89 W. Va. 491 | W. Va. | 1921
Joe Vasey, plaintiff below, appellant here, complains of a decree cancelling a certificate held by him representing 30 shares of the capital stock of the New Export Coal Company, the appellee, and directing that the latter do recover of and from the plaintiff the sum of $272.22, “that being the balance due from him to said 'defendant company upon a statement of the accounts between him and said company as made by the court and now ascertained. ’ ’ The suit was instituted in November, 1916, its main purpose being enforcement of a lien reserved by a paper writing in the nature of a deed of trust, given by defendant to secure a loan of $2,000.00 made by plaintiff to it August 23,1915. The cross-bill answer, filed September, 1917, by way of affirmative relief prayed
In 1915 the Perryville Coal & Mining Company owned about 166 acres of coal land in Kanawha County, in process of development and fully equipped with tracks, chutes, tipples, cars and other appliances necessary to successful mining operations. Desiring to lease, instead of operate, its mines, lands and equipment, it empowered its attorney, G. A. Bealor, to interest prospective lessees in the property. He brought the matter to the attention of the plaintiff, and succeeded in inducing him, together with Thomas Haggerty, J. L. 'Williams and Patrick Gilday, to take a lease of the property and operate it for their common benefit and profit. Instead of taking the lease to themselves directly, plaintiff and his associates, including Bealor, organized the defendant, New Export Coal Company, -with capital stock of $30,000.00, divided into 150 shares of a par value of $200.00. The preliminary understanding was that the five shareholders were to share equally in the new enterprise, 30 shares to each, but Bealor, in order to speed its organization, voluntarily offered to give to plaintiff one-half of his stock if he would “push this thing along and get things going.” Plaintiff, however, accepted only 7% shares of the proposed gift, directing that the other 7% be given to Haggerty. On April 12, 1915, the stock was issued in the following pfoportions: Yasey, 37% shares; Haggerty, 37% shares; Williams, 30 shares; Gilday, 30 shares; Bealor, 15 shares. The certificates expressly provided on their face that they were “fully paid and non-assessable. ” To the New Export Coal Company, thus organized, as lessee, the Perryville Coal and Mining Company executed a lease dated April 27, 1915, for a term of 20 years, with royalty provisions of 8 cents for
This lease constituted the sole assets of the defendant corporation. The incorporators paid nothing into its treasury at the time of the organization. The only consideration furnished by them for their stock was the lease from the Perry-ville Coal & Mining Company to the defendant, which they permitted the former to execute direct to the latter, instead of through themselves as intermediate lessees. Defendant being thus without funds, the incorporators agreed among themselves to provide a small amount of working capital until the company was on an independent operating basis, and decided that $2,500.00 or $3,000.00 would be sufficient for the purpose, each to pay in proportion to his stock interest. About the same time, attractive opportunities presented themselves for increasing their coal holdings by the purchase of adjoining tracts. In particular they acquired one tract of 444 acres, and in order to provide funds for the cash payment, plaintiff loaned the company $2,000.00, August 23, 1915, taking its note secured by a paper writing in the nature of a deed of trust on the land purchased. Similar demands for funds continued, and finally after plaintiff had advanced between $1,300.00 and $1,600.00, in addition to the loan of $2,000.00, he refused to contribute further, and his associates likewise declined to make further advancements unless he would bear his share of the burden. In order to raise more money, the corporate stock was increased from $30,000.00 to $50,000.00, later to $75,000.00, and $100,-000.00, and sold at par, bringing new stockholders into the company.
As already noted, plaintiff instituted this suit November, 1916, to recover his loan and advancements, which the company resisted on the ground that such sums, with the exception of the loan, were payments on his stock, and alleged that plaintiff still was largely indebted for the $7,500.00 worth of stock which had been issued to him. In the meanwhile plaintiff had sold at par 7% of his 37% shares, receiving therefor $1,500.00. On February 24, 1917, a stockholders’
By resolution of November 24, 1917, the company required that all stockholders, who had not paid in full for stock issued to them, must pay the balance due thereon on or before January 1, 1918, and in the event of their failure or refusal to do so, the secretary-treasurer was directed to cancel all such delinquent stock. Copies of this resolution were mailed to all stockholders listed as delinquent, including plaintiff, but none of the original stockholders have paid, all apparently having decided to await the termination of this suit, though all save plaintiff seem disposed to accept defendant’s view that their advancements during the early’ days of the company’s history were in reality payments on stock, and that they are yet liable for the amounts still unpaid. In November, 1918, one year after the adoption of the above resolution, a second resolution was adopted canceling and forfeiting all such unpaid stock and requiring the return of the certificates, but providing for the issuance of new certificates representing the amounts actually paid into the company on the old stock, at the par value of $200.00 per share. It is of this resolution canceling his certificate for 30 shares, as legally enforced by the decree in this cause, that plaintiff complains.
On the other hand, plaintiff admits that these cash advancements were voluntarily paid by the original incorporat-ors in order to put the company on a self sustaining basis, without any written or oral agreement of the company to repay them. But he denies that they were meant or intended as payments on stock, claiming that all such stock was fully paid for by him and his associates in turning over to the company the lease in question. He explains the use of the word “stock,” as found in the receipts and minutes referred to, by stating that it had reference merely to their mutual agreement to advance funds to the company in proportion to the shares of stock each held, and did not mean that such payments were on the stock itself, but pro rata to their respective holdings. In support of this contention, he introduces in evidence the original certificate for 37% shares, which expressly recites that such stock is “fully paid and non-assessable.” Furthermore, the corrected .minutes prepared at the Conley" & Johnson meeting on February 24, 1917, at which all the outstanding stock was represented, disclose two resolutions, which, after setting forth the written proposal of G. A. Bealor, acting for and on behalf of the Perryville Coal & Mining Company, for the royalty stated, upon delivery by the latter of 150 shares of its capital stock of the par value of $200.00 per share, contain the express finding — •” that the property and rights offered by said letter to be leased, conveyed and transferred to this company are necessary for the business of this company, and that the same are of the value of $30,000.00; ’ ’ corresponding to the par value of the shares
Defendant, however, insists that the sole purpose of the corrected minutes was to remove legal obstacles to a proposed bond issue of $75,000.00; but no one successfully challenges their essential accuracy in stating the facts as understood by the parties, and it is important to note that on March 1, 1917, one month after the meeting referred to, plaintiff’s original certificates for 37% shares was canceled at his request and a new one issued to him for 30 shares, he having sold 7% shares prior thereto, and the new certificate like the old one, declared on its face that the stock was fully paid and non-assessable.
Plaintiff argues, that since the defendant has by proper corporate action authorized the issuance of such stock as non-assessable and fully paid by the lease in question, as disclosed by its minutes and by the certificates as well, the valuation so placed upon it must be deemed conclusive, in the absence of actual fraud in the transaction, and the stock issued therefor not liable for any further call, as provided in section 24, ch. 53, Code, with regard to mining and manufacturing corporations. See also Bank v. Belington Coal & Coke Co., 51 W. Va. 60; Maryland Rail Co. v. Taylor, 231 Fed. 119. Undoubtedly, if plaintiff’s theory of the organization of the company is the correct one, then in the absence of actual fraud, the valuation placed upon 'the lease for which the stock was issued is conclusive and now beyond question. He insists that if the original incorporators had taken the lease in their own names and then had assigned it to the company which they had organized, such procedure clearly would have fallen within the scope and meaning of the statute, and that in substance and effect the result is the same where they direct the Perryville Coal & Mining Company to execute the lease to the New Export Coal Com-
But without deciding that question, even accepting defendant’s theory of the organization, can it now he heard to assert that stock, which it has issued as fully paid and non-assessable, was-in fact not páid for? We are of opinion that it can not. Not only do the original and reissued certificates recite that the stock was fully paid and non-assessable, but the corrected minutes prepared at the Conley & Johnson meeting in 1917, after plaintiff had instituted this suit, at which all the stockholders were present, contain similar recitals, both as to the paid up character of the stock and the value at which the lease was accepted by the company, and the stockholders signed these minutes as stating the facts. Even those of the original incorporators who testify in support of defendant’s position state that the advancements were only for one purpose, and that to the extent necessary to put the company on a self-operating basis. There was no fraud upon the company. The sam.e persons who promoted it were also the original incorporators and hence on both sides of the transaction. There was aro innocent in-corporator at that time to he hurt, as was the case in Davis v. Las Ovas Co., 227 U. S. 80. Rather the facts of this case are more nearly analagous to those of Old Dominion Copper Co. v. Lewisohn, 210 U. S. 206—a case involving secret profits by promoters. As was there said: “The difficulty that meets the petitioner at the outset is that it has assented to the transaction with full knowledge of the facts. * * * At the time of the sale to the plaintiff, then, there was no wrong done to any one. Bigelow, Lewisohn and their syndicate were on both sides of the bargain, and they might issue to themselves as much stock iir their corporation as they liked in exehauge for their conveyance of their land. If there was a wrong, it was when the innocent public subscribed.” See also Hoffman Motor Truck Co. v. Erickson, 124 Minn. 279; Inland Nursery etc. Co. v. Rice, 57 Wash. 70.
Moreover, since the issuance of the stock was at most only ultra vires and not wholly void, the court erred in attempting to cancel it. Even assuming that plaintiff was to pay the full par value of his stock in cash, his failure to do so did not justify the course adopted by defendant and enforced by the court. Sections 29 and 30, chapter 53, Code, provide a summary foreclosure proceeding for just such cases, and this should be followed. Procedure by cancellation is authorized by statute only where stock of railroad companies is involved (Sec. 43, Ch. 54, Code), or where a by-law of a corporation provides for such method. (Sections 31, 32, 33, chapter 53, Code.) The defendant has no such by-law.
Our order, therefore, will reverse the decree of the circuit court,.enter a decree here for $72.22 in favor of defendant, New Export Coal Company, and award costs to appellant.
Upon the petition of New Export Coal Company, Thomas Haggerty and T. J. Davis, the cause was opened for re-argument, upon the theory that Davis was in such position as a party to the suit as entitled him to further consideration of his rights as a purchaser of shares of the capital stock of the corporation, issued by it and purchased by him after the exhaustion of the original shares, distributed by Vasey and others, as deseribed-in the former opinion. New Export Coal Company alone answered the bill, and filed a supplemental answer to it. Each answer was in the nature of a cross-bill and prayed for affirmative relief upon the new matter pleaded therein. Neither Haggerty nor Davis joined in any pleading in the cause, except as hereinafter noted. Apart from their appearance as witnesses on behalf of the corporation, they were silent spectators as the cause proceeded through its different stages to maturity for final hearing, from the date the bill was filed, February rules, 1917, until October 28, 1919, when they and other defendants, except the corporation, moved, and the court permitted them, to adopt ás their own the cross-bill answers, and other pleadings of the corporation.
The first cross-bill answer of the corporation proceeded upon the theory that Vasey owed it $7,500.00, less certain
The second, or supplemental cross-bill answer, after the insertion of a part of the resolution, passed by the corporation’s board of directors, calling upon the holders of the original stock issue to pay the balance alleged to be due the corporation thereon, and notifying them that in the event of their failure to heed the call, and they did not heed it, the board would, as it afterwards did, declare the .certificates cancelled and annulled; and the relief prayed for was that such holders of the shares be compelled to surrender the certificates for cancellation, and that Yasey be .enjoined from selling any of his shares. Each of these pleadings did, as it appears, also pray for general relief.
The course pursued in the adoption by one defendant of a pleading by another defendant, where both are interested alike in the matters so pleaded, and in the relief predicated upon them, is permissible, and is not questioned.
It is not in the exercise of the right to invoke and appropriate the pleading of a codefendant that any difficulty presents itself, but rather in the situation of Haggerty and Davis as parties defendant. Although in one respect Haggerty is in condition to ask relief, in that he is a party in his own right, not as an officer of the corporation, yet in another he is not in such a condition. He participated in the wrongful issuance and distribution of the stock, if such' acts fall within the meaning of the term, wrongful. Having done so, he can not be heard to complain; And there is nowhere in the pleading so adopted any allegation of payment by him, or willingness on his part to pay the face value of his shares of stock; or that he intends to pay the amount so represented. The
But what may justly and legally he said of Davis’ status as defendant? Is he entitled to the relief prayed in the pleadings, whose allegations and prayers for relief he has invoked also? Is his status as a party defendant such that he can obtain the full measure of relief demanded by New Export Coal Company ? As to him and his rights, if any he has, the facts and circumstances of the ease being considered, there is not in the pleadings, taken as a whole, any allegation upon which to buttress the relief he asks. His name appears nowhere except in the summons to answer the bill; in the caption and body of the bill and in its prayer. Nowhere else in the entire record, except in the capacity of an officer of the corporation, he being its secretary-treasurer, when this, suit was brought, and he may still occupy the. same position, as far as the record shows; and finally as a witness on behalf' of the corporation, and therein most frequently only by his official designation, secretary-treasurer, without specifically naming him.
The terms used to describe Davis’ official relation to the coal company organization are insufficient to justify the application of the rule as to the identification of the person intended to be summoned, or required to answer or respond to the relief .sought in the pleading. The purpose of making him a party to the suit, as the bill and its prayer clearly disclose, was that he in his official capacity, and Gilday in his official capacity and Haggerty may “be enjoined and restrained from carrying into effect the illegal assessment and illegal order calling in” for cancellation plaintiff’s certificate of stock etc., as directed and required in the resolution of the corporation’s board of directors, before referred to. He is in no sense a party, and did not, by the procedure pursued, become a party in his own right. In that respect he. stands in the same relative situation as if he were a personal representative, and unless the pleading discloses a purpose, either to enforce against him some personal liability, or prays for relief personal to him, apart from his official relation to
A re-examination of the facts and principles discussed in the first opinion does not warrant its alteration in any respect.
Reversed; judgment for plaintiff; remanded.