Inter-Mountain Ass'n of Credit Men v. Davies, No. 3826

No. 3826 | Utah | Mar 27, 1923

CHERRY, J.

Plaintiff, as assignee for the benefit of creditors of Barker System of Bakeries, a Utah corporation, brought this action to recover $2,000 from the defendant, alleged to be due as an unpaid subscription to the capital stock of plaintiff’s assignor.

Defendant admitted the subscription, but pleaded that lie had been released and discharged from the same, and that the stock subscribed for had been issued and sold to another, by the corporation.

The defendant had judgment, from which the plaintiff has appealed.

The evidence is without conflict, except as hereinaffer noticed, and establishes the following facts:

Barker System of Bakeries was incorporated on Febru ary 24, 1919, by defendant and four others, with an authorized capital of $30,000, divided into 3,000 shars, one-half of which was subscribed by the incorporators, and one-half of which was reserved as treasury stock. The defendant’s subscription was for 500 shares, of the par value of $5,000, upon which he paid the corporation $3,000.

At first the business was profitable and dividends were paid. On March 7, 1919, at an informal meeting of the principal stockholders, it was stated that Mr. Frank Pingree, a banker, desired to purchase stock in the corporation, and for the reason that it was thought desirable and for the good of the concern to have a banker connected with it, and at the solicitation of other stockholders, the defendant reluctantly agreed to surrender 200 shares of his subscribed stock, in order that it might be sold to Pingree. Thereupon a certificate for 300 shares, for which the defendant had previously paid, was issued to bim, and the remaining 200 shares subscribed by him, together with 100 shares surrendered by other stockholders, 300 in all, were sold to Frank Pingree, a certificate duly issued and delivered to him, upon which he paid the corporation $1,500, as part payment. Here arises the only conflict in the evidence. F. L. Copemng, the president of the corporation, testified that he personally delivered the certificate to Pingree, who accepted it and paid $1,500 on account of it and promised to pay the remainder in a day of two; that at this time there were no creditors, the business was profitable, and the stock desirable. Pin-gree’s testimony is to the effect that he only wanted 150 shares of stock, for which he paid, and that he kept the certificate for 300 shares because Mr. Copening told him to keep it and determine if he did not want it all, and that later he returned the certificate for 300 shares and obtained one for 150 shares.

It appeared by other testimony that Pingree retained his certificate for 300 shares of stock for over a year, during which time he became president of the corporation, and that after the corporation became insolvent, and after the defendant had severed his connection with the company, Pin-gree canceled his certificate for 300 shares and procured one for 150 shares.

The trial court found as a fact that the corporation had released and discharged the defendant from his subscription, in consideration of the defendant relinquishing the same in •order that the stock subscribed for might be sold to Frank Pingree; that the defendant pursuant thereto did relinquish the stock; and that it was sold by the corporation to Frank Pingree and a stock certificate therefor was issued and delivered to Frank Pingree on or about March 8, 1919.

This finding is assailed by appellant for the reasons: (1) That no consideration is shown for the release; and (2) that the transaction was not had at a formal or legally assembled meeting of directors or stockholders, and that therefore the evidence is insufficient to support the finding.

Without pausing to inquire into the right of the plaintiff to inquire into the transaction at all, under tbe circumstances, it is sufficient to say that the relinquishment of the stock by the defendant and the purchase of the same by Pingree constitutes sufficient 'consideration for the release of the former.

The agreement for the release was made informally between the stockholders, and the record satisfactorily shows the participation and approval of all the stockholders except Mary C. Pingree, who had subscribed for 300 shares. It does not appear that she ever made objection to- the transaction. It does appear that the agreement for the release of the defendant and the substitution of Pingree was carried out and fully executed and Pingree recognized as a stockholder and elected president of the company.

A release of a subscription need not be express or formal; it may be shown by parol or circumstantial evidence; and it is sufficient if the subscription is deemed abandoned by mutual consent. 2 Fletcher, Cye. Corp. § 641; p. 1433.

It is not denied that the proceedings were had in the utmost good faith, without fraud, and before the corporation had incurred any indebtedness. It also appears that the means of the corporation to pay its subsequent creditors were not lessened, and that the plaintiff was not damaged by the transaction. This precludes plaintiff from recovering. Burke v. Smith, 16 Wall. (U. S.) 390, 21 L. Ed. 361" court="SCOTUS" date_filed="1873-03-31" href="https://app.midpage.ai/document/burke-v-smith-88692?utm_source=webapp" opinion_id="88692">21 L. Ed. 361.

The findings and judgment are amply supported both in fact and in law.

Judgment affirmed, with costs.

WEBER, C. J., and GIDEON, THURMAN, and FRICK, JJ., concur.