Kelly v. Clark, 21 Mont. 291

21 Mont. 291 | Mont. | 1898

Hunt, J.

Appellant’s counsel, in their opening brief, declare they find difficulty in telling whether the respondent’s action was brought upon the theory that defendant was liable, as a subscriber of stock, for the difference between what he actually paid therefor and .the par value thereof, or whether it is sought to charge appellant with fraud, as a director of the company. This difficulty arises, argue counsel, because it appears by the complaint that the theory of respondent is. that the trustees fraudulently, and to relieve themselves of personal liability, caused all the capital stock to be issued to. Pardee in payment of the property, which they claim was of the value of only $75,000. Counsel say: “Actual fraud” is. charged, but, because it is not alleged or proved how Kelly was put in any different position by reason of the issuance of the stock in payment of the property in excess of its actual value than he otherwise would have been, they conclude no damage was proved to have come to him. Solution of this, difficulty being of importance, an examination of the findings of the jury is appropriate in order to understand the exact facts to which must be applied the principles that should control.

Considerable testimony was heard bearing directly upon the issues submitted to the jury, and the following facts were found:

(1) That the trustees of .the corporation, when they directed the issuance of 750,000 shares of stock in payment of a seven-eighths interest in the mine, did not actually believe that the said interest was worth the par value of said stock, namely, $7,500,000.

(4) That the par value of the seven-eighths interest in the mine at the time of the purchase by the trustees of the corporation was $125,000.

(5) That the trustees of the corporation, at the time they agreed to issue all of the stock of the company to Pardee et al. in payment of a seven-eighths interest in the mine, knew, or might have ascertained by the exercise of reasonable diligence, that the par value of the stock paid for such interest was in excess of the actual value of the property purchased.

(6) That the defendant Clark, in taking part at the meeting of the trustees of the corporation held on December 19, 1889, did not participate therein with the intent to relieve himself or other stock purchasers from a personal liability to the stock that he or they might acquire.

(7) That from information of the miné that defendant Clark had on December 19, 1889, there was no reasonable ground to believe that a seven-eighths interest was apparently worth the amount of the par value of the shares.

(8) That Clark at that time did not honestly believe that a seven-eighths interest in the mine was apparently worth the amount of the par value of the shares.

(9) That the apparent value of a seven-eighths interest in the mine at that time was not thq amount of the par value of the shares.

(10) That the defendant Kleinschmidt, in participating at the meeting of the corporation of December 19, 1889, did not intend to relieve himself or other stock purchasers from' a personal liability on the stock that he or they might acquire.

A motion was made to the district' court to reject the findings of the jury, with the exception of those numbered 6 and 10. This was denied, and all the findings of the jury were adopted by the court except 6 and 10, and in addition the court found as follows:

(11) That all of the stock of the corporation standing in the name of Kleinschmidt, with the exception of 250,000 shares, were held by him as trustee for Pardee, under the trust agreement referred to in the complaint.

(12) That the remaining 250,000 sh'ares held by said Kleinschmidt were held by him as trustee for the company, and were treasury .stock, donated to the corporation by Pardee at the first meeting of its board of trustees after the agreement between him and the company by which the entire issue of the capital stock was to be paid to him for a seven-eighths interest in the mine.

(13) That all the stock issued to Kleinschmidt was issued to and stood on the books of the company in the name of T. H. Kleinschmidt, trustee, and that the trust in Kleinschmidt for Pardee and- the company was created by direct resolution and previous authority of the company itself, and that the ■company was privy to the creation of both trusts.

The learned judge who presided at the trial of the case drew the following conclusions of law: (1) That defendants Klein■schmidt and Seligman were not liable for the claim of the plaintiff; (2) That the defendant Clark was liable.

What led to the exoneration of any defendants other than Clark is immaterial. The case before us presents for consideration Clark’s attitude only.

We regard this action as one brought to collect from Clark, a stockholder in the Fourth of July Mining Company, a corporation organized under Chapter 25 of the Fifth Division of the Compiled Statutes of the State of Montana (1887), the amount of a judgment debt against the corporation, under the provisions of section 457 of chapter 25.

That section provides as follows: “The stockholders of every company incorporated under the provisions of this article (chapter) shall be severally and individually liable to the creditors of the company in which they are stockholders, to the amount of unpaid stock held by them respectively, for all acts of and contracts made by such company, until the whole amount of capital stock subscribed for shall have been paid in. ”

The respondent’s complaint is in the nature of an equitable petition, instituted in behalf of himself and all the creditors of the corporation, upon the ground that defendant holds a large amount of unpaid stock, and that by the statute he is individually liable to the amount of such unpaid stock for the acts of and contracts made by the Fourth of July Company, until enough of the capital stock held by him shall be paid in to satisfy respondent’s claim. That such is the main theory upon which the respondent proceeded is evident by the pleadings, by the evidence, and by the judgment. The com plaint, substantially averred that defendant Clark owned 173,800 shares of the stock of the company; that 750,000 shares were-, transferred for a seven-eighths interest in a mine, worth no more than $75,000; and that the trustees, of whom defendant was one, knew, at the time of the conveyance of the mining-interest referred to, that such seven-eighths interest was worth no more than $75,000; that the defendant and certain others,, knowing 'that the mine was not worth more than $75,000, agreed to organize the corporation, and that the capital stock thereof should be $7,500,000; that each member of such association agreed to take, and did take, a certain number of shares in the company, at 25 cents per share; that defendant, having taken his shares with the full knowledge that the par value of the stock exchanged for the mining property was grossly in excess of the true value of the property, and, having full knowledge of the transaction antecedent to the issuance of the stock, thereby became the holder of unpaid stock except in the proportion of $75,000 to $7,500,000. The prayer is to have defendants decreed to be holders of unpaid, stock, and that they each pay into court the amount to which the stock held by him is unpaid, until enough shall be paid to satisfy plaintiff’s claim.

These allegations were sufficiént to permit plaintiff to prove that the stock had not all been paid in, as required by Section 158, Fifth Div., Compiled Statutes, which is as follows: “The trustees of such company may purchase mines, manufactories and other property necessary for their business, and issue-, stock to the amount of the value theréof in payment thereof, and the stock so issued shall be declared and taken to be full stock, and not liable to any further call; neither shall the holders thereof be liable for any further payments under the provisions of section 157 of this chapter; but in all statements and reports of the company to be published, this stock shall not be stated or reported as being issued for cash paid into the - company, but shall be reported in this respect, according to. the facts.” (Boynton v. Hatch, 47 N. Y. 225.)

The findings establish that the stock was not paid in as required, and that the seven-eighths interest in the mine was worth only If per cent, of the paid up value of stock exchanged for it. Evidential matters contained in the complaint, reciting the history of the formation of the corporation and the modus ojperandi, are not inconsistent with the theory pursued, and Upon which recovery was had. It may be true that plaintiff believed that actual fraud was a necessary element of his case — that is, that, to recover, it was essential to prove that defendant intended, when the exchange of the stock for the mine was made, to relieve himself from personal liability to the stock that he might acquire; but, even so, still plaintiff should not be turned out of court unless actual fraud is necessary in order to prove the statutory liability. If fraud can be proved by showing that the managers of a corporation have advisedly issued stock for property the par value of which stock was known at the time of its issuance to be grossly in excess of the fair value of the property acquired by the company; the plaintiff, in an action to enforce the individual liability of a stockholder who has taken with full knowledge of the state of affairs, can recover upon allegations sufficient to admit such proof, even though he has failed to prove other allegations in his pleading wherein he has charged actual intentional fraud on the part of the shareholder sued. This is upon the principle that if a' plaintiff aver more than is necessary, and fail to sustain immaterial and redundant averments, but does prove all the material facts upon which a right to relief is based, and no motion to correct the pleading has been made, it will be treated as sufficient, and the surplus allegations disregarded.

Defendant’s counsel, though, exaggerated the difficulty complained of.' There was no misunderstanding of the real basis of plaintiff’s cause of action when they wrote their supplemental brief, wherein they argue that it appears from the pleadings, and particularly from plaintiff’s complaint, that plaintiff did not rely and could not have relied upon the fraud which is made the basis of this action, for the reason that plaintiff asserts his cause of action against the company is by rea-on of a judgment, on account of personal injuries. Again, they thus refer to plaintiff’s attitude: “He invokes the rule * * * that the persons who perpetrated the fraud of which he complains are personally liable to him because of the fraud which they perpetrated, and at the same time shows that he could not have relied upon any such fraudulent misrepresentation, and that he could not have been induced to take the company as his debtor or to become the creditor of the company upon the theory that the shares of stock were fully paid up, and that the corporation had $7,500,000 worth of assets.” Appellant’s counsel then argue that plaintiff has not brought himself within the rule of equity which he invokes, but from which he ‘ ‘has expressly excluded himself by his pleading. ’ ’

Respondent is not. denied relief in equity. The statute imposing the individual liability upon the shareholder prescribes no remedy, and gives no form of redress. In this respect it differs from somewhat similar laws of several states; for instance, Missouri, where, under Section 2517, Revised Statutes of Missouri, 1889, execution may run directly against a shareholder for his liability on unpaid stock, where a judgment creditor of the corporation has issued execution, and the same has been returned nulla bona. But the great current of authority is that creditors in such suits may go into courts of equity, which will afford adequate remedy. (Norris v. Johnson, 34 Md. 485; Harris v. First Parish of Dorchester, 23 Pick. 112; Crawford v. Rohrer, 59 Md. 599; Thompson on the Liability of Shareholders, Sec. 258.)

Having now ascertained that plaintiff and defendant are not far apart in their lines of thought as to the scope of the issues raised by the pleadings and findings, we can proceed upon the deduction that there is no reliance upon actual intentional fraud; that that theory is eliminated from the case; and that, therefore, if the action can be sustained, it must be because fraud upon the law flows as a necessary legal inference from the facts that have been found.

The findings of fact adopted by the court are not attacked for insufficiency of evidence to justify them. We have, nevertheless, scrutinized the testimony in trying to arrive at a proper answer to the main legal proposition necessary to be decided. We have viewed the matter from several standpoints. We have considered that it was a mine that the corporation was giving its stock for, and that the purposes of the company were mining; also, that the value of mining property is honestly often immoderately rated by those who estimate its probable value by some slight indication of an ore body of commercial worth. We have considered the showing made by the development work on the property when the corporation ivas created. We have made every reasonable allowance for the unwarranted hopes of fortune that doubtless filled the minds of the defendant and his associates when they launched their enterprise upon the commercial world. We have even included allowances of fair profit to the promoter in trying to get at the fair value of the entire property as it was turned over to the company. But with all this there is nothing te contradict or shake the effect of the evidence from which it appears so clearly that there was absolutely nothing substantial upon which any man possessed of the most ordinary business capacity could have believed that $7,500,000 was the reasonable value of a seven-eighths interest in the Fourth of July Mine. It must therefore stand as true that the property which the corporation i eceived from Pardee as full payment, for the stock was worth only $125,000 when turned over to the company.

Authority to trustees of corporations to purchase mines, manufactories, and other property necessary to their business, and issue stock to the amount of the value therepf in payment therefor, which stock so issued shall be declared and taken to be full-paid stock not liable to any further calls, is a specific grant of power to buy any species of property necessary to-the business of the company by paying therefor in stock; but, in exercising the authority given, the par value of the stock so issued must be put against the fair value of the property purchased. The language “to the amount of the value thereof,” used in section 458, means the actual or the fairly-estimated value of the property exchanged for the shares of stock delivered in payment. Constructions of the language quoted which permit any valuation to be put upon the property which the parties to the transaction please, and to issue in payment therefor stock of a par value grossly in excess of the true value of the property, we believe to be evasive and erroneous. The statute neither allows a grossly excessive value to be put upon the property sold in order to deliver it over in consideration of a large amount of stock, the par value of which is far in excess of the fair value of the property, nor does it authorize property to be sold at far less than its value, in consideration of payment in stock worth on its face more than the property so acquired actually or fairly estimated is worth.

Corporations are generally formed to execute undertakings which individuals cannot carry out with safety or facility, and to avoid personal liability in execution of such projects. But the legislature prescribes the terms of the contract entered into between the people and the incorporators. Entire immunity from individual liability is not invariably incidental to the grant of a charter or articles of corporate existence. If legal conditions are complied with by the organizers of corporations, the immunity follows as a matter of law; but, if they are not, an individual liability to the shareholders arises, imposed by the same power which granted the right of corporate existence, and whereby creditors may make their claims good. Such we believe to be the correct rule, and such we think is the doctrine announced by the courts and text writers who have reasoned upon the sounder principles of law. We shall not attempt to do more than cite a few recent cases which sustain our views in clear and unmistakable language.

The supreme court of the United States, by Justice Hunt, in Upton, assignee, v. Tribilcock, 91 U. S. 45, announced this salutary rule: ‘ ‘The capital stock of a moneyed corporation is a fund for the payment of its debts. It is a trust fund, of which the directors are the trustees. It is a trust to be managed for the benefit of its shareholders during its life, and for the benefit of its creditors in the event of its dissolution. This >duty is a sacred one, and cannot be disregarded. Its violation •will not be undertaken by any just-minded man, and will not be permitted by the courts. The idea that the capital of a corporation is a football to be thrown into the market for the purpose of speculation, that its value may be elevated or depressed to advance the interests of its managers, is a modern and wicked invention. * * * The capital paid in and promised to be paid in is a fund which the trustees cannot squander or give away.”

Within these principles, many courts of the highest respectability have laid down rules we have stated. _ The use of the term “trust fund” we approve of as understood by the late decision of the supreme court in Hollins v. Brierfield Coal and Iron Co., 150 U. S. 371, 14 Sup. Ct. 127, and as substantially followed by our court in Ames & Frost Co. v. Heslett, 19 Mont. 188, 47 Pac. 805. Speaking of property held “in trust” for creditors, Justice Brewer said in the federal case cited; “Yet all that is meant by such expressions is the existence of an equitable right which will be enforced whenever a court of equity, at the instance of a proper party and in a proper poceeding, has taken possession of the assets. It is never understood that there is a specific lien or a direct trust. ’ ’ There is no direct and express trust attached to the unpaid liability of a stockholder as an asset of -an insolvent corporation; but an equity does arise in favor of a creditor of such a corporation which will be upheld in the creditor’s favor, and which will inure to the benefit of the creditor before it will be held to belong to the separate entity, the corporation itself. A simplified way of expressing the attitute of the creditors of a corporation which -is insolvent towards the corporation is to .say that in such an event ‘ ‘all the creditors are entitled in equity to have their debts paid out of the corporate property before any distribution thereof among the stockholders. ’ ’ (Wabash, St. Louis and Pacific Railway v. Ham, 114 U. S. 587, 5 Sup. Ct. 1081.) That the liability for unpaid stock is an asset of an insolvent corporation has been frequently decided. (Sanger v. Upton, 91 U. S. 56; Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739; Hatch v. Dana, 101 U. S. 205; Beach on Private Corporations, Section 117.)

Judge Peckham, in 1890, announcing the unanimous opinion of the court in Gamble v. Q. C. Water Co., 123 N. Y. 91, 25 N. E. 201, construed the manufacturing act of that state, which is similar to Section 158 of the Montana Compiled Statutes. He said: “We think that, under the manufacturing act, the company cannot issue its stock as full paid at anything less than its par value. The act makes special provision for the exercise of the power to issue stock in payment for property purchased by the company. Whatever the right of a corporation under the general powers pertaining to it as a corporation might be, we must look to the provisions of the statute where it specifically grants such power to find the terms and conditions upon which it is to be exercised. By Section 2 of Chapter 10 of the Laws of 1818, the trustees of a manufacturing corporation, founded under the act, are empowered to purchase property necessary for their business, and to issue stock to the amount of the value thereof in payment therefor; and the stock so issued shall be declared and taken to be full paid stock, and not liable to any further calls. We think this language must mean that the amount of the nominal or par value of the stock must be put against the value of the property purchased; otherwise, we should have such a case as $100 in cash purchasing $100 of stock at par, under a subscription to the capital stock of the company, while the same $100, if first turned into property to be sold to the company, might purchase double the quantity of the stock if the stock were only of the actual value of 50 per centum of its par value. The stock would issue only at its actual value in return for property, but, in return for cash, it would only issue at its par value. In other words, if the stock were really worth but 50 per cent, of its par value, actual cash would purchase only half as much stock as could be purchased with an equal value in property. This was never meant. And 1 think the expression that the stock thus issued for property purchased is to be taken as full paid up stock, and that it is to be issued to the amount of the property purchased, must mean that it is to be issued at its par value.

“It may be said that this construction prevents a corporation from purchasing property and paying for it with its stock, where actual value of the stock is enough below its par value to make the difference in a large purchase very appreciable. That may be so. But it was undoubtedly the object of the statute to make the full-paid stock chat is issued the representative, dollar for dollar, of the money or property that has been paid in for its purchase, so that the company would start off in business with money or property of the full value of its paid-up capital.”

The supreme court of Missouri, with no dissent, in the very late case of Van Cleve v. Berkey, 44 S. W. 743 ("decided the same week that the case before us was submitted), in construing a statute permitting subscribers to pay for stock by labor done or property actually received, said: “Where the law permits subscribers to pay for stock by labor done or property actually received, it means that the corporation must receive in labor or property what it was reasonably worth in money. Corporations- must own property for the purposes of their legitimate business, and, if a man Contracts to take shares in the corporation, he must pay for them, to use a homely phrase, ‘in meal or in malt. ” He must either pay m money or in money’s-worth. And it is the rule laid down by the supreme court of this state, which the learned referee seems to have overlooked, that the property or labor turned into the corporation as payment for shares of stock must be a fair, ’ ust, lawful, and needed equivalent for the money subscribed. ’ ’

In Wallace v. Carpenter Electric Heating Manufacturing Co., 73 N. W. 189, decided in December, 1897, the supreme court of Minnesota used the following apt language: “A certificate for paid-up shares in a corporation is simply a written statement in the name of the corporation that the holder thereof is a stockholder, and that the full par value of his shares has been paid to the corporation. If the shares in fact have not been so paid for, the certificate that they have been is a false representation that the assets of the corporation have been increased to the amount of the par value of the stock so issued. And, when a corporation represents that it has a paid-up capital of a given amount, it represents to the business world that, at the time it issued the stock, it received money or property to the full par value of its stock. The issuing of the stock of a corporation as paid up when it is not so in fact is a public and a private wrong — a cheat and a fraud ■ — which enables the corporation to obtain credit and property by false pretenses. Ethically the legislature might, with the same propriety, authorize an individual to misrepresent his assets for the purpose of obtaining credit as to authorize a corporation, other than a mining corporation, to issue watered stock. ’ ’

In Stout v. Hubbell, 73 N. W. 1060, decided after the case at bar was submitted, the supreme court of Iowa said: “For this court has held, as to creditors of a corporation, thatwhc-n property is received by the corporation, at an excessive valuation, in payment for shares of its capital stock, it is only a payment to the extent of the value of the property received, and that owners of such stock are liable to creditors for the difference between the actual value of the property and the face value of the stock. ’ ’

To like effect are the somewhat older but modern decisions in Elyton Land Co. v. Birmingham Warehouse & Elevator Co., 92 Ala. 407, 9 South. 129; Wetherbee v. Baker, 35 N. J. Eq. 501; Bailey v. P. & C. Coal & Coke Co., 69 Pa. St. 334; Douglass v. Ireland, 73 N. Y. 100; Goodrich v. Dornan, 14 N. Y. Supp. 879; Roman v. Dimmick, (Ala.) 22 So. 109.

There have been numerous contrary decisions, a leading case being Phelan v. Hazard, 5 Dill. 45, Fed. Cas. No. 11,068, cited to us by appellant. But, not stopping to distinguish the cases, the courts of the United States have not of late followed Phelan v. Hazard; and we believe it can be safely said that there has been a steady advance in later years to the view that, in exchanging stock for property under a statute similar to section 458, each must be valued honestly at its fair worth, and the amount of stock issued as paid up shall not be greater than the value of the property purchased.

This brings us to the contention that there can be no liability unless it is proven that the shareholder, in assenting to the purchase of property for stock and the overvaluation thereof, and in capitalizing the enterprise, actually intended to perpetrate a fraud upon the creditors of the corporation; in other words, that he intended actually and by furtive motive to perpetrate a fraud. Bearing in mind always that this appellant, Clark, was one of the original parties to the purchase of the mining property referred to in the findings, and actively participated as a trustee in the company formed, and immediately thereafter became a stockholder, with full knowledge of the fact that the stock had been paid for by a seven-eighths interest in the mine, which was knowingly grossly overvalued, the application of the law becomes quite simple. Upon this question, too, there are decisions in support of the appellant’s theory, but again we shall curtail the results of our investigation by observing that in the later opinions those principles obtain which we believe to be the more just to creditors generally. Upon what rational basis can it be said that the trustees or shareholders of a corporation have a right to deliberately take, in payment for the stock of the company, property intentionally and most unfairly overvalued ? Where is the authority to do it ? What the justification for it in the code to which the trustees must turn ? These questions are not replied to by saying that the common law permitted such a practice; for, if it did, Section 458 of the Laws of Montana (Compiled Statutes 1887), and the constitution (section 10, article 15), do not. Certainly, the common law did allow directors of a corporation to receive property or services in payment for stock, either from original subscribers or from those to whom the original subscribers sell stock; but whether the common law sanctioned an intentional gross overvaluation of property sold for stock in the corporation is, at least, doubtful. To pursue that inquiry, however, is not important, for the statute (section 458) is the specific grant of power under which the conditions are prescribed as to when the stock is paid up when it has been issued for property, and to that directors and shareholders must look for a guide in their conduct in and about such transactions, while section 457 creates the liability.

In Terry v. Little, 101 U. S. 216, Chief Justice Waite said: ‘ ‘The individual liability of stockholders in a corporation is always a creature of statute. It does not exist at common law. The first thing to be determined in all such cases is, therefore, what liability has been created?”

In Camden v. Stuart, 144 U. S. 104, 12 Sup. Ct. 585, Justice Brown clears up evident misapprehension of the former decisions of that court by the following statement: “In view of our decisions in Sawyer v. Hoag, 17 Wall. 610, Scovill v. Thayer, 105 U. S. 143, and the numerous cases arising out of the failure of the Great Western Insurance Company, it is manifest that the resolution adopted at the directors’ meeting of December 29, 1880, that, upon paying §4,000 or their proportions of the same, the capital stock of §150,000 should be deemed to be fully paid, was wholly ineffectual as against the creditors of the company. It is the settled doctrine of this court that the trust arising in favor of creditors by subscriptions to the stock of a corporation cannot be defeated by a simulated payment of such subscription, nor by any device short of an actual payment in good faith. And, while any settlement or satisfaction of such subscription may be good as between the corporation and the stockholders, it is unavailing as against the claims of the creditors. Nothing that was said in the recent cases of Clark v. Bever, 139 U. S. 96, 11 Sup. Ct. 468, Fogg v. Blair, 139 U. S. 118, 11 Sup. Ct. 476, or Handley v. Stutz, 139 U. S. 417, 11 Sup. Ct. 530, was intended to overrule or qualify in any way the wholesome principle adopted by this court in the earlier cases, especially as applied to the original subscribers to stock. The later cases were only intended to draw a line beyond which the court was unwilling to go in affixing a liability upon those who had purchased stock of the corporation, or had taken it in good faith in satisfaction of their demands. ’ ’

. And in Lloyd v. Preston, 146 U. S. 630, 13 Sup. Ct. 131, it was held a Iona fide creditor of a corporation could enforce actual payment by the subscribers to the capital stock of the company where the evidence was convincing that the overvaluation of the property transferred to the railway company in pretended payment of the subscription to the capital stock was so gross and obvious as, in connection with other facts, clearly established a case of fraud.

It is mot necessary to show an actual fraudulent intent in order to establish a legal fraud. ‘ ‘Simulated payments, ’ ’ as the supreme court in Handley v. Stutz, 139 U. S. 417, 11 Sup. Ct. 530, calls payments of subscriptions to capital stock where property is grossly and obviously overvalued, do not constitute excuses for defeating the trusts arising in favor of the creditors of a corporation.

The quantum of proof essential in actions similar to this one has been directly considered by several courts. In Douglass v. Ireland, 73 N. Y. 100, it was said: “A deliberate and advised overvaluation of property * * * is a fraud upon the law. * It is in a direct violation of the policy as well as the terms of the law, which demand payment either in money or property at its value of all the capital stock of the company as a condition of immunity to the stockholders, from liability, for debts of the corporation. The payment of an amount for property in excess of its value does not depend upon any fraudulent intent other than that which evidenced by the act of knowingly issuing stock for property to an amount in excess of its value. All that is necessary to establish the legal fraud and take the stock issued out of the immunity assured to stock honestly issued * * is to prove two facts: (1) That the stock issued exceeded in amount the value of the property in exchange for which it was issued, and (2) that the trustees deliberately, and with knowledge of the real value of the property, overvalued it, and paid in stock for it an amount which they knew was in excess of its actual value. ’ ’

The property in that case was worth §68,000, the capital stock issued being §300,000. This case last cited was approved of in the later case of National Tube Works Co. v. Gilfillan, 124 N. Y. 302, 26 N. E. 538. There the property was found to be worth §75,000, but it was procured by giving §300,000 worth of stock for it. The court approved of a ■charge to the j ury directing them that ‘ ‘the fraud is consummated by the issue of stock as full-paid stock which has not been fully paid; and it does not depend upon any fraudulent intent other than that which is evidenced, by the act of knowingly issuing stock for the property in an amount in excess of its value. All that is necessary to establish legal fraud is proved in two facts, ’ ’ etc. . The court even went to the extent of holding that there is ‘ ‘no exemption from liability because ■credit was imprudently given by the creditor, or because he .supposed that the property of the corporation was sufficient to pay its debts. ’ ’

The New York cases are approvingly upheld in the very able opinion of the supreme court of Missouri in Van Cleve v. Berkey, supra, where the court said it was satisfied that the weight of American authority was against the appellants’ contention on the facts of that case, and that the appellants were liable without other proof of fraud than was afforded by the transaction itself. The transaction spoken of was this: A corporation was organized under the laws of Illinois, and was to have a capital of §100,000, subscribed by the parties in interest to whom the full amount of stock as subscribed was issued as full paid, in consideration of a transfer to the corporation of an invention of little actual value. The evidence ■showed that all the defendants acted in good faith so far as their actual intentions were concerned, and none of them was moved by any actual fraudulent intent in the transaction. About 10 per cent, of the amount subscribed was advanced by the original subscribers, but one B. received §90,000 of the capital stock of the corporation for an invention.

Upon the question of fraud the case is parallel to this. The court also adopts the language of the supreme court of Alabama in Elyton Land Co. v. Birmingham Warehouse & Elevator Co., 92 Ala. 423, 9 South. 129, disapproving of the statements made by Mr. Cook, in section 47 of his book on Stocks, Stockholders and Corporation Law, to the effect that attempts made, in instances where stock was issued for the property taken at an overvaluation, to hold the party reciving such stock liable for its full par value less the actual value of the property received from him, have usually been unsuccessful. :

.The supreme court of Nebraska, in Gilkie and Anson Co. v. Dawson Town & Gas Co., 64 N. W. 981, expressly lay down what is sufficient proof in accordance with the New York decisions. Judge Harrison, for the court, said: “Where an agreement is made whereby stock is knowingly and advisedly issued as paid in full, though but partially paid for, it may be set aside by creditors, and the enforcement of payment in full of the subscription for the stock obtained for the satisfaction of the debts of the corporation. * * * Where property is conveyed to a corporation as payment of a subscription for stock, it is insufficient to' satisfy the liability of subscribers to the creditors of the corporation if there has been a fraudulent overvaluation of the property — an over valuation knowingly and advisedly made. ’ ’

Clark on Corporations, in a logical discussion of the proposition, says that the better opinion is that an actual fraudulent intent need not be shown in order that the person who pays for his stock in property may be held liable to creditors on the ground that the property was overvalued. His summary of the law is as follows: “Laying aside all questions as to whether there is an actual intention to defraud, such transaction would be a fraud in law, both upon dissenting stockholders and upon persons dealing with the corporation on the faith of its stock being fully paid, up, and it would be just as invalid as against creditors as a payment for stock in money' at a discount. If the nature of the property and the extent of the overvaluation are such that the overvaluation may possibly have been due to error of judgment, then, to render the transaction invalid as against creditors, actual fraud must be shown, and the question is one of fact. If, on the other hand, the overvaluation is so gross and obvious that it could not have been due to mere error of judgment, the transaction will be held fraudulent as a matter of law. This seems to be the fair result of the cases, if the opinions are read in the light of the facts actually before the court. ’ ’

In Northwestern Mutual Life Ins. Co. v. Cotton Exchange Real Estate Co., 46 Fed. 22 (decided in 1891), a bill was brought by a judgment creditor of a corporation, alleging, in substance, that the stock of the corporation of the value of §125,000 was paid by conveying a lot and building at a valuation of §200,000, but which in reality was only worth §157,-000. The bonds of the corporation, secured by mortgage on the building, were issued to the defendants to make up the deficit, the defendants being stockholders and directors in the company which owned the building and made the conveyance, and they personally knew of the overvaluation, and were benefited by it. The same arguments were advanced before Judge Thayer that are usually advanced in like cases, namely, that the bill did not show that there was any fraud in the transaction by which the stock was paid for, inasmuch as it did not aver that the stock was intentionally overvalued. Judge Thayer decided that the persons to whom the stock was issued were aware of the overvaluation, and, although the bill was said to show no actual fraud in the transaction, the court regarded an intentional overvaluation of property to the extent and made under the circumstances disclosed by the bill as fraudulent, “in the sense that a complainant is bound to allege and prove fraud. * •* * The law regards such a transaction as constructively fraudulent so far as the corporation’s creditors are concerned; or,, to state the proposition in a different form, the payment of a stock subscription in such manner and under such circumstances is invalid, and not binding on a creditor of the corporation, and, where the law determines the quality of a transaction described in a pleading, it is unnecessary to aver that it was invalid or fraudulent.” The learned judge who decided the last referred tocase had before him, and which was binding upon him, the case of Coit v. Gold Amalgamating Co., 119 U. S. 343, 7 Sup. Ct. 231 (decided in 1886), which is quoted as holding to the doctrine that actual fraud, as heretofore defined, must be shown by a creditor seeking to fix the individual liability of a shareholder. But it is plain that nothing in that decision was regarded as inconsistent with the rule laid down in the New York decisions heretofore cited. Coit v. Gold Amalgamating Co. was an action by a judgment creditor against the defendant company to compel the stockholders to pay what he claimed was due and unpaid on the shares of the capital stock held by them. The capital stock was fixed at §100,000 and the property was turned over for that amount of stock. It was said that, although £ ‘the corporators may have placed too high an estimate upon the property, its valuation was honestly and fairly made.” The court, after saying that, where full-paid stock is issued for property received, there must be actual fraud in the transaction to call stockholders to account, added: “A gross and obvious overvaluation of the property would be strong evidence of fraud.” We fail to see where this language at all conflicts with the opinion of Judge Thayer in Northwestern Mut. Life Ins. Co. v. Cotton Exchange Real Estate Co., supra, or with our own view that when there is super-added to a gross and obvious overvaluation the element of deliberation in having grossly overvalued the property, and knowledge in having done so, fraud is a necessary legal inference from such facts, .for in such a case good faith in valuing the property is entirely wanting. It is a fraud upon the law.

So, also, in Thayer v. El Pomo Mining Co., 40 Ill. App. 344, it was decided that the stockholders in an insolvent corporation were liable to creditors unless they had given for their ■stock “the equivalent of money or in money’s worth.” That was a mining case, and the corporation was organized with a ■capital of §1,000,000, divided into §10 shares. The appellant recovered a judgment against the corporation, which, being unsatisfied, he sought to make good under the statutes making the stock of shareholders liable. The property transferred to the corporation was worth but little more than 10¡ per cent, of the amount of the stock of the company. There,, as in the case at bar, it was considered a fair conclusion that, none of the incorporators had any idea that the property was worth a million dollars, but adopted that sum as a convenient one for the amount of stock to be issued. As between themselves, connected with the organization, the court said there could be no ground of complaint; but, as to creditors, the law regarded the nominal capital of the company, besides its actual assets, as a fund to which they might look for satisfaction. From many former cases in Illinois the rule was deduced that, the stockholders of an insolvent corporation will be liable to creditors unless there has been given for the stock the equiv alent of money or in money’s worth. “No fiction,” say the ■court, “however innocently adopted, is a defense against cred itors. ” In the latest decision in Illinois (1895)—Coleman v. Howe, 154 Ill. 458, 39 N. E. 725 — entire good faith in valu-. ing property is required, and “where the overvaluation is so. great that the fraudulent intent appears on its face, and is not explained, the court will hold it to be fraudulent, as a matter of law. ”

In Elyton Land Co. v. Birminghan Warehouse & Elevator Co., supra, it was held that the absence of fraudulent motive, on the part of a trustee does not give validity to a mere simulated execution of the trust. An averment of fraud in refer-, ence thereto is unnecessary.

In the expression of the foregoing views of our own and those adopted by us from other courts, we do not mean to be understood as going to the extent of holding that a stock-, holder may be successfully charged by a creditor of a corporation as a holder of unpaid stock where the property given in exchange for the stock does not eventually prove to be as; valuable as it was believed to be at the time of the transfer,, nor that unwise judgment or indiscretion alone are sufficient.. The judgment of men is too apt to be erroneous in relation to the valuations of property. This is especially true in new countries, where mining excitements frequently prevail, and values fluctuate rapidly and to an unusual extent. An honest mistake of judgment would seem to be a complete defense to such an action, but no such feature is presented in the case under consideration, (rood faith in the valuation put upon the property is what the law demands, and all that it demands. By good faith is meant actual belief in the value put upon the property — the belief that a prudent and sensible business man would hold in the ordinary conduct of his own business affairs. Beliefs based upon visionary speculative hopes, unwarranted by existing conditions or facts, and without reasonable evidence from the then present appearances, are not such beliefs as will relieve the shareholders. Such is the true rule, we think, and such is the one that the law intends shall be applied.

Higher authority than the statutes also exists to prohibit a corporation’s issuing stock except for property actually received. The constitution of the state (section 10, art. 15) provides as follows: ' “No corporation shall issue stocks or bonds, except for labor done, services performed, or money and property actually received; and all fictitious increase of stock or indebtedness shall be void. The stock of corporations shall not be increased except in pursuance of general law, nor without the consent of the persons holding a majority of the stock first obtained at a meeting held after at least thirty days’ notice given in pursuance of law. ’ ’

In Elyton Land Co. v. Birmingham Warehouse & Elevator Co., supra, a clause in the constitution of Alabama, almost identical with section 10 quoted, was construed as effective against transfers of property deliberately and intentionally overvalued to corporations for their stock. We approve of this construction.

The.constitution of Missouri- (art. 12, section 8) contains a substantially similar clause; and in Van Cleve v. Berkey, supra, the supreme court decided it applied to a case like the one before us, saying: “It is impossible to escape the conviction that in this state, whatever may be the case in some of the other states, the ‘American trust doctrine,’ as suggested by Mr. Justice Harlan, has indeed been re-enforced by its constitution and statutes, and that the proposition that the stock of a corporation must be paid for ‘in meal or in malt’ — in money or in money’s worth — is not a mere figure of speech, but really has the significance of its terms; it may be paid for in property, but in such case the property must be the fair equivalent in value to the par value of the stock issued therefor; that it is the duty of the stockholders to see that it possesses such value; that when a corporation is sent forth into the commercial world, accredited by them, as possessed of a capital in money, or its equivalent in property, equal to the par value of its capital stock, every person dealing with it, unless otherwise advised, has a right to extend credit to it on the faith of the fact that its capital stock has been so paid for, and that the money, or its equivalent in property, will be forthcoming to respond to their legitimate demands — in short, that it is the duty of the stockholder,, and not the creditor, to see that it is so paid. ’ ’

Earnestly have appellant’s counsel sought to convince us that mining corporations are sui generis, and that the doctrine of liability of shareholders for unpaid subscriptions, when stock has been issued for property at an overvaluation, is not applicable to such bodies. To fortify their arguments, they rely upon Judge Hoffman’s opinion in re South Mountain Con. Min. Co., 7 Sawy. 30, 5 Fed. 403, and the opinion by Judge Sawyer in the same case, reported again in 8 Sawy. 366, 14 Fed. 347. The foundation of Judge Hoffman’s remarks is based upon two notions: (1) That the amount of the capital stock of a mining corporation is usually fixed at a purely arbitrary sum, and divided into as many shares as convenience or caprice may dictate; and (2) that the capital stock of a mining company neither bears nor is intended to bear the slightest relation to the real value of the property, — “a value nearly always conjectural, and very often imaginary.” A complete answer to both points lies (1) in the constitutional provision of this state which says that ‘ ‘no corporation shall issue stocks except for * * * money or property actually-received;” and (2) in the law (Section 458, Fifth Division of the Compiled Statutes 1887) wherein the grant of power to-the trustees of a corporation to purchase mines * * * necessary for their business enables them to issue stock to the-amount of the value thereof, which stock so issued shall be declared and taken to be the full-paid stock, and not liable to any further call. There was no such statute in California when the» cases cited were decided, and, so far as we are advised, it does-not appear that the court considered the effect of the constitutional prohibition of that state (Section 11, Article 12} against issuing stock except for property actually received-judge Sawyer also wrote of the common custom, and said that mining corporations in California were organized and carried on upon principles in respect of their capital stock wholly different from banking and like commercial corporations having a subscribed capital stock. No reference is.made» to statutory rules fixing liability for unpaid shares, or extending authority to buy mines. Custom and common knowledge-allowed and looked for any capitalization of a mining company, and nothing to the contrary justified the court m holding against the weight of these arguments. Such is fairly the quite persuasive reasoning of the learned judge.

Morawetz, in his valuable book, cites these two decisions, and sustains their doctrine in the following language: “While the cu toms of business men with regard to the methods of organizing and managing particular classes' of corporations cannot control the established rules of law, such customs must often be taken into consideration in construing agreements made in view of the prevailing condition, of affairs. Thus, it has long been the gene rat practice both in New York and in California to organize mining corporations with a nominal capital bearing little or no relation to the-real capital which the shareholders propose to contribute, and to issue the entire stock as fully paid up. in consideration, of mines whose market value is much below the amount of the stock so issued, and whose real value is generally nothing. This practice is so universal and so notorious that a person who contracts with any ordinary mining company.may usually be presumed to have contracted with a view only to such security as the property transferred to the company may furnish, irrespective of the capital indicated by its charter. A person so contracting would therefore have no equitable claim against the shareholders for unpaid capital if their shares were declared paid up as between themselves and the company. It is to be observed, also, that the nominal capital of a mining company, by the very nature of the mining business, cannot, as a rule, furnish an indication of _the company’s actual capital. The property of a mining company is naturally of an extremely fluctuating and uncertain character. Moreover, it is acquired for the sole purpose of being exhausted and distributed among the shareholders in the form of dividends, and not as a permanent fund with which to carry on business.” (Morawetz on Private Corporations, § 830.)

The intimation that New York, like California, excepts shareholders in mining corporations from statutory liability, is inadvertent, for Douglass v. Ireland, supra, involved the responsibility of shareholders in a corporation for furnace and mining purposes. The two California cases alone uphold the text. As said before, however, those cases were not decided on statutes similar to the New York manufacturing act, quoted in Boynton v. Hatch, 47 N. Y. 225, and identical with the Montana statutes, and for this reason are not wholly pertinent. But we go farther, and are constrained to overthrow their fallacious doctrine of expediency, and to rest our decision upon the law as it is written, and upon the common principles of moral honesty, within its letter and its spirit.

Sifted of specious consideration addressed to judges to regard practices long prevalent in certain mining states, where no laws existed placing mining and manufacturing corporations on an equality, and the warped doctrine we are asked to lay down leads to this: Incorporators of mining companies should be permitted to violate the law, and deliberately deceive the public, but the incorporators of manufacturing enterprises should not; and this notwithstanding the truth that the same specific statutes grant no greater powers to one than the other, and fix the same liabilities upon the shareholders in each.

Counsel assert positively that there is no such thing as the market value of a mine. This court said in Montana Railway Co. v. Warren, 6 Mont. 275, 12 Pac. 641, that even a prospect has a value. “The only'questions are whether a, prospect has a value that may in law be called a market value, and, if so, whether there is proof in this case of any market value. Has a ‘prospect’ — an undeveloped mine — any market value ? A full, positive answer to that is that ‘prospects’ are sold in the market every day. Certainly, property so sold has a market value. The records of Silver Bow county will probably show more transfers by sale of property, such as is known as ‘prospects,’ than of any other kind of real estate. They are frequently sold upon execution, foreclosure and partition sales. They are subject to daily litigation in our courts.” These remarks were “-well said,” wrote Justice Brewer in affirming that decision, in 137 U. S. 348, 11 Sup. Ct. 96. Its holding was also followed in Maloy v. Berkin, 11 Mont. 138, 27 Pac. 442, and Railway Company v. Forbis, 15 Mont. 452, 39 Pac. 571, and a like rule reiterated in O'Keefe v. Dyer, 20 Mont. 477, 52 Pac. 196. The rationale of the California cases can also be accounted for, not only by an absence of statutory conditions which confront the incorporators of mining companies in Montana, but by remembering that when the opinions of Judges Sawyer and Hoffman were delivered, in 1881, and 1882, the science of mining in Western America was and had been far behind its present systematism. The engineer of mines was by no means so accessible or so well informed by knowledge of past experience of development in mines in this country as he has since become, and the light of his professional learning was not nearly so universally spread. It was only a few years before those decisions were pronounced that the universities of America first conferred degrees for proficiency in special courses in mining. In such surroundings, and amid the fewer opportunities for ascertaining with reasonable reliability the value of a mine, the custom of which the California judges wrote sprung up in the early days of California; and, because of its well-known origin and hold, the law and the courts were reluctant to interfere with it. But that it was a pernicious custom is indisputable. It led to deceit, and to fictitious estimates being placed on mining property by the incorporators, for their own gain. Shares in a mine, at a few cents each, allured the unsuspecting and venturesome. The experiences of the custom are filled with disappointment and ruin to investors, rich and poor. All these matters may have been the controlling reason for the adoption of the more honest policy of our laws. Judge Buck, whose opinion as a district judge was read to us on the argument of this case, adverted to the argument of custom in this way: ‘ ‘This custom has made the very word ‘mine' in financial centers of the world almost synonymous with conspiracy to defraud. The caution of capital has become so trepid that. I believe it is no exaggeration to state that many a half-worked rich mine lies idle to-day in the mountains of this state through this cause alone.”

The Supreme Court of Utah, in Salt Lake Hardware Co. v. Tintic Milling Co., 45 Pac. 200, makes no exception in favor of mining corporations; nor does the Supreme Court of Illinois, in Thayer v. El Pomo Mining Co., supra; nor does the Supreme Court of Wisconsin, in Gogebic Inv. Co. v. Iron Chief Mining Co., 47 N. W. 726; nor does the Supreme Court of Iowa, in Oliphant v. Mining Company, 63 Iowa 332, 19 N. W. 212; nor does the Supreme Court of Oregon, in Hodges v. Mining Co., 9 Or. 200; nor does the Court of Appeals in New York, in Douglass v. Ireland, supra.

But, whatever may have been the reason of the old system, things have changed. Estimating the value of a mine is no longer the result of hasty conjecture. Former methods have given way to scientific tests, based upon geological conditions, underground surveys and measurements, careful examinations of ore in sight, the known history of ore bodies in the vicinity, the method and cost of treatment of the ore, together with facilities for its transportation to markets. Now, too, there is a known definition of rights which the courts have step by step established in expounding principles by which the miner shall have preserved to him the greatest benefit of his discovery. These reasons may likewise have weighed with the legislature when it refused to extend greater immunity to stockholders in mining than in certain other corporations formed under the laws of the state.

It is next contended that it does not appear that appellant, Clark, was a subscriber, or had ever agreed to become a subscriber, to any stock. This is upon the theory that there is no actual contract to pay on the part of the shareholders who accept stock in mining corporations as full paid without having signed a formal subscription for the same. Section 457, heretofore quoted, imposes the liability of shareholders to creditors to the amount of unpaid stock, for all acts of and contracts made by the company. Section 458, supra, provides that stock issued in payment for the mining property, to the amount of the value of the property, shall not be liable for any further payments under the provisions of Section 457.” To give any effect at all to this clause, stock issued in payment of mining property must be included. This is obvious. It cannot mean liability to the shareholder in a manufacturing, and exemption to a stockholder in a mining, company. Failure to have signed a formal stock subscription list cannot relieve appellant. The stock was issued to him, and, with knowledge of all the surrounding facts, he became the holder of it. This was enough. See the late case of Smith v. Ferris and C. H. Railway Co., (Cal.) 51 Pac. 710. Where stock has been issued, the holder has impliedly subscribed for it. If it has not been issued, yet he has subscribed to a formal subscription list agreeing to take it, as such subscriber, he may be deemed liable to the amount for which it is unpaid. (Taylor on Corporations, Section 511.) The Supreme Court of Iowa, in Jackson v. Traer, 20 N. W. 764, held that the simple acceptance of stock by one who never became a stockholder by subscription rendered the holder liable. W here the person sought to be charged has already taken the stock by an acceptance of the certificates, the need of a written agreement to do that which he has done is dispensed with and the relation of shareholder exists. (Shickle v. Watts, 94 Mo. 410, 7 S. W. 274; Lloyd v. Preston, 146 U. S. 630, 13 Sup. Ct. 131; Webster v. Upton, 91 U. S. 65.)

Appellant says that plaintiff cannot recover upon the theory that there has been a fraudulent overvaluation of the property, because his cause of action arises out of tort, and not out of contract. This revives the argument already considered and disposed of — that, to recover, plaintiff must show that he relied upon the fraudulent overvaluation of the mine. Counsel overlook the full significance of the language of the statute, whereby the liability exists, not for debts due by the corporation, but for all acts of and contracts made by it. Spelling on Corporations, Section 909, says that damages arising from the commission of torts by a corporation’s agent cannot be recovered where the liability is for debts only; but, where the terms “debts” and “liabilities” are used, “the combination seems sufficiently comprehensive to include all acts and species of obligation and wrong for which a civil action would lie, except such as are purely penal in character. ’ ’ ‘ ‘All acts of and contracts by the corporation” are very comprehensive words, and certainly afford no ground whereon the courts can exclude acts of wrong independent of contract. In an early case in New York, Heacock v. Sherman, 14 Wend. 58, the word ‘ ‘debt’ ’ was regarded as limited to claims arising out of contract, but the court was of opinion that the word “demand’ ’ by itself would include a claim for damages arising out of the wrong of the corporation. Many statutes imposing this individual liability upon shareholders fix it only for payment of debts contracted by the corporation; but in section 457, as if to overcome the restrictions put upon the meaning of the term £ ‘debt’ ’ by the courts, the legislature has avoided the use of any such legal technical word, and extended the liability for all acts of, as well as all contracts by, the company. The statute cannot be evaded. Liability for acts of the corporation plainly includes liability for claims for damages consequent upon torts. (Powell v. Oregonian Railway Co., 36 Fed. 726.) Plaintiff, claiming in tort, had to fix his claim as a creditor in order to avail himself of his remedy; hence it was obligatory upon him to first establish his claim against the corporation. We regard the liability of the shareholders under our statutes as secondary, not primary. They cannot be held until it appears that the corporation is insolvent. Thompson on Corporations, Section 3521, writes that regularly the creditor, before invoking the aid of a court of equity, must have exhausted his remedy at law; £‘and the usual proof of his having done so is the recovery of a judgment, and the return of an execution nulla bona. To like effect is Spelling on Corporations, Section 904. This appears to us to be just and equitable. (Powell v. Oregonian Railway Co., supra.)

What we have already said refutes the final argument of appellant — that; if plaintiff relies upon the statutes, his action is upon a liability created by statute; hence his remedy is barred by the statute of limitations. (Compiled Statutes of 1887, Section 42, First Div., and Laws of 1893, page 50.) Respondent was injured May 26, 1891. He recovered a judgment June 28, 1894, and instituted this action August 13, 1894. When plaintiff sued for damages for his injuries, he sued the company. His claim was thereafter merged in a judgment against the corporation. Now, as a judgment creditor, he is suing other defendants — individual stockholders — to make them pay the amount of his judgment. But, as the shareholders are only secondarily liable, they could not have been proceeded against on an unliquidated demand until the judgment against the corporation was taken, or the demand was liquidated, and the company was insolvent. (Powell v. Oregonian Railway Co., supra.) The better rule in such cases is'that no cause of action accrues against the shareholder until the creditor has failed to make the amount of his judgment or ascertained claim from the assets of the company, or unless, perhaps, in certain cases, it appears to be useless to proceed against the corporation. (Hawkins v. Glenn, 131 U. S. 319, 9 Sup. Ct. 739; Scoville v. Thayer, 105 U. S. 143.)

Several minor errors are assigned. They have been attentively examined, but are not well founded, and require no discussion.

The conclusions we have reached in this case are in accord with those bolder interpretations which uphold, rather than impair, the letter of the constitution and the laws of the state. Enforcement of the liability in this, the first action brought before this court involving the important questions considered and determined, may be a hardship; yet the policy upon which the statutes are founded is most wholesome. In the course of the history of the state, the maintenance of those principles which we have followed will intercept the further growth of a system by which “wildcat” corporations have done grievous wrong to the public generally.

The law has said to the incorporators of mines: “Youmust not issue as paid in more stock in exchange for property taken than will fairly represent what the property is worth. It thus exacts no more from you than it does from the incorporators of manufacturing schemes. You must be fair and honest in valuing your mining properties, so that your capital stock may be assumed to represent what is actually paid in. It requires no impossibilities from you, but it insists on identically the same good faith from you as a miner that it calls for from your neighbor as a manufacturer. By obeying its commands, you are perfectly free from individual liability; but, by palpably and advisedly evading them, you run the risks consequent upon your evasion.”

The judgment and order appealed from are affirmed.

Affirmed.

Pemberton, C. J., and Pigott, J., concur.