Attorney General ex rel. Potter v. McVichie

Hooker, J. The Anthony Powder Company, Limited,, was organized on January 3Í, 1890, under Act No. 191, Pub. Acts 1877 (2 Comp. Laws, §§ 6079-6089). The original articles of association show that the capital was to be $10,000, divided into 2,500 shares, of $4 each. Subsequently the shares were increased in number to 10,000. The articles also provided that the board of managers should consist of five persons. Their term of office was one year. At the annual meeting of stockholders held February 2, 1904, the relator was present, owning 5 shares of stock. There being 5 managers to be elected, he and others sought to cumulate their votes for the relator, under the minority representation law (3 Comp. Laws, § 8553). Upon that basis he received a total of 24,250 votes. All of the managers being voted for at once, the remaining stock—5,150 shares—was voted for each of the respondents. The meeting refused to recognize the right to have cumulative votes counted, and credited Potter with 4,850 votes—that being the number of shares so voted—and declared the respondents to be elected members of the board of managers. The relator thereupon instituted these proceedings to inquire into their right to the office, and prays judgment [389] upon the right of the relator to such office. The only question raised is whether the minority law (§ 8553, 3 Comp. Laws) applies to this association. Counsel for the relator discuss four propositions, viz.: “The relator takes the position that it does apply, for "the following reasons: “1. Under the Constitution, the statutes, and the decisions of our Supreme Court, a partnership association is & corporation. ‘ ‘ 2. If, in the opinion of this court, it is not a common type of a corporation, yet we maintain that partnership associations are governed by the law of corporations. “3. Should this court hold that the question whether or not a partnership association is a corporation, or is governed by the law of corporations, depends partly on the statute and partly on its articles of organization, then relator submits that the Anthony Powder Company, Limited, is a corporation, and is governed by the law relative to corporations. “4. The stockholders’ minority law is entitled to a liberal construction.” The importance of these questions rests upon the conclusion that the minority representation law necessarily applies in case we may say that a partnership association is a corporation, or is governed by the law pertaining to corporations generally. Certain provisions of the Constitution are made applicable to “all associations and joint stock companies, having any of the powers or privileges of corporations, not possessed by individuals or partnerships.” See Const. § 11, art. 15. But it does not follow that the term “ corporation,” as thereafter used in legislation, must in every instance be so comprehensively construed. Had the Constitution makers so intended, they could easily have said so, and the fact that the provision was limited to the term as used in the preceding sections indicates a contrary intention. We have therefore to ascertain the intention of the legislature in passing the minority law. At the time it was passed the directors or trustees of an -ordinary corporation constituted a board by which the [390] corporation was managed and its business was done. A majority of a quorum of the board, only, could do business for the corporation, except as such majority delegated, power. ■ It is radically different as to members of ordinary copartnerships where each member has authority to contract for the copartnership. This feature is preserved to some extent in limited partnerships and in partnership associations. See 2 Comp. Laws, §§ 6057, 6083. The application of the minority law to corporations in general does not make it possible for the minority member or members to act against the wish of the majority of the board. To apply it to partnership associations would enable minority stockholders to elect one or two of several' managers, who, though a minority, without authority from or the consent of a majority, could lawfully bind the association by their acts and contracts. There is nothing in the minority act which justifies an inference of an intention to authorize this as to general corporations, and if this unusual, if not unreasonable, policy is to be established under the act, it must be through a construction which applies it to partnerships or partnership associations—possibly both— where individual agency is preserved by the terms of the organic law. The act provides, in terms, that cumulative voting is proper in elections for directors of any corporation. But the legislature for years has avoided applying the name “corporation” to these associations, and designated them by the name of “ partnerships;” and it is not, in our opinion, unreasonable to conclude that it was not their intention to include them under the term ‘ ‘ corporations ” in this statute. An opposite construction would make the law a sword susceptible of use for aggression, whereas it was obviously intended as a shield for defense. Judgment of ouster must be denied, and the proceedings dismissed, with costs. The other Justices concurred.