212 N.W. 446 | Minn. | 1927
Defendants Burrichter, Firminger and Chapple, herein referred to as the promoters, were the organizers and, at first, the managers of the corporations. Defendants Gmeinder, Schrupp, Berla, Moran and Bisson, herein referred to as the defendants, having pride in their community, encouraged the promotion of the corporations and became owners of some of the mortgage notes of the corporations. The organizations were perfected in the fall of 1919, when 2,400 shares of stock of the American Buckram Manufacturing Company were issued, 800 to each of the promoters. On March 10, 1920, 2,400 shares of the Henderson Casket Manufacturing Company were issued to them in equal proportion.
The management of the two corporations was not successful. The real estate and plant of the one were mortgaged for $25,000 and the other for $30,000.
On October 2, 1920, the promoters and defendants entered into a written contract relative to each corporation. For the purpose of transferring control to defendants, the promoters assigned and transferred to them, as trustees, six shares more than half of all the outstanding stock. Each contract also recited, in substance:
That defendants should elect themselves directors; and "as trustees of said stock and as directors" devise ways and means to *244 keep the concern going; not pay dividends until certain percentage of secured indebtedness should be paid; upon payment of all unsecured and 40 per cent of secured debts defendants would reassign the stock to the promoters; that defendants should have the right to vote the stock; and that one share of stock in said corporation transferred by the promoters to the defendants should be issued to each of defendants in his own name and the ownership should remain in defendants as individuals.
Defendants in good faith on October 2, 1920, accepted certificate No. 21 for 1176 shares in the American Buckram Manufacturing Company and certificate No. 4 for 1,326 shares in the Henderson Casket Manufacturing Company, issued to them as trustees. They elected themselves as the board of directors of each corporation. Within a few days they discovered the financial condition of the corporations to be much worse than had been represented. They abandoned all efforts of re-establishing the business. The plan having become impossible defendants did not formally reassign the certificates to the promoters who apparently were willing that the creditors should take all their interest, and on November 1, 1920, waived their rights under the contract with defendants by executing the usual form of assignment on the back of the certificates after changing the word "transfer" to "cancel." Certain notations were made on the stubs in the stock books evidencing an intention to cancel certificates No. 21 and No. 4 which were turned in to the corporation and attached to the stock book stubs.
Thereafter the receiver was duly appointed in each case. Proceeding were instituted resulting in an order for a 100 per cent assessment against the stockholders in each corporation. This action followed.
1. Upon the record the stock is bonus stock. A stockholder is liable for all unpaid instalments on stock owned by him. G.S. 1923, § 7465, subd. 1; First Nat. Bank of Deadwood v. Gustin M.C.M. Co.
2. The important question is: Who owned this stock after October 2, 1920? No transfer of the stock was made on the books of the corporation. None was necessary to transfer title to the holder. Lund v. Wheaton R.M. Co.
Whether the contract passes ownership is a question of law. Dun. Dig. § 3407; Wells v. McNerney,
The promoters on November 1, 1920, attempted to completely separate themselves from this stock. They did not relinquish it to defendants who surrendered possession of the certificates. We may fairly infer that the promoters and defendants were trying to release all their interest for the benefit of the corporations or their creditors. Their procedure was irregular. It is not suggested that the promoters escaped liability as stockholders nor that they attempted to do so. Their acts in this respect could not affect the status of defendants under the contract. They neither added nor detracted. It cannot be successfully urged that defendants were trying to enjoy the benefits and escape the burdens of a transfer. Courts have been *246
sedulous in their efforts to blot out schemes for that purpose. Defendants deny that there was a transfer. Except as hereinafter stated, they never consented to become stockholders. Indeed they have in no way assumed ownership of the stock or done anything which should estop them from asserting the true facts. They have not done those things which usually constitute estoppel. Thompson, Liability of Stockholders, § 223. This is not an action to enforce a stockholder's constitutional liability but relatively it concerns the ownership of the stock at the time the action was commenced. First Nat. Bank v. Winona Plow Co.
If defendants are stockholders it is because of the terms of the contract. Clearly they intended to hold the stock in trust directly for the benefit of the promoters and indirectly for the benefit of the creditors. They did not acquire any beneficial interest in the stock. Hence the rule that burdens follow benefits is not applicable.
The passing of title was solely for the purpose of investing power in defendants to carry out their plan of temporary control and not to make the stock their property. It did not even directly inure as a financial benefit to them. The fact that they owned an interest in the secured indebtedness is of no moment. Defendants were giving, not receiving benefits. Whether defendants were desirous of helping the promoters, the community or the holders of the mortgage notes, it is certain that they in fact never supposed they were becoming the owners of this stock. That was not the plan. If the venture had been successful the promoters would have been the principal beneficiaries. The transactions involving the efforts to cancel the stock cannot be construed as affecting the defendants. If the effort toward cancelation was futile, it is here immaterial. The contract clearly discloses the intent of the parties. If we look at the contract as being a reality, it is not illegal. It was crude. It was not fraudulent from any standpoint. It did not contravene the rights of stockholders, creditors, the corporation or the public. The creditors whom plaintiff represents have not been harmed nor was it the purpose of the contract to harm them. The intention was to help them. This is the reflection of the contract itself. It is not *247
unlawful to temporarily separate the voting power of stock from its owner. Every proxy does that. In this case there was no unlawful exercise of a lawful power nor was there an attempt to authorize the exercise of an unlawful power. But whether the contract is one that the promoters could have revoked at any time as indicated in Harvey v. Linville Imp. Co.
We hold that it appears upon the face of the contract that defendants did not become the owners of the stock transferred to them in trust.
The language of the contract puts title to one share of stock in each of the defendants, and recites, "the ownership thereof shall be and remain in such second parties as individuals and not as trustees." The contract did not contemplate that this stock would be reassigned. We are of the opinion that as to this stock defendants subjected themselves to the liability claimed and must respond to the extent of the par value of the stock. They were familiar with the history of the transactions and must be charged in law with knowledge of the character of the stock.
The conclusion of law will be modified to impose liability upon each defendant resulting from the ownership of one share and plaintiff will be given judgment in each case accordingly. Otherwise the orders are affirmed. *248