referrring, to the items to which we have just referred. We notice them because they' were made the subject of an unauthorized investigation before the master, and of a report prepared but not filed by him, and have been discussed ,by counsel on the hearing with the understanding that the court should consider them, iuso far as they question of are found proper to be considered, in determining the receiver's compensation. It woul4 be improper for us to discuss t4eqqestion whether these items, and others objected to, should be alloVl'edto the receiver in his final accounts.' All questions of that ch,aracter must be reserved until the hearing upon the master's report upon that subject. What we now decide is that there is no showing of such fraudulent conduct on the part of the receiver as a,hould deprive him of compensation for services. ,The order is that petitioner be .allowed· for extraordinary services the sUIP of $4,390, to be credited, to him on final settlement.
D. J. I have examined carefully the facts upon which application· for additional compensation is claimed, and fully concur in the foregoing opinion of the Circuit J udge-MoCBABYo
HOUGJlTON COFPU WORKS
(Oirc'Uit Otmrt, W. D. Miihigan, N. D.
July 12, 1881.)
DI1utCTO'R$ IMPROPEIlLY CoNVENED-ACTION
Where a by-law ofa corporation required. its secretary to give due notice . of meetings of the board of directors, held, that important action taken at a meeting frOm which a director, whom the secretary made no attempt to notify that such a meeting was to be beld, was absent, is unauthorized. So BONA FIDE PuRCHAaER WITHOUT NOTICE-WHO IS No'r. "The a.former shareholder, :was pre,ent at the meeting of the boar<i at which the sale was made, and knew that one of the directors was away. He was bound to know that absent directors must be notified of board meetings. Held, that he Wll'8not a bonafldB purchaser wiihout notice.
STOCK BQ"WlHT BY THE CORPORATIQN-WHEN ENTITLED TO· VOTE.
It t)lat stock bought by the corporation for non-payment of asseBBments is entitled to vote only when.an the stock is represented at the mceUng. and consent to have the treasurer cast the vote.
Stock thus subllcribed for ls not to QeCOQD.ted in taking a Iltock vote.
The records of a corporation are prima jacilevidence against etockholdera of its acts recorded therein. Bcction 2847 of the Compiled LaWIi of Mic!liian. in 10 far as 1\ proVide. for the du? flling of proxies. is directory olUl.
In Equity. Hearing on pleadings and proofs.
Dan. H. Ball and G. V. N. Lothrop, for complainant.
T. L. Chadbourne alid Ashley Pond, for all defendants except the' Houghton Copper Works. WITHEY, D. J. The Houghton Copper Works was under the laws of Michigan in 1871, am6ng other things, for the purpds'e of manufacturing copper, with a capital stock of $250,000, divided into 10,000 shares of $25 each. Complainant is a stockholder; arid brings this suit to set aside a' sale made by a majority of the ,dire.ctors to defendant Edwards, October 6, 1879, for the price of The sale comprised all the real estate, works, and property of th& company. The object sought to be aocomplishsd was to close out the property and wind up the business, and such is manifestly ,the effect if the sale is valid. The sale is attacked principally upon three grounds:
(1) That it was made without authority of the stockholders, in1J8much three-fifths in interest of the entire stock of the company, at a meeting called' for that purpose, did not vote to authorize the sale; (2) that a majority of the directors, convened without notice to all the directors, possessed no power to make the sale; and, lastly, that the sale was fraUdulent, it being made with intent to deprive complainant of hiB-rights as a stockholder.
According to the records of the company, the stookholders, September 20, 1875, authorized a sale of all the property of the cor· poration; but it is said that three-fifths in interest of the entire stock was not represented and did not vote in favor of authorizing the directors to sell. Compo Laws, § 2888. Whether this objection is valid depends upon two questions:
(1) Whether certain of the capital stock owned by the company, and carried in the name of the treasurer, was to be counted in determining the threefifths in inter.est of the entire stock, part of it having been subscribed and immediately transferred to the company to be subsequently disposed of in the interest of the corporation, while other of the stock so held had been' purchased at a sale of stock delinquent for non-payment of assessments; (2) whether the prima facie evidence made by the records of the stockholders' meeting, stating that 3,387 shares-more than three-fifths, excluding shares owned by the corporation-voted in favor of authorizing the directors to sell. has been rebutted.
The entire capital stock was subscribed at its par value, but, as stated, nearly one-half of the subscriptions were intended to be merely nominal, and such stock was at once transferred to the treasurer for the company, on which, of course,no assessments were paid. None of this stock was, in· my opinion, to be counted in determining whether
three-fifths in interest ,of the entire ,stock voted to authorize a sale. It was stock only in name, and therefore not entitled to vote. As to the stock boughtpy the company for non-payment of assessments, there would be less objection; but if voted it should be in such a mannerQ.s to represent the interest of every stockholder, for every one of them had an interest in the stook, and was entitled to have his, interest voted according to his own views. If the treasurer El4o,uid exercise the right to vote such stock, it might result in making the action of the meeting adverseJo the views of the majority of the stockholders; ,and it is not seen how it would be practicable to have the stock vqted in harmony with the views of all, unless all the stock was represented at the meeting and all consented to have the cast the vote, and such was not the case. , if the stock owned, by the cornpaoywas' not entitled to be voted, the next inquiry is whether the requisite three-fifths of the remaining stock was voted in favor of the resolution authorizing the direct. ors to sell. The record, ,after setting fOJ;th the resolution to be acted on, states ,that a vote by ballot was taken, and sets it forth after this manner, viz.: "T. W. Edwards, 316 shares; T. W. Edwards, proxy, 5 shares;" and so on until the vote in person and proxy is shown to be 3,387 shares ill favor of the resolution, being more than three. fifths, excluding stock owned by the company. Of the stock thus voted, 1,561 shares were voted by proxies. This record is prima facie evidence; certainly against stockholders, of the acts of the corporation therein -recorded. The officer making up the minutes was the agent of the stockholders, and it is therefore their record of their own action. It may not be conclusive, but if a stockholder seeks to discredit this evidence he must do it by proofs conclusive in character , and weight. Excluding stock owned by the company, it is elaimeCl that threefifths of the shares did not vote in favor ofa sale. The evidence from which such conclusion is urged is mainly that of the 3,387 affirmative votes, 1,561 of the shares were voted by proxies, and that a large number of such proxies are missing from the office of t4e company, raising the presumption that they never existed, and if not, then the resolution to authorize a sale was not passed by a. vote of three-fifths, in interest of the stock. It is said the statute (section 2847) which permits stock to be voted by proxy requires the proxy to be "duly filed." But this must be regarded as directory. If the proxies were present and actually voted, the fact that none of them were filed, or that nonf;l of them can
now be fOtlnd in the company's office, will not defeat the action la.ken at the meeting. The record states that E. voted a proky of five shares, anlUhis means that he held a proxy which was present, signed by a holder of five shares of stock, that authorized E. to vote those shares, and that the proxy was deemed sufficient; and so in the case of every share stated to have been voted by proxy. If the directors were authorized to make a sale of the company's property, the next question is whether a majority of the directors could director take the necessary action to sell without notifying the of the meeting, either personally or by notice left at his residence. There were five directors, four of whom met and assumed to sell. The. fifth director, being temporarily absent from the state, was not notified, nor was there any attempt made to notify him, of the meet· ing. The statute says:
"A majority of the directors of every such corporation, convened according to the by-laws, shall constitute a quorum for the transaction of business." Section 2847.
The only by-law bearing on the subject relates to the duties of the secretary, viz.:
" The secretary shall give due notice of all meetings of the stockholders and board of directors."
There had been no meeting of the directors for many months; there was no custom to hold directors' meetings on given days, and no rule that business might be transacted whenever a majority should be present. On the contrary, the only by·lawon the subject requires a notice of board tQ.eetings. In such a condition of local statute and regulations of the company, no business could be transacted by a majority without notice first given. to every director. A director not present would be entitled to the opportunity of being present and participating in the business of the meeting. Failure to give him notice not only deprived him of sucb opportunity, but practically excluded him from all participation in the business transacted. It would hardly be contended that a meeting of directors, at which the majority excluded the minority, could legally transact business affect· ing the corporation. They had an important duty to discharge, as they were authorized to sell only when the price was by them deemed sufficient; the price 'was, therefore, a material thing to be determined. On the question of the action of a majority convened without notice to all the members, see Wiggins v. Baptist Society, 8 Met. 301; Stowe v. Wise, 7 Conn. 219; The State v. Ferguson, 31 N.J. Law, at
p. 124; Angel & Ames on Corp. § 492; Field on Corp. §§ 2271 228, 234; Grant on Corp. 156-7-8. It is not necessary to determine whether the sale was fraudulent. The majority of the directors acted without authority. Their action operated unjustly upon the rights of complainant and other stockholders, and the purchaser, Edwards, is not in the position of a bona fide purchaser, without notice of the actual posture of affairs at the time of the sale A brief statement will show where the equities are, and why a court of equity should afford the relief prayed for against the action of a majority of the directors. The land and works cost $75,000. The company operated until 1874, when it suspended, heavily indebted. September 20, 1875, a stockholders' meeting was held, and the directors were authorized to sell the entire property of the company whenever they could obtain a satisfactory price. Edwards was then a shareholder, but in 1876 sold his stock to complainant at a price which would make the entire stock worth $50,000. Subsequent to 1876 the directors sold 4,479 shares of stock owned by the company for $12,000, and paid the debts of the company. There was now less urgency, if there was any necessity, to sell the property. Prior to the time of selling the 4,479 shares of stock, the directors fixed the price for all the assets and property at $55,000. After selling the stock and paying the debts, they fixed the price of what remained at $4-4,000. All this was known to defendant Edwards. One of the directors, but a few months prior to the sale to Edwards, sold to complainant 5,101 shares of the stock for $13,770, a rate which would the value of the entire stock oyer $26,000. That the director had made a sale, and for that price, defendant Edwards received information, and the directors were fully advised of the sale, price, and to whom made. They also knew that complainant, had he known of the proposed sale, would be opposed to it. In such a posture of affairs, on the morning of October 0, 1879, Edwards sent a written proposition of $10,000 to the directors the property. A director, president of the board, was absent from the state. The other four directors met, accepted the proposition, and caused So conveyance to be executed the same day. Edwards was present at the meeting. He was bound to know that notice of a board meeting was necessary, and he knew that one of the directors was not present, and was absent. The manifest purpose and effect was to circumvent complainant, the owner of a majority of the stock, and deprive him of his rights. The absent director was at once informed of the sale, _and not only
UNITED STA.TES .,. lItJIUSOB'.
promptly I'efused to acquiesce, but repudiated what had been done. When this suit was commenced, Edwards had paid but $2,000 of the purchase price, but paid the balance, $8,000, after being fully advised of the matters set up in the bill of complaint. !tis in the power of the corporation to refund the purchase money, and this should be done. Complainant is entitled to a decree setting aside the sale, and for a conveyance of the property to the Houghton Copper Works, making the injunction perpetual, and referring the cause to a master to take proofs and state.an account for the use of the property. The Hough. ton Copper Works is to be decreed to refund the purchase price paid by defendant Edwards, less whatever may be found owing fromhittl for the Uile of the property, for which use Edwards is to account and pay.
UNITED STA.TES .,. HUMASON.
(Circuit Court, D, Oregon. July 22, 1881.)
1. OFll'ICIAL BOND-PROOF OF ExECUTION.
In an action upon an official bond, if the execution thereof Is denied, It can. not be proven by a copy certified by the secretary of the treasury under section 882 of the Revised Statutes, but a copy certitled by the register of the treasury under the seal of the department, under section 886 of the Revised Statutes, is sufficient proof of such execution, it being declared to have the sa1Jle force as the original when duly authenticated or proven in court.
2. NONSUIT BY THE PLAINTIJ!'lI'.
Under section 243 of. the Oregon Code, the plaintiff in an action can only become nonsuit before the trial commences, or afterwards, with the consent of the defendant; and this is considered the later. and better rule generally.
NEW TRIAL-STALE CLAIM.
The United States delayed bringing an action against the sureties in the bond of a deceased Indian agent in Oregon, for an alleged failure to account for t7,OOO Or 18,000 received thereunder, for a period of 14 years; and on the trial there was a verdict for the defendant, by the direction of the court, because of the failure of the plaintiff to produce proof of the execution of the bond, which was denied, as provided in section 886 of the Revised Statutes. Held, that the plaintiff was guilty of negligence, and therefore was not entitled to a new trial; and that in passing upon the motion weight ought to be giyen to the fact of the long delay in bringing the suit, whereby it had become difficult, expensive, and almost iinpossible to make legal proof of facts which probably existed tending to show that the deceased had duly disbursed the money in question. A stipulation in one action to abide the event of another entitles either party thereto to such proceedings in the former as will enable him to have the ben. efit of his stipulation, provided the result of the latter action is favorable to him.
'" STIPULATION TO ABIDE EvENT OF ANOTHER ACTION.