The copper era., 1902-03-27

The Supreme Court OF California re
Gently handed down a decision of much
Importance to stockholders generally
as it treats at length OF their
liabilities TO creditors, The ease wa.
an action to collect on behalf OF cred
itors the unpaid balance due on stock
Of the Declez Granite company, which
bad become insOlvent. The par value
of the stock was 800 per share. Each
stakeholder had paid s20 per share on
his stock and no more. The lover
court sustained the stockholders, but
the supreme court reversed the de-
cision, and said:
AS far as the corporation is con-
cerned, there j. not much in the above
contention, for in this State fully-paid
stock may be assessed. The question
concerns creditors only. As to them
the corporation Is presumed to have
sought credit based upon its supposed
capital stock OF 800, 900, actually paid
in or due from the stockholders
Public policy requires that the fact.
whether particular creditor did
trust the corporation on that basis,
-hOuld not be inquired of. Corpora
tons often advertise the amount Of
their capital stock and whether it is
fully paid"
In the case Of the defendant corpor-
alton, the directors, II the theory OF
the defense is sustainable, might have
truthfully advertised that il had a sub.
scribed and fullypaid-up capital OF
300 900, when in fact il had only 500
coo. If by any lawful devise this can
BE- done, it IS plain that the policy OF
the law will be defeated. And, again,
the corporation being mere agency OF
the stockholders. for il to release these
obligations would be for u debtor to re-
lease his own liability. As the sup
posed capital is the sole basis of credit.
the stockholders who are the real
parties carrying on the business. must
make the presentations good"
Directors OF mining companies in
prospectus cannot be- too
careful IN their announcement TO the
public. All facts should be given
The indebtedness OF the company
should be shown. If the promoters
have decided the property to the COM
pany for consideration in stock, this
fact should be noted in the prospectus.
together with the amount Of shares
placed in the treasury for development
purposes. The investors are entitled
to all the fact, and when they are COR
rectly given there can be no complain Is
rom investors, If the property should
not turn out we'll. Creditors, of course
ian have recourse on the company S
property. but it is extremely doubtful
II they could recover from shareholders
provided the directO had been care
ful to promulgate nothing but the the
acts. and all the facts, in connection
with the company's Organization and
its business affairs. There is no ques-
ion but that May frauds are perpe-
lrated upon the public by sharpers and
'windlers under the cloak of the law.
are that our Incorporation laws
are too lax in every state in the Union.
There shOIld BE- Il law passed by the
general government controlling all
modelled after the laws of
Great Britain, where an investor has
some protection for his money. In
his country il frequently happens that
stock is sold by companies operating
under a charter, but without property
anywhere. 1t is a rank fraud and
swindle. and yet the company has the
anction OF the state to rob the people. |