Titusville Oil Exchange v. Witherop

Opinion by Smith, J., This proceeding was begun in the court of common pleas of Crawford county for the purpose of effecting a dissolution of the Titusville Oil Exchange, a corporation organized under the laws of Pennsylvania. A petition in the name of the Titusville Oil Exchange, signed by its officers and directors was presented to that court under the provisions of the act of April 9, 1856, [516] and its supplements, setting forth, in a general way, the existence of the conditions required by that act in order to secure the benefit of its provisions. It was averred, inter alia, that at a duly convened meeting of the stock-holders of the corporation, “ it was resolved by a majority of the meeting of the corporators of the Titusville Oil Exchange to apply ” for a dissolution of the corporation, and that a full and true account of the transactions of the officers accompanied the petition, which the court was asked to approve, and decree a dissolution. An answer was filed to this petition by other stockholders of the corporation denying that the petitioners were duly authorized to procure a dissolution, and asserting that the resolution to that effect was not lawfully or regularly adopted at the meeting referred to in the petition. The court below, without hearing any evidence as to the matters alleged in the answer, decreed a dissolution of the corporation. From this decree an appeal has been taken by the corporators opposed to the dissolution. The question here is whether the court below properly exercised its powers in the premises. The act of -June 16, 1836, section 13, provides that “ The several courts of common pleas shall have the jurisdiction and powers of a court of chancery, so far as relates to ... . the supervision and control of corporations, other than those of a municipal character, and unincorporated societies or associations and partnerships.” In The Commonwealth v. Bank of Pennsylvania, 3 W. & S. 184, it was held that this act gave the courts “ general and unlimited ” equity jurisdiction over corporations. “ This gives the court all the powers and jurisdiction of a court of chancery over corporations, to be exercised in the ordinary mode in which a court of chancery acts, whether by bill, injunction, or otherwise, as the equity of the case may require.” — Seug-east, J. This view of the powers of the courts, and the mode of proceeding, has repeatedly been affirmed: Sandford v. R. R. Co., 24 Pa. 378; Big Mountain Improvement Co.’s Appeal, 54 Pa. 361; Baptist Congregation v. Scannell, 3 Grant, 48; Sarver’s Appeal, 81* Pa. 183; Tunis v. Pass. R. R. Co., 149 Pa. 70; and it has never been qualified or questioned. The equity jurisdiction thus given extends to the supervision of corporate elections, even to the appointment of a master to [517] conduct an election: Gowen’s Appeal, 10 W. N. C. 85; Baker’s Appeal, 109 Pa. 461; Tunis v. Pass. R. R. Co., 149 Pa. 70. It does not, however, include the power to determine the validity of an election of directors ; this can be adjudicated only at law, on a writ of quo warranto: Jenkins v. Baxter, 160 Pa. 199; Bedford Springs Co. v. McMeen, 161 Pa. 639. But the writ of quo warranto is wholly inapplicable when the election is to make choice, not of a person, but of a policy, — • to decide on the adoption or rejection of a proposed measure; for example, on the amendment or renewal of the corporate charter, the adoption or amendment of by-laws, the reduction or increase of capital stock, the issue of preferred stock, a change of the location of the principal office, of the time and place of meetings and elections, of the number of directors, of their terms of office, or the' dissolution of the corporation. Unless the courts may, in the exercise of the equity powers conferred by the statute, supervise the proceedings by which the stockholders elect the course they will pursue with respect to these and similar matters, it is manifest that great injustice may be done, through irregularity, fraud or violence, with no adequate remedy at law. There are certain statutory provisions regulating, in part, the choice of officers, and the decision on a proposed increase or reduction of the capital stock. But the acts of assembly are entirely silent as to the manner of conducting elections on other questions, and as to the mode of receiving and recording the votes cast at any election. The supervision of corporate elections, on the points left unsettled by the legislature, is necessarily part of the duty with which the courts are charged in the exercise of the jurisdiction conferred by the statute. The aim' of tins supervision is to secure a free and full expression and an accurate record of the will of the stockholders on the subject of the election. For this purpose it is not necessary to lay down hard and fast rules of procedure. It is sufficient in the main to indicate guiding principles. Upon a question so vital to the corporation as that of its dissolution, it is not too much to say that the proceedings should be, at least, as deliberate and orderly, and with as full an opportunity for participation by the stockholders, as on an election [518] of officers, or on the question of an increase or reduction of capital stock, or an issue of preferred stock. The most exacting of the statutory provisions relating to such elections are not too much to ask when the existence of the corporation is put at stake. With respect to the notice, no more may be demanded than is fixed by the act of April 4, 1872 (P. L. 40). But the requirement of that act — “publication in two papers in the county ” — is indefinite as to the period of notice ; a literal compliance would permit the election on the day following publication. In the absence of direction on this point, in the act of 1872, the shortest notice of election for any purpose directed by later statutes reasonably indicates the minimum period with which this omission should be supplied. With respect to the proceedings of the judges, the statutory requirements in relation to other elections apply with equal force to an election to decide a question as important as that of dissolution. With respect to the balloting, it is manifest that it should be so conducted as to give every stockholder an opportunity of voting, to ascertain that every one who offers a vote is legally entitled to cast it, to challenge every vote which he may believe to be illegally offered, to see that the votes are fairly counted, and that the record of the election shows accurately the result of the ballot. To this end, the stockholders are entitled to free access to the books of the corporation, so far as may be necessary for the requisite information, particularly in relation to the ownership and transfer of stock. An election conducted in conformity with the principles thus indicated is reasonably calculated to insure an adequate expression of the views of the stockholders. In the case before us, the petition shows a prima facie case requiring a decree of dissolution. Members of the corporation have, however, a clear right to show that the facts are otherwise than as set forth in the petition, and that, from irregularity, fraud or other cause, the election, as returned, failed to exhibit the purpose of a majority of the stockholders. This right is to be exercised by becoming parties to the proceeding, and laying before the court the grounds of objection. The act of April 9, 1856 (P. L. 298), on which the proceeding is based, in providing for an application to the court of common pleas, must be understood as referring to the equity [519] jurisdiction given to that court in the supervision of corporations by the act of 1886. Though the petition was not addressed to the court, sitting in equity, it must be regarded as a bill in equity, since the jurisdiction of the court is wholly in equity, and the proceedings must be held to conform to the practice in equity. The answer, though inartificially drawn, discloses matters of substance, bringing hato question the validity of the election; and it may be amended, if necessary, in accordance with the equity rules. The cause must be viewed as heard on bill and answer; and in this aspect, the answer, which must he taken as true, alleged sufficient to bar the plaintiff’s right to the decree prayed for. The plaintiff may by replication raise an issue as to the allegations in the answer, and thereupon the cause may come on for hearing upon evidence pertinent to the issue. The decree made by the court below, though leaving out of view the matters alleged in the answer, was a final adjudication of everything embraced in the petition and prayer. The sale of the corporation property, to take place after the dissolution, is a separate and independent proceeding. The decree of the court below is reversed and a procedendo awarded.