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JANNEY v. PHILADELPHIA TRANSPORTATION COMPANY. (12/29/56)

December 29, 1956

JANNEY, APPELLANT,
v.
PHILADELPHIA TRANSPORTATION COMPANY.



Appeal, no. 251, Jan. T., 1956, from decree of Court of Common Pleas No. 7 of Philadelphia County, Sept. T., 1955, No. 7561, in case of Joseph N. Janney v. Philadelphia Transportation Company et al. Decree affirmed; reargument refused January 18, 1957. Declaratory judgment proceeding. Final decree entered finding Acts permitting stagered elections of corporate directors constitutional, opinion by OLIVER, P.J. Plaintiff appealed.

COUNSEL

Leonard B. Gordon, with him Samuel Gordon, for appellant.

Hamilton C. Connor, Jr., with him Charles I. Thompson, Jr., and Ballard, Spahr, Andrews & Ingersoll, for appellees.

John B. Prizer, with him Philip Price, Francis H. Scheetz, Elder W. Marshall, W. P. Hackney, J. Tomlinson Fort, and Reed, Smith, Shaw & McClay, for amici curiae.

Before Stern, C.j., Jones, Chidsey, Musmanno and Arnold, JJ.

Author: Stern

[ 387 Pa. Page 283]

OPINION BY MR. CHIEF JUSTICE HORACE STERN

The sole question presented in this action for a declaratory judgment is whether the right granted by statute to classify corporate directors and stagger their terms violates the right conferred by the Constitution upon the stockholders to cumulate their votes in all elections for directors. Are these two rights so incompatible as to make their co-existence legally impossible?

Plaintiff, Joseph N. Janney, is a stockholder and also a member of the Board of Directors of the defendant, Philadelphia Transportation Company, being the record owner of 9500 shares of its common stock of a total of 1,720,184 shares which are presently owned by approximately 27,000 shareholders. The Board consists of 21 members, of whom five are appointed by the City of Philadelphia under an agreement of July 1, 1907, entered into between the City and the predecessor of the Company by virtue of authority granted by the Act of April 15, 1907, P.L. 80.

Article II, Section 2, of the By-laws of the Company provides as follows: "The stockholders, at their annual meeting in 1951, and at each annual meeting thereafter, shall elect directors to fill the vacancies caused by the expiration of the terms then expiring, and the directors so elected shall each serve for two years or until their successors are elected and qualified, so that four directors will be elected to fill such vacancies at the

[ 387 Pa. Page 284]

    annual meetings in 1951 and 1952, and eight at each meeting thereafter."

It is plaintiff's contention that this By-law and Section 1 of the Act of June 17, 1887, P.L. 411, by which it was authorized, are invalid because in conflict with Article XVI, Section 4, of the Constitution of the Commonwealth, and that all the 16 elective directors of the Company must be elected at each election. The court below, in a comprehensive opinion by President Judge OLIVER, held to the contrary, and entered a decree declaring that the section of the Act and By-law in question are not in conflict with, nor in violation of, Article XVI, Section 4, of the Constitution. Plaintiff appeals from that decree. The City of Philadelphia was permitted to intervene in the proceedings as an additional defendant in order to protect its right to be represented on the Board of Directors of the Company under ...


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