73 Wash. 89 | Wash. | 1913
The plaintiff, the National Realty Company, a corporation, instituted this action for the purpose of recover
“Pioneer Fire Insurance Company.
“No. 71 Stock Subscription ' Par value $100
“Shares 95. Subscription Price $150 per share.
“I, the undersigned, hereby subscribe for 95 shares of the capital stock of the Pioneer Fire Insurance Company, of Tacoma, Washington, and I promise to pay for the same at the rate of one hundred and fifty ($150) dollars per share, which shall apply as follows: $100 per share on stock, and $50 per share for the surplus fund of said Company.
“(signed) James Neilson,
“Dated this 19th day of Jan. 1910. P. O. Address Lind, Wash.
“Received this 19th day of Jan. 1910, on the above subscription seventy-five dollars per share to apply as follows: $50.00 per share on stock, and $25.00 per share on surplus fund. Pioneer Fire Insurance Company.
“By Geo. N. Marsh.”
Prior to this time, he had subscribed for five shares, which had been issued and delivered to him and upon which he had paid $75, $25 of which was to go to the surplus fund. It will be noticed that the subscription agreement contains an express promise to pay $150 per share, $100 on the stock, and $50 for the surplus fund. It was believed by the directors of the Pioneer Fire Insurance Company that $75 per share would be sufficient to maintain the company and make it a going concern. Indeed, when Neilson subscribed, it was represented to him by one Marsh, then the vice president of the company, that the sum of $75 per share would be all that would be required' to be paid in upon the agreement. Payment of $75 per share upon the ninety-five share subscription was made by Neilson by delivering to the company certain securities. Subsequently these securities were returned to him and he gave his promissory notes for the amount, the final payment on which was made to the company on October 27,1910. Prior to this date, however, the board of directors of the insurance company, finding the financial condition of the company was involved, and that it would be necessary to collect
Subsequently the company, finding itself in great financial embarrassment, and being threatened with a revocation of its license by the state insurance commissioner unless it could show an unimpaired capital sufficient to meet the requirements of the law, constituted one J. B. Askew its fiscal agent for the purpose of making some arrangements with the different subscribers whereby assets acceptable to the insurance commissioner could be produced. S. S. Askew, as a representative of J. B. Askew, met Neilson in Spokane on December 16, 1912, and there obtained from him a new note, payable to his own [Neilson’s] order, and indorsed on the back by Neilson. Neilson, at the same time and place, indorsed in blank the certificate of stock for ninety-five shares in the Pioneer Fire
Neilson, in his answer and cross-complaint, denied liability upon the note, and pleaded affirmatively that, if he should be held liable on the note, then he was entitled to a judgment against the Pioneer Insurance Company for an amount equivalent to any judgment that might be obtained against him on the note by the National Realty Company. The cause was tried to the court and a jury. The jury returned a verdict in favor of the National Realty Company and against Neilson on the note, and a verdict for a like sum in favor of Neilson and against the Pioneer Insurance Company. In due time a motion for j udgment notwithstanding the verdict was made by the Pioneer Insurance Company. This motion being granted, Neilson appeals therefrom.
From the facts stated, the first question to be determined is whether or not Neilson’s subscription for ninety-five shares constituted an oversubscription to the capital stock of the Pioneer Insurance Company. It will be remembered that the total amount of the capital stock was subscribed for on May 24, 1909, and a few days later, and before any business had
“In considering the question of the validity of an attempted release of a subscriber by the corporation, distinction must be drawn between the cases which involve the rights of creditors and those which involve the rights of the corporation and its members only. Where the rights of creditors are not involved, the corporation, acting with the unanimous consent of its members, enjoys the right to enter into contract with respect to its shares on whatever terms it may deem to be to its advantage. It may therefore permit a member to withdraw absolutely, canceling all claims against him for unpaid portions of the subscription price of his shares, and this, too, although no other person is substituted in his stead. As indicated, however, to such action on the part of the corporation, the consent of the other stockholders must be unanimous.”
In order to effect a cancellation or abandonment of a subscription contract, it is not necessary that the agreement to cancel be express or formal. 1 Cook, Corporations (6th ed.), § 169. Under these authorities, the attempted cancellation or abandonment was valid, and it follows that the subscription of Neilson was not for an overissue of stock. It was a binding and valid contract of subscription.
It is next contended that; if the original subscription were cancelled, then the total amount of the capital stock had never been subscribed for, and for that reason Neilson was en
“The first five of these defenses [one of them being no full subscription to the capital stock of the company] may be considered together. It must be remembered that this is not an action by the corporation to enforce the collection of subscriptions for stock or its contracts with its subscribers, but is an action brought by a receiver, under order of the court, to enforce such subscriptions for the benefit of creditors. As between the corporation itself and the stockholders all these defenses would probably be good, but as between the stockholders and the creditors of the corporation another rule prevails.”
It is urged that the cases of Elderkin v. Peterson, 8 Wash. 674, 36 Pac. 1089, and Birge v. Browning, 11 Wash. 249, 39 Pac. 643, sustain the doctrine of nonliability of the subscriber even as against the rights of creditors unless the full amount of the capital stock had been subscribed; but these cases, in so far as they may not be in harmony with the later case of Cox v. Dickie, supra, are in effect overruled by that case.
It is finally contended that Neilson is entitled to a judgment against the Pioneer Fire Insurance Company for the dif
The judgment will be affirmed.
Mount, Morris, Ellis, and Fullerton, JJ., concur.