In re the Election of Directors of Mutual Fire Insurance

Majority

p. 163

In the Matter of the Election of Directors of The Mutual Fire Insurance Company of Albany. The Mutual Fire Insurance Company of Albany and Others, Appellants; Robert G. Scherer and Others, Respondents.

Headnote

Election of directors of a mutual five insurance company—votes based upon “cash policies" and “ note policies” when counted for one party must be counted for the other — what act of the voter entitles him to have all his legal votes counted ■— when a new election should be ordered.

At an election of directors of a mutual fire insurance company, the supporters of one of the contesting boards of directors (the Scherer board) claimed that “ cash policies ” as well as “ note policies ” might be voted upon, and made a statement in connection with each proxy and ballot cast by them of the number of votes which they claimed the member so voting had the right to cast.

The supporters of the other contesting board (the Rathbone board), at the time they presented their ballots, made no statement as to the number of votes they claimed to cast. The inspectors of election decided, in accordance with a custom which had prevailed since the organization of the company, that holders of “cash policies” were not entitled to. vote, and rejected upon that

■ ground 870 votes cast for the Scherer board, thus leaving that board 1,112 votes. They also, by reference to the books of the- company", decided that there were cast for the Rathbone board of directors 1,347 votes, which votes represented only “note policies;” the supporters of the.Rathbone board, however, held and controlled “cash policies” which, if the inspectors had considered it lawful to count them, would have entitled them to 720 more votes. Although it appeared that it was the opinion of most, if not all, of those voting for the Rathbone board that those holding “cash policies” coiild not lawfully vote thereon, there was no evidence that they did not intend to cast all the votes they lawfully could.

The inspectors of election having declared the Rathbone board of directors elected, the Special Term, in a proceeding instituted under section 27 of chap

p. 164

ter 687 of the Laws of 1892 (The General Corporation Law), decided that “ cash policies” might be voted upon and added the 870 votes rejected by the inspectors of election to the 1,112 votes credited to the Scherer board and declared the latter board elected.

Upon an appeal from that order, it was

■Held, without deciding whether “cash policies” could be lawfully voted upon, or whether the Special Term had power to count votes .rejected by the inspectors of election, that if the Scherer board was entitled to be credited with the “cash policies” voted upon by its supporters, the supporters of the Rathbone board were also entitled to be credited with votes upon the “ cash policies”

• held by them; and that, as the Rathhone board of directors had a majority of the votes cast at the election, whether the “cash policies” controlled by either side were included in, or excluded from, the votes cast, the Rathhone hoard should be declared elected ;

That when the voter presented the ballot which he desired to vote, he did all that the law required him to do; that it then became the duty of the inspectors to credit him with all the votes to which the books of the company showed that he was entitled, unless, when he presented his ballot, he expressed his desire to vote a less number.

Semble, that, under the circumstances of this case, even assuming that,the voters for the Rathhone ticket must be deemed to have voted only upon the “ note policies,” the Special Term should have granted no greater relief than to order a new election.

Appeal by The Mutual Fire Insurance Company of Albany and others from an order of the Supreme Court, made at the Albany. Special Term and entered in the office of the clerk of the county of Albany on the 9th day of March, 1900, declaring Robert Gr. Scherer and. others, the respondents, to have been duly elected as directors of The Mutual Fire Insurance Company of Albany, at the annual election held at the office of said company on the 22d day of January, 1900, except from so much of said order as granted a stay of all proceedings other than the taking of the appeal.

The application was made.pursuant to the provisions of section •27 of chapter 687 of the Laws of 1892.

Marcus T. Hun and Learned Hand, for the appellants.

Lewis E. Carr, for the respondents.

It may be conceded that those holding “ cash policies,” so called, have the same right to vote at an election of the directors of this company as those holding “note policies.” And it may also be

p. 165

conceded that, in this proceeding, the Special Term has authority to recount the votes cast for the Scherer board and include therein those who were rejected by the inspectors of election. And yet I conclude that the order from which this appeal is taken must be reversed.

It appears from the record that the two gentlemen who, as proxies, voted all the votes cast for the Scherer board, made a statement with each proxy and ballot cast by them of the number of votes which they claimed each member so voting had the right to cast. And it appears that, if all the votes so claimed had been allowed as legal votes, they would have cast 1,982 votes.

The inspectors of election, however, although they received all of the proxies and ballots when offered, withheld their decision as to how many votes should be credited to each, until at a later hour they should determine whether those of them that represented “ cash policies ” were entitled to be counted. They finally decided that “ cash policies ” could not lawfully be voted upon, and, therefore," rejected 870 votes of the 1,982 so claimed for the Scherer board.

The record also distinctly shows that some fourteen policyholders in person and five by proxy cast ballots for the “ Rathbone Board,” so called. At the time they presented their ballots to the inspectors they made no statement whatever as to the number of votes they claimed to cast. The inspectors, how'ever, by reference to the books decided that they had the right to vote, and counted as voted by them 1,347 votes. Such votes represented only those authorized by “ note policies.”

Thus the Scherer board having been credited with but 1,112 votes and the Rathbone board having been credited with 1,347 votes, the inspectors declared the latter- board elected.

It is also conceded that the books showed that those so voting for the Rathbone board held and controlled “ cash policies,” which, if the inspectors had considered it lawful to count, would have increased their vote by 720 more votes.

The Special Term, holding that votes based upon “ cash policies ” should have been counted as well as those based upon the “ note policies,” added the 870 votes rejected by the inspectors to the 1,112 votes allowed to the Scherer ticket, and declared such ticket elected.

But, under that view of the law, the question arises why, if those

p. 166

870 votes based upon “ cash policies” should be added to the 1,112 other Scherer votes, the 720 votes based upon the “ cash policies ” held by the Rathbone supporters should not be added to the 1,347 other votes cast for the Rathbone ticket. It is manifest that, if the latter addition was made, the Rathbone ticket would still have the ■majority.

It is answered that the 720 votes were never cast by the. Rathbone voters.

I concede that it clearly appears from the record that it was the opinion of most, if not all, of those voting for the Rathbone board that those holding “ cash policies ” could not lawfully vote thereon. But the fact that they held that opinion does not by any means amount to a refusal or a neglect on their part to cast for the Rathhone ticket all the votes that, under, the law, they had the right to cast. There is no claim that any one of them, at the time of voting, expressed his opinion on that subject, or by any statement whatever limited the number of votes which he desired to.cast. The number of votes which - should be credited to the voter was not to be ascertained from the number which he claimed the right to vote, but from the facts appearing upon the books of the company. When the voter presented the ballot which he desired to vote, he had done all that the law required him to do. He was not to be deprived of his vote or any of his rights, because he did not mark upon the ballot the number of votes he claimed the right. to cast. It was the duty of the inspectors to ascertain from the books the number of votes to which he was entitled, and to give him credit for having cast that number, unless when he presented his ballot he expressed his desire to vote a less number. We have not, in this record, the slightest warrant to assume that any one of the supporters of. the Rathbone ticket intended to cast only the votes based upon a “ note policy,” if the law authorized to be counted to him and his opponents the votes based upon, the “ cash policies ” held by each. Nor have we any warrant to assume that the inspectors proceeded upon any such theory.

On the. contrary, the record shows affirmatively by the affidavits of such voters that they had no idea of relinquishing their right to have counted for their ticket all the votes which they lawfully might cast. . And the affidavit of the inspectors shows that they

p. 167

rejected the 720 votes, not from anything that was said or claimed by those casting the Rathbone ballot, but because they believed that all votes based upon “ cash policies ” were illegal under the statute.

I cannot agree; therefore, with the conclusion that those voting for the Rathbone board must be deemed to have omitted to vote upon all the “ cash policies ” held' by them. I think it clear that, had the inspectors concluded that such “ cash policies ” could be lawfully voted upon, it would have been their duty to have counted the 720 votes in favor of the Rathbone ticket. They could not have declined* to do that upon the theory that such voters held, a different opinion upon the law, so long as they had by no act or statement declared their intention to vote less than the inspectors should conclude they had the right to do.

. If the court at Special Term proceeds' to take the place of the inspectors and recounts the votes, it seems clear that it should act upon all the information and facts that were before them, and count the votes cast upon either side, in accordance with the law of the case.

But suppose we conclude that, because of their opinions, the supporters of the Rathbone ticket must be deemed to have voted only the votes based upon the “ note policies,” I am of the opinion that the order appealed from should not have been made.

Under the statute upon which this proceeding is based, the court is to “ establish the election, or order a new election, or make such order and give such relief as right and justice may require.” (The Ueneral Corporation Law, Laws of 1892, chap. 687, § 27.) Here is a case where it clearly appears that the Rathbone supporters believed that they had no right to vote on the “ cash policies,” and that the inspectors agreed with them in that belief. Such belief was fortified by the fact that, since the organization 6f the company, none but “ note policies ” had ever been given a vote. At the election, those supporting the Scherer ticket claimed the right to vote upon their “ cash ” as well as “ note ” policies. Now, although the court at Special Term is of the opinion that such claim was a correct one, it is also apparent to it that, if that rule be adopted as the one .that ought to have controlled the election, those supporting the Rathbone ticket owned and could have voted upon a large number of

p. 168

“ cash policies,” sufficient in amount to have elected their ticket. Under such circumstances, does, “.right and justice ” require that the supporters of the Scherer hoard be given the election ? It is manifest that the election was held under the theory that only “ note policies ” could be voted upon. It is because of that alleged error • on tne part of the inspectors that the Special Term was asked to interfere and give relief to the Scherer voters. Under, such circumstances, ought the court to have' done more than declare .the law . which should control the voting, and order a new election tó be held in accordance therewith % In my judgment it should have granted no greater relief than that. The most that the petitioners could justly ask was that both parties should have an opportunity of casting their votes in accordance with. the rule of law. which the court should decide was applicable to the case,

For such reason, I conclude that the order of the Special Term, giving the election to the petitioners, cannot be sustained.

Inasmuch, however, as it so distinctly appears upon the record in this case that, under the law as declared by the Special Term, those voting for the Rathbone board hold a majority of the votes, and ■that had the inspectors proceeded under such law and counted the votes based upon the “ cash policies ” on either side, it would have resulted in the election of the Rathbone board, no substantial error was committed by the inspectors to the injury of these petitioners. The result of the election would have been the same as that announced by the inspectors, and, therefore, a new election is unnecessary.

It is sufficient for this court, therefore, to reverse the order of the Special Term- and establish the election of the Rathbone hoard.

All concurred, except Herrick, J., not sitting.

Order reversed, with ten dollars costs and disbursements, and the election of the appellants established.