State ex rel. Flagg v. Board of Trustees of the Lady Bryan Mining Co.

4 Nev. 400

• Court: Nevada Supreme Court
• Decided: July 1, 1868
• Status: Published

Opinion

By the Court,

Lewis, C. J.

Upon the proper statutory notice regularly served the relator petitions this Court for a peremptory writ of mandamus, commanding the defendants, who are the trustees of the Lady Bryan Company, to call and make provision for a meeting of the stockholders of the corporation for the purpose of electing their successors.

The facts upon which the writ is claimed are those substantially stated in the petition. The Lady Bryan Mining Company is a corporation, organized on the 3d day of February, A. d. 1868, in accordance with the laws of the State of Nevada, for the purpose of mining for gold and silver in the county of Storey. The certificate of its incorporation declares that its capital stock shall be one million eight hundred thousand dollars, divided into six thousand shares of the par value of three hundred dollars; that the corpora tion shall exist for the period of fifty years; that the number of trustees to manage its affairs shall be five, three of whom were named in the certificate. It is further alleged that the relator is a stockholder in this corporation, owning upwards of one hundred shares of its capital stock; that John Rule, William T. O’Neale, A. W. Baldwin, George T. Gillis, and R. M. Daggett are acting, or assuming to act, as its Board of Trustees, and that they are the only persons who are assuming or claiming to act in that capacity. The relator then states that “ he is advised by his counsel, and believes the same to be true, that under the requirements of the law of the State, the first annual meeting for the election of a Board of Trustees of said company to manage its concerns for the first year then next ensuing, should have been held on the 3d day of August, A. D. 1868, but he says no such meeting was called or held.” It is also charged that the trustees, having so failed to call a meeting of the stockholders, the petitioner served a paper, which was addressed to the “ acting President, Secretary, and Board of Trustees of the Lady Bryan Mining Co.,” upon each member of the Board, in which he requested them to make provision for and call, such meeting at the earliest practicable day. But, it is alleged,' “ notwithstanding the demand contained in said notice, the said acting Board of Trustees have refused to call a stockholders’ meeting as therein requested, or any other meeting of stockholders for the purpose of electing trustees for the said corporation, and do still so refuse.”

It is argued for the relator that by the incorporation law of this State, the first election of trustees under this organization should have been held on or about the 3d day of August, A.D. 1868, six months after the time the certificate of incorporation was filed. This claim is predicated upon the language of section two of anAct to provide for the formation of corporations for certain purposes, (Laws of 1865, page 359) which declares that the certificate of incorporation shall state the names and number of trustees, who shall manage the concerns of the company for the first six months. The certificate whereby this corporation was incorporated being filed in the proper office on the third day of February, it is argued that the trustees named therein could hold their office only for six months, and so that a meeting should have been called for the election of their successors on or about the third day of August. This section clearly limits the term of the trustees selected and named in the certificate of incorporation to six months from the time of incorporation, and clearly at the expiration of that time an election should have been held. But section five of the Act already referred to declares that the “ annual election shall be held at such time and place within the State, and upon such notice and in such manner as shall be directed by the by-laws of the company.” This language, it is urged for defendants, leaves the time of holding such elections to be determined by the Board of Trustees, who have the right to designate it by the adoption of a by-law. The law itself, it is argued, does not fix the time, and as it is not alleged in the petition that a time has been fixed by by-law, it is not shown that the Board of Trustees have neglected any duty, and as this writ will only issue to compel the performance of an act which the law especially enjoins as a “ duty resulting from an ofBce, trust or station,” counsel conclude that the petition is defective in not alleging the fact that a day had been fixed by by-law for holding the election, and upon that ground a demurrer is interposed to it. It is true that the time of holding-the elections should be designated in a lj>y-law; but the time fixed in that way must accord with the letter and spirit of the Act of the Legislature, and the second section of that Act unmistakably limits the term of the trustees first selected to six months. That time expired in this case on the 3d day of August, hence at that time the election should have been held. As it is made the duty of the trustees, by section four, to adopt all necessary by-laws, they should have designated that day, or the earliest practicable day thereafter, as the time for holding the election for their successors.

We do not think the language of section five leaves the time of holding the elections absolutely in the discretion of the trustees, as claimed by the learned counsel for the defendants. So far as the first election is concerned, it certainly does not. The time when that is to be held is fixed in the law itself, at a period six months after the filing of the certificate of incorporation. This time is .unequivocally specified, and we see npthing in the context of the law to induce the belief that the Legislature did not intend precisely what it expressed. But the period of six months might expire on the Sabbath or some holiday upon which the election could not well be held — hence it becomes necessary to designate some day, and the time of the day when it shall be held. That, the trustees have the right to do by by-law, and this is the extent of the authority given them in section five. It is necessary that so far they should be allowed to exercise their own discretion ; beyond that they are controlled by the law itself. The Act of the Legislature does not require an election to be held at any time not practicable, but when -it limits the term of the first trustees to six months, the time of the election should be set at as early a day as practicable after the expiration of that time. The law does not demand that which is impossible, but it exacts good faith and fair dealing. It was the duty, then, of the trustees to call an election upon the third day of August, or as soon thereafter as practicable. It is, however, charged in the petition that, at the time of its filing, which was on the 24th day of September, none had been called, and it is alleged that the trustees still refused to make such call. This, it seems to us, makes out a case for the relator. The failure for a period of nearly two months after the time designated in that law to call and provide for an election, is at least & prima facie showing of neglect and failure on the part of the trustees to perform their duty. Whether they had- adopted a by-law regulating that matter or not, is of no consequence so far as this question is concerned; for if they had failed for this length of time to call the election, it shows either that the by-law is unreasonable and not in accordance with the provision of the legislative Act, which required an election about the third day of August, or that the by-law itself had been disregarded. In either case a mandamus should issue to compel an election at the earliest practicable day. Or if no by-law had been adopted fixing a day of election, and that fact were alleged in the petition, still the failure to call such election would be no less a neglect of duty on the part of the trustees, for it is their duty to adopt such bylaw, and they cannot avail themselves of the failure to do it as a reason why they should not do another act which the law imposes upon them as a duty. If the petition contained such allegation it would simply show a double neglect of duty — that is, a failure to call an election and also to adopt a by-law, an act which should properly have preceded the same. But such by-law maybe adopted at any time. The want of it is therefore no reason why the writ should not issue commanding the trustees to call an election. Indeed the by-law is simply the prescription of the time, place, and manner in which the election shall be held, while the ultimate object to be attained is the election itself.

A writ, therefore, commanding the trustees to call an election, accomplishes all that is necessary, as the law itself directs the manner in which the call shall be made — that is, by the adoption of a by-law designating the day, place, and manner. And the command to call an election necessarily includes the order to do it in the manner provided by laAV. This is somewhat analogous to a case where the Avrit is issued to a judicial tribunal, commanding it to proceed Avith the trial of a cause, although it may be indispensably necessary to perform many acts preliminary to the trial, and Avith-out which no trial can be had, such as the opening of Court, or the issuing of a venire for a jury, and the like. Still these are matters Avhich are never considered, but the writ issues commanding the Court to proceed Avith the trial, and the laAV directs the manner in w'hich it shall be conducted. Hence we conclude that the failure to allege the existence of a by-laAV does not render the petition defective.

It is also suggested that the petition does not show that an election has not already been had. We think otherAvise. It is first alleged that the first annual meeting should have been held on the 3d day of August; that no such meeting AYas called or held; that in consequence of the failure of the trustees to call it, the relator requested the Board in Avriting to call such meeting at as early a day as practicable; that notwithstanding such request this Board have refused to call a meeting, as requested, or any other meeting of the stockholders for the purpose of electing trustees, and do still so refuse. Such is the substance of the allegations upon this point. Doubtless they might have been more explicit, but we think the fact that no annual election had been held at the time the petition was filed is sufficiently shown under the liberal rules of our 'Practice Act, Section 70 of which declares that “In the construction of a pleading for the purpose of determining its effect, its allegations shall be liberally construed, with a view to substantial justice between the parties.” And it is conceded that the petition in a proceeding of this kind is to be governed by the rules controlling the pleadings in a,n ordinary action. If, then, we give its averments this liberal construction, it can scarcely be claimed that it does not show that the annual election which should have been held on or about the 3d of August has not been held. Although not fully explicit upon this point, we do not think the petition so defective as to warrant a refusal of the writ upon that ground, at least after the defendants have answered over and thereby waived all defects in the manner of stating a fact.

The only remaining point presented for consideration is raised by an allegation in the answer to this effect, that on the fifth day of October (which was some time after the institution of this proceeding) the relator and other stockholders of the Lady Bryan Company assembled at the office of the said company, and as such stockholders proceeded to and did vote to expel and remove the old trustees, Rule, O’Noale, Baldwin, Gillis, and Daggett, from office, and elected for their successors the relator and four others, to act as trustees of the company. The defendants, however, deny the right of the stockholders to proceed in such manner, and do not admit the legality of the proceeding, or that it is binding upon them.

But this proceeding, in our opinion, constitutes no objection to the issuance of the writ in this case, for two reasons. 1st. Because the defendants themselves claim that the action of the stockholders removing them was illegal, and hence that they are still the legal Board. Such being the case, the allegation of the answer only show's that the stockholders did an act which effected nothing, being entirely nugatory and void. We do not think that the defendants ought to be allowed to avail themselves of this proceeding by the stockholders as a defence while they deny its legality, and claim, notwitstanding, to be the legal trustees. 2d. Even admitting the removal to be valid, still that does not obviate the necessity for an election. This action of the stockholders is a special proceeding, which is authorized under certain circumstances by section five of the incorporation law-of this State, which declares that “it shall be competent at any time for two-thirds of the stockholders of any corporation, organized under this Act, to expel any trustee from office and to elect another to suce,eed him.” Although under the authority of this provision all the members of a Board be expelled from office, still that should not interfere with the annual election. If any one or all of the trustees be expelled in accordance with this section only a day preceding the annual election, the election must still be held. If the expulsion be valid, the individuals only are changed, the Board continues, and the answer in this case does not show that there is not the'same necessity for issuing the writ to the new Board as to the old, and without such showing we are unable to see how any change of the individuals composing the Board can affect the relator’s right in this proceeding.

Entertaining these views of this question it is unnecessary to decide whether the expulsion of the old trustees was a legal proceeding or not. The defendants deny its legality, and so render that fact unavailing as a matter of defense to themselves in this proceeding ; for if it were illegal and void, they still constitute the legal Board of Trustees, and to them the writ should issue.

The mandamus must issue commanding the Board forthwith to give notice of an election to be held upon some day within two weeks from the time the writ is issued.

Whitman, J., did not participate in the foregoing decision.