200 P. 517 | Utah | 1921
The plaintiff, in her complaint, in substance, alleged: That the defendant corporation, hereinafter called defendant, on the 20th day of November, 1906, was duly incorporated pursuant to the laws of Utah, with a capitalization of 1,000,000 shares, of the par value of $1 each. That the defendant was incorporated for the purpose of taking.over, holding, and operating certain mining claims and mining property located in the state of Utah. That said mining claims and mining property were conveyed to the defendant by the owners thereof, in consideration of 600,000 shares of said capital stock, all of which was duly issued and delivered to the owners of the property aforesaid, who were the incorporators of the defendant. That the remainder of said 1,000,000 _ shares, to wit, 400,000 shares, were retained in the treasury of the defendant, to be disposed of for the purpose of developing and working said mining property. That the entire amount of said capital stock, including said 400,000 shares, was fully paid up by the conveyance of said mining claims and mining property. That it was provided in the articles of incorporation that the whole of said capital stock was “fully paid and nonassessable.” That on or about the 1st day of May, 1911, the plaintiff purchased 1,000 shares of said stock, which was evidenced by a certain stock certificate, numbered 1,070, that theretofore had been duly issued and delivered by said defendant to one W. H. Havenor, and which certificate was
The complaint is very long and contains many repetitions. We have tried to condense it so far as possible, and we think the foregoing statement contains all of the material facts alleged. We are obliged to state the allegations of the complaint somewhat in detail for the reason that it was assailed by general demurrer on behalf of the defendant, which demurrer was overruled; and, the defendant electing to stand upon its demurrer, the court entered judgment in favor of plaintiff as prayed for, from which the defendant appeals.
The only error assigned is that the court erred in overruling the demurrer and in entering judgment for the plaintiff. The question presented for decision is whether, in view of the provisions of our Constitution and statutes, the articles of incorporation, in which it is provided that the capital stock is full-paid and nonassessable, may be amended by the stockholders owning a majority of the stock, so as to make
In Garey v. St. Joe Min. Co., 32 Utah, 497, 91 Pac. 369. 12 L. R. A. (N. S.) 554, it was held that, under the statute in force when the company which was the defendant in that case was incorporated and organized, for the reasons there stated, the articles of incorporation could not be amended, so as to make nonassessable stock assessable without the unanimous consent of the stockholders; while in the case of Nelson v. Keith-O’Brien Co., 32 Utah, 396, 91 Pac. 30, it was held that, in view that the articles of incorporation in that case provided that the same “may be amended in any respect,” the number of stockholders owning the required number of shares of stock could make an amendment to the articles of incorporation, so as to levy assessments against the stock, without getting the unanimous consent of the stockholders. Counsel for both sides conceded that, in view that the defendant in the case at bar was organized under a statute which in some respects differed from the one under which the defendants in the foregoing two cases were incorporated, those cases are not controlling here, and we have referred to them only for the reason that some of the questions here involved are to some extent considered in those cases, although not decided.
In view of the legal questions involved in this case, it becomes necessary to state with some particularity both the constitutional and statutory provisions of this state which relate to corporations like the defendant, and which were in force at the time the defendant was incorporated. Our Constitution (article 12, § 1) provides:
“Corporations may be formed under general laws, but shall not be created by special acts. All laws relating to corporations may be altered, amended or repealed by the Legislature, and all corporations doing business in this state may, as to such business, be regulated, limited or restrained by law.”
Comp. Laws Utah 1917, § 861, which was in force when the defendant was incorporated, provides what the articles of incorporation must contain, and one of the things that must be stated therein is:
*529 “Whether or not the private property of the stockholders shall he liable fhr its obligations.”
The several sections hereinafter referred to were all in force when the defendant was incorporated. Section 879 reads as follows:
“The property of the corporation and the unpaid stock shall he liable for the debts of the corporation; hut the individual property of any holder of full-paid capital stock of any corporation organized since March 8, 1894, or that hereafter may he organized, under the laws of this state, except as otherwise expressly provided in this title, shall not be liable for the corporate obligations, nor shall assessments be levied on such stock for any purpose whatever, except to such extent and in such manner as may be expressly provided in the articles of incorporation.”
Section 886, so far as material bere, provides:
“The articles of incorporation of any corporation now existing or that hereafter may be organized under the laws of this state may be amended in any respect conformable to the laws of this state by a vote representing at least a majority in amount of the outstanding capital stock thereof at a stockholders’ meeting called for that purpose as prescribed in section 887. * * * ”
Then follow several provisos not material here. The section concludes with the following proviso:
“ * * * And provided, further, that the personal or individual liability of the holder of full-paid capital stock for assessments or for the indebtedness or obligation of the corporation shall not be changed without the consent of all the stockholders.”
Section 900 reads as follows:
“The full-paid capital stock of any corporation organized since March ^8, 1894, or that may hereafter be organized under the laws of this state, shall not be assessable for any purpose whatever, except to such extent and in such manner as may be expressly provided in the articles of incorporation: Provided, that if such stock is made assessable and the manner of levying the assessment is not provided for, it .shall be levied in the manner and form hereinafter prescribed.”
The statute further provides how the assessments shall be levied, and the notices that shall be given and in case the assessments are not paid how the stock shall be sold, etc. The foregoing provisions of our Constitution and statutes, all of which were in force when the defendant was incorporated, must therefore be considered in connection with the
The provisions contained in the Constitution and statutes are as much a part of the articles of incorporation as though they were expressly copied therein. The law
“ * * * The provisions of the statute or general incorporation act enter into and form a part of the charter, and the incorporation papers and statute are to be construed together; the latter controlling in case of conflict. It is not necessary that the general law should he copied in the charter, but it forms an essential part of it, and all parties are bound by its terms, whether copied in the charter or found only on the statute book. Moreover, constitutional provisions automatically become a part of the charter.”
In Association v. Keith-O’Brien Co., 45 Utah, 218, 143 Pac. 1015, the holding of this court is to the same effect. Under the statute, therefore, any provision which is made a part of the articles of incorporation may be amended or changed, unless the proposed amendment or change is prohibited by the statute. Moreover, such amendment or change may be made by such number of votes as the statute may prescribe. If the statute requires á majority vote only, that number is sufficient, or if it requires the consent of more than that number, or all, of the stockholders, the amendment or change cannot be made until the requisite number consent thereto as provided in the statute. The right to make such an amendment or change, however, exists, whether the right is merely given in the statute, or whether it is expressly written into the articles of incorporation. In Nelson v. Keith-O’Brien Co., supra, it was held that the articles of incorporation might be amended so as to make the stock assessable, because the right to amend the same “in any respect” was reserved in the articles themselves. As we have seen, however, that right in this case existed by virtue of the statute, precisely the same as though it had been reserved in the articles.
In view, therefore, that a majority of the stockholders of the defendant clearly had the right to amend the articles of incorporation to make the stock assessable, the question is
“That the personal or individual liability of the holder of full-paid capital stock for assessments * * * shall not be changed without the consent of all the stockholders.”
When the defendant company in the Garey Case was incorporated, and for many years prior thereto, the proviso we have just quoted read as follows:
“That the liability of the holder of full-paid capital stock for assessments * * * shall not be changed without the consent of all the stockholders.”
The qualifying words, “personal or individual,” were inserted into the statute in 1903. Sess. Laws Utah 1903, c. 94, p. 80. It will thus be seen that the phraseology of the proviso underwent a material change after the defendant in the Garey Case was incorporated. As the statute read prior to 1903, no levy for assessments on full paid stock could be made without the consent of all the stockholders. After the amendment of 1903, however, the liability was restricted to “personal or individual” liability. In changing the phraseology of the statute, it must be assumed that it was the intention of the'Legislature to change its effect. 2 Lewis, Suth. St. Const. (2d Ed.) § 399; Dahl v. Salt Lake City, 45 Utah, 544, 147 Pac. 622. If it was intended to continue in effect the proviso that no levy for assessments could be made unless consented to by all the stockholders, why make the change in the phraseology of the statute, by inserting therein "the qualifying words “personal or individual” preceding the word “liability”?
In making that change the Legislature manifestly intended to change the proviso, so that the liability should thereafter
“Personal Liability. — The statutory liability oí stockholders of corporations by which they are held individually liable for the debts of the corporation.”
To the same effect is Anderson’s Law Dictionary, p. 616. In Black’s Law Dictionary, p. 893, the author defines personal liability thus:
“The liability of stockholders in corporations, under certain statutes, by which they may be held individually responsible for the debts of the corporation, either to the extent of the par' value of their respective holdings of stock, or to twice that amount, or without limit, or otherwise, as the particular statute directs.”
Such is the meaning which is given to the term “personal or individual liability” by our own Constitution and statutes, and to that, effect are the decisions. In view that the Legislature deliberately changed the phraseology of the statute, by inserting therein the qualifying words referred
Neither side has cited or referred to any case in which the question here involved was directly decided, and, after an extended research, we have not been able to find any. There
In this connection it is also important to keep in mind that this court, in the ease of Dotson v. Hoggan, 44 Utah, 295, 140 Pac. 128, is committed to the doctrine that there is a distinction between the personal liability of the stockholder and the liability to which his stock may be subjected by levying an assessment and the forfeiture thereof in case he refuses or fails to pay the assessment. That distinction is also recognized in the case of Wall v. Basin Min. Co., 16 Idaho, 313, 101 Pac. 733, 22 L. R. A. (N. S.) 1013. To the same effect is Schricker v. Ridings, 65 Mo. 208. In Wall v. Basin Min. Co., supra, it is held that a proceeding under a statute like ours to collect an assessment by the sale and forfeiture of stock is a proceeding in rem merely. In the course of the opinion (16 Idaho. 328, 101 Pac. 738, 22 L. R. A. [N. S.] 1013) the court said:
“The levy of an assessment, under the statute of this state, against stock fully paid up is a proceeding in rem by which the stock may he sold; but no personal liability attaches to the stockholder for any deficiency arising from the sale.”
That is precisely what is held by this court in Dotson v. Hoggan, supra. Moreover, it is there held that no personal action can be maintained against the stockholder to collect an assessment levied upon fully paid stock.
Counsel for plaintiff, however, insist that by virtue of section 919 a personal action may be maintained against the stockholder for the collection of such assessment. That section reads as follows:
“On the day specified for declaring the stock delinquent, or at any time subsequent thereto and before the sale of delinquent stock, the board of directors may elect to waive further proceedings under this chapter for the collection of delinquent assessments, or any part*534 or portion thereof, and may elect to proceed by action to recover the amount of the assessment and the costs and expenses already incurred, or any part thereof.”
In making the foregoing contention, counsel have manifestly overlooked the fact that, as pointed out by this court in the case of Forsyth v. Selma Mines Co., 58 Utah —, 197 Pac. 586, our statute provides for two kinds of assessments, one for what are usually denominated calls for unpaid subscriptions and the other on fully paid stock. When all of the provisions of our statute are properly considered and construed, it becomes quite clear that the action referred to in section 919, supra, is limited to the collection of calls
Nor are the cases cited by counsel from the Supreme Court of California, namely, San Bernardino, etc., Co. v. Merrill, 108 Cal. 490, 41 Pac. 487, National Parafine Oil Co. v. Chappellet, 4 Cal. App. 505, 88 Pac. 506, and Marshall v. Wentz, 28 Cal. App. 540, 153 Pac. 244, in point here. Those cases are all based on the California statute, under which each stockholder is personally liable for the debts of the corporation to the extent stated in the statute. Each stockholder may thus be sued at any time, and a personal judgment obtained against him, which may be collected precisely the same as any other personal judgment may be. Such is not the law of this state, and this court, the same as the Supreme Court of Idaho, as pointed out, is committed to the contrary doctrine. Nor has the case of Ireland v. Palestine, etc., Co., 19 Ohio St. 369, any application here.
In view of the provisions of our Constitution and statutes, all of which must be considered and applied in connection with the provisions of the articles of incorporation, we think it is clear that it was the intention of the Legislature to authorize a majority of the issued and outstanding stock of any corporation to change the articles of incorporation, so as to make unassessable stock assessable, provided no attempt is made, in making such amendment, to change the personal or
Moreover, we do not think it was the intention of the Legislature to permit one stockholder, owning a few shares of stock in a corporation, to prevent all the other stockholders from raising funds to pay debts of the corporation or to develop its property. No doubt it was the intention to protect the stockholder against personal liability, but not to enable him to play the “dog in the manger.” When it is kept in mind that in this state'there are many mining corporations, the only assets of which are undeveloped mining claims, one can readily understand why the Legislature framed the statute so as to permit the majority of the stock to control in the raising of funds for the payment of corporate debts and for the development of the mining property. ' If that could not be done, a single stockholder could compel the sale and sacrifice of what might be developed in the future to be a very valuable property, merely because he would not consent to the levying of an assessment. Again, he might either arrest or
From what has been said, therefore, it follows that the district court erred in overruling defendant’s demurrer. The judgment is therefore reversed, and the cause is remanded to the district court of .Salt Lake county, with directions to sustain the demurrer, and, in case the plaintiff elects not to amend her complaint, to dismiss the action. Costs to appellant.