125 F. 207 | 3rd Cir. | 1903
The American Alkili Company, the plaintiff below, brought its action in assumpsit against William S. Campbell, the plaintiff in error herein, and alleged: That it was a corporation duly incorporated under the laws of the state of New Jersey on April 29, 1899, with an authorized capital of $30,000,000, of which $6,000,000 was preferred stock, consisting of 120,000 shares of the par value of $50 each, and on which preferred stock there had been paid to the company, by the original subscribers therefor, the sum of $10 each. That on the 12th day of September, 1901, at a meeting of the board of directors of said company, duly called and held, the following resolution was adopted:
“Resolved, for the purpose of providing funds for the completion of the present works, the building of additional works and providing working capital, that a call of ten dollars upon each share of the preferred stock of the company be made September 16, 1901, payable at the office of the company in four installments as follows: First installment, $2.50 per share, October 21, 1901; second installment of $2.50 per share, payable January 21, 1902; third installment of $2.50 per share, payable April 21, 1902; and fourth installment of $2.50 per share, payable July 21, 1902.”
The first installment called for by the above resolution was, at a subsequent meeting of the board of directors, postponed until November 21, 1901, and that both the call made under the resolution of September 12, 1901, and the postponement of the time of payment of the first installment were ratified at a meeting of the stockholders of
We are of the opinion that this action is proper in form, and that the declaration sets out a good cause of action. Webster v. Upton, 91 U. S. 65, 23 L. Ed. 384; Nashua Savings Bank v. Anglo-American Land Mortgage & A. Co., 48 C. C. A. 15, 108 Fed. 764; Pullman v. Upton, 96 U. S. 328, 24 L. Ed. 818. The affidavit of defense admits that on the 12th day of September, 1901, the defendant was the owner of 5,100 shares of the preferred stock of the plaintiff corporation of the par value of $50 each, upon which there had been paid, $10 each—■ 300 of said shares having been acquired by him by original subscription, and 4,800 by subsequent purchase; that he 'continued to be the holder of record of all of said shares until October 3, 1901, when he sold the said shares to one David S. Thomson, surrendered his certificates, and the said stock was transferred to said Thomson on the books of the company, and new certificates for said stock were issued to said Thomson by the company, and that thereby he became “relieved and discharged of and from all liability for any unpaid calls made on said shares of preferred stock prior to the date of said transfer, and for any calls which might be made or become due thereon after said date”; that by virtue of the statutes of New Jersey (which are set forth) and the principles of law established and followed by the courts of New Jersey, a transfer of stock, followed by registry of transfer and grant of new certificates, the subscriber and former owner of stock is relieved from unpaid and future calls thereon; that the call described in plaintiff’s declaration was abrogated by the subsequent action of the directors September 25, 1901, and the stockholders on October 30, 1901, whereby it was illegally permitted to reduce the capital stock of the company by allowing shareholders paying- the call to exchange five shares of part paid preferred stock for two shares of the same full paid. The affidavit also sets forth and offers to prove certain acts in the organization of the company and its subsequent workings, which make this call fraudulent.
The first question which presents itself is, what is the date of the call? A call is defined in Cook on Corporations, § 104, to be “an official declaration by the proper corporate authorities that the whole or a specified part of the subscription for stock is required to be paid.” The resolution of September 12, 1901 (set out at length supra) provides for a call September 16, 1901. In it both the date of the call and the payments of the installments under it were fixed. It was the same as if the call had been determined and made of that date. The resolution was only giving notice of what could have been done without notice. That the resolution provides for the payment in installments is evidence of the fact that the call was made as of a date antecedent to that of the payment of the installments. There was but one debt created—that of $10, per share, and it was payable in four “installments,” which the Century Dictionary defines to be “partial payments
Campbell, the defendant below, being the registered holder of 5,100 shares of preferred stock on September 16, 1901, was liable, as such holder, for any unpaid and uncalled for subscription thereon; and when such call was made by resolution of September 12th as of September 16th, an obligation was then imposed on him to pay. Cook on Corporations, § 256; Webster v. Upton, 91 U. S. 65, 23 L. Ed. 384; Pullman v. Upton, 96 U. S. 328, 24 L. Ed. 818; Finn v. Brown, 142 U. S. 56, 12 Sup. Ct. 136, 35 L. Ed. 936. But the transferee of preferred stock duty registered on the books of the company was liable for after-assessments as provided in the certificates held by the defendant. “After payment of ten dollars per share on the preferred
Can this liability to pay be enforced by an action at law? Doubtless it can, unless the company is deprived of it by the remedy of forfeiture provided by the statute. Where a right of action and a right of forfeiture exist, it is manifest that the company cannot resort to both; but where a personal liability is imposed on a delinquent shareholder, and the right to forfeit the share is also given, the law is clear that the latter right is cumulative, and not exclusive. Ashton v. Burbank, 2 Fed. Cas. 26, 2 Dill. 435. “A grant of the power to declare a forfeiture for nonpayment does not by implication deprive the corporation of an option of remedies.” Cook on Corporations, § 124. It is put to its election, and may resort to either; not both. It will be noticed that the statute in this case is not mandatory, but permissive. The treasurer is not directed to sell, and can only do so when ordered by the board of directors, and then he shall sell at public sale. There is no obligation imposed on the directors to follow this remedy permitted by the statute. The language is (section 23): “If the owner of any share shall neglect to pay any sum assessed for thirty days after the time appointed for payment, the treasurer, when ordered by the board shall sell at public auction such number of shares of the delinquent owner as will pay all assessments due from him.” The statute itself recognizes the pre-existing liability and delinquency oFthe shareholder.
Has the defendant, then, being liable for the assessment levied upon the stock of which he was a registered holder on the books of the company at the time of the call, shown any valid defense? We think not. Doubtless a stockholder has a right to defend and resist a fraudulent call, “but an order of assessment, whether made by the directors, as provided in the contract of subscription, or by the court, as the successor in this respect, was doubtless, unless directly attacked, conclusive evidence of the necessity for making such an assessment, and to that extent bound every stockholder.” Great Western Tel. Co. v. Purdy, 162 U. S. 329, 16 Sup. Ct. 810, 40 L. Ed. 986. If, therefore, a stockholder desires to attack an assessment, he must do so directly, and not collaterally (Elizabethtown Gaslight Co. v. Green, 49 N. J. Eq. 329, 24 Atl. 560); otherwise it might happen that one stockholder might be released and another held, while the same legal liability attached to each.
On the whole case we are of the opinion that the defendant’s liability attached September 16, 1901, the date of the call; that he was not relieved of his liability by the transfer of his stock October 3, 1901; and that to the action here properly brought he has no defense.
The judgment of the Circuit Court is affirmed.