Court Opinion

ID: 8260569
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:53:34.461337+00
Date Added: 2024-06-11T16:43:10.254488
License: Public Domain

Bond, J.
(dissenting.) — I am constrained to dissent to the disposition of this case made by my associates. The result reached by the majority of the court appears to be upon their construction of the testimony of Frizzell, the secretary of the corporation. I cannot concur in that construction. My understanding of his testimony and the facts in this record will appear in the course of this opinion.
This was a motion (Revised Statutes, 1889; sec. 2517,) to chai’ge appellant as the holder of unpaid stock in the Thompson Manufacturing Company. This proceeding is in the nature of an independent and original action, bhsed upon motion and notice thereof to the stockholder. This notice has been held to be “in substance and effect a process of garnishment.” On its trial two issues are presented, to wit, “whether the person sought to be charged is indeed a stockholder, and if he is indeed indebted to the insolvent corporation Wilson v. Railroad, 108 Mo. 588, 602. The proof of both of these issues necessarily devolves upon the plaintiff in the execution sought to be enforced against a stockholder.
Under the facts in this record the right of the execution creditor to recover is dependent on his proof of the first issue. This question is raised .both in the motion for a new trial and the errors assigned on appeal. The general rule is, that ‘ ‘shares issued by a corporation *47in excess of the amount authorized by its charter or articles of association are legally null and void, although the holder may have acted as a shareholder. No person would be entitled to give the company credit on the faith of such excessive issue of shares, because all persons dealing with the company would be bound at their peril to take notice of the terms of its charter or .articles of association.” 2 Morawetz on Private Corporations, sec. 849. To the same effect is Beach on Private Corporations, sec. 494, where it is said: “And .a note, the consideration whereof is stated therein as being shares of the capital stock, is held to be non-collectible if there has been an over-issue of stock; inasmuch as it cannot be shown but that the shares delivered do the purchaser were among those illegally issued.”
In the application of these principles of law to the facts in this proceeding on appeal, this court has the same power to make findings which it would have in a casein equity. Ollesheimer v. Mfg. Co., 44 Mo. App. 172, 176; Erskine v. Loewenstein, 82 Mo. 301, 305. From the evidence, I find the fact to be that the Thompson Manufacturing Company was incorporated on May 19, 1888, with a capital stock of $50,000, divided into one thousand shares belonging to the several persons named in its articles of association. I find further from the testimony of the secretary that certificates of stock for the full amount so subscribed by said incorporators were either delivered to them, or retained in his possession, and have never been canceled nor annulled by the •corporation. I also find that the recital in the articles of association that one half of the sum therein subscribed has been paid was substantially untrue. I ■further, find that, at the trial of this proceeding the ■stock book of said Thompson Manufacturing Company disclosed that the list of its shareholders embraced all -of its incorporators for the full amount subscribed by *48each, and sixty or seventy other persons who had subsequently subscribed for stock to the amount of $7,000 or $8,000 in the aggregate, and among these latter appellant’s name as that of the holder of two shares. Prom these findings and the facts in the record, I conclude that the Thompson Manufacturing Company made an over-issue of stock, and that the two certificates handed appellant on May 25, 1888, as shown by his receipt, were a part of such over-issue; that such stock is void, and that it confers on the holder no rights, and subjects him to no liability. This is not only the effect of the evidence in this case, but is in accordance with the direct adjudication of this court in Ollesheimer v. Mfg. Co., supra. There James Abbott, one of the original incorporators of said company, was adjudged liable in solido, by virtue of his signature to the articles, to a creditor of said corporation moving against him as a stockholder for his unpaid subscription; despite the fact that said Abbott had never received his certificate as a stockholder, and the further fact that the evidence tended to show that this subscription was to be transferred to other solvent citizens of Springfield, whom he had induced to subscribe for stock in the corporation, and that the officers of the corporation had orally agreed to take these other citizens as subscribers in his stead, and had further agreed that his stock should be canceled by this substitution. It was there said: “But there was no evidence from the records of the defendant corporation or otherwise of any corporate action on the part of that corporation by which such substitution was made or attempted. This evidence, as a matter of law, disclosed no defense on the part of the defendant stockholder. Nothing is more.firmly settled in the law in this state and elsewhere than that a person who with *49others subscribes to the stock of .a corporation must perform his contract according to its form and substance by paying for his shares the full value stated in the contract of subscription, either in money or in money’s worth.”
In the present proceeding there is not a particle of evidence that the certificates issued to the appellant were in substitution for those of any one of the original subscribers, who had together taken all the shares (i. e., $50,000) which the corporation could lawfully issue. The stock books showed an excess of stock issue ranging between $7,000 and $8;000 of stock.' 'The testimony of the secretary, while it disclosed an intention on the part of the original incorporators to use some of their subscription to cover stock which it was expected would be subscribed in Springfield, wholly fails to show that any part ims so used, and least of all that Foley’s certificate was given in lieu of that of any other subscriber. The proper place for such facts to be noted is on the corporate records. “Persons whose names are found to bo registered thereon as holders of the stock are presumed to be the regular and lawful owners of the shares and as such liable for the company’s debts.” Beach on Private Corporations, sec. 125.
In the case at bar the stock book affirmatively showed that the original stock subscribers were still stockholders in the company of all of its authorized shares. Nor is there in this record any evidence whatever that any part of the stock or stock subscription of any one of the stockholders has been transferred to appellant; on the contrary the evidence and receipt of appellant disclosed that his dealing was directly with the corporation. The unauthorized act of the secretary in issuing stock to appellant and others beyond the limit fixed by law created no obligation against the *50holders of the overissued shares, and did not make them in law stockholders.
I, therefore, hold that the judgment holding appellant as a stockholder should be reversed.