State ex rel. Reed v. Smith

14 P. 814, 15 Or. 98, 1887 Ore. LEXIS 55

Opinions

Thayer, J.

These two cases come here upon appeal from judgments of the Circuit County for the county of Multnomah rendered in them severally. Each of them was an action at law brought in said Circuit Court in the name of the State upon the relation of S. G. Reed. The first one against Elijah Smith, C. J. Smith, and 'L. B. Seeley is for usurping, intruding into, and unlawfully holding the office of director in the Oregon Iron and Steel Company, and also upon the right of George H. Williams, Martin Winch, and William M. Ladd to the position. The second one, against said Elijah Smith, is for a like usurpation, intrusion into, and unlawfully holding the office of president of said company, and also upon the right of said Reed to the same. The two cases arise out of the same transaction, and the circumstances involved in them are so blended that they were heard together and may conveniently be considered together. The Circuit Court’s findings of facts cover both cases, and include all the general matters relating to them. The following are said findings: —

1. That the Oregon Iron and Steel Company was organized under the general laws of Oregon on the twenty-second day of April, 1882, and among other specified objects and business for which it was organized it undertook “ to purchase, acquire, hold, open,” etc., “iron and coal mines,” to purchase, construct, maintain, and operate blast furnaces, rolling-mills, nail-mills, sawmills, machine shops, warehouses, ship-yards, and to engage in the manufacture of iron and steel, etc.; also, 4th, to construct, purchase, acquire, hold, own, improve, and operate wmals, and to transport freight and passengers by steam or otherwise thereon. 5th. To build, equip, and operate a railroad from Oswego to Portland, Oregon, and to extend the same from Oswego to form a connection with any railroad in the Willamette Valley, and to transport freight and passengers thereon; also to purchase, build, and operate railroads to connect its mines and other property with its furnace, rolling-mills, etc. 7th. To promote or facilitate and assist the construction, building, extension, equipment, and operation of any railroad line, steamship line, or steamboat line, and the formation of any companies for such purposes.

2. That the fifteenth day of June, 1886, was the date for the annual meeting of said corporation, and on that day the subscribed stock of the corporation was 7,501 shares, and a majority thereof was 3,751 shares, and there was represented at said meeting by the owners in person or by proxy (as appeared by the stock transfer books of the corporation) 5,701 shares, and according to said transfer and-stock books S. G. Reed held in his name 3,422v( shares, and represented the same in person, and held, as proxy for George B. Clapp,-500 shares, for H. 1ST. Arnold 100 shares, and for A. S. Reed 400 shares, making in all which said Reed apparently represented in person and by proxy 4,422J shares of stock. That said S. G. Reed was president of said corporation and presided at said meeting, ¥m. M. Ladd, vice-president, Martin Winch was secretary of said corporation, and they were both present at said meeting, and said Winch acted as secretary. Upon representations there made in effect that Elijah Smith was on his way to Portland and would probably, if the meeting was adjourned to suit his convenience, make some proposition to resuscitate and benefit the company, George A. Williams, being a stockholder present in person, moved, and it was voted to adjourn till July 1, 1886.

3. That on the first day of July, 1886, according to adjournment, the stockholders met at the place appointed, S. G. Reed, president, presiding, Martin Winch, secretary, and acting as such, and Wm. M. Ladd, vice-president, present and participating in the proceeding, and on call of stock there was 7,501 shares represented by the owners in person or by proxy, of which S. G. Reed appeared to represent in person 3,422J shares, and Geo. B. Clapp by L. B. Seeley proxy represented 500 shares. That at said meeting, and before a vote was taken for directors, L. B. Seeley claimed to own 361 shares of stock, that stood on the books of the company in the name of S. G. Reed, and demanded from said Reed a proxy to vote the same, which demand was answered by said Reed that said 361 shares would be voted in the usual way, and in accordance with the by-laws of the corporation, and thereupon immediately the sheriff of this county entered the room and served on said Reed an injunction issued out of this court from Department No. 2, commanding said Reed not to vote said 361 shares of said stock at said meeting, or at any adjourned meeting of said stockholders.

That Geo. H. Williams then moved an adjournment of the meeting to July 9, 1886, in order that Reed might have opportunity to apply for a discharge of the injunction which had been issued ex parte, and the motion was seconded and put and lost. That as to the said 361 shares of stock, the same did, prior to November 6,1885, stand upon the stock book and transfer journal of said company in the name of L. B. Seeley; that on the twenty-seventh day of March, 1884, said Seeley assigned and delivered to said S. G. Reed said 361 shares of stock, as collateral security for the payment to said Reed of $50,000 in two years after date, with semi-annual interest at seven per cent per annum, for which sum Seeley on that day gave to Reed his promissory note. The assignment and transfer of said stock was absolute in form and embodied an absolute and irrevocable power of attorney, directing and authorizing the transferees to transfer the same from Seeley’s name to that of the transferee on the books of the company; said assignment was also acccompanied by a written agreement of the same date, made by said Reed and Seeley, providing, among other things, that upon default in the payment of said $50,000 note and interest at maturity thereof, said Reed might sell or dispose of said stock at public or private sale, and in such manner and on such terms as to said Reed should seem best; said stock remained in Seeley’s name on the books of the company, and were voted by Seeley till the 6th of November, 1885, when said 361 shares, on request of said Reed, were transferred on the books of said corporation to said S. G. Reed, and the certificate thereof to Seeley was canceled, and said shares have ever since stood, and do now stand, on the books of said company in the name of said S. G. Reed. The $50,000 promissory note of said Seeley, for the security of which said 361 shares were assigned to said Reed, was due on the 30th of March, 1886, and the same was not paid, nor had the same been paid on said first day of July, 1886. That on the refusal of the meeting to adjourn, the usual business of an annual meeting was proceeded with, and among other things, it was voted .to proceed to the election of directors for the ensuing year. There was then laid before the meeting by Joseph Simon, proxy for E. W. Creighton, a certificate of stock in the name of E. W. Creighton, and he stated that one share thereof had been assigned to Elijah Smith and one share to C. J. Smith, and the fact in regard to said two shares was that on or about the fifth day of June, 1886, said E. W. Creighton, for the consideration of $100 cash to him paid, had assigned one share of said stock to Elijah Smith and one share to C. J. Smith, and that within a week thereafter said Creighton sent to Martin "Winch, secretary of said corporation, an informal notice of said assignment, but no transfer of said two shares, or either of them, had been made on the books of the company on the fifteenth day of June, 1886, the date of the annual meeting, nor on the first day of July, 1886, the date of said adjourned meeting, but said two shares were in fact transferred on the books of said corporation from E. W. Creighton to Elijah Smith and C. J. Smith respectively on the second day of July, 1886. At said adjourned meeting, C. R. Donohue was present and voted 87|- shares of stock in person, and also voted one share by Thos. N. Strong, proxy. E. W. Creighton was present in person, but his stock, 290J- shares, was controlled and voted by Jos. Simon, proxy. The 290J shares so voted for E. W. Creighton included the two shares sold to Elijah and C. J. Smith aforesaid. At said meeting, Elijah Smith held a written proxy from Wm. Alvord, authorizing him as proxy to vote Alvord’s 100 shares of stock at the annual meeting, and a telegram of date July 1st, confirming and extending the written proxy to all meetings during the year 1886, and the same were laid before the meeting. Geo. H. Williams objected to the stock of Wm. Alvord being voted by Elijah Smith, proxy,, .and also objected to L. B. Seeley’s voting the 361 shares-of stock standing in the name of S. G. Heed, and which said Beed had been, enjoined from voting, and claimed that Seeley had no right to vote the said 361 shares. A vote for directors was then taken, and said 361 shares were voted by said Seeley for Elijah Smith, C. J. Smith, and L. B. Seeley, and the ballots laid before the president, said S. G. Beed, to be canvassed, and thereupon said Geo. H. Williams objected to the votes cast for Elijah Smith and L. B. Seeley being counted, because they were non-residents of this State, and also objected to the votes cast for Elijah Smith and C. J. Smith, because they were not stockholders within the meaning and intent of the by-laws, and objected to the said 361 shares voted by Seeley being counted. Said Beed, president, sustained the objection to the vote of said 361 shares by L. B. Seeley, and the vote of said 100 shares owned by Wm. Alvord and voted by Elijah Smith, proxy, and excluded the same from the count of votes. Mr. Jos. Simon, as proxy for said E. W. Creighton, appealed from the decision of the president, and the appeal was seconded, but the president refused to entertain the appeal, and proceeded to declare the result of the voting, and then and there excluded from the count of votes the said 361 shares of stock voted by L. B. Seeley, and the 100 shares voted by Elijah Smith, proxy for Wm. Alvord, and declared the result of the voting as follows, to wit: That S. G. Beed had received 7,040 votes; that W. S. Ladd had received 7,040 votes; that W. M. Ladd had received 3,563J votes; that Geo. H. Williams had received 3,563J votes; that Martin Winch had received 3,563-J votes; that Elijah Smith had received 3,476J votes; that C. J. Smith had received 3,476J votes; that L. B. Seeley had received 3,476-J- votes.

And then he declared that S. G. Beed, W. S. Ladd, Geo. H. Williams, Wm. M. Ladd, and Martin Winch, having received a majority of all the legal votes cast, were duly elected directors of the Oregon Iron and Steel Company for the year ensuing, and a certificate of their election was in due form issued to said persons by said Beed, president. Geo. H. Williams, after the declaration of the vote, moved an adjournment and Martin Winch seconded it, and the president put the question to vote viva voce, and there was a sound of ayes and a sound of noes, but no call was made for a recorded vote by ayes and noes, nor for a division and special count of votes. Whereupon the president declared the meeting adjourned. The fact was, however, there were seven persons representing a majority of the stock voting, who voted against adjournment, and four persons representing a minority of the stock voting, who voted for the adjournment. On announcing the vote and declaring the meeting adjourned, the president, with Geo. H. Williams and the secretary, Martin Winch, withdrew from the meeting, but before said Winch, secretary, had passed out of the room, the record book of the corporation, in which were recorded the minutes of stockholders’ meetings, along Avith a part of the ballots for directors and several other papers and documents belonging to the secretary’s office, were taken from him by force by L. B. Seeley. After the president, secretary, and said Geo. H. Williams had so retired from the room, the persons remaining, among whom was Wm. M. Ladd, vice-president of the corporation, proceeded to choose W. S. Ladd, chairman, and Wm. M. Ladd, secretary, and proceeded to declare what they claimed to be the true result of the above-described vote cast for directors, and as data for the same referred to tally lists kept by some of the stockholders when Reed was canvassing the vote, and to memoranda left by Winch, as well as the recollection of the stockholders present, and said persons then by vote ordered that the 361 shares voted by L. B. Seeley and the 100 shares voted by Elijah Smith, prosy, for Alvord should be counted. Said 361 shares and said 100 shares had been voted for Elijah Smith, C. J. Smith, and L. B. Seeley for directors, and the same were now counted for said parties, and said W. S. Ladd, chairman, proceeded to declare the vote as folloAvs, to wit: That S. G. Reed had received 7,501 votes; that W. S. Ladd had received 7,501 votes; that Elijah Smith had received 3,937-?? votes; that C. J. Smith had received 3,937J votes; that L. B. Seeley had received 3,937J votes; that Geo. H. Williams had received 3,563J votes; that Martin Winch had recei\red 3,563-J votes; that Wm. M. Ladd had received 3,563-g- votes.

. And said W. S. Ladd, chairman, then declared that S. G. Eeed, W. S. Ladd, Elijah Smith, C. J. Smith, and L. B. Seeley were elected directors for the ensuing year, and said chairman thereupon executed and issued to said persons a certificate of their election.

4. That Elijah Smith, C. J. Smith, L. B. Seeley, and W. S. Ladd, claiming to be directors of the Oregon Iron and Steel Company, by virtue of election as aforesaid, July 1, 1886, took 'the oath required by law to qualify directors of such corporations to act in such capacity, and on the same day, without notice to S. G. Eeed, proceeded at a special meeting to organize said board of directors by choosing Elijah Smith for president, "YYm. S. Ladd, vice-president, and Wm. M. Ladd, secretary, and at a regular meeting of said board, held on Tuesday, August 17, 1886, the proceedings of the said meeting of directors, held on July 1, 1886, was by vote and in form ratified, confirmed, and approved.

5. That on the sixth day of July, 1886, S. G. Eeed, George H. Williams, and Martin Winch, claiming to have been elected directors of the Oregon Iron and. Steel Company at the meeting of stockholders held July 1, 1886, as above described, in due form took the oath required to qualify directors of such corporations to act as such, and on the same day due notice thereof having been given to W. S. Ladd and Wm. M. Ladd, held a special meeting of said board of directors and elected S. G. Eeed, president, George H. Williams, vice-president, and Martin Winch, secretary, for the ensuing year.

6. That Elijah Smith and L. B. Seeley were, on July 1, 1886, and still are non-residents of this State, and they and C. J. Smith are claiming and assuming to act as directors of said corporation, and said Elijah Smith is claiming and assuming to act as president of said corporation.

7. That if the 361 shares of stock standing on the books of the company in the name of S. G. Eeed and claimed by L. B. Seeley, and voted by him, be excluded from the count of votes, the number of votes cast at said meeting for Elijah Smith, C. J. Smith, and L. B. Seeley, respectively, would be 3,576J for each, which is 174J votes less than a majority of all the stock of the company.

8. That said Oregon Iron and Steel Company holds by purchase and operates a short narrow gauge railroad, from its furnace to its mine, about three miles in length. That it owns a short canal projected from Tualatin River to Sucker Lake, and has spent in and about the improvement of the Tualatin River so as to make said canal useful and in getting right of way and of flowage, and the like, about $10,000, but said canal is not now navigable for boats, and the said company has run a preliminary survey to extend said road to their timber lands in Washington County, a few miles distant, and proposed, in case of the extension and construction of said railroad and the improvement of said canal and river, to do a general transportation business on said lines.

That Elijah Smith and C. J. Smith submitted to the stockholders’ meeting, held July 1, 1886, a certificate of stock in the Oregon Iron and Steel Company, issued to E. W. Creighton for 290J shares of the capital stock of said company, upon which certificate was indorsed an assignment and transfer of one share of said stock to Elijah Smith and one share to C. J. Smith each, under date of June 5, 1886, and said Elijah Smith and C. J. Smith, at stockholders’ meeting, upon exhibiting said certificate and assignment, claimed by virtue thereof that they were stockholders of said Oregon Iron and Steel Company.

From these findings of fact the said court found the following conclusions of law: —

1. That L. B. Seeley was not a stockholder in the Oregon Iron and Steel Company as to the 361 shares of stock claimed by him and standing in the name of S. G. Reed, and was not entitled to vote said shares on the fifteenth day of June, 1886, nor on the first day of July, 1886, and said 361 shares were not entitled to be counted, when offered and cast by said L. B. Seeley.

2. That said Elijah Smith, C. J. Smith, and L. By Seeley, not having either of them received a majority of the /egal vote of the shares of the stock of said corporation, after rejecting from the count said 361 shares cast by L. B. Seeley md standing on the boobs of the company in the name of S. G. Reed, were not elected directors of said Oregon Iron and Steel Company, and are unlawfully assuming to act as such.

3. That the proceedings of the assembly of persons on the first day of July, 1886, described in the pleadings and findings of facts herein, whereof W. S. Ladd was chosen chairman, and at which a count of the votes of the stockholders of said corporation was claimed to have been made, and Elijah Smith, C. J. Smith, and L. B. Seeley were declared and elected directors of said corporation, were irregular, contrary to law, and are without force or validity.

4. That the canvass of votes by said W. S. Ladd, chairman, and the certificates of election of directors of said corporation, issued by said W. S. Ladd, chairman, were and are void and of no force or effect in law.

5. That Elijah Smith and C. J. Smith were not, nor was either of them, on said first day of July, 1886, a stockholder in the Oregon Iron and Steel Company, and neither of them was eligible to the office of director.

6. That the vote of 1Ó0 shares of stock owned by ¥m. Alvord and represented by Elijah Smith, proxy, at said meeting, on July 1, 1886, was entitled to be counted, and was by said Reed unlawfully rejected.

7. That the alleged meeting of July 1, 1886, at which it is claimed Elijah Smith was chosen president of the Oregon Iron and Steel Compay, was irregular and without authority of law.

8. That defendants Elijah Smith, C. J. Smith, and L. B. Seeley have each of them usurped, intruded into, and are unlawfully holding and exercising the office of directors in the Oregon Iron and Steel Company, and the plaintiff is entitled to judgment; that they and each of them be excluded from said office.

9. That Elijah Smith, defendant, has usurped, intruded into, and unlawfully holds and exercises the office of president of the Oregon iron and Steel Company, and the plaintiff is entitled to judgment; float he be excluded from said office.

The general question to be determined here is whether the conclusions of Vw are warranted by the facts, and if they are not, then what deductions should be drawn from the facts, and the effect thereof upon the final result reached by the Circuit Court. There seems to have been an active rivalry between two sets of the parties interested in the enterprise >7111011 the corporation was organized to promote, and a considerable effort made to employ sharp practice by the respective opponents. It has resulted in a complication of the affairs of the corporation which thé courts must undertake to untangle, and which presents several important and difficult questions to solve. The conclusions of law, as found by the Circuit Court as a whole, cannot, in my opinion, be sustained. I think Seeley was a stockholder as to the 361 shares of stock referred to in said first finding, and had a right to vote them on the dates therein mentioned. His assignment to Reed of said shares of stock under the circumstances and for the purposes shown by the evidence amounted only to a pledge. The agreement executed by Reed back to Seeley at the time the assignment was made clearly shows it. The transaction took place on the twenty-seventh day of March, 1884. The agreement recites that Reed was about to loan or advance to the Oregon Iron and Steel Company a certain amount of money, so that the total amount of his loan or advances to said company, including the amount theretofore loaned or advanced by him, should aggregate the sum of $150,000, and that Seeley was willing to obtain a third interest in the said total, and had given his note of that date to Reed for the sum of $50,000, payable two years from date with seven per cent interest, and had delivered as collateral security for said note and interest the 361 shares of stock. Therefore Reed undertook and agreed, upon the full payment of the note and interest, to redeliver to Seeley said shares of stock, etc., in consideration of which Seeley authorized aud empowered Reed, upon default of the payment of said note at the maturity thereof, with the interest thereon, to sell or dispose of at public or private sale, and in such manner and upon such terms as to the said Reed should seem best, the said stock, etc. The terms of the assignment were absolute, and empowered Reed to transfer upon the books of the company the shares of stock, but did not change the character of the transaction. In Edwards on Bailments, section 219, the author says: “Shares of stock in a corporation are now, and have been for many years, habitually pledged as collateral security for money loaned. The pledge is made by a direct transfer of the scrip in writing, with an authority to effect a transfer in due form on the books of the corporation ; and in his note for the sum loaned the borrower further authorizes the pledgee to sell the stock. The effect of the transaction is not a mortgage, but a pledge of the stock to secure the prompt payment of the money borrowed. On account of its incorporeal nature, property iu stock cannot be otherwise delivered. The delivery of the scrip alone is not considered sufficient, because it does not of itself enable the pledgee to sell the stock and apply the proceeds to pay the debt.The contract of pledge is entirely consistent with the owner’s right as a stockholder. Until the pledge is rendered available by a foreclosure ho remains a member of the corporate body, interested it its management.” It cannot be maintained, I am satisfied, that the transaction amounted to anything more than a pledge, or authorized Eeed to use, employ, or dispose of the shares of stock except iu default of the payment of the note at its maturity, and then only by a public or private sale, and transfer of them upon the books of the company. The discussion at the hearing was quite earnest as to the necessity and effect of a transfer of shares of stock upon the company’s boobs, the one side claiming that an assignment alone could only operate to transfer an equitable title; the other, that it transferred, in the language of section 14, chapter 7, Miscellaneous Laws, “all rights of the original holder, or person from whom the same is purchased.” This point has been a source of a great deal of controversy in the courts, and attempts in many of the States have been made to settle it by legislative enactment. The State of New York, by an act passed more than sixty years ago, provided that, “ in all cases where the right of voting upon any share or shares of stock of any incorporated company of that State should be questioned, it should be the duty of the inspectors of the elections to require the transfer books of said company as evidence of stock held; and all such shares as might appear standing thereon in the name of any person or persons should be voted on by such person or persons, directly by themselves or by proxy, subject to the provisions of the act of incorporation.” Another provision was also made at about the same time as the former, providing that it should be the duty of the Supreme Court, upon the application of any person aggrieved by or complaining of any election, or any proceeding, act, or matter in, or touching the same, to proceed forthwith, and in a summary way to hear the affidavits, proofs, and allegations of the parties, or otherwise inquire into the matter or cause of complaint, and thereupon to establish the election so complained of, or to order a new election, or make such order, or give such relief in the premises as right and justice might appear to the court to require. Under these two statutes it has been held by the courts of that State that the inspectors of such elections should be bound by the transfer book; but that, as errors might creep into the transfer book, it was deemed expedient to provide a mode of correcting the result of such errors. To that end the court was vested with ample power to inquire into the cause of complaint on motion, and to give relief by ordering a new election, or otherwise, as right and justice should require. (Strong v. Smith, 22 Sup. Ct. Rep. 234.) How said courts would have held as to such inspectors being bound by the transfer book upon a question of qualification as a voter in the absence of the statute can only be a matter of conjecture. In California, there is a statute which provides that no transfer of stock shall be valid, except between the parties thereto, until the same shall have been so entered upon the books of the company as to show the names of the parties by and to whom transferred, the number and designation of the shares, and the date of the transfer. Under that statute it is held by the courts of that State that a transfer of stock until entered upon the books of the company confers on the transferee, as between himself and the company, no right beyond that of having such transfer properly entered. (People v. Robinson, 64 Cal. 375.) It was, however, held in a former case that a surviving partner had a right to vote shares of stock belonging to the partnership, although standing upon the books of the corporation in the name of the deceased partner. Cope, J., in delivering the opinion of the court, said: “We think that no consequence is to be attached to the circumstance that a portion of the stock represented by Hill stood upon the books of the corporation in the name of Devane alone. This was prima fade evidence that it belonged to the separate estate of Devane, but it was competent for the defendant to show that it was in fact the property of the partnership. The eases cited from Hew York proceed entirely upon a statute of that State, and the reasoning in some of the cases indicates very clearly that in the absence of the statute the conclusions would have been different. We are unable to perceive that the other authorities referred to have any bearing upon the case. It would seem, upon principle, that the real owner of stock should be entitled to represent it at the meeting of the corporation, and the mere fact that he does not appear as owner upon the books of the company should not exclude him from the privilege of doing so.” (Allen v. Hill, 16 Cal. 119.) The authority of this case does not seem to be questioned in the latter one; and from the two we may, I think, conclude that the real owner of the stock is entitled to represent it, in the absence of express law interfering with the right. In view of the Hew. York statute referred to, “that shares of stock standing upon the books of the corporation in the name of a person or persons shall be voted on by such person or persons, directly by themselves or by proxy, subject to the provisions of the act of incorporation,” we cannot expect much aid from the decisions of the courts of that State in construing the laws of this State upon the subject. And we are equally unfortunate in regard to the decisions of the California courts respecting the rights of transferees of stock before any transfer is entered upon the books of the corporation, as the statute of that State, which has beeii referred to, declares in express terms the effect of such transfer. We are also in the same situation, so far as I have been able to observe, with reference to most of the decisions that have been cited by counsel herein. They have generally been made under some statute that controlled them. The decision of a court of another State, when made under a statute similar in its provisions to our own, is entitled to consideration; but when it merely undertakes to construe a different one, it does not aid us in interpreting ours. We have a statute which requires private corporations to beep a stock book in such manner as to show intelligibly the original stockholders, their respective shares, the amount paid, and the amount due thereon, if any, and all transfers thereof, which stock book, etc., shall.be subject to the inspection at all reasonable hours by any person interested therein and applying therefor. (Mise. Laws, § 12, ch. 7.) But it wholly fails to declare the effect of a neglect to enter such transfer upou such stock book, or of the extent of the right of a purchaser from a holder, except as provided in said section 14 of said chapter, as before mentioned — “ the rights of the original holder or person for whom the same is purchased.” It seems to me that under the statutes of this State no such consequences attach on account of a neglect to have a transfer of stock entered upon the books of the corporation, as has been held by the courts of many of the other States, and that such holding has resulted from the peculiar provisions of the statutes of those States, or of the articles of incorporation of the companies, or by-laws authorized by statute. I believe that it was the intention of the legislative assembly of this State to permit a stockholder to sell his stock to whoever he might see fit, and that the purchaser should succeed to all his rights, both equitable and legal. Certain relations exist, it is true, between corporations and their stockholders which are the subject of regulation. There are mutual obligations upon the part of the respective parties, and in order to maintain them and promote the interest of all, the corporations are empowered to make reasonable by-laws for the conduct of their affairs. This power under the statute extends to the making of by-laws, no,t inconsistent with existing law, for the transfer of the stock of the corporation. (Mise. Laws, subd. 6, § 5, ch. 7.) The bylaws so made have no force, however, except to regulate the relations referred to; they merely prescribe rules to be observed in the performance of acts which the members are, by tacit obliga•tion to the body politic, required to perform. Any exaction beyond this is an absolute nullity. In the case under consideration, Mr. Seeley had a right to pledge to Mr. Reed the 361 shares of stock and retain the general ownership of it, and it was not in the power of the latter or of the corporation to deprive the former of any right arising out of such ownership without his consent. Mr. Reed’s authority over the shares of stock was specified in the written document before referred to, and any attempt upon his part to exercise authority not therein conferred was an usurpation. It appears that Mr. Reed, without selling the stock under the power given him, and without waiting for the event to transpire which authorized him to sell it, had it transferred on the books of the company to himself. He had no more right to do that than he would have had to forcibly take the stock from Seeley’s possession, and have it transferred to himself upon the books; and any countenance given to the transaction by the company made it a joint wrong-doer with him. The company had no power to sanction the act or view it in any other light than a wrong. The fact that the stock was transferred upon the books to Reed and stood in his name, unless done by consent of parties or in pursuance of lawful authority, clothed him with no rights in reference to it, nor deprived Seeley of any; nor did Reed’s ruling, as president of the stockholders’ meeting, .that Seeley was not entitled to vote on said shares of stock, affect ■the question. The latter’s right to so vote was derived from the law and not from Mr. Reed. He did vote, and his vote should beReemed counted. Elijah Smith, C. J. Smith, and L. B. Seeley ¿received at that meeting a majority of the legal votes of the shares ■of .'Stock of the corporation. The findings that the proceedings had on the first day of July, 1886, by the assembly of persons whereof W. S. Ladd was chosen chairman, were irregular, contrary to law, and without force or validity; that the canvass of votes by W. S. Ladd, chairman, and the certificates of election .'issued:by liim as chairman, were void and of no force or effect in 'law, may, in one sense, be correct. The proceedings were certainly irregular, and there was a reason for it. Mr. Reed ¿attempted, to. adjourn the meeting, evidently against the consent .of a majority'of the holders of stock represented in person and by proxy, and he and others left before the business was done'. He had, before leaving, attempted to exclude the vote on the said 361 shares of stock, had declared himself and friends elected directors when they had not received a majority vote of the stock, and declared the meeting adjourned. Such conduct was not calculated to incite order and regularity. It was a sort of coup d’etat movement, which he probably felt justified in resorting to in order to counteract a similar one on the part of his opponents. This left the meeting, no doubt, in a confused condition. It however reorganized by choosing Mr. W. S. Ladd, chairman, and the proceedings referred to were had, anc[ whether the emergency authorized it or not, did not affect the legality of the election that had taken place before it occurred. The vote had then been taken and the question decided. As was said by one of the counsel for the respondent in an election contest case, while occupying a seat upon this bench, “whoever has received a majority of the legal votes cast is as much elected at the closing of the polls as he possibly can be by means of that election. The choice of the voters has become a perfect fixed fact. To make proof of that fact is all that remains to be done.” (Day v. Kent, 1 Or. 129.) In the condition in which the meeting was left, after the president withdrew, it was doubtless embarrassing to know how to proceed or what to do. The members had a right to ascertain for their own benefit whether the result of the vote, as declared by the president, was correct or not; and if their action in the premises was entirely unofficial, I cannot see how it affects the case. Mr. Need could not, by any erroneous ruling as canvasser of the votes, defeat any of the candidates. The will of the voter could not be thwarted in that way. This court would not certainly oust a person from the possession of an office who had received a majority of the legal votes cast for the office, because the canvasser had erroneously decided that certain of the votes cast for the officer were illegal, and had wrongfully excluded them, nor would attempt to do it because parties interested in the election had undertaken to act as canvassers and issue certificates of election where they had no authority to do so. The only question the court would attempt to determine would be, who received the requisite number of votes entitling him to the office. Under the view taken as to the right of Seeley to vote the' 361 shares of stock pledged to Mr. Reed, Mr. W. S. Ladd, Elijah Smith, C. J. Smith, and L. B. Seeley severally received a majority of the votes on all the shares of stock of the corporation for the office of director; but whether they were all entitled to such office or not depends upon other questions that have been presented for our consideration.

Residence of directors. One of the questions is, that the corporation does not come within that class of corporations that can permit a minority of the board of directors to reside out of the State, and that as Elijah Smith and L. B. Seeley were non-residents of the State at the time of the election, they were ineligible. From an inspection of the articles of incorporation, it will be seen that they include objects the corporation was authorized to carry out, which come within the proviso of the statute allowing a minority of non-resident directors; and we think the evidence tends to show that the corporation may be included in the class referred to. The reasons for adopting the said proviso do not' appear from anything contained in the statute, and I doubt whether the extent of business the corporation was engaged in, or expected to engage in, was the ground for adopting it. It applies to corporations “ constructing railroads or military wagon roads, canals or flumes, or publishing newspapers or conducting •institutions of learning.” They may be enterprises of great extent or very limited. I do not see that the legislature had in view organizations engaged in general business any more than those engaged in local matters. If it did it should have so indicated. The court could hardly be expected to determine the lengths the road should be, or size of the canal or flume, in order to decide whether the corporation constructing it had the right to permit the minority of its board of directors to reside out of the State. I do not see that the court can do more than decide whether the corporation comes within the character of organizations allowed the privilege referred to, and it seems to me that this one does.

Directors must be stoclcholders. Another of the questions raised by the respondent’s counsel is as to the qualification of Elijah Smith and G. J. Smith to be directors. They contend that the Smiths were not stockholders of the said corporation at the time of the election mentioned, there having been no transfer of the stock held by them made upon the company’s books. Section 4, article 6, of the by-laws of the corporation provides that: “Transfer of stock shall be made only upon the books of the company by the holders in person or by power of attorney, duly executed and filed with the secretary of the company, and on the surrender of the certificate or certificates of such shares.” Section 7, same article, provides that the secretary shall keep a transfer book, in which he shall register all transfers of stock, etc., and that such transfer book shall be closed for ten days previous to, and on the day of the annual meeting of the stockholders. These by-laws have no effect whatever upon the property rights of the stockholder; nor do they restrict his right to transfer his stock at pleasure, subject to the charter rights of the corporation. Bylaws, as before suggested, have no force except as a regulation of the intercourse between the stockholder and the company. They are restrictions, as said by Beck, J., in Farmers’ and Merchants’ Bank of Linnville v. Wasson, 48 Iowa, 339, “intended for the benefit of the corporation, when its rights may be protected thereby.” Such a restriction as that contained in section 4 “ is necessary in order that the officers of the corporation may know who are stockholders, which is essential in conducting elections of officers, and for other matters. It can never defeat the rights of other parties, and in all eases must be regarded as a reasonable requirement.If the corporation has no rights to be protected by its exercise, and other parties would be deprived of their property thereby, it cannot be enforced in such cases. Its enforcement would operate as an infringement upon the property rights of others, which the law will not permit.” The same view is expressed in Seeligson & Co. v. Brown, 61 Tex. 114, and in Angelí & Ames on Corporations, section 357. The respondent’s • counsel, according to my notion, fell into an error in regard to by-laws of a corporation affecting property rights in the stock thereof. They insisted that a party might be a “stock owner” and not be technically a “ stockholder,” and that a purchaser of shares of stock from the holder, when not transferred upon the ' books of the company, could not vote the stock at corporation elections, or claim dividends accrued thereon, because he was not strictly a stockholder. This, as I view it, is a mistake. Such purchaser is both owner and holder of the stock, and would be so recognized everywhere except in conducting affairs with the company. The latter might very properly claim and establish that it would recognize no one as a stockholder until, a transfer of the stock was made upon its books. In the case at bar the Smiths appeared at the stockholders’ meeting with a regular assignment of a share of stock to each from a former holder, but without the same having been transferred upon the books of the company. That would ordinarily have been sufficient proof that they were stockholders, but not so with their dealings with the company. Its by-laws provided that the “transfer should be made only upon the books of the company by the holder in person ”; and it had the right to ignore their claims to vote on the stock, or to receive dividends that might be due thereon. The corporation, through its board of directors, made the rule for its own benefit. It convenienced its officers in enabling them to know from an inspection of the company’s books who were its stockholders, and entitled to enjoy the privileges and franchises it conferred; and it tended to avoid disputes and controversies regarding a transfer of its stock. I have no doubt but that a stockholder’s right to vote on stock claimed to have been purchased, but not so transferred upon the books, or to demand dividends thereon, could be- successfully challenged upon that ground alone. This, however, is the only purpose it could serve. I consider the regulation a reasonable one where the law upon the subject is reasonably construed. The Smiths stood very differently in relation to the two shares of stock from what Seeley did with reference to the 361 shares pledged to Eeed. The latter was on the books in Seeley’s name until the attempt was made to transfer it to Eeed. The former was on the books in the name of another party, and no transfer made as provided by the by-law. Negligence might be imputed to the Smiths in not having had their shares of stock transferred to them upon the books; but it co.uld not be charged against Seeley, he not having author ized it, nor being a party to it. I do not think the former would have had the right to vote upon their share of stock if they had desired to do so. But did this render them ineligible to be elected directors of the corporation? This is the most difficult question to my mind in the whole case. They were not shown to be stockholders by the books of the company, though they were such in fact, and the representative of a majority of the shares voted in favor of their election. The by-laws are silent in regard to the consequences of not having the transfer made upon the books, and the power to. adopt them in the absence of express statutory authority cannot, in any case, be extended further than necessary to the protection of corporate rights. It cannot be maintained that section 4 of article 6 of the by-laws referred to has the force of a legislative enactment, or in view of the statute upon the subject, that a transfer of stock can be made only upon the books of the company. The statute provides that “the stocks in all private corporations organized under chapter 7, Miscellaneous Laws, are to be deemed personal property, and subject to attachment, execution, levy, and sale, as such ; and the corporation, in case of such sale, is required to make the necessary transfer to the purchaser upon the stock book.” (§13 of said chapter.) If such stock is personal property, subject to attachment, execution, levy, and sale as such, the holder certainly is entitled to make a voluntary sale of it without authority from the statute; but if such authority were required, section 14 of said chapter, impliedly, at least, gives it; and it will hardly be contended that a sale does not generally operate to transfer property from the vendor to the purchaser, and the same rule applies, in my opinion, to the sale of stock, whether transferred upon the stock book or not. I cannot see that the latter, as expressed in the statute, amounts to anything more than a registration of the transaction. The sale is made by the seller to the buyer. The corporation has nothing to do with it except to make the necessary entry upon the stock book, showing the fact, and as before suggested, that is evidently required for the convenience of the officers of the company in the management of its affairs. If a purchaser of stock were to neglect to have the transfer made upon the stock book, his dividends could be withheld, or paid to the former holder, perhaps, and should he offer to vote on the stock at a stockholders’ meeting, his vote could be refused. Under the statutes of this State, I do not believe that the corporation in question had any authority to adopt a by-law limiting the right to transfer stock, as the one in question attempted to do, or that it can be construed to have any more force or effect than I have indicated. If the stockholders at the meeting referred to had refused to recognize the Smiths as stockholders, for the reason mentioned, the latter could not have justly complained, but a majority of the stockholders did not. On the contrary, they voted for their election as directors of the company. Must this court then say, as a matter of law, that they were ineligible, and that they unlawfully intruded into the office of director? In a case in 44 Hew Jersey Law Reports, p. 529, entitled In re the Election of Directors of the St. Lawrence Steamboat Co., Depue, J., in delivering the opinion of the court, said: “The general rule is, that the books of a corporation are the evidence of the persons who are entitled to the rights and privileges of stockholders in the management of the affairs of the corporation, .... the books of the corporation are the only evidence of who are the stockholders, and as such are entitled to vote at elections. Neither the inspector nor other stockholder can dispute the right to vote of one who appears by the company’s books to be the holder of stock legally issued.But with respect to the qualifications of a director, the company’s boobs are not conclusive. A person may be qualified to be a director whose vote cannot be received at the election. He may be a bona fide holder of stock at that time, and yet be disqualified from voting on it by reason of the transfer not being entered on the books. He may appear as a stockholder on the boobs and still, for reasons aliwide, be disqualified for the office of the director. The question of the competency of a person for the directorship is one exclusively of judicial cognizance, over which the inspectors of the election have no jurisdiction. They have no means of making the necessary investigation on the subject, and no power to reject a competent vote because cast for a person who, in their judgment, is disqualified for the office.The question of eligibility is one that can be raised only in the courts. Independently of the statute, a person might be a director of a corporation without being a stockholder. The statute is guardedly expressed. It prescribes as the qualification of a director, that he shall be a bona fide holder of stock. A stockholder may have purchased stock with a view of-becoming a director, or have obtained it by gift, or he may hold it upon a trust, and be qualified to be a director. If the stock was legally issued, and is not the property of the corporation, and the legal title is in him, he is prima jade capable of being a director, and his right to be a director in virtue of his legal title to such stock can be impeached only by-showing that title was put in him colorably, with a view to qualify him to be a director for some dishonest purpose, etc. If the conclusions of the learned judge are correct, they are decisive of the question under consideration, although the view expressed may not be in every respect in harmony with our own. But the main point in the question is whether the Smiths were stockholders within the meaning of the section of our statute, which provides that no person is eligible to the office of director unless he is a¡ stockholder in the corporation.” (§ 8 of said chapter 7.) I am inclined to the belief that in view of the various provisions of the statute, and in the absence of any qualification of the right acquired by general purchase, they were. If the opposite view were to obtain, cases would be likely to arise that would present a strange anomaly. If a majority of all the stock of this corporation had, on the day of the election, stood in the name of Elijah Smith, and five or six days previous thereto it had been sold regularly upon execution, and Mr. Reed had purchased it, still Smith could have gone into the stockholders’ meeting and elected himself and friends directors, although he did not legally own a cent’s worth of stock at the time. It seems to me that the right to vote the shares of stock under such circumstances would be carrying the doctrine far enough without extending it to the right to elect a person director whose only title to stock was the fact that the entry of the transfer on the stock book had not been made. That would be carrying fiction, in my judgment, to an unreasonable extent. It would, indeed, be a sacrifice of substance to name. This disposes of the, ease as against the directors. The judgment against Elijah Smith for intruding into the office of president of the board of directors, I am inclined to think, should not be interfered with. The attempt upon the-part of the directors, chosen under the circumstances he and his friends were, to hold a special meeting at once, without any notice to Mr. Reed,'and elect officers, exhibited an indecent haste, and was irregular; nor do I think the irregularity was cured by the attempt at the subsequent meeting to ratify and confirm the proceedings of the previous one. I do not think such proceedings would be any more regular when ratified and confirmed than they were originally. The best way to legalize them is to begin over again and transact them properly. The special meeting, so called, was unauthorized, and the proceedings had thereat were a nullity, and not capable of ratification or confirmation. The result is that Elijah Smith was not president de jure of the board of directors. The judgment in the action against Elijah Smith, C. J. Smith, and L. B. Seeley will be reversed and the complaint dismissed, and the judgment in the action against Elijah Smith will be affirmed; costs in each case to be taxed in favor of the prevailing party.