64 Wash. 292 | Wash. | 1911
Lead Opinion
Action by a receiver against certain stockholders of a corporation, on behalf of creditors, to collect unpaid portions of stock for which it is alleged the par value was not paid. From a judgment of nonsuit, this appeal was prosecuted.
In the spring of 1909, respondent McArthur secured an option upon certain coal lands in Thurston county, Wash
The evidence shows that Clement was financial agent of the company, employed in selling stock, and though not clear on this point, seems to indicate that his stock was transferred to him in consideration of services to be rendered in that capacity. It appears that McArthur first aided Kraber in the management of the mine, and later paid a note of the company for $600 which has not been repaid, and he contends that this and his services paid for his stock in full. There is evidence, also, that Rainey did some typewriting and other clerical work for the company, and the claim was advanced that this was in payment for the 100 shares of stock issued to him.
In the latter part of May, 1909, Kraber visited Anacortes and employed the respondent Funk to aid him in selling stock, Funk in turn securing the aid of the respondent Mc-Callum. Through the aid of these two, Kraber sold to the respondent John Ball 2,000 shares of treasury stock for $10,000, and also transferred to Ball as a part of the same transaction 3,000 shares of the trust or promotion stock, evidently as a part of the consideration for the $10,000 which Ball then paid. This stock was all on its face “fully paid and nonassessable.” Eight thousand dollars of this money was used in payment of the first and second installments of the purchase price of the property. Funk and McCallum each received for their services in this matter 6,250 shares of treasury stock. Ball was shortly afterward elected trustee of the corporation, but took no active part in the management of the mine until about the first of October, 1909. He advanced various sums of money to meet the payroll and pay debts of the company, and finally in September, when he had advanced about $3,000 in addition to the $10,000 paid for the stock, he demanded more stock,
We are of the opinion that, in any view of the case, the action was properly dismissed as to the respondent John Ball. He was not a subscriber nor an incorporator. In his first purchase of stock there can be little question that he was a bona fide purchaser for value. He looked over the property at the time, but it is not claimed that he had any knowledge of coal mines. There was no evidence' that he was told or learned of anything which would lead him to believe that the property if properly managed was not worth the full amount for which it was capitalized. It is fairly inferable that the stock was represented to him as paid up. It was' on its face “fully paid and nonassessable.” He is presumed to be a bona fide purchaser. The correct rule in such cases is expressed in 1 Cook on Stock and Stockholders (3d ed.), § 50:
“A bona fide purchaser for value and without notice of stock issued by a corporation as paid up cannot be held liable on such stock in any way, either to the corporation, corporate creditors, or other persons, even though the stock was not actually paid up as represented. Such a purchaser*297 has a right to rely on the representations of the corporation that the stock is paid up.
“Where, however, a statement is made on the face of the certificate that it is paid-up stock, the bona fide purchaser of the certificate need not inquire further, but may rely on that representation, and is protected thereby against liability.
“A purchaser of stock is entitled to rely on statements in the corporate books that the stock is paid up. The law goes still further, and holds that where a person in open market, in good faith and without notice, purchases certificates, such stock is to be deemed ‘paid up’ in his hands, and he is protected as a bona fide purchaser, even though there is nothing on the face of the certificates stating that they are paid up. This can now be laid down as the established rule. It is based on sound public policy, favoring, as it does, the transfer of personal property, and the ^««¿-negotiability of stock, and discountenancing secret liens and constructive notice.
“A purchaser in open market of stock represented to be paid up, by a statement to that effect on the certificate, is presumed to be a bona fide purchaser. Hence there has arisen the well-established rule, both in America and England, that a bona fide purchaser for value, and without notice, of stock issued as paid up, is not liable for any part of the par value which may not have been paid.”
See, also, Brant v. Ehlen, 59 Md. 1; Troup v. Horbach, 53 Neb. 795, 74 N. W. 326; Young v. Erie Iron Co., 65 Mich. 111, 31 N. W. 814; Steacy v. Little Rock etc. R. Co., Fed. Case, No. 13,329; Foreman v. Bigelow, 4 Cliff. (U. S.) 508.
Up to the time when he received the additional 6,860 shares, there is no evidence that he believed the property was not worth the full issue of stock. He was a trustee, but was not often at the mine nor actively connected with its management. The evidence shows that the mine had not been paying expenses, but it also shows that Davies, the present receiver, who was then superintendent of the mine, had reported at a meeting of trustees on July 6th when Ball was present that the reason for this was that more money was needed “in order to produce coal faster and with more
“The fact that the person to whom the stock is issued returns a part of it as a gift to the corporation or to trustees for the corporation to sell the same below par and put the proceeds in the corporate treasury for a working capital does not necessarily prove that the property was overvalued. The person receiving the stock may have been willing to sacrifice a part of his stock and property in order to make the rest more valuable.” 1 Cook, Stock and Stockholders (3d ed.), p. 66, § 46.
It is claimed that some $2,000 of the indebtedness was incurred upon representation made by him after this time. That, however, would not affect his bona fides in purchasing the stock. It would be immaterial in a suit by the receiver for nonpayment of stock which he purchased in good faith prior to such representation.
As to the other respondents, a more difficult question is
“Any agreement by which a person shows an intention to become a stockholder is sufficient to bind both him and the corporation. When one accepts or assumes the position and duties, and claims the rights and privileges and emoluments, of a stockholder, and the corporation- accepts or acquiesces therein, such person is estopped to deny that he is a subscriber, even though there may have been something irregular or defective in the form or manner of his subscription, or there may have been no- formal subscription at all.” 1 Cook, Stock and Stockholders (3d ed.), p. 86, § 52.
See, also, 10 Cyc. 390, subd. 8.
The acceptance of stock by these incorporators, after having filed articles of incorporation declaring over their signatures that the capital stock was $500,000 and the shares of a par value of $10 each, should estop them from claiming that they did not agree to assume also the liability of subscribers for the stock. Thompson v. Reno Sav. Bank, 19 Nev. 103, 7 Pac. 68, 3 Am. St. 797.
While all of the stock excepting twelve shares was originally issued to Kraber, he at once, and as it appears in pursuance of the original understanding, issued stock to all
“Each stockholder in all incorporated companies, except corporations organized for banking or insurance purpbses, shall be liable for the debts of the corporation to the amount of his unpaid stock, and no more, and one or more stockholders may be joined as parties defendant in suits to recover upon this liability.”
Rem. & Bal. Code, § 3698, declares:
“Each and every stockholder shall be personally liable to the creditors of the company, to the amount of what remains unpaid upon his subscription to the capital stock, and not otherwise.”
The respondents contend that this is a mining corporation within the meaning of Rem. & Bal. Code, § 7347, permitting mining claims to be transferred to such corporations in full payment of the capital stock, that therefore no subscription was necessary, and that respondents cannot be held as subscribers. We do not believe that this statute was ever intended to apply to corporations formed for the mining of coal. The words, “number of feet, shares, or interest in any claim in any mining claim in this state,” seem hardly apt for describing a coal mine, but are the terms commonly used in reference to claims or locations for mining the precious metals. As stated in one of the briefs,
“It appears that the legislature, knowing that no one was able to tell what is in the ground, or the value of a mining claim, placed mining corporations on a different basis from other corporations, and the statute in question is a qualified license to gamble.”
But coal mines in general do not possess the ultra speculative nature of mining claims. Ordinarily coal companies are
The respondents Funk and McCallum occupy still another position. Unquestionably they had nothing to do with the original transaction. They received their stock for services rendered to the corporation in selling stock to Ball. They cannot be held as subscribers because they neither actually nor impliedly subscribed for any of the stock. They are not prima facie within the rule expressed in Campbell v. McPhee, 36 Wash. 593, 79 Pac. 206, because they did not buy stock upon which nothing had been paid. In that case McPhee' purchased stock for cash at much below par, knowing that nothing whatever, neither money nor property, had been paid thereon. His liability was plain from the start. The defense of good faith could not be invoked. As to the two respondents here, the question is simply one of good or bad faith. The evidence before us is clearly sufficient to put these respondents to their defense. The very fact that they
The respondents Davis and Sornberger were not incorporators. While they participated in the original distribution of stock, they seem to have been passive throughout the career of this corporation. If they can show that they paid anything for their stock and took it without actual knowledge that it was not fully paid up, they should be held purchasers in good faith.
There is another matter of defense which may be available to all of these respondents. They should be permitted to show, if they can, that the creditors in whose behalf this action was brought, or any of them, dealt with the corporation with knowledge of the fact that the stock was issued for property of less value than the par value of the stock. Any such creditor will be estopped to participate in the trust fund created by an enforcement of the liability of the stockholders. Adamant Mfg. Co. v. Wallace, 16 Wash. 614, 48 Pac. 415.
As to the value' of the property, we hazard no opinion, since the evidence before us presents only one side of that question, and there must be a new trial in any event.
The judgment is affirmed as to the respondent Ball. As
Dunbar, C. J., Crow, and Morris, JJ., concur.
Dissenting Opinion
(dissenting in part)—I concur except as to that part of the opinion holding Davis and Sornberger. As to them a prima facie case was not made out.