Story Case

Mr. Davis was the owner of ten shares of stock in the American Cotton Gin Company. An election of directors was announced for the 31st of January, 1915. Mr. Davis was taken ill a few days before that time. Knowing that he would be unable to attend the stockholders' meeting, he gave written authority to a stockholder, Mr. Harris, to vote in his stead. At the meeting the stockholders refused to permit Mr. Davis' stock to be voted. Were they justified in doing so?

Ruling Court Case. People's Home Savings Bank Vs. Superior Court, Volume 104 California Reports, Page 649; Volume 43 American State Reports, Page 147

The People's Home Savings Bank was a corporation engaged in the banking business. By law in California, it is provided that stockholders of a corporation may be represented at all elections by proxies. In framing its bylaws, the People's Home Savings Bank provided that no proxies shall be voted by any one not a stockholder of the corporation. Certain stockholders sent their proxies by persons who were not stockholders. The corporation refused to permit them to be voted.

The question in this case is whether or not the corporation could restrict the statutory right in this manner.

Decision

A state, by statute, may provide that stockholders may vote by proxy. A fair construction of such a statute that the stockholders may appoint any reasonably fit person to sit in stockholders' meetings and represent and vote for him. Accordingly, a bylaw of the corporation which conflicts with this statutory right is void. The corporation had no right to say that the proxies must be voted by stockholders.

Mr. Justice Garoutte said in part: "That section is broad in its terms, and when it says that a stockholder in a corporation may appoint a proxy - an attorney in fact - to represent him at elections held by the corporation, in the absence of limitations in the law, it must be held that the statute gives him the right to name the attorney in fact of his own selection."

The Court held that the bylaw of the corporation is void.

Ruling Law. Story Case Answer

Every registered stockholder is entitled to as many votes in a stockholders' meeting as he holds shares in the corporation. This gives him the right to vote in person. It does not give him the right to vote by an agent or proxy. The right to vote by proxy must be specifically conferred by law. Most states provide, by statute, that shareholders can vote by proxy. These statutes give the shareholder the right to appoint some person to vote for him. The corporation may not specify the persons who shall be entitled to vote by the proxies. In the Story Case, Mr. Davis would have been entitled to vote his stock in person. He could qualify Mr. Harris to vote for him if a statute in the state authorized.