83 P. 62 | Cal. Ct. App. | 1905
Lead Opinion
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *124 Appeal from a judgment against the defendants, Lord and Widaman, and from an order denying their motion for a new trial. The plaintiff and intervener are creditors of the defendant corporation, on judgments of date June 4, 1901, or later, and the suit was brought to subject *125 to the payment of plaintiff's claim the alleged subscription liability of the appellant defendants. The causes of action on which the judgments were rendered arose in the year 1901; but with regard to plaintiff's cause of action, it appears from evidence introduced by him that part thereof was in renewal of a note of the corporation to him, of date October 4, 1900, for the sum of $500, given in lieu of a personal note of O'Bryan, who was president of the corporation. The certificate of incorporation was filed August 18, 1900. The capital stock of the corporation consists of five hundred shares of the par value of $100 each; of which the defendant Widaman and Bingham, the assignor of the defendant Lord, are named as having subscribed for ten shares each. One Rowan, who is named as a subscriber for one share, was originally a defendant in the case; but the suit as to him has been dismissed. The other subscribers named are Raymond and O'Bryan — the former for two hundred and forty shares, the latter for two hundred and thirty-nine shares. These subscriptions together make up the full amount of the capital stock, and the subscribers are named in the certificate as directors of the corporation. The certificates of stock to Bingham and Widaman are dated in August, 1900, and were issued to them in the month of November of that year, under two resolutions of the board of directors, of date August 25, and September 4, 1900; which are as follows: "On motion, duly seconded, it was resolved that the secretary and president be and they are hereby authorized to issue to the stockholders of this corporation the certain shares of stock subscribed by the respective incorporators, namely, to R. C. O'Bryan a certificate calling for two hundred and thirty-nine shares, to H. A. Bingham a certificate calling for ten shares, to Robert A. Rowan a certificate calling for one share, to W. B. Raymund a certificate calling for two hundred and forty shares, and to O. P. Widaman a certificate calling for ten shares. And upon the motion of O. P. Widaman it was resolved that in consideration of the assignment, sale and delivery to this corporation of all the fixtures, safe, property and effects now used in the office of this company, that there shall be issued to W. B. Raymund two hundred and forty shares of the capital stock of this corporation, and to R. C. O'Bryan *126 two hundred and thirty-nine shares, and in consideration of the payment to this company by O. P. Widaman, Robert A. Rowan and H. A. Bingham of the sum of $1.00 (one dollar) each, and the further consideration of their goodwill, interest and services in and about the management, formation and directorship of said corporation, that there shall be issued to the said O. P. Widaman ten shares of the capital stock of this corporation, to Robert A. Rowan one share of the capital stock of this corporation, and to H. A. Bingham ten shares of the capital stock of this corporation, and the president and secretary, respectively, are hereby authorized and directed to issue such capital stock as aforesaid under the name and seal of this corporation."
The complaint alleges: That Widaman and Rowan "were subscribers to the capital stock of said defendant corporation at the time of its organization"; that they have not "paid the full amount of their subscription . . . or any portion thereof"; and "that each of said defendants is indebted to said defendant corporation on account of his subscription," Widaman in the sum of $1,000, Rowan in the sum of $100; that since the organization of the corporation the defendant Lord "has become and is now the owner of ten shares of stock" therein; that "there is due, owing and unpaid on account of said ten shares of stock to the said corporation the sum of $1,000, no part of which has ever been paid by the defendant Lord, or by his predecessors in interest of the said ten shares of stock." The prayer of the complaint is, in effect, that the court ascertain the amount of indebtedness from each of the defendants Lord, Widaman, and Rowan to the corporation on account of their subscription, and that plaintiff have judgment against each of them for the amount due to the plaintiff on his judgment against the defendant corporation, not to exceed the amount due from each of said defendants to the defendant corporation. The allegations and prayer of the complaint in intervention are substantially similar, except that it is alleged in the latter that the defendants are the only stockholders liable for unpaid subscriptions; but this allegation is negatived by the findings. There was a demurrer to the complaint, which was overruled. *127
The answers of the defendants deny the alleged indebtedness and plead specially, in effect, that the stock was issued as paid-up stock, to the defendant Widaman and to Bingham, the predecessor of the defendant Lord, in consideration of services rendered and to be rendered. But on the answers of the two defendants — as on the allegations of the complaint, and on the evidence and facts found — their cases differ in detail. As to the defendant Widaman, the cause of action is on his alleged subscription to the capital stock, as evidenced by the certificate of incorporation; and in his answer, besides denying "that he ever subscribed and agreed to pay any sum whatever for ten shares . . . of the capital stock of the" corporation, he alleges in effect: That there was an agreement between the incorporators of the company that there should be issued to him for certain legal services to be rendered by him the ten shares of stock for which in the certificate he is named as subscriber; that this agreement was confirmed and adopted by the company; that the services were rendered and the stock issued to him accordingly; and that the services rendered were in excess of the nominal or par value of the stock. As to the defendant Lord, the cause of action is based on his acceptance of the stock as assignee of Bingham; and in his answer, besides denials, it is alleged that the stock was fully paid for by Bingham, and was issued to him as paid-up stock — which is in effect equivalent to the defense more specifically pleaded by Widaman; and it is further alleged that he was induced to take the stock by representations made to him by the corporation, through its proper officers, that it had been fully paid for, as to which allegation it may be observed that it appears from his testimony that he was invited by O'Bryan, the president of the corporation, "to take the Bingham stock and act as director," and that, accepting the proposition, he took the stock supposing it to be paid for.
On the issues made by Widaman, the findings are, in effect, that he has paid no part of the sum for which he subscribed to the capital stock of the company, and there is due on account of his said subscription the sum of $1,000; that a certificate of ten shares of stock was issued to him "on account of said subscription." As to other matters pleaded by this defendant it is found: "(10) . . . That the defendant *128 Widaman did do work as an attorney at law for the defendantcorporation for which the president and secretary of saidcorporation issued to said defendant Widaman his certificatefor said shares of its capital stock; that said defendantWidaman did perform work and labor or render services to saidcorporation in excess of the value of said ten shares of stock; that no contract between the defendant Widaman and the promoters of said defendant corporation, whereby said promoters were to pay the said defendant Widaman for services rendered, or to be rendered, by him in the organization of said corporation, was ever recognized by resolution of the board of directors of said corporation, or otherwise; that no such resolution was ever passed after the organization of said corporation; that said ten shares of stock issued by said defendant corporation to the defendant Widaman were never by any authority of said corporation so issued to him as fully paid stock in consideration of the services rendered by said defendant Widaman to the promoters of said corporation; that the said defendant Widaman had not fully paid for said ten shares of stock issued to him by said corporation at the time of the delivery thereof or at any other time; that there was due from the defendant Widaman at the time of the issuance of said stock to him the sum of $1,000 to said defendant corporation." There is no finding as to the allegation of the answer of this defendant that the value of the services rendered by him was in excess of the par value of the stock, though there was evidence that the services were worth more than twice the par value. As to the defendant Lord, it is found that the stock held by him was not paid for, in whole or in part. Upon these findings judgment was entered in favor of the plaintiff and the intervener against each of the defendants for the sum of $1,000, the par value of the stock.
The following are the points urged by the appellant for reversal: 1. The court erred in refusing to allow the defendants to show the contract between the corporators as to how the stock was to be issued, and for what consideration. 2. It was also error to exclude the question to Raymund: "What was the market value of that stock at the time it was transferred to Mr. Widaman." 3. The evidence was insufficient to support the findings in various particulars. But the only *129 specifications that need be considered are those referring to the alleged indebtedness of the defendants, and the nonpayment thereof, and to the parts of finding 10 unitalicized. 4. (a) The resolution of September 4, 1900, was valid and effectual to authorize the issuance of the stock to the stockholders for the consideration agreed upon; (b) it was duly passed; (c) nor can it be attacked on account of the interest of the directors, except by the corporation or a stockholder. (d) The evidence offered and excluded was admissible to explain it. 5. In the case of the defendant Widaman there is a material variance between the case alleged and found and the proofs.
The points principally discussed by the respondent's counsel relate to the due passage, the construction, and the validity of the resolution of September 4, 1900. It is claimed also, that these are the only questions involved; but this proposition is, we think, clearly untenable for several reasons: 1. Widaman testifies that the corporation was indebted to him at the time of the trial for money loaned; and this seems to be confirmed by the ledger of the company, put in evidence by the plaintiff, which, as we understand it, shows two credits of $250 each, of dates February 21, and 28, 1901; as to one of which, at least, we can find no debit. Besides, it is found by the court that the value of the services rendered by Widaman was in excess of the value of the stock received by him; and from the only evidence in the case on the point, it appears that his services "were worth twice the face value of the stock." It is, indeed, claimed by the respondents that no "offset" or "quantum meruit" is pleaded by this defendant. But as to the first item, the evidence of Widaman was admitted without objection, and the amount of the indebtedness was brought to the attention of the court by the plaintiff himself; and we are not prepared to say that in an equitable proceeding of this character, it was not the duty of the court to render equity in this particular to the defendant. (Code Civ. Proc., see. 440.) But, however this may be, the facts showing the indebtedness of the corporation to Widaman for his services are pleaded; and we are of the opinion of the appellants' counsel that (if the theory of the court be assumed) the actual plea "includes all the elements of a plea of the quantum meruit and more." *130
We are of the opinion, therefore, that, on this account, as well as on account of the bearing of the fact on the other issues, the court should have found the value of the services of Widaman, and given the fact due effect. But we are of opinion, also, that the objections of the respondent to the due enactment of the resolution of September 4, 1900, as well as of the previous resolution of August 25th, are untenable. On this point it is unnecessary to dwell on the fact that the resolution was ratified by Rowan and Bingham (who, with the others, were the only stockholders) by their acceptance of the stock; nor need we enter at length upon the question as to proof of notice of the meeting of the former date. The record of the meeting recites that the directors were notified, and it is sufficient that the contrary does not appear. (Granger v. Original Empire M. M. Co.,
As to the construction of the resolution, reading it in connection with the previous resolution of August 25th, and the evidence introduced and offered, we think there can be no doubt it must be construed as claimed by the appellants, and that the stock was issued as paid-up stock; and, it may be added, this construction is confirmed by the consideration that otherwise the issue of the certificates would have been illegal (Const., art. XII, sec. 11; Civ. Code, secs. 323, 359;Kellerman v. Maier,
As to the validity of the transaction, the question is to be considered from two points of view, namely, with regard to the corporation, and with regard to subsequent creditors. As to the corporation no serious question can arise. By the adoption of the incorporators' agreement, that agreement became the agreement of the corporation. (San Joaquin L. W. Co. v.Beecher,
This disposes of the various points made by the appellants' counsel, except the last point of the appellant Widaman, which is that there is a material variance between the case alleged and found, and the proofs. This point — though perhaps by itself insufficient for reversal — is well taken. The action against Widaman is based upon the subscription, and from the findings and the evidence it appears that the contract of subscription (whatever may have been its terms) was executed. The judgment, therefore (if it could be otherwise supported), would have to rest simply, as in the case of Lord, upon the contract implied (as held in Vermont Co. v. Declez Co.,
For these reasons, the judgment and order appealed from must be reversed. But there are other questions involved, antecedent to those discussed by the counsel, which must be determined with a view to the further proceedings in the case. These are: 1. Can an action be maintained by a creditor of a corporation upon a stockholder's liability otherwise than through the medium of an assessment by the corporation, *134 or by the court itself in the suit? 2. Assuming this question to be answered in the negative, will it be necessary in a creditors' bill against a corporation to make the stockholders parties? 3. Or, assuming the first question to be answered in the affirmative, can a suit be maintained by a creditor against a stockholder on his subscription liability without making all the stockholders parties, or excusing the absence of missing stockholders?
The first and second of these questions will be considered together. Under the constitution and statutes of this state, it is settled that there are two methods of proceeding by creditors of a corporation to collect their debts, to wit: 1. "Each stockholder may be compelled to pay to the corporation assessments to the full amount of his subscription to the capital stock of the corporation for the payment of creditors"; and 2. He will "be individually liable to each creditor for such proportion of his claim as the amount of stock held by such stockholder bears to the whole of the capital stock." (Sacramento Bank v. Pacific Bank,
As to the equitable remedy, until recent times the principles governing it and the mode of procedure were equally well defined. A suit may be maintained by the creditor of a corporation on behalf of himself and other creditors against the corporation to subject its assets to the creditors' lien. (Wood v. Dumner, 3 Mason, 308, [Fed. Cas. No. 17,944]; 2 Story's Equity Jurisprudence, sec. 1252.) Among these assets the unpaid subscriptions of stockholders are to *135
be regarded as part, and with reference to these the court will either compel the corporation to assess the stock in the amount necessary for the payment of its liabilities, or it will itself make the assessment; and in this proceeding — unless a personal judgment against a stockholder be sought — it will be unnecessary to make all the stockholders parties, the assessment, whether by the corporation or by the court, being conclusive upon them. (Salmon v. Hamborough Co., 1 Cas. Ch. 204, cited, Thompson on Liability of Stockholders, sec. 16;Glenn v. Saxton,
By section
On the other hand, there are some cases in this state in which it has apparently been held that a direct judgment in favor of creditors against several stockholders is admissible (Baines v. Babcock,
The case of Hatch v. Dana,
For these reasons we are satisfied that in this state creditors of a corporation can maintain a suit directly against a stockholder for his statutory proportion of the corporation indebtedness, only; and that to enforce his subscription liability otherwise than by means of a suit against the corporation, and an assessment, would not only be an unnecessary, and therefore unwarranted innovation upon the established equity practice, but it would also be in direct contravention of the provisions of section 322 of the Civil Code, and of the decisions of the supreme court in UnionSavings Bank v. Leiter,
On the other hand, reverting to the third question, if we could assume that a suit could be maintained by a creditor *140
against a stockholder without the intervention of an assessment by the corporation, or by the court, then it would be clear that all the stockholders should be parties, "at least so far as they can be ascertained," or, as practicable (Hatch v. Dana,
For the reasons given, the judgment and order appealed from must be reversed, and further proceedings had in accordance with the views expressed in this opinion.
Allen, J., concurred.
Concurrence Opinion
I concur specially in the reversal of the judgment and order. I do not think there is any analogy, however, between this case and the case of a creditor seeking to collect his debt from the debtor of his debtor by attachment. I am strongly of the opinion that the creditors may sue the stockholders of a bankrupt corporation directly and without any effort to compel an assessment by the corporation, and believe that the liability of the stockholders to such creditors is several as well as joint, and that it is not necessary to join all the stockholders in such a suit. (Walter v. Merced Academy Assn.,
A petition to have the cause heard in the supreme court after judgment in the district court of appeal, was denied by the supreme court on December 29, 1905, and the following opinion was then rendered:
The COURT. — In denying such petition, it is proper to say that such portions of the opinion of said court of appeal as are devoted to the discussion of such questions as, it is said in the opinion, "must be determined with a view to the further proceedings in the case," are concurred in by only two of the justices of said court of appeal, and, consequently, do not constitute "the law of the case" for further proceedings. *142