Laughlin v. Geer

¡¡VIr. Justice Smith delivered the opinion of the court. Appellants contend that the by-law in question is valid under the statute, and at common law; and secondly, that a court of equity is without jurisdiction to enjoin the proceedings of the board of directors. Section 6, chapter 82, of the statute provides that “the directors or managers * * * may remove any officers when the interests of the corporation shall require.” The question arises under this statute, and the facts set forth in the pleadings, whether a director of a corporation is an officer of the corporation, and may be removed from office by the board of directors, under this provision of the statute. In our opinion he is an officer of the corporation, but-he is not such an officer as may be removed under the power given by the statute. The officers of a corporation formed under the act are declared to be, in 'the above mentioned section, “a president, secretary and treasurer, and such other officers and agents as shall he determined by the directors and managers.” These are the officers referred to as subject to removal in the subsequent clause of the section above quoted. By no reasonable construction of the language of the section can it be made to include the directors as subject to removal by the directors or managers. The directors of incorporated companies are the representatives of the stockholders selected by them under a right guaranteed by the constitution. Article XI of the constitution provides “that in all elections for directors or managers of incorporated companies every stockholder shall have the right to vote in person or by proxy the number of shares 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.”- Clearly the object of this provision was to guard the rights of minority stockholders in corporations organised under the laws of this state. The legislature had this constitutional provision in mind in adopting our General Incorporation Act. The language of section 6 of the Act clearly discriminates the directors from the general officers of a corporation. Directors are charged with the exercise of the corporate powers and as a part of those powers may choose or appoint officers or agents, who may be removed by them when the interests of the corporation require. But the board of directors may not nullify the constitutional right of a' stockholder to choose whomsoever he may think proper to represent him on the board of directors. If a board of directors could legally remove a member either with or without a by-law, such as was adopted by the ¡National Hollow Brake Beam Company and under which the defendants were assuming to act, a power most dangerous to the minority stockholders would be lodged with the majority stockholders which would enable them through the action of the directors chosen by them to re-constitute the entire directory of a corporation as completely as if they owned every share of stock. This is not their right, nor have they this power, under the law of this state. We do not doubt that the complainant, being a director of the National Hollow Brake Beam Company, is an officer of that company in a broad and comprehensive sense, but he is not such an officer as is contemplated in that clause of the statute conferring the power of a motion. In Cook on Corporations, vol. 2, sec. 711, the author says: “The term of office of director is usually fixed by the charter pf the corporation or the statutes applying to it. Such being the case, a director having been elected is entitled to hold his position until the expiration of his term of office. He cannot be turned out either by the stockholders, or the directors, or by a court. Sometimes, however, the charter, statutes or by-laws authorize and empower the stockholders to remove directors at any time.” As we have seen no such power is given in the statute. If the board of directors of a corporation organized under the laws of this state have not the power to remove a director duly elected and serving, it has no power to adopt a by-law for that purpose. The section of the by-laws, therefore, under which the defendants were proceeding to remove the complainant is, in our judgment, void. The fact that this section of the by-laws was adopted by a majority vote of all the stockholders of the company does not make it binding upon the complainant, by the principle of estoppel, for he is not shown to have participated in its adoption, or to have assented to it. Hence, People v. Sterling et al., 82 Ill., 457, cited by appellants, is not in point. In People v. Higging, 15 Ill., 110, cited by appellants, the question was presented as to whether the trustees of the Illinois State Hospital for the Insane had the power to remove the medical superintendent of the institution, and it was held that the power was conferred, upon the board of trustees. «That, however, is a very different question from the one now under consideration, and the decision in that case cannot be regarded as an authority applicable to this case. Without stopping further to discuss the authorities cited by appellants in detail it must suffice to say that they relate to different kinds of corporations from the one in question, or to the amotion of other officers than directors in a stock company, or decide different questions from those presented in the case at bar. We entertain no doubt that a court of equity has jurisdiction to prevent the illegal action of the board of directors contemplated in the proceedings to remove complainant. If carried out to its final conclusion it would result in a continuing injury to complainant and a continuing deprivation of his right in the future to sit as a member of the board of directors. A court of equity has the authority to interpose by its restraining power, and to give the preventive relief proper in such eases. Brunnenmeyer v. Buhre, 32 Ill., 183. The order granting the injunction is affirmed. Affirmed.