West Side Hospital v. Steele

Mr. Presiding Justice Smith

delivered the opinion of the court.

A motion was made by appellees in both appeals to dismiss them on the ground principally that The West Side Hospital of Chicago was not a party to the order appealed from. This motion in each ease was reserved to the hearing.

The West Side Hospital of Chicago was properly made a party to the bill of complaint. It is vitally interested not only in the main litigation and the decree which may be entered, but it is also interested in the injunction orders appealed from, for they affect directly the management of its property. . And this is true although the injunctions do not run directly against the corporation itself. A corporation may be, and in this case is, affected by an order which operates upon its officers, or those who are acting as its officers and the custodians and managers of its property for the time being, whether officers of the corporation or not. A party who is affected by an order or decree has a right, we think, of appeal, even though such party may not be specifically mentioned in such order or decree. Such a party should be before the court on appeal, if, as in this case, such party is a party to the record. Elliott on Appellate Procedure, secs. 139, 143, 160.

In Louisville v. Kean, 51 Ky. (18 B. Monroe), 10, an appeal was taken from a judgment in a mandamus case directing a writ to issue against the mayor and members of the general council of the city of Louisville. The city took an appeal, and on motion to dismiss the appeal upon the ground urged here that, not being a party to the order, it had no right to appeal, it was held that the appeal was properly prosecuted in the name of the city.

In Derrick v. The Lamar Ins. Co., 74 Ill, 404, it was held that where, on a creditor’s bill, the cause was referred to a master in chancery to take proofs of all claims against the estate of the defendant which might be presented to the receiver, and a claim was sought to be proven before the master by a creditor who., was not a party to the bill, and the master reported his disallowance of the claim and the court overruled, exceptions taken to the report and sustained the report, an appeal would lie on behalf of such claimant, though he was not a party to the suit.

We think these appeals are properly prosecuted and that the motion to dismiss in each case must be denied.

It is urged on behalf of appellants that the main, if not the only, question presented by the bill of complaint is the validity of the election of the president and treasurer of the corporation at the directors’ meeting of January 10, 1906; and that a court of equity will not entertain jurisdiction of a suit, the purpose of which is merely to test the legality of the election or1 the removal of officers of a corporation. As to the principle of law involved in this contention we have no dissent to express. It is too well established to admit of discussion or the citation of authorities. We cannot, however, agree with counsel in their statement of the case presented by the bill. As we view it, the case stated in the bill is not merely one involving the validity of an election of officers, but it involves the rights of the minority stockholders of the corporation, under the constitution and laws of this State, to have an annual election of directors held according to law, and to cumulate their votes at such an election; and that the officers and management of the corporation shall only be installed in control of the corporation and its property and business by, through, and in compliance with the law, and the legal by-laws of the corporation. The minority stockholders of a corporation have property rights in the corporation and its assets and management, which the directors, their trustees, may not ignore and set aside. Uor can the majority of the stockholders, broad as their powers are, override the organic law of the corporation for the illegal purpose of preventing the minority from securing the representation in the directory which the shares of stock owned by them enable them to elect.

The bill shows that there was a conspiracy between three of the directors and a majority of the stockholders to adjourn the annual stockholders’ meeting before the election of the directors to succeed those whose terms of office expired at the annual meeting, and then that the directors, including defendants ¡Noble and ¡Newton, whose terms of office had expired (but who were still acting as directors until their successors should be elected) should at once, upon the adjournment of the annual meeting to a day certain, proceed to the election of officers of the corporation. The object of this scheme was to prevent the minority stockholders from electing a representative in the directory, as they could have done and had a legal right to do, by cumulating their stock vote on one candidate for director.

Section 4 of article 3 of the by-laws provides: “¡Regular meetings of the board of directors shall be held immediately after the adjournment of each regular meeting of the stockholders,” etc. This by-law construed in connection with section 1 of article 3 of the by-laws which provides for the election of directors at the regular annual meeting of the stockholders, means that when the directors have been chosen at the annual meeting, the new board of directors shall immediately hold a regular meeting and proceed to the election of officers of the corporation as provided in section 1, article 4, of the by-laws. By the adjournment of the stockholders’ meeting until April 11, 1906, it became impossible under the by-laws to hold the regular annual meeting of the board of directors until that date for the purpose of electing officers. This scheme involving as it did not only a denial of the rights of the minority of the stockholders under the constitution and statute but a violation of the by-laws as well, was a fraud upon the minority stockholders, conceived and executed by men occupying a fiduciary relation to the stockholders. It was a clear violation of their duty and of their trust. The acts of the defendants to the bill resulted in putting the business and property and funds of the corporation in the hands of men who are not legally entitled to act for the corporation.

The contention of appellants is that there is an adequate remedy at law for the situation shown in the bill, by quo warranto. We do not think so. As said in Bartlett v. Gates, 118 Fed. R., 66: “The stockholders of this corporation are legally entitled to have a, meeting of stockholders called, at which they can express their choice for directors of the company, and the court will afford them an opportunity to exercise that right under conditions that will secure to each one of them legally entitled to vote, the right to do so.

“The complainant’s remedy at law is not adequate. The remedy at law would leave the parties free to renew the contest on the same and other like lines that have thus far stifled the voice of the stockholders.” See also Dodge v. Woolsey, 59 U. S., 331.

If the majority stockholders have the right for the purpose charged in the hill and shown by the facts alleged therein to adjourn the annual stockholders’ meeting to April 11, 1906, they may still further adjourn it, until the next annual meeting, and may adjourn that meeting and so deny indefinitely to the minority its right to vote for directors, and thus perpetuate the officers placed in control of the corporation by the illegal methods indicated above. Thus, any and all quo warranto proceedings would be rendered abortive as rapidly as they could be brought to final conclusions.

We do not hold that a regular annual meeting of stockholders may not be adjourned for a reasonable time for legitimate reasons. But, for the purpose of preventing the minority stockholders from exercising their legal rights to elect other directors, and continuing the old board of' directors in existence to elect officers as shown by the bill, an adjournment of the meeting may not be made over the protest of the minority stockholders or any of them.

There can be no doubt that questions as to the election of officers of a private corporation can and should be determined at law and by quo warranto proceedings, but while this is the general rule, where there are other elements in the case which make it proper that a court of equity intervene “then the mere fact that the questions presented make it necessary, for the purpose of such intervention, to determine which of two sets of officers are the lawful officers of a private corporation, will not deter the court of equity from acting.” Garmire v. American Mining Co., 93 Ill. App., 331, and cases there cited; Blinn v. Riggs, 110 Ill. App., 37; Chicago Macaroni Co. v. Boggiano, 202 Ill., 312.

The court having jurisdiction in equity, as we think, to hear and determine the case presented by the bill, the next question is, did the court improperly exercise its discretionary power in granting the temporary orders appealed from.

The rule governing us on this question is that unless it clearly appears that the court below improperly exercised its discretionary powers in issuing the injunction pendente lite the order should be affirmed. New Ohio W. C. Co. v. Coal Belt Ry. Co., 116 App., 153; High on Injunctions (4th ed.), sec. 1696; New Music Hall Co. v. Orpheon Music Hall, 100 Ill. App., 278.

“Ho answer or affidavits having been filed by appellants the bill must be taken as true, so far as the facts alleged are well pleaded, in considering whether the injunction was properly issued.” New Music Hall Co. v. Orpheon Music Hall Co., supra. The bill, we think, shows a clear case for intervention by injunction. The order appealed from in Ho. 12878 was entered without notice. This was a limited order as to time, expiring three days after it was entered. We think the showing in the bill was sufficient to justify the court in entering the order. It had the effect merely to hold matters in statu quo until the court could hear the application for an injunction on full notice. We find no error in entering the order in the first instance without notice.

Holding the views above expressed as to the case made by the bill, it does not appear to us that the discretion of the court below was improperly exercised in granting the order in Ho. 12879, continuing the injunction in force until the final decree.

The order in each case is affirmed.

Affirmed.