In case of a dispute as to the right to vote at a meeting of a corporation, the books of the corporation [are prima facie] evidence as to who possesses that right. A pledgor of stock which stands on the books of a corporation in the name of the pledgee, may, by suit in equity, compel a transfer to him, or oblige the pledgor to give him a proxy to vote; but where the pledgor acquiesces for years in the control of the stock by the record owner, the pledgee, and makes no attempt to inform the corporation of his ownership until a contested election occurs, and then not until the votes are being or have been counted, it is too late to ask the interference of a court of equity with the declared result of such election. Where stock stands in the name of "M., Trustee," he is the proper person to vote upon it, until the equitable owner, if any there be, shall seasonably assert his right to have it transferred to him. A contested election of directors of a corporation was decided by votes cast by M. upon shares owned by E.P.T. and C.T. and pledged to M. as security for debts due him and others. Neither the ownership nor pledge appeared on the books of the corporation, where the stock had always stood in the name of "M., Trustee." The certificate was so issued and M. had always voted thereon without objection until the meeting, and no objection was then made until while the votes were being counted, or after they had been counted. Held, on an application for a quo warranto against the officers declared elected at such meeting, that judgment must be given for the respondents and the application be refused.
POTTER, J.
In this case the material facts are, that a certain number of shares in the corporation, owned by Edward P. Taft and Cyrus Taft, were pledged to Earl P. Mason as security for debts due to himself and others; but neither the ownership or the pledge appeared on the books of the corporation, where the stock had, from the formation of the corporation, stood in the name of "Earl P. Mason, trustee." The certificate was so issued, and he had always voted thereon, without objection, until the meeting of June 9, 1870, and voted upon them at that meeting, no objection having been made until while the votes were being counted, or as some of the affidavits say, after they were counted. It is not disputed that the votes so thrown decided the election made on that day. It is claimed, on one side, that the person who then made the protest stated that said Mason held the stock as security only. This is denied, on the other side.
A person who pledges stock has the right to vote upon it until the title of the pledgee to the stock is perfected. Case of Jacob Barker, 6 Wend. 509. If Taft had appeared on the books as owner, and the books had shown the pledge, Mr. Taft's right to vote on the stock could not have been disputed. The object of the stock book, and of requiring transfers of stock to be recorded by the corporation, is for the protection of the corporation, to enable it to know who are its members, who are entitled to dividends; and for no purpose is it more important than to enable it to know who are entitled to vote in case of an election. This doctrine is recognized by many authorities expressly, and by many others impliedly. Gilbert v. Manufacturing Iron Co. 11 Wend. 627; Bank of Utica v. Smalley, 2 Cow. 770, 778; Kirtright v. Bank of Buffalo, 22 Wend. 348, 362; Fisher v. Essex Bank, 5 Gray, 373, 380; Hoagland v. Bell, 36 Barb. 57, 58.
And we think that in a case of a dispute as to a right to vote, the books of the corporation are the prima facie evidence; at any rate, the corporation cannot be required to decide a disputed right. Of course, if the pledgor and pledgee, or the trustee and cestui que trust, agree that either shall represent the stock, or if the facts are admitted, that might be sufficient. Upon any other rule, it could never be known who were entitled to vote, until the courts had decided the dispute. The corporation or its officers would have to decide it for the time, and it would leave the election in uncertainty.
If the real owner wishes to have his name, or the true state of facts, appear on the books, he has his remedy in equity to compel a proper transfer, or to compel the pledgee to give a proxy, as was done in the case of Vowell v. Thomson, 3 Cranch, C.C. 428. But when the real owner or pledgor acquiesces for years in the control of the stock by the record owner, and without any attempt to inform the corporation of the true state of facts until a contested election occurs, and then, not until the votes are being counted or have been counted, we do not think he presents a proper case to justify a court of equity in interfering with the result of the election as declared. See State v. Lehre, 7 Rich. (Law,) 234, 256, 325. In the present case the stock stood in the name of Earl P. Mason, trustee. The books did not disclose the nature of the trust. If any other person was the equitable owner of the stock, and entitled to have it transferred to him, he should, if his right was disputed, assert it in season, and take the proper measures to enforce it. But if the trust was of such a nature that the trustee has the control and management of the property, and is to exercise his discretion concerning it, then he is the proper person to represent and vote upon it. And the corporation cannot be required to examine into the nature of the trust, with a view to decide as to the right to vote.
We have examined the cases cited by the petitioners. The cases of Merchants Bank v. Cook, 4 Pick. 405, and Scholfield and others v. Union Bank, 2 Cranch, C.C. 115, were cases in which the transfer was made directly to the bank itself. In the first case the question was, whether the pledgor (a sheriff) was so interested in the bank as to be disqualified from serving a writ in a suit in which the bank was a party. In the second case it was held that the pledgor had a right to vote. The report does not state whether the transfer on the books was absolute or conditional; but in that case it could make no odds, as, the pledge being to the bank itself, the bank must be presumed to know that it was a pledge, although the books might show an absolute transfer. In that case an injunction was granted to stay the election.
And the case of Vowell v. Thomson, 3 Cranch, C.C. 428, relates only to the remedy which the pledgor has in a court of equity to compel the pledgee to allow him to vote upon the stock. In that case the stock had been transferred to the plaintiff in trust as collateral security. The court, in their opinion, refer by way of analogy to the cases relating to advowsons; and a decree was made requiring the pledgee to give the pledgor a proxy to vote on the stock. If the corporation books had shown the true state of facts, this could hardly have been necessary. The judgment must therefore be for the respondent.