148 Tenn. 353 | Tenn. | 1923
delivered the opinion of the Court.
The bill was filed to collect a subscription to the capital stock of the complainant corporation in the sum of
The first point raised is that the capital stock was increased from $50,000 to $75,000 after the subscription had been made and without the consent of the defendant. The facts of this case do not bring it within the rule announced in Newport Cotton Mill v. Mims, 103 Tenn., 465, 53 S. W., 736, relied on by defendant, as it appears from the record that the capital stock was originally fixed at $50,000, this amount being fixed in the charter, and the company being organized on this basis, the increase to $75,000 being made by subsequent amendment. Whatever remedy a dissenting stockholder may have for an increase of tli e capital stock of a corporation he may not on this ground deny liability for his subscription when the increase has been brought about, as in this case, by action subsequent to the original organization.
In the second place, it is insisted that the subscription of defendant was obtained by such misrepresentations as to relieve hii a of liability, but an examination of the record fails to sustain this contention. The subscription was made in writing, and its terms were very clearly made to appear. The defendant is shown to have been a man of business experience, and, having been register of the county, was necessarily particularly experienced in the examination and analyses of documents of all kinds. No sort of misstatement is proven to have been made to him by Mr. Russell, who obtained his subscription, and the contract for the payment of $5,000 in stock of the corporation for certain services was fully set out. If the defendant did not read this instrument he certainly is not
In the third place, it is insisted that the defendant should be relieved of his subscription because, $50,000 in valid and solvent subscriptions were not obtained. It does appear that perhaps $3,000 of the total subscription was not collectible, but there is neither allegation nor proof that any of the stockholders whose subscriptions were obtained were insolvent at the time. In the absence of fraud or gross negligence, this defense is not available. As to all of these defenses, this court agrees with the finding of the chancellor as set out in his decree.
The fourth assignment raises the question of the applicability of what is known as the Blue Sky Law, being chapter 31, Acts of First Extra Session 1913 (Shannon’s Code, sections 3273al21-3273al36). It is insisted that the transaction involved in this case was within the provisions of this act, and that, the terms of the act not having been complied with, there can be no recovery on the subscription. In order to bring this transaction within
' At the time this sale Avas made the corporation was not in existence. No step had been taken to procure a charter, nor was it in the contemplation of the parties proposing to associate themselves for the transaction of the business in mind that, Avhen a charter should be obtained and the corporation organized, stock or other securities Avould be sold or negotiated by it. No sale of stock was contemplated as a part of the business for Avhich this corporation was to be organized. Obviously, in such a situation there could not and need not have been any compliance with the requirements of the act of 1913. It is clear that the taking of this subscription was not a sale of stock by an investment company as defined by that act. Also it necessarily folloAvs that Mr. Russell, the person who solicited the defendant’s subscription, did not at the time and under the circumstances sell to the defendant stock of an investment company as defined by this act.
The case of Goodyear v. Meux, 143 Tenn., 287, 228 S. W., 57, is readily distinguishable from the one now before us. The sales were made in that case by agents employed by the corporation after its organization in Delaware for the express purpose of selling its securities; and it was quite apparent that the corporation Avas engaged in the business in pursuance of a well-defined and actively pro