Humphrys v. Winous Co.

165 Ohio St. (N.S.) 45
CourtOhio Supreme Court
DecidedMarch 14, 1956
DocketNo. 34485
StatusPublished

This text of 165 Ohio St. (N.S.) 45 (Humphrys v. Winous Co.) is published on Counsel Stack Legal Research, covering Ohio Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Humphrys v. Winous Co., 165 Ohio St. (N.S.) 45 (Ohio 1956).

Opinions

Bell, J.

It can not be disclaimed that by reason of the stock distribution of this particular corporation a classification of the three directors into three classes containing one director each effectively divests the minority shareholders of a measure of control they formerly exercised over the corporation by electing one member of the board through the expedient of cumulative voting.

The issue herein, however, is not whether a particular result was accomplished but whether, under the statutes, such a result can legally be accomplished.

Section 1701.64, Revised Code, provides, in part, as follows:

“The articles or the code of regulations may provide for the term of office of all of the directors or, if classified upon the basis of the expiration of the terms of office of the directors, of each class thereof, provided that no term shall be fixed for a period of more than three years from the date of their election and until the election of their successors. ’ ’

Section 1701.58, Revised Code, after providing that any shareholder may, upon giving 24 hours notice of his desire to do so, cumulate such voting power as he possesses and give one candidate as many votes as the number of directors multiplied by the number of his votes equals, then provides that ‘ ‘ such right to vote cumulatively shall not be restricted or qualified by the articles or the code of regulations. ’ ’

The Court of Appeals sustained the contention of appellees and held that, since Section 1701.58, Revised Code, was specific in character, it constituted a limitation upon the applicability of Section 1701.64, Revised Code, and that, since the classification by appellants, attempted under the authority of Section 1701.64, Revised Code, did restrict the right to vote cumulatively as specifically guaranteed by Section 1701.58, Revised Code, such classification was invalid.

It is a well settled rule of statutory construction that where a statute couched in general terms conflicts with a specific statute on the same subject, the latter must control. Gibson v. [49]*49Summers Construction Co., 163 Ohio St., 220, 126 N. E. (2d), 326; Andrianos v. Community Traction Co., 155 Ohio St., 47, 97 N. E. (2d), 549; Acme Engineering Co. v. Jones, Admr., 150 Ohio St., 423, 83 N. E. (2d), 202. The rule, however, often is much easier stated than applied, and especially is this true in the instant case.

The primary duty of a court in construing a statute is to give effect to the intention of the Legislature enacting it. In determining that intention, a court should consider the language used and the apparent purpose to be accomplished, and then such a construction should be adopted which permits the statute and its various parts to be construed as a whole and gives effect to the paramount object to be attained. Cochrel, a Minor, v. Robinson, 113 Ohio St., 526, 149 N. E., 871.

In enacting Section 1701.58, Revised Code, did the General Assembly intend, as urged by appellants, to guarantee only that the rigkTAo vote cumulatively shaRjutbe resjmicled or qualified? Or did it intend to^uarantée^tEaTTÉeeffectiveness of cumulative vofiñg^o^^nsureTMifior representation on the board of directors shall not be restricted or qualified?

In 1897, immediately prior to the enactment of the first statute expressly providing for cumulative voting of shares of stock in the election of directors, Section 3245, Revised Statutes, provided that directors “shall be chosen, by ballot, by the stockholders * * *; each share shall entitle the owner to as many votes as there are directors to be elected, and a plurality of votes shall be necessary for a choice.” This court held in State, ex rel Baumgardner, v. Stockley, 45 Ohio St., 304, 13 N. E., 279, that this statute did not confer upon shareholders the right of cumulative voting at the election of directors held thereunder.

Section 3245a, Revised Statutes, provided: “A corporation may provide in its articles of incorporation that each stockholder, irrespective of the amount of stock he may own, shall be entitled to one vote, and no more, at any election of directors, or upon any subject submitted at a stockholders’ meeting, and when such provision is made it shall be governed thereby.” 2 Bates Annotated Statutes (4 Ed.), 1843.

It is interesting to note that, as early as 1893, the organ[50]*50ized bar of Ohio began to interest itself in the rights of minority shareholders. In an address before the annual meeting of the Ohio State Bar Association held at Put-in-Bay in July 1893, John H. Doyle, then president of the association, said:

“* * * While there is a unanimity of purpose and an accord of thought amoungst the shareholders, the corporation moves smoothly, and its directors represent and carry out the wishes of such shareholders.

“But that is not always the case, and under the present law, as it has been interpreted by the Supreme Court, a bare majority can absolutely exclude the minority from all voice in its management. To illustrate:

“In a corporation represented by 100 shares of capital stock, the owners'of 51 shares could manage the corporation without the voice of the remaining 49 shares being heard, and the one odd share would be the available power; the 51 shares might be made very valuable, while the 49 could be rendered valueless, and the odd share or the balance of power receive an immense value. These suggestions will show that any statute providing for minority representation in corporations would not lead to ‘ absurd or improbable results, ’ but would be marked with wisdom and a fair regard for the rights of the parties.

‘ ‘ The old story, so often told, of a prominent Eastern newspaperman’s reply to the question of what the shares in his company were worth, is very apt:

“ ‘There are 51 shares,’ said he, ‘that are worth $250,000. There are 49 shares that are not worth a--.’

“I think the law should be so amended as to allow the 49 shares to elect two out of the five directors or three out of seven, as the case may be.

“In other words, that the shareholders be allowed to cumulate their votes on one or more directors, as they see fit, so that all interests may be fairly represented, without destroying the right of the majority to control.

“It would result in increased confidence in the management of such concerns, prevent the freezing-out process so often resorted to, and very often prevent fraud and corruption in the management of private corporations.”

At the annual meeting of the bar association on July 20, [51]*511897, the Committee on Judicial Administration and Legal Reform submitted the following as a part of its report to the association:

“The annual address of Judge Doyle to this association in 1893 recommended the amendment of the law respecting the management of private corporations so as to secure a representation in that management to minority stockholders, in proportion to the amount of stock held by them. In an address delivered to the association in 1895 by Mr. Bateman [Warner M. Bateman, of the Cincinnati Bar], the deficiency of our laws in provision for the security of creditors was discussed and the reformation of them, in that respect, recommended. With a view to carry out the suggestions made, Mr. Bateman submitted to the committee amendments and additions to the statute.

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Related

Marbury v. Madison
5 U.S. 137 (Supreme Court, 1803)
Andrianos v. Community Traction Co.
97 N.E.2d 549 (Ohio Supreme Court, 1951)
Maddock v. Vorclone Corp.
147 A. 255 (Court of Chancery of Delaware, 1929)
Cochrel v. Robinson
149 N.E. 871 (Ohio Supreme Court, 1925)
Acme Engineering Co. v. Jones
83 N.E.2d 202 (Ohio Supreme Court, 1948)
Bond v. Atlantic Terra Cotta Co.
137 A.D. 671 (Appellate Division of the Supreme Court of New York, 1910)
Cohen v. A. M. Byers Co.
70 A.2d 837 (Supreme Court of Pennsylvania, 1950)
Humphrys v. Winous Co.
125 N.E.2d 204 (Ohio Court of Appeals, 1955)

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Bluebook (online)
165 Ohio St. (N.S.) 45, Counsel Stack Legal Research, https://law.counselstack.com/opinion/humphrys-v-winous-co-ohio-1956.