Magill v. North American Refractories Co.

124 A.2d 718, 36 Del. Ch. 13, 1956 Del. Ch. LEXIS 105
CourtCourt of Chancery of Delaware
DecidedJuly 19, 1956
StatusPublished
Cited by1 cases

This text of 124 A.2d 718 (Magill v. North American Refractories Co.) is published on Counsel Stack Legal Research, covering Court of Chancery of Delaware primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Magill v. North American Refractories Co., 124 A.2d 718, 36 Del. Ch. 13, 1956 Del. Ch. LEXIS 105 (Del. Ct. App. 1956).

Opinion

Marvel, Vice Chancellor:

Plaintiff is the holder of 1,000 shares of the capital stock of the defendant corporation and seeks a statutory review1 of election of directors and officers of the defendant corporation.

The first of the above numbered actions (between plaintiff and the then directors of the defendant corporation) sought a declaratory judgment and injunctive relief against the holding of the scheduled May 1, 1956 annual meeting of stockholders of the corporation at which directors were to be elected. The complaint charged noncompliance with § 219 of Title 8, Del.C. A motion for a preliminary injunction was denied and the meeting was held. Plaintiff then amended his complaint in Civil Action No. 717 and filed a new action (Civil Action No. 721) against the directors (other than himself) declared elected at the May 1 meeting with the purpose of obtaining a review of the results of the election. In both actions North American Refractories Company is named a defendant.

The first question to be decided on cross motions for summary judgment in the consolidated action is whether or not the vote taken at the meeting of May 1 resulted in the election of a valid board and if so the names of the directors and officers now in office.

Plaintiff contends that because the list of stockholders posted by defendants prior to the election and made available at the election pursuant to the terms of § 219 of Title 8, Del.C. failed to contain the addresses of stockholders and the number of shares of stock held by each stockholder, there was a wilful failure to comply with that section, making ineligible for election to office not only incumbent di~ [15]*15rectors but also those directors chosen from a so-called alternate management slate who as attorneys advised management that the use of a complete list of stockholders entitled to vote arranged in alphabetical order constituted compliance with § 219 of Title 8, Del.C. At the conclusion of the election at which cumulative voting was permitted plaintiff and nine management candidates were declared elected. Management nominees received a total of 1,685,490 votes, while Magill and others on his slate received a total of 259,690 votes.

It is unnecessary to go into the facts in detail. The story of recent Delaware litigation between the present parties is one of diligent effort on plaintiff’s part to obtain information about the corporate defendant’s stockholders and of equally diligent effort on defendants’ part to frustrate plaintiff’s purpose. Having failed because of the exigencies of time to get to grips with defendants by way of mandamus in Superior Court, plaintiff, as has been noted above, first sought injunctive relief in this Court and now seeks review of the May 1 election, charging that all but two of the persons nominated by management were ineligible for the office of director. Plaintiff specifically seeks an order under the statute declaring plaintiff’s slate of eight candidates plus two eligible management candidates to be the corporate defendant’s validly elected board or in the alternative an order directing the holding of a new election. Plaintiff recognizes that acceptance of his interpretation of the meaning of § 219 by the Court would probably result in an order for a new election. He contends, however, that defendants’ tainted candidates should be declared ineligible for office at such election.

As I read the papers before me, there is no dispute as to any fact material to decision of the basic issue, namely, whether or not there was compliance with § 219 of the Delaware Corporation Law.

Plaintiff contends that inasmuch as there are no Delaware cases interpreting § 219 the Court must be guided in determining the meaning of the critical portion of the section by an allegedly established practice. Plaintiff insists that to read the word “list” as meaning a list of names and nothing more would be a slavish acceptance of the literal at the expense of common sense and common usage. Plaintiff [16]*16argues in support of his theory of practical construction that not only has it been the general practice in Delaware to construe the phrase “complete list” as meaning the type of list which plaintiff demanded be posted, a practice allegedly recognized and given legal force by the Legislature by subsequent re-enactments of the critical language of § 219 without change, but that the corporate defendant itself observed such established practice in part by using such a list as a practical aid to conducting the May 1 meeting.

None of the Delaware cases in which § 219 is referred to throws any light on the meaning of the phrase “complete list of the stockholders entitled to vote * * Accordingly, this Court must decide as a matter of first instance whether plaintiff’s or defendants’ view of the meaning of the phrase is the correct one.

Section 219 of Title 8, Del.C. was first enacted into law in 1883 in substantially its present form in a section governing voting which included a paragraph declaring the stock ledgers or in their absence the transfer books to be the only evidence of the right to vote, § 22, Chap. 147, Vol. 17, Laws of Delaware. In 1899, this section, § 17 of Chap. 273, Vol. 21, Laws of Delaware, was re-enacted into law as part of what has come to be known as the General Corporation Law of the State of Delaware and in this section was also included an elaboration of what is now with minor changes § 220 of Title 8, Del.C.

At the time of the enactment of the 1883 statute providing for the posting of a complete list of stockholders ten days before an election, a New Jersey corporate law which can be assumed to have been the prototype of the corresponding Delaware statute (Chicago Corp. v. Munds, infra) required that such list disclose the number of shares held by each stockholder, Downing v. Potts, 23 N.J.L. 66, decided in 1851. Furthermore, in 1899, when our basic General Corporation Law was enacted, the New Jersey statute governing the posting of a list of stockholders prior to a meeting (C.S. p. 1620, § 33) required that such list include not only the number of shares held by each stockholder but also the residence of each stockholder, In re Zenitherm Co., 95 N.J.L. 297, 113 A. 327.

[17]*17The fact that the legislators of Delaware in 1883 and again in 1899 enacted a statute which excluded language found in the earlier New Jersey prototypes is significant. Because the earlier New Jersey laws served as models for the Delaware statutes providing for incorporation under a general law, a departure in Delaware from the phraseology of a New Jersey model has been considered to be indicative of a legislative intent that a change of meaning was intended. In the case of Chicago Corp. v. Munds, 20 Del.Ch. 142, 172 A. 452, 454, Chancellor Josiah Wolcott after observing that it is common knowledge that the General Corporation Law of Delaware enacted in 1899 was modeled after the then existing New Jersey Act, stated in reference to the phraseology of the valuation section of the Delaware merger statute:

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Related

Magill v. NORTH AMERICAN REFRACTORIES COMPANY
124 A.2d 718 (Court of Chancery of Delaware, 1956)

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Bluebook (online)
124 A.2d 718, 36 Del. Ch. 13, 1956 Del. Ch. LEXIS 105, Counsel Stack Legal Research, https://law.counselstack.com/opinion/magill-v-north-american-refractories-co-delch-1956.