# Motion to Dismiss — Holekamp v. Holekamp Lumber Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_0103%3A3 ## Record - **Collection:** Supreme Court brief - **Document type:** Motion to Dismiss - **Published:** January 1, 1961 - **Citation:** 366 U.S. 715 ## Text 2 ; f UlliCe-oupretic Uourt, U.o, hoe Y b FILED ~ APR 26 1961 | JAMES R. BROWNING, Cler! £4 ¥: IN THE — COURT OF THE UNITED STATES. rs Nigh REE RII I EG) ORS DO ARRON: FH ’ . % e . OCTOBER TERM, 1960. STATE: OF MISSOURI ex x inf. JOHN M. ) DALTON, Attorney General, ex rel. _ RICHARD E. ‘HOLEKAMP, et aliy Popes e.° vs. + No. 870. HOLEKAMP LUMBER-CO., a om. tion,-et al., a Appellee. J a Trustees of Dartmouth College v. Woodward, 4 Wheat. aoe 4 1, Ba: OD (oer) ....:.............0%. 45,8,9 Fletche r( ‘yclopedia of Corporations, Section 3668 . a Journal of the Missouri Constitutional Convention. 1875 (State Historical Society of Missouri), Vol. pp. 178-179; Vol. 2, pp. 527-528, 831 2.0. OS, — hee Debates, C ‘onstitutional Convention of 1875 (State His- torical Society of Missouri),- Vol. — pp. 364-399, elas one gt gt IER 2 Ae lS a ae a 4 (‘onstitution of Missouri, 1875 ......... ween neeneeone 9,-3- Revised Statutes of Missouri, 1899, Section 958 ....3, 10, 11 Revised Statutes of Missburi, 1899, Section 972... .3, 10,11 IN THE SUPREME COURT OF THE UNITED STATES. wt OCTOBER TERM, 1960. F | STATE OF MISSOURI ex inf. JOHN M. > DALTON, Attorney General, ex~rel. RICHARD E, HOLEKAMP, et al., , . Appellants, vs. > No. 870, . HOLEKAMP LUMBER CO., a Corpora- fll tion, et al,, ied bg - Appellees. ) 5, ag Appeal from the Supreme Gouri of the State of Missouri. ‘MOTION TO-DISMISS APPEAL. Appellees, pursuant @p Rule 16 of the Revised Rules of the Supreme Court of the United States, move that the appeal to this Court from the final judgment of the Supreme Court of Missouri be dismissed, on the grown that it does not present a substantiatefederal question. EUGENE H. BUDER, aaa LKONARD KE. MARTIN, Attorneys for Appellees BRIEF-}N SUPPORT OF MOTION TO DISMISS. QUESTION PRESENTED. Appellees take exception to Appellants’ statement lot the * question presented, both in the notice of Appeal and in the Jurisdictional “Statement, for omitting the essential element of the opinion of the Supreme Court of Missouri, Which is that the Missouri Legislature had reserved power é¥er corporate charters in 1908 at the time of the incorpo- ration of Holekamp Lumber Company. Appellees further take exception to Appellants’ statement of the question presented fer postulating that the authority to extend the corporate duration by a simple majority vote of the share- diolders came only from the statutes enacted in 1943 now under attack by Appellants. Appellees restate the, ques- tion presented as follows: . ' 3 Where in the Constitution of 1875, as construed by the Supreme Court of Missouri, the state reserved the power to its Legislature to repeal, change, or amend, by general ° laws, ‘the general laws authorizing corporations to be formed and the general laws pertaining to amendment of corporate charters, and where Holek@mp Rumber Company Wag incorporated in 1908 under general law for a period f fifty. years; the maximum then permissible, and extended | its duration for an additional period of fifty years in 1957 , by a vote of 58% of its sharehglders pursuant to definite statutory authority enacted in 1943, assuming that such an Bytension could have been made only by the vote of * three-fourths of the shareholders prior to the 1943 enact- ment, does the statute of 1942, in violation of the Federal Constitution, impair the obligation of any contract of the mnineritv. shareholders who opposed the exterfgion ! STATEMENT OF THE CASE. Appellants’ Statement of the Case likewise omits all” reference to reserved fower afid the Missouri fonstitution of 1875.7 At 340 S. W. 2d 640-681 (pp. 21-24 of the Juris- dictional Statemext) the Supreme Court of Missouri con- strues the“pertinent parts of that coystitution, and con- cludes: ‘‘We, therefore, hold that thre 1875 Constitution did contain a sufficient reservation to permit our Lexgisla- ‘ture to adopt general laws authorizing amendments to articles of incorporation of existing corporations, organ- ized under general laws, to be made by a majority vote of their shareholdegs."’ Appellants’ statement, in referring to R: S. Mo. 1899, gunger which Holekamp LugiberaCompany was organized, sets out part of Section 972 thereof, providing for accepting the general corporation laws by a three-fourths vote and taking an extension of duration jncidental thereto, but makes no mention of Section 958, R. S. Mo. 1899, which authorized charter amendments in geo: terms, only restricting them to powers that could originally have, been’ invoked by the corporation. The-Jurisdictional Statement, however, does cite Section 958 as a statute involved, and sets it out at pp. 65-66. Section 958 ig treated by the opin- iow of the — Court of Misaouri at 340 S. W. 2d 682-683 % Jurisdictional Statement, pp. 26-27), ww Pay ro ARGUMENT. _ LI. Even if the Statute of 1943 for the First Time Per- mitted Extension of a Corporate Term by a Simple Ma- jority Vote, It Is Free From Constitutional Doubt Because of Missouri’s Reserved Power. The Supreme @®urt of Missouri held that the State, nnder its Constitution of FR75 (in effeet until 1945), had reserved the power to its Legislature to repeal, change, or amend, by general laws, the general laws authorizing corporations to be formed, and the general laws pertain- ing to charter amendments (340 S. W. 2d at §80-681, 683; Jurisdictional Statement, pp. 21-24, 28). ‘This finding of ee, power with respect to the charters of corpora- tions Sich as Holekamp is the very heart of the opinion. This finding is clearly right. The Court construes the words of the Constitution to fiidd the necessary intent of the constitutional convention. That such was indeed the intent of the framers is shown by the record of their debates. Journal of the Missouri Constitutional Conven- tion, 1875 (State Historical Society of Missouri), Vol. 1, pp. 178-179, Vol. 2, pp. 527-528, 831; Debates, Constitu- tional Convention of 1875 (State Historical Society of Missouri), Vol. VIII, pp. 264-399, 490-493. Appellants do not now question the correctness of the Missouri Supreme Court’s finding of reserved power.’ They recognize such finding and claim only: ‘‘Both the St. Louis Court of Appeals and the Supreme Court® held that the only way Appellees’ action could be sanctioned is by a holding that no Constitutional right was involved" i. Joyisdictional Statement, pp. 14-15). But ‘ho constitu- tional right is involved; exactly such a holding was made ly this Court in Phillips Petroleum Co. v. Jenkins, 27 U.S. 624, 634; 56S. Ct. O11, 615, 80 1. Bd. 948, 947-948 be] \ a— a » Qs 2 ‘ between the state cand the corporation, as in the case at bar, the élause.of the Federal Constitution on obligation of . contacts does not apply. There is really nothing more to argue about; Appellants are relying solely on Article I Section 10 of the Fedefal Constitution (Ifipairment of J the Obhgation of Contracts) (Jurisdictional “ Statement, pp. 6-7, 8-9; the Notice of Appeal’ refers only to this clause). Although ‘the priuciple is well established ‘by the Phillips case, we’ discuss very briefly-the history of re- exerved power as treated in other cases decided by this Court. . ‘ In response to Justice Story's concurring opinion in Trustees’ of Dartmouth College v. Woodward, 4 Whioeat. 518, 712, 4 L. Ed. 629, 677 (1819), virtually all the states of the Union put reserved power over corporations into théir constitutions, or statutes (Fletcher, °Cyclopedia of Corporations, Vol. \ Section 3668, Note 9). By the de- cision now appealed from, Missouri was simply shown to he in the same position as virtually all the other states. Since the Missouri Legislature had this reserved power, the enactmént of the Corporation Code of 1943 (ineluding the seetions thereof now under attack) was an exercise : \ ‘ os q of that power to the extent necessary to the validity of Coe, the new code. Under an unbroken line of decisions of~ this Court, this crucial element of reserved power pre- . . Nal : Yo cludes all constitutional doubf concerning the statutes presently under attack. In the leading case of Looker v. Maynard ex rel. Dusen- bury, 179 U. S..46, 52; 21S. Ct. 21, 23; 45.1. Bd. 79, st (1900), this Court held: ’ “The effect of such a provision, whether contained in an original act.of incorporation, or in a constitu- tion or general law subject to which a ‘charter. is accepted, is, at the least, to reserve to the legislature the power to make any alteration or amendment of a - Pp hace AAW crocs charter subject to it, “which will not defeat or sub-’ stantially impair the object of the grant, or any right® vested. under the grant, and which the legislature may deem necessary to carry into effect the purpose of,the grant, or to protect the -rights of the public or of the corporation, its stockholders or — or to promote the, die administration, of its affairs." This doctrine was .approv ed in Phillips Petroleum Co. v. Jehkins, 297 U. S. 629, 56S. Ct. 611, 80 L. Ed. 943 (1936), which appears to be the last word on the subject by this Court. In the Looker case, supra, this Court upheld a Michigan statute imposing compulsory cumulative voting on a corporation, against the objection of the majority shareholders that this law impinged ‘on a vested right of theirs to elect the entire board of directors. The Court thus expressly held that reserved power extends to con- tractual relations ameng the shareholders, explaining dfs position by reference to prior cases and the dissents therein. Now the duration of a corporate charter, pres- ently before this Coust, is a matter which prima facie con- cerns the state only (opinion of Sup. C*, of Mo., 340 S. W. 2d at 682, Jurisdictional Statement at pp. 25-26, citing -with approval Smith v. Eastwood Wire Mfg. Co., 58 N. J. Kq. 331, 43 A, 567, 568). Insofar, however, as the minority shareholders may have an interest in the limitation of the corporate pefiiod, that: ‘interest is clearly defeasible under the Looker doctrine. ek i: Other Supreme Court cases holding contractual rights of shareholders to ke within the reserved power, and hence subject to changes imposed or authorized by subsequent « law, are the following: Sherman v. Smith, 1 Black. D87, 17- L. Ed. 163 (1862) (imposing individual liability on share- holders of a bank); Miiler v. New York, 15 Wall. 478, oy | L. Edi-98 (187: 3) (reduction in voting power of incorpora- tors from power to elect nine directors out of thirteen, to power to elect only six out of thigteen) ; Close v. Glen- / ij . - wood Cemetery, 107 U.S. 466, 2S. Ct. 267, 27 L. Ed. 408 (1883) (removin vented’ of an ineorporated cemetery from original proprietors to a board of trustees, and lim- iting the future returns: to the original proprietors, to one-fourth of the recejpts); Polk v. Mutual Reserve Fund Life Association, 207 U. S. 310, 28 S. Ct. 65, 5 d2 L.Ed. 222 (1907) (changing insurance of members from assessment plan, to flat premium ‘‘old line’’ insurance). (It is sub- mitted that all these changes are more drastic than ice ing the corporate term. In Coombes v. Getz, 285 U. 434, 441-442, 52S. Ct. 485, 436, 76 L. Ed. 866, 871 (19: - this Court refused to let the reserved’ power extend so far as to permit cutting off the vested quasi-contractual right of a corporate ¢reditor against directors of the cor- poration, but expressly recognized once again that. re- served power does extend to changing’ the interrelations , of state, corporation, and stockholders. This Court has apparently never passed ‘specifically oti the constitutionality of extending a_ corporate charter under subsequent law enacted pursuant to reserved power, but the question is clearly answered in principle by the eases just discussed, and in the affirmative. Such exten- sion, moreover, has been specifically approved, against charges of impairment of obligation of contract, by ,all the state courts whose opinions are cited by the Supreme Court of Missouri, 340 S. W. 2d at 628, Jurisdictional Statement at pp. 25 and 26, and by the St. Louis Court of Appeals, 331 S. W. 2d at 177-179, Jurisdictional State- ment at pp. 39- 43. (The Court of Appeals distinguished these eases on the theory that Missouri had no reserved power.) Appellants have never cited, aid do not now cite, a single case holding that such an extension. violates the clause against impairing the obligation of contracts or any other provision of the Constitution. . Concerning the construction placed upon the state Con- - stitution of 1875 by the'Supreme Court of Missouri, to the ° = ffect that ‘the constitution did contain reserved power over corporate charters, Appellants do ‘not even suggest that that construction should be reviewed by this Court. To some extertt at least, they say they have never ques- tioned it (Jurisdictional Statement, p. 14). The general rule is that the consiruction of state constitutional pro- visions or staiutes by the highest court of the state: is binding on this Court. Missouri ex rel. Hurwitz v. North, 271 U.S. 40, 46S. Ct. 384, 70 L. Ed. 818 (1926). True, an exception to this rule has been made in eases on obliga- tion of coniract (Coombes v. Getz, supra), but even there the state construction is to be, given great page Dudge v. Board of Education of Chicago, 302 U. S. 74, 58 S. Ct. 9%, 82 L. Ed. 57 (1937), and will be followed pert mani- festly Wrong. Hale v. Iowa State Board of Assessment and Review, 302 U. S. 95, 58 S. (t. 102, 82 L. Ed. 72 (1937); Atlantic Coast Line R. R. Co. v. Phillips, 332 U.S. 168, 67 S. Ct. 1584, 91 L. Ed. 1977 (1947). Here Missouri has interpreted its 1875 Constitution, not so as to give the state extraordinary or novel powers, but only to give it such powers as*it certainly did have under its 1865 Constitution (340 S. W. 2d at 680, Jurisdictional Statement at p. 22), certainly could hawe without violat- ing the Féderal Constitution, and such powers as virtually every state has suecessfully claimed for itself since the decision of the Dartmouth College case. The decision now appealed from potentially -affeets every extant Missouri corporation formed between 1875 and 1943, and sets at rest, onee and for all, vague doubts that have heietofore heen entertained concerning the powers of. those corpora- tions fo modernize themselves in keeping with current law. Practically speaking, the decision restores Missouri to its competitive position in holding and attracting cor- porate b¥ajness with its home hase in Missguri, after a long period of vague uneasiness and a short panic caused hy the opinion of the St. Louis Court of Appeals. On broad lines ‘of poliey, there is nothing in a federal -svs- ee, ) ee te 4 tem requiring federal review of a state decision which so eminently well disposes of a state problem. Even on narrow legal grounds, there is no eall for re- view of the state constitutional interpretation here in- volved. The broadest authority asserted by this Court is that it will deferentially re-examine the facts said to have given rise to the contract and the law said to ‘have im- paired it. Coombes v. Getz, supra. Here these questions are not open: there was a contract. in the form of the corporate charter under the Dartmouth Gdllege doctrine, but its obligation was not impaired if the state had re- served power at the time of meorporation. The om; open question is the underlying one of whether Missouri had such reserved power, answered in the affirmative by the Supreme Court of Missouri. State construction of such underlying questions of state law will not be reviewed by the Supreme Court. City of’ New ‘Orleans v. New Orleans - Waterworks Co., 142 U.S. 79, 12S. Ct. 142, 35 L. Fd. .943 (1891); Long Sault Development Co. v. Call, 242 U. S..272, 37S. Ct. 79, 61 L. Ed. 294 (1916). To sum up, there is no reason why this Court should review Missouri’ s finding ‘of reserved power in its former constitution, which is certainly not manifestly wrong, and onee reserved power is in the case there is no substantial federal question, hecause it has heen repeatedly held by this Court that reserved power takes a corporate charter out of the class of contracts protected against impairment _of obligation by the Federal Constitution, even. as_ to rights of shareholders claimed under the charter. II. The Right to Extend the Term of Holekamp Lumber Company by a Simple Majority Vote Existed From the ‘Beginning; Hence There Was No Possible Impairment of Contract. Appellees contended in the Missouri courts that a simple majority of the shareholders had the power under the cor- — 1()-- é poration laws of Missouri‘in effeet in 1908 to extend the, corporate term for’an additiona) period of fifty years, as vas done by Holekamp Lumber Company in 1957, In this additional respect, we take exception to Appellants’ state- ment of the question on appeal, because it postulates that, ouly the corporation Code of 1943 authorized an extension by a simple majority. We submit that the Supreme Court of Missouri held, or almost held, that in 1908 stockholders - could extend the corporate term by a simple majority vote. If this Court should review that decision, it would ‘undoubtedly come to the same conclusion, particularly ‘as it deferred to the Missouri Court’s eonstruction of the- ” pertineat Missouri statutes, On this view there would he no significant change in the law between. 19Q8 and 1948, and henee no possible impairment of contract. This question breaks down to determining whether such an extension could be effected undergRevised Statutes of Missouri 1899, Section 958, generally authorizing charter - amendments, as destinguished from Section 972, which pertained to accepting the new laws, requiring’ a three-. fourths majority therefor, {nd granting an extension in- cidental to such, acceptance. The St. Louis Court of Ap- peals considered the question at length, and. decided it against Appellees, (331 S, W. 2d at 181-184, Jurisdictional Statement at pp. 48-54). We submit that the Supreme (‘ourt of Missouri also decided the question, although somewhat unobtrusively, and decided it in favor of Ap- pellees and the existence of ¢he prior power (340 S. W. 2d at 682-683, Jurisdictional Statement, at pp. 26-27). The (‘ourt held that only specially chartered corporations (not Holekamp) Were intended to ageept the general laws under i Section ‘942, ang that corporations organized under gen- eral laws (like Holekamp) were included in the terms of Section 972 ‘‘undoubtedly’’ for the purpose of collecting a fee from them when they extended. The opinion also sug- gests that the three-fourths vote was required only be- "aes «te ° canse there was: a qnestion of relinquishing the special privileges conferred by a special incorporation. Then the opinion refers to Section 95 os, generally ‘authorizing amend- ments, and cites an earlier case holding it in pari materia with Section $72, and requiring the tax to “he paid under Section 972 when extension was.made by charter amend- ‘ment. Only Section 95s, not Section ht authorized char- ter amendments.” The conclusion is, not expressly drawn by the Court, Hut we will draw it here: Section 972, in- sofar as it pertained to accepting the new laws, applied anly to special-charter* corporations, ant® extension was incidental_to such acceptance; insofar as ‘it called for a tax on extension it applied to all corporations; Section 95%’ applied generally to amendmenfs and was in pari materia - with 972; taking the two together, a general- law cor pora- ‘tien extending by corporate amendment had to pay the tax called for by Section 972; but since the acceptance pro- vision$ (and hence the incidental extension pfovisionis) of 972 were not intended to apply to such a corpotation, its power of extension, clearly recognized here and in the earlier case ejted, could only have come’ from Section 958. And the earlier case, as stated in the Current opinion, rec- ognized extension by gharter amendment, which means by Segtion 958. It was never expressly de¢gided what majority was required under Section 958, as the’ 6pinion observes; but in the absence .of any special ‘requirement im- posed by statuté or decision, on eencral principles or cor- poration law, a simple majority. was enough. (Note again he nik’ eemaaeae that a three-fourths vote was re- Mivoa only for purposes of relinquishing special priv- ileges.) . _All the fotegoing premises are stated in the Court’s ‘opinion, and the conclusion ‘necessarily follows. It is submitted that the only reason why the conclusion was not drawn as. we have drawn it is that the Court con- sidered that the question would nexer arise again. If a conclusion were foreed, it would inevitably be as above stated. . bennmith sma sinnere ‘ ‘ stdbatcone os eee Arran bn lvetineeab tenet santloe dina ? a we Po San CONCLUSION, The appeal should me dismissed. because the federal question raised by Appellants i is insubstantial. Appellants do not question the Missouri Court’s finding of reserved _ power, With reserved pow er in the case, the question has heen decided against Appellants by a long line of decisions of this Court, that last of which (Phillips Petroleum, supra) states that there remains no constitutional ques- tion, and hence no. federal question. Finally, a review would only confirm@an agditional ground for supporting the judgment: namely, that the statute under’ attack ‘merely expressed more clearly what had always been the law and the-centractual rights of the parties, and hence could not possibly have impaired those contractual rights. Res{&ctfully suhmitted, EUGENE H. BUDER, LEONARD E. MARTIN, . Attorneys for Appellees. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385001_0103%3A3. Public record. Not legal advice.