29 Mont. 347 | Mont. | 1904
prepared the opinion for the court.
Appeal from final judgment and from an order dissolving attachment.
The material allegations of the complaint are, briefly, as follows: That on the 23d day of May, 1900, appellants and respondent entered- into a contract whereby respondent agreed to sell appellants 4,000 shares of the capital stock of the respondent company at the price of $2,000; that appellants purchased the same, and paid the consideration therefor to respondent; that at the same time this purchase was made the respondent agreed in writing with the appellants that if, at the expiration of six months from the date of the sale, appellants should become dissatisfied with the stock, or with its earning power as an investment, they should be entitled to return the said stock to said respondent upon notifying respondent of their intention so to do, and that the respondent should relieve themi of all liability thereon, and repay to them, the said $2,000, with interest at 8 per cent, from date of payment; that on or about September 13, 1900, appellants became dissatisfied with the stock' and its earning power as an-investment, and notified respondent of their conclusions, and of their intention to return the stock to respondent and demand the payment of the sum of $2,000 and interest. The complaint continues: “And at said date the said James Porter and George Swan did demand of said Plymouth Gold Mining Company, of Gould, Montana, the payment of the said $2,000, with interest, as aforesaid, and did
Despondent demurred on the ground that the complaint did not -state facts sufficient to constitute a cause of action. The court below sustained this demurrer. Appellants standing on their complaint, judgment was entered in favor of defendant.
Upon the filing of the complaint and issuance of summons in this case appellants caused an attachment to iss-ue against the property of respondent. Despondent made a motion to dissolve the attachment, which motion was heard at the same time as the hearing of the demurrer. The court dissolved the - attachment, and appellants also- appeal from said order of dissolution.
On the day of the hearing of these appeals counsel for respondent presented a motion for their dismissal, based on the three following grounds, viz.: (1) Because the record does not disclose that the notice of appeal was- served upon respondent. (2) Because the record does not contain the notice of appeal properly certified. (3) Because it does not appear from the certificate of the clerk of the court below that the record contains the judgment roll. On the hearing, permission was given appellants to- correct the record so as to- avoid the motion to dismiss^ if the facts warranted it. Counsel for the appellants procured a new certificate of the clerk of the court below, which now appears, attached to the transcript, and by which the clerk certifies that the record contains “full, true and correct” copies of the judgment roll and notice of appeal.
There is no- merit in the first ground of the motion. The respondent does not object because there was no service of this notice, but because it does not appear from the record that a notice of appeal was served upon respondent. The bill of excep
The second and third grounds of the motion, viz., that .the record does not contain the notice of appeal and judgment roll properly certified, have been removed by the new certificate of the clerk of the court below, to which no- objection has been made.
We advise that the motion to dismiss the appeal be overruled.
We shall therefore consider the appeal upon its merits. The first matter for consideration is the appeal from, the judgment, and the first question to be decided is, does, the complaint state facts sufficient to constitute a cause of action ?
(a) May a private corporation purchase its own stock? Generally speaking, a corporation, when acting within the scope of the purposes of its organization, has the same power to contract with reference to such purposes as an individual. True, this power must be exercised in the proper corporate manner, and by the proper corporate officers. In this case, however, no question is raised concerning the form or manner of the execution of the contract sued upon. So we must assume that it was made in the proper corporate manner, and by the proper corporate officers. In the absence of a showing ,to the contrary, we must also, assume that the corporation held the stock in question for sale just as it holds any other asset, and possessed the power of disposition. We are therefore not concerned as to the manner in which the corporation acquired the stock, or the character of the stock itself. It is sufficient to know that it had the stock.
Despondent complains that the corporation did not stop' at the sale of the stock and the receipt of the purchase money, but contracted to take the stock'back and return the purchase price, with interest, upon the happening of certain events. This agreement by the corporation is based upon the consideration of the purchase of and payment for the stock by appellants, by the express terms of the contract sued upon. Two objects were evidently in the minds of the contracting parties at the time this contract was entered into, which were sought to be accomplished by the contract, viz., the sale of the stock and a contract for its repurchase. The company desired to' sell the stock; appellants desired to purchase the same, but were unwilling to do so without having the company bound by contract to repurchase it upon the happening of certain events. The purchase and payment of the purchase price was a consideration to the company for its promise to repurchase the stock. There was but one contract, viz., for the sale and repurchase of the stock, each object being a consideration for the other. This contract was entire and indivisible. The sale could not be sustained unless the contract of repurchase could be enforced. Therefore, if a portion of the contract is ultra vires, the whole contract must fall. The corporation cannot be heard to say that the sale was valid and the contract to repurchase was void without rescinding the sale and returning the purchase money, thus placing the other party in statu quo ante. The appellants have executed the contract of purchase on their part by the payment of the purchase price. The corporation therefore has received from them something of value, which it would not have received except for its contract of repurchase. ,It cannot be heard to say: “True, I have received your two thousand dollars, which I promised to return to' you upon the happening of certain events, but my promise in that regard was and is beyond my power to enter into, and, although the contemplated events have occurred, I will keep your money, and will not perform my contract.”
The following language of Judge Parker in Steam Navigation, Co. v. Weed, 17 Barb. 378, is very pertinent in this connection: “I am happy to come to the conclusion that the law will not sustain this most unconscionable defense. It ill becomes the defendants to borrow from the plaintiff one thousand dollars for a single day, to- relieve their immediate necessities, and then to turn around and say, ‘I will not return you this money, because you had no power, by your charter, to lend it.’ Let them first restore the money, and then it will be time enough for them to discuss with the sovereign power of the state of Connecticut the extent of the plaintiff’s chartered privileges. ' We shall lose our respect for the law when it so far loses its character for justice as to sanction the defense here attempted.”
But this is somewhat of a digression, and is only stated as illustrating the character of the defense sought to be interposed by the corporation. We shall now return to the question under consideration.
We believe the rule to be well settled in the United States by the overwhelming weight of authority and reason that a private corporation may purchase its own stock if the transaction is fair and in good faith; if it is free from fraud, actual or constructive; if the corporation is not insolvent, or in process of dissolution; and if the rights of its creditors are in no way affected thereby. (Clapp v. Peterson, 104 Ill. 26; City Bank of Columbus v. Bruce, 17 N. Y. 507; State ex rel. Page v. Smith, 48 Vt. 266; Williams v. Savage Mfg. Co., 3 Md. Oh. 418; Taylor v. Miami Exp. Co., 6 Ohio, 177; Crandall v. Lincoln, 52 Conn. 73, 52 Am. Rep. 560; Chicago, Pekin, etc. R. R. Co. v. Marseilles, 84 Ill. 145; Dupee v. Boston Water Power Co., 114 Mass. 37; St. Louis Rawhide Co. v. Hill, 72 Mo. App. 142; Morgan v. Lewis, 46 Ohio St. 1, 17 N. E 558; Yeaton v. Eagle Oil & Refining Co., 4 Wash. 183, 29 Pac. 1051; Chapman v. Ironclad, etc. Co., 62 N. J. Law, 497, 41 Atl. 690; Blalock v. Kernersville Mfg. Co., 110 N. C. 99, 14 S. E 501;
No bad faitb, unfairness or fraud is charged against this transaction. There is nothing tending to show that the corporation is insolvent, or in process of dissolution, or that any cred-. itors exist whose rights could be affected.
(b) Would the capital stock of the company have been reduced in violation of Section 438, Civil Code, by the purchase of this stock?
Section 438, Civil Code, provides as follows: “Directors of corporations must not * * * reduce or increase the capital stock except as hereinafter specially provided.” The mere repurchase of this stock would not tend to decrease the capital stock of the company, unless .the directors should absolutely merge or extinguish the stock after its repurchase. The company could own and deal with it just the same as it had done before the sale. It could be sold and issued again. The company would be in no different position as to- this stock than it would have been had the transaction with appellants in regard to it never occurred. When it is transferred to the company, it becomes a part of its property. It is there for the creditors and stockholders. The capital stock is not decreased. A portion of the capital of the company may be unavailable until the stock is again sold and issued, but nothing is destroyed. Whether the stock is merged or extinguished or held as an asset for sale is much a matter of intention on the part of the corporation.
(c) Did such purchase secretly allow a subscriber to withdraw his subscription ?
It must be remembered that appellants did not become subscribers for any stock of the respondent company, and therefore there could have been nothing’ due to the company from them as subscribers. By the transaction they became the bona fide owners of the stock as full paid, and could never be called on, at least by the company, to pay any further sum on the stock. Therefore the numerous eases relied on by the counsel for the respondent of secret contracts between a corporation and a subscriber for stock, by which the subscriber’s liability for further payment on their subscription is released, while excellent law, have absolutely no bearing upon this case. The Supreme Court of Illinois well says with, reference to these cases: “So the question is not whether appellant may release the village from paying for and receiving the -shares subscribed for, but whether appellant has power to purchase shares of its own stock, paid for, issued to and held by the village.” (Chicago, Pekin, etc. Ry. v. Marseilles, 84 Ill. 643.) In the following cases, among others, contracts similar to the one in question were held not to be ultra vires, and were enforced against the corporations: ■ Browne v. St. Paul Plow Works, 62 Minn. 90, 64 N. W. 66; Vent v. Duluth C. & S. Co., 64 Minn. 307, 67 N. W. 70 ; Freer mont Carriage Co. v. Thomsen (Neb.), 91 N. W. 376; Chicago P. & S. W. R. R. v. Marseilles, 84 Ill. 145; Howe Grain, etc. Co. v. Jones, 21 Tex. Civ. App. 198, 51 S. W. 24; New Eng
We are satisfied from tifie foregoing authorities that the contract was a valid and enforceable one, and that the court erred in holding that it was ultra vires. Speaking generally, there is nothing inherently wrong about such contracts, and they have been frequently enforced as between individuals. (Schultz v. O’Rourke, 18 Mont. 418, 45 Pac. 634; Maurer v. King, 127 Cal. 114, 59 Pac. 290.)
Tbis specific defect in tbe complaint was not raised or argued in tbis court. Counsel for respondent insists only that tbe complaint is deficient, because it does not allege that tbe stock was offered to- be returned, properly indorsed, so as to pass title to tbe company upon its surrender; and not that there was no offer to deliver tbe stock. Tbis position must have been taken by counsel under tbe erroneous assumption that the allegations of offer to return tbe stock on September 13th were sufficient. We have seen that they did not have that effect. Tbis court has established tbe rule that, where a demurrer has been filed to a complaint on tbe ground that it does not state facts sufficient to constitute a cause of action, and tbe court below sustains such demurrer, and plaintiff elects to stand on bis complaint, and judgment is entered against him, upon an appeal from tbe judgment it will be affirmed if tbis court, upon an inspection of tbe complaint, concludes that tbe demurrer should
Counsel for appellants may say that the bill of exceptions in the record discloses the fact that the court below, in deciding the demurrer, only passed upon the question that the complaint did not state facts sufficient to constitute a cause of action, because the contract sued upon was ultra vires. There is nothing, however, in the bill of exceptions, which in any manner discloses that the point last above referred to in this opinion was not argued to or considered by the court. It may have been. The presumption that it was is just as consistent with the recital in the bill of exceptions as that it was not. We cannot, therefore, permit this recital in the bill of exceptions to' prevail over the law as laid down by this court in its decisions.
Por tbe reasons stated in tbe foregoing opinion, tbe motion to dismiss is denied, and tbe judgment and order affirmed.
I agree with tbe conclusion reached in paragraph 2 of the opinion. Tbe only question before tbe court for determination is, does tbe complaint state a cause of action ? That question is answered in tbe negative in paragraph 2 above, and tbe judgment of tbe trial court is affirmed. In my judgment, tbe decision reached in paragraph 1 of tbe opinion is simply a dictum, and should not be announced as a determination of tbis court.
Rehearing denied February 10,'1904.
