110 P. 872 | Utah | 1910
Lead Opinion
This is a suit in equity in which plaintiff seeks to be adjudged the owner of, and entitled to have issued to him, 1,060 shares of the capital stock of the Colorado Mining Company, a corporation organized under the laws of this state. Service of summons was had on Jesse Knight and the Colorado Mining Company, each of whom filed an answer to plaintiff’s complaint. The other defendants were not served
In order to understand the points 'and questions involved, it is necessary to make a somewhat elaborate and detailed statement of the issues and facts. The Success Mining Company was incorporated under the laws of this state, with its general place of business in Salt Lake City. It 'had a capital stock of thirty thousand dollars divided into three hundred thousand shares of the par value of ten cents per share. The capital stock was all subscribed for and fully paid up by the incorporators, six in number, by the conveyance to the corporation of the Success mining claim situate in the Tintic mining district,' this state. The articles of incorporation were filed December 7, 1898. There were five directors, three of whom resided at Eureka, and one at Robinson, in Juab County, Utah, and the other, Ernest Williams, who was also secretary and treasurer of the company, lived in Salt Lake City, Utah. The articles of incorporation provided that the persons therein named as officers should continue in office until the annual stockholders’ meeting, and until their successors were elected and qualified. No election of officers was held until October 3, 1906, and the persons rained as officers of the company in the articles of incorporation continued to be the officers of the company until that date. The company was unable to find any ore or valuable minerals in its ground, and therefore was not a financial success. There were eight assessments levied upon the capital stock. The eighth and last assessment was levied at a meeting of the board of directors held at Eureka, Juab County, February 10, 1900. This was the last meeting held by the board of directors first appointed, and with the exception of an entry made by the secretary in the minute book of the company April 14, 1900, reciting that certain stock had been sold to pay the eighth assessment levied thereon, there was
A copy of a printed notice purporting to contain a list of the certificates representing stock on which the eighth assessment had become delinquent, and which was published in one of the daily papers of Salt Lake City, with the publisher’s affidavit attached thereto, was introduced in evidence by plaintiff, and was made part of the bill of exceptions. The notice did not include any of plaintiff’s stock. While we think it may be fairly inferred from this that no publication of plaintiff’s stock was made as required by law, yet it does not necessarily follow that, because of this, plaintiff is entitled to recover in this action. If this were a suit for the conversion of plaintiff’s stock, or to compel the Success Mining Company to replace the stock and make an entry of plaintiff’s ownership on the books of the company, the fact that the stock was not advertised and sold as required by law might be a controlling feature in the case. But, as we have observed, this is a suit to compel the Colorado Mining Company to issue to plaintiff one thousand and sixty shares of its stock. Therefore the fact that plaintiff may have been unlawfully deprived of his stock in the Success Mining Company by a void sale which the record shows was made, if made at all, more than eight years before the commencement of this action, is not necessarily decisive of the case. This phase of the case will be more fully discussed further along in the opinion.
Again reverting to the facts: We find that on or about May 3, 1906, the eighty-four thousand nine hundred and twenty-five shares of the stock of the Success Mining Company, represented by certificate three hundred and sixty-five issued to C. E. Pearson, were purchased from Pearson by
In pursuance of the foregoing resolution, the president and secretary of the Success Mining Company duly conveyed to the Colorado Mining Company all the real and personal property owned by the Success Mining Company and received from the Colorado Mining Company a certificate for seventy-nine thousand five hundred shares of its stock issued in favor of the Success Mining Company. On October 18, 1906, at a meeting of the board of directors of the Success Mining Company, the following resolution was adopted. “Be it resolved, that a dividend of the seventy-nine thousand and five hundred shares of the Colorado Mining Company’s stock, ^received as the purchase price for the company’s real and personal property, be and it is hereby declared, and that the same be paid on the basis of two hundred and sixty-five shares of said Colorado company’s stock for every one thousand shares of this company’s stock, and that said dividend be paid
The position taken by appellant and the contention made by bim on this appeal is clearly set forth in his brief in the following language: “Thus the action of the stockholders and directors of the Success Mining Company, and the delivery to it by the Colorado Mining Company of the certificate for seventy-nine thousand and five hundred shares of the Colorado stock, made each of the stockholders in the Success Company a stockholder in the Colorado, on the basis of two hundred and sixty-five shares of Colorado for each one thousand shares of the Success held by him, and made the Success-Mining Company the holder of the legal title only, in trust for its several stoqkholders. Therefore the duty of the Colorado Mining Company was not a duty that it owed to a stranger, or to the stockholders of some other corporation, but
The evidence, without conflict, shows that the seventy-nine thousand five hundred shares of Colorado stock were distributed to parties only who were stockholders of record in the Success Company as shown by the books of the company, and in compliance with the terms of the very resolution upon which appellant bases, his right to recover. When a party presented for cancellation a certificate of Success mining stock and demanded in lien thereof Colorado stock, Mr. Mangum, secretary of the Success Mining Company, who was also secretary of the Colorado Company, with the assistance of Jacob Evans, who was a director in and also the attorney for the Success Company, would examine the books, records, and papers of the Success Company, and, if these •showed that the party presenting the certificate was the owner thereof, and there was no record on the books showing that the stock had been sold for assessment, the certificate would be taken up and canceled, and the party presenting it paid his pro rata share of the seventy-nine thousand five hundred shares of Colorado stock. On this point Jacob Evans testified, and his testimony is not denied, that : “We presumed the books stated the truth and facts and relied upon the books. We had only so many shares to distribute, and our books showed every share of stock was owned by stockholders as recognized by the books of the corporation, and we distributed the stock as best we could to the stockholders as the book showed.” Section 330, Comp. Laws 1907, so far as material here, provides as follows: “That for the purpose of voting, and of receiving dividends, and of levying and collecting assessments, and wherein the corporation is otherwise interested, the holder of record, as shown by its hooks, shall be treated and considered as the holder in fact, and the transferee shall have no rights or claims as against the corporation until transfer thereof be made upon the
Nor do we think that Jesse Knight can be successfully charged with negligence because he failed to see to it that appellant and his assignor, George W. Heintz, received their proportion of the Colorado stock. As we have observed, the stock certificate book of the Success Mining Company shows that the stock of plaintiff and his assignor
Counsel for appellant invite attention to the fact that no entry was made in the stock ledger of the Success Company of certificate three hundred and sixty-five issued to Pearson, and that Pearson’s name does not appear thereon as a stockholder. This is referred to, if we correctly understand counsel’s position, as a circumstance sufficient to put Knight upon inquiry as to the validity of the Pearson certificate. Two answers can be made to this contention. The certificate, which had been issued for more than six years, being regular upon its face, Knight had the right to assume, and to act upon the assumption, that Pearson was the true owner of the eighty-four thousand nine hundred and twenty-five shares of stock represented by the certificate,, and under the well-settled rule as announced by the text-writers and declared by the courts he was not required to examine the books and records of the company to ascertain if there was any infirmity in Pearson’s title to the stock; and, second, as we have stated, if Knight had examined the books, he would have found that Pearson was the stockholder of record of this particular block, of stock. Moreover, the record shows
Counsel for appellant in their printed brief have with much severity denounced the action of the stockholders and officers in passing the resolutions which culminated in the transfer of the assets of the Success Company to the Colorado Company in exchange for Colorado stock. These criticisms are mainly directed against Knight, who was at the time the resolutions were adopted president, director, and the principal stockholder in each of the companies. If this were a suit in which the validity of the resolutions was assailed or called in question, there might be some justification as well as foundation for the criticisms made, and the transactions themselves would call for the closest scrutiny by the court. But, as we have repeatedly pointed out, appellant, by bringing this action and basing his right to recover upon the strength of these resolutions, has ratified them as
It has been suggested that, because Knight received the proceeds of the stock in issue, he ought to be compelled to account to plaintiff therefor. This can only be done, if done at all, on the theory that plaintiff’s stock was converted, and that Knight failed to acquire title to the full eighty-four thousand, nine hundred and twenty-five shares of stock that he purchased from Pearson. We again in-
The judgment is affirmed, with costs to respondents,
Concurrence Opinion
(concurring).
I concur with the conclusions reached by Mr. Justice McCarty. I must confess, however, that I arrived at the conclusion that appellant cannot recover against the defendant J esse Knight after some hesitation,- and for that reason desire to add something to what has been well said by my Brother.
After mature reflection and a thorough examination of the authorities, I am forced to the conclusion that, in view of the facts and circumstances of this case, appellant never had a cause of action against the defendant Jesse Knight either in law or in equity. As appears from the undisputed facts, the stock in question was transferred by the Success Company to Pearson as having been forfeited by plaintiff and one Heintz for nonpayment of an alleged assessment levied against the stock; that the stock, in fact, was not sold for the assessment, but it was nevertheless transferred by the corporation to one Pearson, and a new certificate issued to him in place of the old certificates, which had been issued and were held by plaintiff and Heintz; that afterwards Pearson sold the stock issued to him to the defendant Knight and assigned the certificate to him, and Knight presented the same to the Success Company for transfer. The company allowed the transfer and issued to him a new certificate which was finally surrendered' by Knight, and for it he received his proportion of the Colorado stock, as stated by Mr. Justice McCarty in the opinion written by him. The plaintiff and Mr. Heintz could have treated the action of the Success Company in canceling their certificates as a conversion and could have forthwith sued that company for damages, or they could have brought an action in equity against both the company and Mr. Pearson so long as he held the stock and could have required’ the company to repay Mr. Pearson what he had
“It lias also been shown that he who applies to the corporation for a registry of transfer, such registry being the first one since the forgery was committed, is not allowed to retain the stock. An entirely different rule prevails as regards all subsequent bona fide holders of the new certificate obtained by the first registry. The person who obtains the first registry has no rights except as against his transferrer. But all subsequent purchasers without notice are fully protected. They cannot be compelled to give up the stock, either to the corporation or to the person who lost it by forgery.”
In 3 Cl. & Mar. Cor., section 597e, tbe rule is stated thus: “Tbe owner of shares wbicb bave been transferred by tbe corporation on its books under a forged power of attorney
“It is no less the interest of the shareholder than the public that the certificate representing his stock should be in a form to secure public confidence, for, without this, he could not negotiate it to any advantage. It is in obedience to this, requirement that stock certificates of all kinds have been constructed in a way to invite the confidence of business men, so that they have become the basis of commercial transactions in all the large cities of the country, and are sold in open market the same as other securities. Although neither in form or character negotiable paper, they ap*103 proximate to it as nearly as practicable. If we assume that the certificates in question are not different from those in general use by corporations, and the assumption is a safe one, it is easy to see why investments of this character are sought after and relied upon. No better form can be adopted to secure the purchaser that he can buy with safety.”
Tbe real claim made by tbe appellant is that Mr. Knigbt, as an officer of tbe Success Company, owed appellant tbe duty of exercising ordinary care and diligence in mailing distribution of tbe assets of tbe Success Company so as not to pay appellant’s share to some one else. No doubt it is tbe duty of corporate officers to exercise reasonable diligence and ordinary care to protect tbe interests of tbe stockholders. But tbe court found, and tbe finding is sustained' by sufficient evidence, that Knigbt was not guilty of negligence in anything,that be did. But what duty did Mr. Knigbt owe appellant in distributing tbe assets of tbe Success Company? As we have seen, in view of tbe law applicable to tbe facts, Mr. Knigbt bad become tbe lawful owner of tbe stock claimed by appellant long before tbe Success Company sold and transferred its property and received tbe consideration therefor which Knigbt assisted in distributing. Mr. Knight’s name then appeared on the stock books of tbe Success Company as a stockholder. To this stock Mr. Knigbt bad succeeded in due course of business. Any stockholder of tbe Success Company, therefore, could just as well have claimed Mr. Knight’s stock as appellant. Under tbe facts and circumstances, Mr. Knight’s right and title to tbe particular stock was no more assailable by appellant than by any other stockholder. This being so, Mr. Knigbt, in receiving bis proportion of tbe assets of tbe Success Company, was simply obtaining tbe fruits of bis purchase of tbe stock from Pearson — no more, no less. If appellant could not have assailed Mr. Knight’s right and title to tbe stock, bow can be attack Mr. Knight’s right to share in what tbe stock represented, namely, a proportionate part of tbe assets of tbe Success Company ? It seems to me that tbe right to assail
The facts of this case do not constitute it one of overissue of stock which could not be made effective against anyone, except, under peculiar circumstances, the corporation issuing the same. When the stock in question was issued it was intended that it should, and it in fact did, take the place of the stock that had been issued to appellant and Heintz, and which was evidenced by the certificates held by them and which were attempted to' be forfeited for nonpayment of the assessment. The stock sold to Mr. Knight, therefore, in no sense constituted overissued stock, and hence cannot be asailed on that ground. (Kinnan v. Forty-second, etc., Co., 1 Misc. Rep. 457, 21 N. Y. Supp. 789-792, affirmed in 140 N. Y. 183, 35 N. E. 498.) But, if the four thousand shares of stock which were issued to Mr. Knight shall be deemed as an overissue, then there would have been issued an outstanding three hundred and four thousand instead of three hundred thousand shares of Success Company stock. Mr. Knight would thus have held such overissue all of which would have been worthless. This is clearly established because when the assets of the Success Company were divided there were only three hundred thousand shares of stock recognized and permitted to share in the division. The four thousand shares of so-called over-issued stock were thus ignored and received nothing. If nothing was awarded to the four thousand shares, then the holder thereof, Mr. Knight, obtained nothing for them, and, if he obtained nothing, he could have wronged no one: From this it follows that the four thousand shares originally owned by plaintiff and his assignor were either represented by the so-called over-issue, or by the Pearson stock, which was transferred to Mr. Knight. If the former theory be accepted as true, then the four thousand shares did not participate in the distribution, , and the holder thereof received nothing for them, and, if the latter theory be correct, then Mr. Knight succeeded to the Pearson stock in the manner and under the circumstances already stated, and for the reasons heretofore
This brings ns back to tbe proposition already advanced that wbat was done by tbe Success Company and its secretary amounted to a wrongful interference with tbe property rights of appellant, and in law constituted a conversion of bis stock. If we now permitted appellant to recover in face of tbe fact that Mr. Knigbt purchased after tbe new certificate bad been issued to Mr. Pearson, to whom tbe first certificate was issued after tbe attempted forfeiture of appellant’s stock, we would have to go contrary to all tbe law upon tbe subject. I have not been able to find any well-considered case that bolds that appellant can recover under tbe undisputed facts and circumstances in this case, and my associate has found none.
While my inclinations have always been in favor of permitting appellant to recover as against Mr. Knigbt, yet these considerations are of secondary importance. As has well been said by an eminent jurist: “No one supposes that a judge is at liberty to decide with sole reference even to bis strongest convictions of policy and right. His duty in general is to develop' tbe principles wbicb be finds with such, consistency as be may be able to attain.” Kecognizing this duty, and applying tbe law as I understand it to tbe facts of this case, I cannot see bow appellant can recover either in an action at law or in equity. In arriving at this conclusion, I place no stress upon tbe theory on wbicb this action was tried in tbe district court. My own view is that under our Constitution and statutes a party is entitled to whatever relief bis pleadings and tbe evidence based thereon entitle him, regardless of tbe theory of bis counsel. True, an appellant may not by changing bis theory predicate error in this court upon tbe rulings of tbe trial court wbicb be induced 'that court to make, or wbicb it made in response to bis contentions, but this doctrine is not involved where a party comes into court by setting up tbe facts and by asking relief upon them to wbicb be is not entitled. Tbe fact that be may not
For tbe foregoing reasons, I am of tbe opinion that tbe conclusion reached by Mr. Justice MoOaety is tbe only one permissible under tbe facts and tbe law applicable thereto.
Dissenting Opinion
(dissenting).
I dissent. As I view them, tbe essential features of tbe case are: Tbe Success Mining Company was organized in 1898. Its capital stock consisted of three hundred thousand shares fully issued. Its mining claim adjoins, or is adjacent to, those of tbe Colorado Company. In 1899 tbe plaintiff and bis assignor each became tbe owner of two thousand shares of tbe Success Mining Company represented by three certificates which were regularly issued and delivered to them, all of which is made to appear by tbe books and records of tbe Success Company. It was, however, alleged in tbe answer of tbe defendants that tbe certificates of tbe plaintiff and bis assignor were sold for tbe payment of a delinquent assessment. But there is no proof of such fact. Defendants offered no evidence in support of such allegations, except an unsigned recital in one of tbe books of tbe Success Company, said to be in tbe bandwriting of tbe then secretary of that company, that an assessment was levied in February, 1900, by tbe board of directors of tbe company, being assessment No. 8, and that tbe shares of stock of tbe plaintiff and bis assignor were sold in April, 1900, to pay tbe delinquent assessment, and a notation on the stubs of tbe certificates issued to tbe plaintiff and bis assignor, in blue pencil writing, also said to be in tbe bandwriting of tbe then secretary of that company, “sold at tbe eighth sale.” Upon tbe record it is quite apparent to me that such recitals and notation were untrue, and were made not at tbe time of apy such purported transactions. Tbe books of tbe company fail to show that any notice was given of such a meeting of tbe board, or that such a meeting was ever called or held, or that any such assessment was ever levied by tbe board. Nor is there any record of any such transaction
Where one corporation transfers all its property to another corporation under an arrangement by which the stockholders of the former company exchange their stock for stock in the latter company, a consolidation and not a purchase is effected. The former corporation in such case is for all purposes outside of the winding up of its affairs defunct and in the condition of a dissolved corporation. (Cooper v. Utah L. & Ry. Co., 35 Utah 570, 102 Pac. 202.) Since all of the property of the Success Company was transferred to the Colorado Company under an arrangement by which the stockholders of the former company exchanged their stock for stock in the latter company, the plaintiff and his assignor, conceded to be genuine stockholders of the former, I think, were entitled to maintain an action against the latter to compel it to issue to them the number of its shares constituting their proportion of the exchange. (Anthony v. American Glucose Co., 146 N. Y. 407, 41 N. E. 23; Fletcher v. Newark Tel. Co., 55 N. J. Eq. 47, 35 Atl. 903.) This is but equity.
The position taken by Knight and the Colorado' Company is that notwithstanding the plaintiff and his assignor were at the time of the transfer, and of the distribution, the un