Humphrys v. Winous Co.

133 N.E.2d 780 (1956)

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Nature of the Case

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Facts

[NOT IN CASEBOOK] Humphrys (P) owns 40% of the stock and had been a director in the Winous Co. (D). Putnam and Andrews own 59% of the stock. Having failed to give notice of his election to vote cumulatively in 1954, P was not re-elected to the board. At the annual meeting of the corporation the shareholders adopted a resolution amending the code of regulations and providing that each director, after the election at that meeting, shall hold office for three years, and that the three directorships shall be designated by classes as follows: Class A director shall hold office for one year and thereafter for three years; class B director for two years and thereafter for three years; and class C director for three years and thereafter for three years. The shareholders then adopted a resolution which 'designated and appointed' Anthony as the first-class A director, appellant Andrews as the first-class B director and appellant Putnam as the first-class C director. Ps filed a petition for declaratory judgment and equitable relief against the election of directors by classes. The Court of Common Pleas held that, although under Section 1701.64, Revised Code, it was within the power of the majority of the shareholders to classify their three directors in the manner undertaken, the notice of the annual meeting was insufficient to permit such classification at that meeting. It, therefore, held that the three directors, having been duly elected for terms of one year, should continue in office during the remainder of such period. Section 1701.64 provides that the articles of a corporation may provide for the term of office of all of the directors or, if classified upon the basis of the expiration of the terms of office of the directors, of each class thereof, provided that no term shall be fixed for a period of more than three years from the date of their election and until the election of their successors. Section 1701.58 provides that any shareholder may, upon giving 24 hours notice of his desire to do so, cumulate such voting power as he possesses and give one candidate as many votes as the number of directors multiplied by the number of his votes equals, then provides that 'such right to vote cumulatively shall not be restricted or qualified by the articles or the code of regulations. The Court of Appeals held that, since Section 1701.58, Revised Code, was specific in character, it constituted a limitation upon the applicability of Section 1701.64, Revised Code, and that, since the classification by D, attempted under the authority of Section 1701.64, Revised Code, did restrict the right to vote cumulatively as specifically guaranteed by Section 1701.58, Revised Code, such classification was invalid. This appeal resulted.