State ex rel. Cullitan v. Campbell

OPINION

By TERRELL, PJ.

Plaintiff brought an • action in quo warranto to determine the title to office of directors and officers of The Aetna Rubber Company.

There are two disputing groups in this company. Each group claims the right to the offices in dispute. The controversy arises over a provision in the charter and the stock issued to preferred stockholders, which attempts to designate the right or power of preferred stockholders to vote. The provisions are as follows:

“That the stockholders of preferred stock shall not be entitled to vote at any meeting.of the stockholders of the company unless default shall have been made in the payment of a dividend upon the preferred stock for one-year, in which event and so long as any such default shall continue thereafter the holders of preferred stock shall be entitled to the same voting power as the •holders of the common stock.”

Dividends upon the preferred stock were in default for more than one year. At a certain meeting of the stockholders a certain number o+ the preferred stockholders interested in the plaintiff’s group, attempted to vote each share of preferred stock about eighty-nine times as against one vote for each share of the common stock. This contention arose because plaintiff’s group contended that the sum total of preferred stock was given the same voting power as the sum total of the common stock and that each snare of preferred stock therefore would be entitled to a pro rata share of the votes to which the class of preferred stockholders would be entitled.

Without setting forth the amount of preferred stock outstanding, and the amount of common stock outstanding, it is sufficient to say that if the contention of plaintiff's group as herein set forth prevails, each share of preferred stock would be entitled to about eight-nine votes against one vote per share of common stock. Defendant’s group contend that the preferred stock was entitled to be votea only one vote for each share of preferred stock against one vote for each share of common stock.

To set forth our view of the law, it is unnecessary to go into the detailed evidence pertaining to the meeting in question. Suffice it to say that if the contention of plaintiffs prevail as 1.0 the voting rights or power of the stock then a decree should be entered for the plaintiffs in this action upon their petition. This brings us directly to an interpretation of the words:

“The holders of preferred stock .shall be entitled to the same voting power as the holders of the common stock.”

It appears to the majority of this court that the plain, ordinary interpretation of this phrase would lead to no other conclusion but that each share of preferred stock- was entitled to vote the same number :of -votes as each share of common stock.

Where nothing is said as.to the.power or right of preferred stock to be voted, the statutes provide that each share of preferred stock shall be entitled to one vote.

These statutes are of material help in interpreting the right and power of preferred stock to be voted under the provision'in question. Nothing definite is said in this provision as to the extent of the voting power of each share of preferred Stock. Therefore a resort to this statute leads us to conclude that each share of preferred stock has only the right of one vote.

Counsel for plaintiff has attempted very strongly to make a distinction between voting power and voting rights.

For a fair understanding of this question we refer to the case of State ex rel v Urschal, 104 Oh St 172, wherein in the fourth syllabus it is stated:

“4. Preferred stock in Ohio corporations have equal voting power with every other class unless limitations or restrictions upon such power are made by the resolution by virtue of which the preferred stock was authorized, and any agreement, understanding or belief to the contrary, not expressed in such resolution is ineffective.”

In this Urschal case just quoted, it was held that each share of preferred stock and each share 01 common stock were entitled to one vote only although the number of shares of each class outstanding were not equal. It is apparent that in interpreting the phrase “that the preferred stock has equal voting power with every other class” the court-clearly indicated the meaning thereof to be that the voting power of preferred stock and common stock were equal, share for share, and not class for class.

It seems hardly necessary to proceed further in an effort to arrive at a proper conclusion of the interpretation of the phrase in question.

Counsel for plaintiffs have endeavored in an ingenious manner through a highly artificial method, to build up a conclusion .that the . phrase m question should be interpreted as equal voting power, class for class. However, co come to that conclusion it is necessary to read into the phrase something that it not there. To conceive the thought contended for by the plaintiff it is necessary to read into the phrase the words, “as a group” after the words “preferred stock” and after the words “common stock.” These words and this thought do not appear m the plain, express language of the phrase in question. These words were readily available for use when this charter was conceived.

The mere fact that' the words were omitted will not admit of the attempt of counsel to supply them by seting up an argument of the apparent purpose so-called of the right of the preferred stockholders to vote upon default in dividends.

The fact remains that the incorporators of this company had the legal right to limit, qualify and extend tne voting privileges of any class of stockholders, provided apt language was used to express such privileges or qualifications.

In the charter of this company, preferred stockholders were primarily denied the right to vote and were granted the privilege of voting only upon default in the payment of dividends. The statute grants to preferred stockholders, where nothing else is said, the right to vote one vote for each share of stock. Ho more argument of 'counsel can add anything else to the statute nor to the phrase in question.

Holding these views we conclude that the writ should be denied and judgment entered for the defendants.

LEVINE, J., concurs. LIEGHLEY, J. dissents.