what is meant in the New York statute by the words “appropriate remedy of . .. . certiorari” in that connection, our limited research into the election laws of that State does not qualify us to say. But as far as we have felt justified in investigating we have found no authority for saying that by a writ of certiorari a New York court can convert itself or its referees into a judicial returning board, canvass the vote and decide who was elected or nominated. In People ex rel. v. Austin et al., comprising the election board, 20 App. Div. (N. Y.) 1, it was said: “There is a further reason why the writ cannot he supported, and that is in the fact that a certiorari is available only to review a determination judicial in character. The functions of the election hoard of a town in receiving votes aud announcing the result are not judicial. In doing-that, they do not necessarily have any discretion to exercise or any determination to make. They receive the votes, count them, and return the results which the figures produce. There is no allegation in the petition of any judicial action of the defendants, nor does anything of that character appear in their return. It cannot, therefore, he assumed that any acts performed by them, as such hoard, were other than such as may be denominated ministerial and administrative. And, therefore, they are not the subject of review by the writ issued herein. [Code Civ. Proc., sec. 2120; People ex rel. Corwin v. Walter, 68 N. Y. 403; People ex rel. Railroad Co. v. Board Comrs., etc., 97 Id. 37; People ex rel. Trustees, etc., v. Board of Supervisors, 131 Id. 468; In re Many, 10 App. Div. 451.] The writ of certiorari should be quashed. All concurred.”

In New Tort, therefore, the writ of certiorari is not the appropriate remedy to review and correct errors, if any, in the ministerial acts of ministerial officers. And that is also the law of Missouri. [In re Saline County, 45 Mo. 52; Phelps County v. Bishop, 46 Mo. 68.]

The writ of certiorari in our system of jurisprudence brings up only the record proper of the tribunal to which it is addressed; it does not bring up the evidence on which the judgment of the trial court was founded.

The office of a writ of certiorari is to give relief to an injured party in a cause when the trial court has acted without jurisdiction, or in excess of its jurisdiction, or where it appears on the face of the record proper that the trial court rendered a judgment which it had no right in law to render. But the writ cannot he used as the substitute for an appeal or writ of error. [State ex rel. v. Kansas City, 89 Mo. 34; State ex rel. v. Springer, 134 Mo. 212; State ex rel. v. Shelton, 154 Mo. 670; State ex rel. v. Woodson, 161 Mo. 444; State ex rel. v. Bland, 168 Mo. 1.]

As the writ of certiorari is defined and its nses explained and circumscribed in the decisions in those cases, there is no room to contend that a court, by force of its writ of certiorari, could take the ballot boxes out of the hands of the election commissioners, turn them over to referees appointed by the court — to open the boxes, to count the votes, and to report the result, to the end that the court may pronounce judgment as to which was the successful candidate.

The learned counsel who drew .the petition on which the case was founded in the circuit court seem to have realized that there was difficulty in attempting to render either awrit of mandamus or of certiorari appropriate to the case and, therefore, ignoring mandamus, the petition prays for the issuance of “a writ of certiorari or review according to law.” We do not know what the counsel meant by a writ of review and they have not undertaken to explain it in their brief. What the court ordered was & writ of certiorari which was addressed to the election commissioners commanding them to send up the ballot boxes containing the ballots, the keys and the reports of the election officers. Those things are not judicial records to be reviewed under a writ of certiorari as that writ is known in this State.

But section 23 of our primary election law, after saying what may be done “by the appropriate remedy of mandamus or certiorari, ’’ goes further and says: “In addition thereto, the Supreme Court of this State, or any justice thereof, or the court of appeals having jurisdiction over any city to which this act is applicable, or any judge of such court of appeals, or the circuit court of any such, city, or any judge of such circuit court, shall have summary jurisdiction upon complaint of any citizen to review such action or neglect. ’ ’ What is the word “review” in that connection intended to mean? We know what is meant when it is said that an appellate court is to review the action of a court of original jurisdiction. It refers to the action of any appellate court concerning a case that is before it either on appeal, writ of error or certiorari. But there is no appeal or writ of error to bring a case from the office of the election commissioners into this court, to a court of appeals, or to a circuit court, and, as we have already seen, the writ of certiorari, as we know it in Missouri, is inappropriate to such case.

Primary elections are usually held so shortly before the general elections to which they are related that there is scarcely time for the trial of a contest with that deliberation that ought to characterize every judicial proceeding. In view of this well-known fact, which is to be taken into consideration when we are endeavoring to come to an understanding of what the General Assembly intended in passing this act, it seems improbable that in the brief space of this section 23 the intention was to provide for such a trial. No provision is made for the service of notice on the party whose .election or nomination is to be contested. On the contrary, it is said: “For any of the purposes of this section, ser-; vice of a writ of mandamus, certiorari, order or other process of such court, or justice or judge, thereof, upon the chairman or secretary of such convention, committee or board shall be sufficient.” And in point of fact in the case now before the circuit court in which the proceedings sought to be prohibited are under way, the relator here whose nomination it is sought to annul, is not made a party and therefore has no right to be heard in that case. The General Assembly never intended to authorize such a course. To deprive a man of a right or privilege by tlie judgment of a court, in a suit to which he is not a party, is not in accord with due process as we understand it and it would he an unjust reflection on our General Assembly to' impute to it an intention to sanction such a proceeding.

The attempt to regulate a primary election by stat-. ute is a novelty in the line of legislation, and this act shows that much is yet to be learned by experience before, if ever, such legislation can be reduced to a salutary system.

In the natural order of political events the manner of making party nominations is under the direction and control of party committees and there is where it ought to be left, holding party committees responsible for their conduct to their respective parties. When the General Assembly undertakes to put such matters in the hands of public officers and under the control of the courts it thereby' proclaims distrust of the party committees and in taking it out of the hands of the party committees it relieves them of that sense of responsibility which after all is the best security for honest conduct.

In thig act of 1901, which we are now discussing, the lawmakers have apparently attempted to divide the responsibility, not trusting fully either the party committees, the election officers, or the courts. The act throws on the election commissioners the responsibility of appointing the judges and clerks to hold the primary election, but requires the appointments to be made from a list of names furnished by the political committee or the candidate, thus leaving the party committee with a dominating influence, yet relieved of responsibility, and imposing on the election commissioners a responsibility without adequate authority. If this responsibility is to b¿ imposed on the election commissioners, the election ought to be held by the official judges and clerks who are appointed by the ©lection commissioners. By this act, also, the same half-hearted confidence is given to the courts. When a case gets into conrt the act says: “In reviewing snch action or neglect, the conrt or justice or judge shall consider, hut need not be controlled by, any act or determination of the regularly constituted party authorities upon the questions arising in reference thereto.” Or, in other words, the court or judge, “reviewing” the case must, before deciding it, find out what the regularly constituted party committee thinks about it and that is to have its influence in the judgment to be rendered, though not necessarily to control. That is a remarkable factor to be taken into the mind of the court in reaching a judicial conclusion. All these features of the primary election act of 1901, which we have discussed, are copied literally from the New York statute and are quite out of place in our system of elections and judicial control over them.

It is bad policy to attempt to impose party contests of this kind on the courts. It, in effect, aims to clothe the courts with powers purely political in their nature and to constitute the courts managers of the affairs of the political parties. And, besides being inappropriate, it is also inexpedient. The hasty, and summary manner in which contests of a primary election must be decided, to be of any avail, is inconsistent with the deliberate course of judicial procedure. To render a judicial trial available in such case, the General Assembly would have to make a special code of procedure, and when the General Assembly comes to consider the subject and takes into account the few days that ordinarily intervene between the primary and the general election, it would discover that the enactment of an official code of procedure in such case is an almost, if not quite, impossible task. But that thought is a matter for the future; it is sufficient for the present to say that there is nothing in the primary election law of 1901, relating to cities of 300,000 inhabitants and over, that undertakes to confer on the courts authority to try and determine a contested primary election case, and for that reason the writ of prohibition was awarded in this case.

Brace, G. J., Marshall, Burgess and Gantt, JJ., concur; Fox, Jconcurs in the result; Lamm, J., dissents.