State ex rel. Lake Shore Telephone & Telegraph Co. v. De Groat

O’BRIEN, J. The relator, the Lake Shore Telephone & Telegraph Company, is a Wisconsin corporation, and the owner of a majority of the capital stock of the Zenith City Telephone Company, a corporation also organized under the laws of Wisconsin, and which owns nearly all the [174] stock of the Zenith Telephone Company, a corporation organized under the laws of Maine, and operating a telephone system in Duluth, Minnesota, and holding as owner a majority of the stock of the Peoples Telephone Company, a Wisconsin corporation operating a telephone system in Superior, in that state. The legality of these-stock holdings is not questioned. For the purpose of making its control of the three last-named companies effective, the relator delivered to the president and secretary of the Zenith City Telephone Company a written demand, pursuant to the by-laws of that company, that a special meeting of the stockholders be called. Instead of complying, a special meeting of the directors of Zenith City Telephone Company was held, at which it was resolved not to accede to the request. Thereafter proceedings-in mandamus to compel the calling of the meeting were instituted against F. H. De Groat, a citizen of St. Louis county, in this state, and secretary of Zenith City Telephone Company. After a trial, judgment was rendered that a peremptory writ issue, commanding De Groat, as secretary, to call a meeting of the stockholders of Zenith City Telephone Company for the consideration of the following business: “First. The instruction of the directors of the Zenith City Telephone Company to take such steps, by way of amendments to the articles of incorporation and by-laws of the various corporations-hereinafter set forth, so that the annual meetings of the.stockholders-of said corporations shall be held in the following order: First, the annual meeting of the Lake Shore Telephone & Telegraph Company; second, the annual meeting of the Zenith City Telephone Company third, the annual meeting of the Zenith Telephone Company; fourth, the annual meeting of the Peoples Telephone Company. “Second. The giving of instructions to the directors of the Zenith City Telephone Company as to the policy to be pursued in the management of the Zenith Telephone Company and the Peoples Telephone Company. “Third. The transaction of any business of interest or importance to the stockholders of the Zenith City Telephone Company. “Fourth. The giving of instructions to the directors of the Zenith [175] City Telephone Company, or to any other person to call a special meeting of the stockholders of the Zenith Telephone Company, and of the Peoples Telephone Company, or either of them, for the purpose of amending the articles of incorporation of said companies, or either of them, to bring about the purposes set forth in the first item of business hereinabove set forth, or the making of any other amendments that may be deemed important; also the authorizing of any stockholder in the Lake Shore Telephone & Telegraph Company, or such other person as may be selected at said meeting of the Zenith City Telephone Company, to east the vote upon the stock of the Zenith Telephone Company, .held by the Zenith City Telephone Company, at any meeting of the stockholders of the Zenith Telephone Company hereafter held, whether said meeting be a special meeting or a regular annual meeting, to be hereafter held, it being-understood that there will be presented at the special meeting of the stockholders of the Zenith City Telephone Company, a proposition that the stockholders of the Zenith City Telephone Company at that meeting authorize some other person than its own directors or president to vote the stock of the Zenith Telephone Company, owned by the Zenith City Telephone Company, at all subsequent meetings of the stockholders of the Zenith Telephone Company.” This appeal is from the judgment so entered. 1. The appellant claims that, under the provisions of section 4556, [Revised Laws of 1905, the writ of mandamus will not lie to compel the performance of an act which is imposed as a duty upon one, not by the laws of a state, but only by a by-law of a corporation. The statute reads that the writ may issue “to compel the performance of an act which the law specially enjoins as a duty resulting from an office, trust, or station.” It was held by the supreme court of Connecticut (Bassett v. Atwater, 65 Conn. 355, 32 Atl. 937, 32 L. R. A. 575) that the office of secretary of a corporation and the performance of the duties of that office constituted, under the statute of that state, an office and trust, within the meaning of the statute regulating proceedings in mandamus, and that such secretary could be compelled to call a meeting of the stockholders of a corporation when a sufficient demand was made upon him, as provided in the by-laws [176] ■of the corporation. The cases referred to in the note attached to this ■decision, as printed in 32 L. R. A. -575, seem to hold in harmony •with it. If the Zenith City Telephone Company were a domestic corporation, there would be no doubt as to the propriety of the remedy sought. Subdivision 8 of section 3171, Revised Laws of 1905, gives the district court authority to cause a meeting of the managing-board, stockholders, or members of a corporation to be held, when deemed necessary for the preservation of its property or protection ■of its interests. To this end it is clear that the district court could, in i furtherance of the powers vested in it, compel the proper officer of ■ :a domestic corporation, subject to the visitorial powers of the state, ! to call a meeting of the stockholders; and, while its right to do so may j not rest upon the existence of a by-law providing for a call, the fact! that such a by-law in fact existed would be taken into consideration by the court in determining what its action should be. The writ of ' mandamus is not one of right, but is an extraordinary legal remedy, which the court may use in its discretion in furtherance of justice. State v. U. S. Express Co., 95 Minn. 442, 104 N. W. 556. We do not think that, even in the case of a domestic corporation, the existence of a by-law providing for a meeting upon demand of a certain number of stockholders deprives the court of its discretion in directing a mandamus to compel an officer to call a meeting; but we have no doubt that the remedy is a proper one in the case of a corporation ■organized under the laws of this state. 2. If the act sought to be compelled amounts to the regulation of the purely internal affairs of a foreign corporation, the courts of this state will assume no jurisdiction of the subject. Guilford v. Western Union Tel. Co., 59 Minn. 332, 61 N. W. 324, 50 Am. St. 407. The relator insists that the desired action does not fall within' this rule; that it, as the owner of the majority of the stock, has! a clear right to insist that the secretary of the corporation, a citizen1 and resident of Minnesota, perform the duty imposed upon him by the by-laws; that this is not a regulation of the internal affairs of a. corporation, as the court is not called upon to say what the ultimate action of the stockholders must be; that it is analogous to the sitúa-, [177] tion wliere, although the court will not attempt to control the discretion of an officer, it will compel him to exercise the discretion with which he is vested. If calling a meeting of the stockholders of the Zenith City Telephone Company, a corporation organized under the laws of Wisconsin, is not an act regulating, or dealing, or having to do solely with the internal management of that and the other corporations mentioned in the judgment, the contention of the relator is sound. Both parties to this appeal appear to rely upon the decision of this court in Guilford v. Western Union Tel. Co., supra. That was a case in which a citizen of Minnesota was permitted to maintain an action in the courts of this state to compel the issuance to him by the Western Union Telegraph Company, a foreign corporation, of certain shares of its stock in lieu of certain shares- which it had duly issued to plaintiff’s assignor, and which had been lost. It was a case in which, while the plaintiff’s rights arose out of his membership in the corporation, he had, as against the corporation, an individual claim and demand. The opinion in that case affirmed the doctrine “that courts will not exercise visitorial powers over foreign corporations, or interfere with the management of their internal affairs,” and gave a number of instances of what would be such interference— amongst others, “who, of rival claimants, are its legal officers.” In North State v. Field, 64 Md. 151, 20 Atl. 1039, it was attempted to formulate a statement defining what was and what was not the regulation of internal affairs of a corporation: “That where the act complained of affects the complainant solely in his capacity as a member of the corporation, whether it be as a stockholder, director, president, or other officer, and is the act of the corporation, whether acting in stockholders’ meeting, or through its agents, the board of directors, that then such action is the management of the internal affairs of the corporation, and in case of a foreign corporation our courts will not take jurisdiction.” This statement of the law was accepted by the supreme court of Bennsylvania in Madden v. Electric Light Co., 181 Pa. St. 617, 37 Atl. 817, 38 L. R. A. 638, and was evidently referred to by this court in the opinion in Guilford v. Western Union Tel. Co., supra, where, [178] at page 341 of 59 Minn., page 325 of 61 N. W. (50 Am. St. 407), after summarizing that statement, it is said: “We think there are cases, and that this is one of them, where, although the rights of a party, grow out of his membership in the corporation, yet, as the matter affects only his individual rights under the contract by which the stock was issued, therefore an enforcement of those rights will not be an interference with the internal management of the corporate affairs within the meaning of the rule.” This modification is in harmony with the weight of authority. Thus a court will compel the officers of a foreign corporation, having in their possession within the state the books and records of the company, to open them in a proper case, for the inspection of a stockholder. Richardson v. Swift, 7 Houst. (Del.) 137, 30 Atl. 781; State v. Lazarus, 127 Mo. App. 401, 105 S. W. 780. [7] In Selover v. Isle Harbor Land Co., 91 Minn. 451, 98 N. W. 344, this court held that an action might be maintained in Minnesota to compel a South Dakota corporation to issue and deliver to the plaintiff, a citizen of Minnesota, a certain proportion of its common stock pursuant to the provisions of a valid contract to that effect. In all of these cases the claimant’s rights depended upon his membership or right of membership in the corporation and his claim was directed against the corporation, and to a greater or less extent affected the rights of the corporation and its members. But in-each instance he was asserting an individual property right, except, ■' perhaps in those cases in which an inspection of the books has been compelled, and in those cases not only the officers having the custody of the books, but the books themselves, were within the state the courts of which exercised jurisdiction. The statement found in 19 Cyc. 1238, is in harmony with all these cases: “ * * * Upon the question what acts of a foreign corporation are within this rule, and what without it, the distinction has been taken that, where the act affects one solely in his capacity as a member, he must seek redress of his grievance in the courts of the state or country creating the corporation; but, where the act affects his individual rights, he may demand redress of any tribunal where jurisdiction may properly be acquired.” It must be remembered, also, that the relator is [179] not a citizen of Minnesota, seeking redress for an individual wrong or asserting an individual property right, but is a foreign corporation, asking that a court of this state exercise its discretion in granting it this extraordinary remedy to compel the officer of another foreign corporation to perform a duty imposed upon him by its by-laws. In the writer’s opinion, the relator in this proceeding is attempting to assert only the right which a member has in the management of the affairs of a corporation. Its right is in proportion to its stock holding, no greater and no less, and no different from that of any other member.. It entirely grows out of and depends upon his membership in the corporation. The calling of a stockholders’ meeting is the first step necessary in an attempt to change the time for the annual meeting of three foreign corporations, for instructing the directors of a foreign corporation as to the business policy to be pursued in its affairs, for amending the articles of incorporation of one or all of the three foreign corporations mentioned in the writ, and which it claims the right to control. These are regulations of internal affairs, in which each stockholder, as well as each corporation, is vitally interested, and each step in the proceeding is such regulation to a greater or less extent. It is only by arguing that the judgment of the court is not effective that the conclusion can be reached that the court is not called upon to enforce, as between each other, the claims of rival stockholders in a foreign corporation. In Guilford v. Western Union Tel. Co., supra, one of the contentions stated to be clearly beyond the power of the court was, in a foreign corporation, “who, of rival claimants, are its legal officers.” Here we have the contention as to which of rival claimants shall control its policy. If this was an action to test the appellant’s right to hold the office of secretary, it would fall within the class of cases which this court said were beyond the power which the courts of this state would attempt to exercise, and to say in what manner he shall perform the duties of his office is equally outside the visitorial power of this state. The Zenith City Telephone Company was created and exists under the laws of Wisconsin, and is sfibject to the laws of that state. The election of a secretary, who resides in Minnesota, does not prevent the state authorizing the corporation from exercising [180] any visitorial or other power over the corporation which it possesses; nor can those powers be increased by the laws or judicial procedure of this state. 3. A majority of the members of this court are unwilling to hold at this time that in no case will the courts, of this state compel, by mandamus, a resident of this state, who is the secretary of a foreign corporation, to perform the ministerial duty of calling a meeting of the stockholders; but we all agree that the district court was without power to direct the transaction of the business by the various corporations set out in the judgment, particularly when this extraordinary power of the court is invoked by a corporation for the confessed purpose of controlling the affairs of other corporations foreign to this state, and which are not parties to this action. Judgment reversed.