176 P. 623 | Utah | 1918
The answer admits the issuance of the certificates, but denies that they were wrongfully issued, and claims that the same were issued under resolution of the board of directors passed on the 22d day of February, 1916, and, further, that the said defendants are innocent purchasers and paid a valuable consideration for said stock, and prays judgment that the same be declared legal and valid stock in the corporation, and that they be entitled to all the privileges and benefits of other stockholders in said company.
Hearing was had before the court, and at the close of plaintiff’s testimony the court sustained a motion for a non-suit and entered judgment dismissing the action. Plaintiff appeals.
The minutes of a regular directors’ meeting held on the 23d day of February, 1916, at which the president of the company and the other directors were present, show that the following proceedings were had:
“Meeting called to order by President MacDonald. Present were: MacDonald, Fuelling, Rolley, Andrew, Van Alstine, Frankel. President MacDonald stated the object of the meeting is to devise means to pay off the obligations and expense for the ensuing year. Minutes of the last meeting read and approved. All bills presented for legal services and filing fees were ordered paid, also the bill of the Park Record. Balance of bills were tabled and laid over for our further meeting.
*608 “It was finally discussed among Fuelling, Andrew, MacDonald and Van Alstine to dispose of a certain amount of treasury stock, and Van Alstine moved that we place 50,000 shares of the treasury stock on the market at five cents net, or as much more as we can obtain, and that Mr. MacDonald be given full authority to place the stock on the market with some reliable brokerage firm or some mining promoting firm, and to use his best judgment in the matter. The same was seconded by Fuelling. Mr. Eolley made an amendment to the motion, but being no second the same was lost and the original motion was carried. ’ ’
It appears that subsequently, some time in April, 1916, a meeting of the directors was had of which no written minutes were kept and at which meeting the president, Mr. MacDonald, reported that he had consulted several brokers in Salt Lake City and was advised that such brokers were overloaded with stock and that they were unable to sell the stock of this company at any price. At a later date, on or about July 18, 1916, a directors’ meeting was had at which the.president, Mr. MacDonald, presided. At this meeting a Mr. Pratt submitted a proposition to the board to dispose of the company’s holdings at a price named, and a thirty days’ option was given with a provision for fifteen days’ additional if any sale of consequence was pending. At the same meeting the secretary called the board’s attention to a note due and other expenses, and thereupon that subject was postponed for a later meeting.
Mr. MacDonald, president, was present and presided at a special meeting of the directors on September 1, 1916, at which meeting he (MacDonald) stated that the object of the meeting was “to raise money to pay the note and other incidental expenses and current bills the company owed.” At that date an assessment of one cent per share was made upon the stock, to create a fund to pay the expenses for the year 1917, and it was decided that the assessment should be paid to the treasurer of the company at once and any stock delinquent would be advertised for sale October 1,1916, and sold November 1, 1916. Subsequently, on October 24, 1916, another
The articles of incorporation provide that the annual meeting of the stockholders shall be held on the third Monday in January of each year at the general office of the company at Park City, Utah. No meeting was, however, held at that date in 1917. A special stockholders’ meeting was called and met on April 23, 1917, at which time the other directors, for the first time, learned that the defendants held stock in the company or that any stock had been sold by the president. At that meeting MacDonald represented the stock sold to defendants by written proxy. At a later date the directors repudiated the action of the president in selling the stock in
Three questions are presented for determination: (1) Did the president, Roderick W. MacDonald, have authority under the action taken by the board of directors in February, 1916, to sell the stock in question? (2) If not, did he have such authority by reason of the fact that he was president of the plaintiff company? (3) Are the defendants such bona fide purchasers as will estop the plaintiff company from questioning in a court of equity the validity of the stock issued where plaintiff offers to return to defendants all amounts expended by them?
An examination of the minutes of the meeting of February s23, 1916, will show that the purpose of offering any part of the treasury stock was to obtain money to pay the obligations of the company and the expenses for the ensuing year. We need not discuss or determine whether, under the particular wording of the minutes of that meeting, the
Acting in conformity with the power given him, the president attempted to place the stock with certain brokerage firms, but ascertained that there was no sale for stock of that nature, and so reported to the directors at a
"Any act of the directors may be proven by oral testimony, when it is shown that no record was made of sueh action, or when it is shown that if such record was made it has been lost.” 3 Cook on Corp. (7th Ed.) Section 714, p. 2471.
At the subsequent meetings of the directors, after April, 1916, no reference is made to the authority given to the president to sell part of the treasury stock. Efforts were made to sell, and propositions for the sale of the entire property were considered and acted upon. At the meeting
Respecting the second question: It has been determined by this court that under Comp. Laws Utah 1907, section 324, the president of a corporation ordinarily has only the powers of a director, or such additional powers as may be directly
‘ ‘ While it is true that the president or general manager of a corporation sometimes exercises quite extensive powers in the executive management of its business, he is, nevertheless, acting all the time under the express or implied authority of the directors, who are the real managers of the corporation. He has no implied authority to sell treasury stock. ’ ’ Camden Land Co. v. Lewis, 101 Me. 98, 63 Atl. at 531.
Having determined that the president had no express authority to issue the stock in question, and also that he has no such implied authority, it necessarily follows that the right of the defendants to be protected in their purchase depends upon the justice or equity of their
‘ ‘ This being so, it will be seen at onee that the light to relief depends upon the equity of the person claiming it. If he has expended money upon the faith of the official certificates of the officers of the company, he has a right to be indemnified to the extent of his expenditure against loss from false certificates, but only because of the fact of his expenditure. The false certificates are no certificates in legal contemplation, and give no rights of their own force. But the act of the officers in issuing them having been accepted and acted upon by another, the company cannot be heard to deny the truth of the fact represented. ’ ’ Appeal of Kister-*613 bock, 127 Pa. 601, 617, 18 Atl. 381, 383, 14 Am. St. Rep. 868, at page St. Rep. 651.
See,' also, 5 Fletcher, Cyc. Corp. par. 3497.
The court refused to permit the plaintiff to prove the reasonable value of the stock in question, and that ruling is assigned as error. As a retrial of the action is necessary, it is desirous that this court express its views
Merely proving the value .of the stock, alone, might or might not be sufficient to prove a conspiracy between the president of the company and the defendants; but at least it is an element which should be considered in determining the fact of a conspiracy, if such existed. It is in the record that the issued and outstanding stock of the plaintiff company was something between 40,000 and 50,000 shares, and, as the property was under option for sale at something like $37,500, it can readily be seen that the value of the shares of stock sold was largely in excess of the price received. It may well be that, where the amount received for stock is so disproportionate to its real value, that fact should be accepted as conclusive evidence of a conspiracy between the purchaser and the officer selling the stock without authority and as claimed in this case, with the object of obtaining control of the corporation.
It follows from the foregoing that the case must be reversed, with directions to the lower court to reinstate the case and proceed to try it upon its merits. Apellants to recover costs.