Comm'th v. Detwiller

18 A. 990, 131 Pa. 614, 1890 Pa. LEXIS 1144

• Court: Supreme Court of Pennsylvania
• Decided: January 6, 1890
• Docket: Nos. 38, 68, 76
• Status: Published

Opinion

NOS. 38, 68.

Opinion,

Mr. Justice Williams :

The assignments of error in these cases are forty-four in number, but they have been properly treated by counsel on both sides as raising but seven questions. The first of these is stated in the words following: “ Can a person not a citizen of Pennsylvania become a member of the Farmers & Mechanics Institute of Northampton County?” As applicable to these cases, the words “ citizen of the United States ” may properly be substituted for the word “person,” in the question as stated by the appellants. Our question would then stand thus: “ Can a citizen of the United States, who is not a citizen of Pennsylvania, become a member,” etc.

Before proceeding to answer the question, we must also know what are the requisites to membership in this corporation, as laid down in the charter or by general law. Turning to article III. of the charter, we find the only provision which relates to this subject. This declares that “members shall severally subscribe at least one share of stock, amounting to twenty-five dollars;” and in the same connection it is added, “the aggregate subscriptions of which shall constitute the capital stock of the association.” A member must therefore be a stockholder, and the capital stock is made up of the shares subscribed for by the members. There is no provision in the charter which contemplates the possibility of members who are not stockholders, or of stockholders who are not members. Throughout the charter the word “members” is uniformly used where stockholders are spoken of; the only exception being found in article VII. This article declares that the association may be dissolved “by two thirds in number and value of the members and stockholders,” and then provides that in case of such dissolution the funds shall be “ divided among the members in proportion to the amount of stock held by them.” This is the only place where the word “stockholders” appears in the charter, and it is very clear that it is here used in the sense of “shares of stock.” The meaning of the provision is, that, in order to dissolve the corporation, two thirds in number of the stockholders must agree to such action, and two thirds of the shares of stock must be represented by them. Two thirds in number of the stockholders cannot dissolve the association, nor can less than two thirds in number, representing two thirds of the shares; but there must be an agreement of two thirds in number of persons, and two thirds in number of shares held, before dissolution can be lawfully ordered. We conclude, therefore, that a member of this corporation is necessarily a stockholder, and that a stockholder is, ipso facto, a member.

Returning, now, to our question, which concerns the rights of a holder of shares of stock, let us substitute the word “stockholder” for the word “member,” and the final form of the question will be: “ Can a citizen of the United States, who is not a citizen of Pennsylvania, become a stockholder in the Farmers & Mechanics Institute of Northampton County?”

We answer, first, there is nothing in the charter that forbids it. It is true that the preamble or declaration with which the charter begins, sets out the fact that the persons by whom the application is signed are citizens of the commonwealth of Pennsylvania ; but it contains no engagement that they shall remain so, or that upon removal into another state their stock shall escheat to the commonwealth, or be forfeited to the association. The-charter invests the association with the powers of a corporation, including the power to issue stock, but it lays no restrictions upon the stockholders. Nor, in the second place, is there anything in the general law as it stood when this charter was granted, or as it stands now, that forbids it. The act of April 6, 1791, authorized the governor, and that of October 18, 1840, authorized the courts, to incorporate associations for literary and other purposes, “ when any number of persons, citizens of this commonwealth, are associated, or mean to associate,” for such purposes. The power of the courts was further enlarged by the act of February 20, 1854, so as to embrace associations for the promotion of agriculture. The charter of this association was granted by the courts of Northampton county on April 25, 1856, under the authority conferred by the acts of 1840 and 1854. It may be conceded that a petition for incorporation, purporting to be signed by citizens of New Jersey, or of any other state except Pennsylvania, would have been refused by the court. The advantages of corporate powers provided for by the general laws, as they then stood, were reserved, in the first instance, for citizens of the state; but, when granted to citizens, no 'restrictions were put upon their exercise that affected the negotiable character of their stock, or the rights or powers of stockholders. The corporation, once created, was clothed with the power to issue stock. In the absence of any express provision to the contrary, the stock so issued was, like the stock of other business corporations, and like all varieties of personal property, freely alienable by the owner by gift or sale, by bequest or intestacy. Nothing less than an explicit provision in the charter or in the general law could deprive the shares of their character as personal goods, or the owner of his power to dispose of his own property. As we have seen, no such restriction is to be found in either.

If we now turn to the general law, as it stands at present, wo shall find that non-residents may become corporators. Section 3 of the act of April 29, 1874, P. L. 75, declares that “the charter of an intended corporation must be subscribed by five or more persons, three of whom, at least, must be citizens of the commonwealth.” Two, therefore, of the original corpora-tors may be persons who are neither citizens of Pennsylvania, nor residents within its jurisdiction. In section 7 of the same act it is made the duty of the directors to procure certificates: of stock, and deliver them, duly signed and sealed, to each person entitled to receive them, according to the number of shares held by such person. The section then proceeds as follows: “Which certificates or evidences of stock shall be transferable at the pleasure of the holder;.....and the assignee or party to whom the same shall have been so transferred shall be a member of said corporation, and have and enjoy all the immunities, privileges, and franchises, and be subject to all the liabilities, conditions, and penalties, incident thereto, in the same manner as the original subscriber or holder would have been.” This was a mere declaration of the law as it then stood, and not the introduction of a new rule. But the act of April 17, 1878, P. L. 22, is a legislative step in advance. It authorizes any corporation, authorized to hold exhibitions of natural and artificial articles and products, to mortgage its real and personal property and franchises, and provides that the purchaser or purchasers at public sale under such mortgage “shall be, and they are hereby, constituted a body politic, with all the rights, immunities, and privileges of the corporation whose property and franchises may be thus sold.”

From this glance at the general law as it now stands, it is very clear that the restriction upon the rights of stockholders in this association, contended for by the appellants, and which we have found wanting in the charter and the general law as it stood when the charter was granted, has not been supplied by the statutes now in force. Our first question may, then, be answered in the affirmative. A citizen of the United States may become a stockholder in the Farmers & Mechanics Institute of Northampton County, although he is not a citizen of, or resident in, this state. For the same reasons the second and third questions must be answered in the affirmative. The nonresident stockholder takes his shares with all the rights and privileges which pertain to them in the hands of a citizen, and he may vote upon them, and, where no other qualification than ownership of stock is required of the directors, he may become a director. We put the right of the stockholder, not so much on the provision of the constitution of the United States, which was discussed with so much learning by the judge of the court below, as upon the nature of the stock as a personal chattel, and the right, of an alien friend at the common law to deal in personal goods, embark in trade, loan money, sue and be sued for the collection of debts, and the protection of his person and personal estate.

The fourth and fifth questions relate to the right of a stockholder to cast more than one vote, if he owns more than one share of stock, and his right to vote by proxy. A corporation is a voluntary association of persons engaged in a common enterprise. When the methods of voting are not fixed by general law, the corporators may make the law for themselves, subject to the qualification that such laws and regulations as they make shall not conflict with the laws of the state or of the United States. The general law did not touch either of the questions now raised, and for that reason the corporators or stockholders took them up, and made a law for themselves, covering both subjects. They have provided that stockholders shall have one vote for each share held by them up to ten shares, and they have fixed the proportion which his votes shall bear to his shares above that number. This is a reasonable regulation; it is uniform in its operation; it conflicts with no law, and it is binding on all the shareholders. The same thing may be said in regard to voting by proxy. It was competent for tlie members of this association to consider what was most convenient for themselves, and best calculated to secure the votes of all the shareholders at the annual elections. They had the power to refuse to receive votes unless offered by the voters in person, but, upon consideration, they decided that votes might be cast by proxy. This also was a reasonable regulation, uniform in its application, works no wrong to any shareholder, and conflicts with no law of the commonwealth. It is therefore a valid and binding law, made by the shareholders for their own government.

The sixth and seventh questions may be considered together, as they relate to the power of the directors to fill vacancies. Article I., § 7, of the by-laws is as follows: “ When any director shall die, resign, neglect to serve, or remove out of the county, the board may proceed to supply the vacancy,” etc. How is the power thus conferred to be exercised? The death of a member of the board of directors would ordinarily be a matter of sufficient notoriety to justify the prompt filling of the vacancy. A resignation made to the board affords evidence of a vacancy, upon which action may be taken at any time. Removal for neglect to serve is in the nature of a penalty, and cannot be imposed without inquiry into the fact. The alleged delinquent, if within convenient reach, should have notice that he is charged with neglecting to perform his official duties, and be heard, if he so desires, in his own defence. The only other ground on which a vacancy may be declared, is the removal by one who was a resident of the county when elected a director, to another county or state. Such a removal ordinarily operates to transfer the business and social interests of the person from his old to his new home. Old forms of activity and old business relationships are discontinued, and new ones, in a new neighborhood, take their places. But a removal out of the county does not necessarily produce these results in all cases. It may not be intended to be permanent. It may not interfere with the ability or inclination to discharge acceptably all the duties of a director. The question in each case is whether a vacancy exists in fact. If it does, when the fact is ascertained the vacancy may be filled. The subject of the section is the filling of actual vacancies happening intermediate the annual elections. The board cannot create a vacancy. They cannot oust a director because they differ from the stockholders as to his eligibility, nor because he fails to attend a called meeting, nor because he is not a citizen of the commonwealth. Legal questions must be settled in the courts. Questions of fact, such as the existence of an actual vacancy by removal after election or neglect of duty by a member of the board, may be settled by the directors, and the resulting vacancies, if any, may be filled by them; but this is the extent of their power in the premises.

The judgment is affirmed.

no. 76.

Mr. Justice Williams:

In the case of Commonwealth v. Detwiller, in which an opinion has been filed at the present term, ante, p. 631, we have considered the question: “ Can a citizen of the United States, who is not a citizen of Pennsylvania, become a stockholder in the Farmers & Mechanics Institute of Northampton County?” We are now to push our inquiries one step further, and determine whether one who is not a .citizen of the United States, but is, and for many years has been, a resident and property holder in Pennsylvania and in Northampton county, can become a stockholder in the same association; and whether, if he may become a stockholder, he is entitled to vote as such at the stockholders’ meetings; and, finally, whether he may be legally elected a director of the association.

For the reasons given in Detwiller v. Commonwealth, supra, we think he may become a stockholder. The stock being personal property, he may acquire it by gift or purchase. An alien could at common law buy personal goods, and sell them, and, except in the case of an alien enemy, there was no restriction upon trade with aliens. If he can acquire the stock, he can acquire with it all the rights and privileges which its ownership confers, among which is the right to have a voice in the control of the enterprise, and the selection of those who are to conduct its affairs. He may therefore vote in the same manner, and with the same effect, as any other stockholder may do. Why may he not become a director? The office is not a political one. If it was, he would, of course, be ineligible to it, and disqualified for voting for any one else to .fill it, because of his want of citizenship. But the charter makes but one qualification, and that is found in the fifth article: “ The members of this association shall elect fifteen of their number to be a board of directors, who shall, within ten days after their election, divide themselves into three classes of five each, .... and annually thereafter five new directors shall be elected to serve for three years.” A director must be a stockholder. No other qualification is required. We are not to inquire how many shares he holds, whether he was an original corporator, or in what manner he acquired title to his stock. The single question which the charter raises is whether he is a stockholder.

The learned judge who tried this case in the court below thought that the right of the citizens of New Jersey to become stockholders, to vote, and to hold office in this association, rested on the constitution of the United States, and, logically enough, held that one who was not a citizen of the United States could not become a director; but we think the right of all persons, not alien enemies, to buy and hold, use and enjoy, personal property, whether corporate stocks or articles of merchandise, is older than,the constitution, and that citizenship of the United States is not necessary to its exercise. Even as to real estate, the distinction between a resident alien friend and a citizen, has disappeared in -Pennsylvania and nearly every other state in the Union. The words of our act of 1807 are: “ It shall and may be lawful for any alien or aliens, actually resident within this commonwealth, and not being the subject or subjects of some sovereign state or power which is, or shall be at the time or times of such purchase or purchases, at war with the United States of America, to purchase lands, tenements, and hereditaments within this commonwealth, and to have and to hold the same in fee-simple, or for any lesser estate, as fully, to all intents and purposes, as any natural born citizen or citizens may or can do.” The conditions annexed to this section were modified by subsequent legislation, so that now the only limitations are that the purchase shall not exceed 5,000 acres in extent, or $20,000 in annual value. An examination shows that in thirty-eight states resident alien friends are put upon the same footing with natural born citizens as to the right to acquire, use, and dispose of real estate. In one or two others an exception is made excluding the Chinese from the privileges conferred on other resident-aliené, and in two more no provision is found upon the subject.

In Pennsylvania, therefore, a resident alien friend can deal as freely in all forms of property, whether personal or real, “ to all intents and purposes as any natural born citizen or citizens may or can do.” He may embark in business, become a stockholder in a joint-stock association or corporation, become a manager or director, when not expressly made ineligible, and use, enjoy, control, and direct his property, of whatever nature or kind, in the same manner as any natural born citizen may do. The judgment of the court must therefore be reversed as to the appellant, and he be restored to the position to which he was regularly elected by his fellow-stockholders; the costs of the appeal to be paid by the appellees.

Judgment reversed.