Court Opinion

ID: 6903728
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:57:37.238728+00
Date Added: 2024-06-11T16:06:15.734071
License: Public Domain

Decided February 10, 1914.
On the Merits.
(138 Pac. 468.)
Mr. Justice Ramsey
delivered the opinion of the court.
This is a suit in equity for a decree requiring the defendant G. K. Wentworth to transfer to the plaintiff 6,500 shares of the capital stock of the Coast Range Lumber Company, or, in case he should fail or refuse to make such transfer, for a decree against him for the value of said stock, etc.
The suit was originally brought against the defendant H. C. Mahon alone; but subsequently the plaintiff, with leave of the court, amended his complaint, and made G. K. Wentworth a defendant.
As no question arises as to the sufficiency of the pleadings, it is not necessary to set out any part thereof.
In March, 1907, the Sunset Lumber Company, a corporation, was organized with a capital stock of $500,000, divided into shares of $10 each. The plaintiff did a large amount of work in organizing and promoting said company, and others performed certain services in connection with the organizing and promotion of said corporation. After said company was incorporated and organized, the plaintiff turned over to it certain options for the purchase of timber lands which he had obtained. In consideration of the service that the plaintiff had rendered, as stated supra, and of the transfer of said options to said company, it was agreed by and between said company and the plaintiff, and between the defendant H. C. Mahon, E. O. Samuels, T. R. Terger, and the plaintiff, all of said persons being the original stockholders of said company, that the plaintiff should receive 6,500 shares of the fully paid-up capital stock of said company, of the par value of $10 per share.
When said company was organized it was deemed advisable, for convenience, and in securing a loan for *249said company, that the stock of the above-named persons Should be held in the name of one of their number, and it was agreed that said stock should be subscribed for and held in the name of the defendant H. C. Mahon, in trust for said persons, as follows: 6,500 shares for E. O. Samuels, 6,500 shares for T. R. Yerger, 6,500 shares for H. C. Mahon, and 6,500 shares for I. W. Lane, the plaintiff. In accordance with said agreement said stock was subscribed for by the defendant H. C. Mahon, and issued to him, to be held by him in trust for said persons, according to their several interests, as stated supra.
In June, 1910, the stockholders of said company decided to reorganize said company under a new name. On June 9,1910, the following preamble and resolution was unanimously adopted at a meeting of the stockholders of said company:
“On motion of Mr. R. H. Kipp, duly seconded by Mr. GL F. Skipworth, the following resolution was offered: ‘Whereas, the Sunset Lumber Company, a corporation, is indebted to various and divers persons in the sum of approximately one hundred and ten thousand dollars ($110,000); and whereas, a corporation is about to be organized and known as the Coast Range Lumber Company; and whereas, the Coast Range Lumber Company, in consideration of the sale and transfer of all the property belonging to the Sunset Lumber Company, both real and personal, to the Coast Range Lumber Company, the Coast Range Lumber Company agrees to assume and pay all of the indebtedness of the Sunset Lumber Company; and whereas, as a further consideration of said sale and transfer, the stock of the Sunset Lumber Company is to be surrendered and exchanged for stock pi the Coast Range Lumber Company, the stock so exchanged to be of the same par value as the stock in the Sunset Lumber Company, and the said stockholders of the said Sunset Lumber Company are to receive an equal amount of stock in the Coast Range Lumber Company *250for the stock each stockholder owns and holds in the Sunset Lumber Company: Therefore, be it resolved, that the stockholders of the Sunset Lumber Company do hereby agree to the above proposition, and do hereby authorize the directors of the Sunset Lumber Company to transfer said property of said Sunset Lumber Company'to the Coast Range Lumber Company, upon the terms and conditions set forth in this resolution, and they are hereby authorized to do any and every thing necessary for the purpose of consummating said sale and transfer, upon the said terms and conditions set forth.’ ”
This preamble and resolution, adopted by the stockholders of said company, shows that it was the intention and agreement of all the stockholders of said company that, in the reorganization under a new name, each stockholder in the old company should have in the new company the same number of shares of stock that he had in the old company. It is important to bear this in mind, for this feature of the plan for the reorganization was never changed.
On June 9, 1910, the date of the adoption of said preamble and resolution, articles of incorporation of the Coast Range Lumber Company were prepared, and executed, and acknowledged by J. H. Mahon, R. II. Kipp, and H. Koepke, and witnessed by I. W. Lane and Gr. F. Skipworth; each of said persons being a stockholder of the Sunset Lumber Company. These articles of incorporation were not filed in the public offices until later. In connection with this reorganization, the plaintiff did much work.
In February, 1911, the said reorganization of said company was^ completed under the articles of incorporation executed June 9, 1910, as stated supra, and the name of the new company is ‘ ‘ The Coast Range Lumber Company.” At this reorganization all of the assets of the old company, including all options for *251the purchase of timber land, were transferred to the new company, and the new company assumed the payment of all of the debts of the old company. On the organization of the new company, the defendant H. C. Mahon subscribed for all of the stock of the new company, excepting five shares. The amount subscribed for by him was 49,995 shares, and the whole number of the shares of the capital stock being 50,000, and the par value of each share being $10.
On pages 29 and 31 of the Eecord Book of said new company, which is plaintiff’s Exhibit A-3, it appears that H. O. Mahon, at the date of the organization of said new company, transferred to it approximately 4,080 acres of timber land, etc., for $499,950 of the capital stock of said company, and that the company accepted said transfer, and, in consideration thereof, issued to him $499,950 of the stock of said company.
The property so transferred to said company by H. C. Mahon was all of the assets of the Sunset Lumber Company. This property did not belong to Mahon, and the shares of stock transferred to him in exchange for said property were issued to him in trust for the stockholders of the old company (including himself).
The plaintiff claims that he owned $65,000 of the stock of the old company, and that, according to the agreement and understanding of all of the parties concerned in said reorganization, he was entitled to have transferred to him $65,000 of the stock of the new company that was subscribed for by and issued to Mahon, in consideration of the sale to the new company of the assets of the old company. The defendants, by their pleadings, deny this claim of the plaintiff, and the question for decision is whether this contention of the plaintiff is true.
*252If, at the time that the assets of the old company were transferred to the new, he owned $65,000 of the stock of the old company, and said reorganization was effected with the understanding and agreement, among the parties that brought it about, that, in consideration of the transfer of the assets of the old company to the new, the new company assumed the debts of the old company, and it was agreed, also, that each stockholder in the old company was to have, in consideration of said transfer, the same number of shares of stock in the new company that he had in the old company, then the plaintiff is entitled to have transferred to him $65,000 of the stock of the new company, and he has a right to have such stock transferred to him by the defendant Wentworth, if the latter took a transfer of said stock from Mahon without consideration, or with knowledge or notice of the plaintiff’s right to said stock.
There is some conflict in the testimony; but the material facts are established by a clear preponderance of the evidence. It is clearly proved that the plaintiff owned, at the time of the transfer of the assets of the old company to the Coast Range Lumber Company, as stated supra, $65,000 of the capital stock of the Sunset Lumber Company. Parts of this stock were held, at times, as collateral for money that he had borrowed; but he paid these debts, and his stock was released from such liens. Some of the owners of stock in the old company contemplated making assessments on their stock for betterments, and, if these improvements had been made, some deduction would have had to be made therefor. However, those improvements were not made. There is no proof that the plaintiff sold any of his stock. We hold that a preponderance of the evidence shows that the plaintiff owned, at the *253time of the formation of the new company, $65,000 of the stock of the old company.
4. On June 9, 1910, when the articles of incorporation for the new company were executed as stated supra, the stockholders of the old company, including the plaintiff and the defendant Mahon, at their annual meeting, as shown supra, unanimously adopted a preamble and resolution in favor of forming a new company, and of transferring to it all of the assets of the old company, and it was expressly stated, in said preamble that the new company should assume and pay all of the indebtedness of the Sunset Lumber Company, and that the stock of the latter company should be exchanged for stock in the new company, and that‘the stockholders in the old company should receive of the stock in the new an amount equal to what they owned in the old company. The same persons that adopted said preamble and resolution executed or caused to be executed said articles of incorporation for the new company, and said new company was organized for the purpose of taking over all of the assets of the old company, and assuming its obligations to its creditors and its stockholders, and for the purpose of effecting said exchange of stock. While, under the advice of counsel, to the effect that the new company could not take over the old company’s property in all respects as' planned by the preamble and resolution set out supra; the said preamble and resolution was revoked, the evidence shows that said plan, was carried out, in substance, as to all persons but the plaintiff.
The evidence shows that all of the property of the old company was taken over by the new company, and that the latter paid all of the debts of the old company, and that, in consideration of receiving the assets of the old company, the new company issued to the *254defendant Mahon all of the $500,000 of the capital stock of the new company, but five shares.
The evidence shows, also, that said assets belonged to the old company, and not to Mahon, and that Mahon received said stock as trustee for the stockholders of the old company, and that each stockholder of the old company was entitled to receive from Mahon, as trustee, as many shares of the capital stock of the new company as he owned in the old company.
The evidence shows, also, that every stockholder in the old company (excepting the plaintiff) received from Mahon, as trustee, as many shares of the stock of the new company as he had in the old company, and that he received such stock in the new company in exchange for the stock in the old company, and without paying anything for it. A few of the stockholders in the old company, as shown by the evidence of Mahon (evidence, page 323), instead of receiving stock in the new company, received cash in lieu thereof. But he admits that every stockholder of the old company, excepting the plaintiff, received in exchange for his stock in the old, an equal amount in the new company, or received cash in lieu of stock in the old company. This was carrying out the plan set forth in the preamble and resolution set out supra, as to all persons but the plaintiff.
The defendant Mahon testifies (page 297 of the evi7 dence) that each stockholder in the old company was to have stock in the new company equal in amount to what he had in the old company, and he admits that Lane was entitled to $65,000 worth of stock in the old company (evidence, page 340), and he asserts, on page 290 of the evidence, that he was never opposed to Lane’s getting stock in the new company. He admits (evidence, page 294) that, in a conversation with Lane, Skip-*255worth, and others, he said that Lane was entitled to $65,000 of stock in the new company.
The defendant Wentworth admits (page 379 of evidence) that he knew that Lane was to have a certain amount. of stock in the old company. In a letter to Wentworth, dated December 15, .1910, Lane expressly stated that he had $65,000 of stock in the old company. In other letters and orally, at different times, Lane informed Wentworth of the stock that he owned in the old company. Lane also informed Wentworth, at different times before Mahon assigned to him the stock, that he claimed and was entitled to $65,000 of the stock in the new company, held by Mahon in trust, in exchange for his stock in the old company.
The defendant Wentworth knew, also, that the assets of the old company that were transferred to the new belonged to the old company, and not to Mahon, and that the stock that Mahon had in the new company was paid for with the property of the old company, and that Mahon held said stock as trustee for the owners of the stock in the old company. Excepting the $100,000 in stock which was transferred to Wentworth for his influence in selling the bonds, the stock that was transferred to him by Mahon was received by him with notice that it was held' in trust, and that Lane claimed and was entitled to $65,000 thereof. He received said stock with notice that $65,000 thereof belonged to the plaintiff, and he holds said stock in trust for the plaintiff, and it is his duty to transfer it in due form to the plaintiff.
The manner in which the defendants “eliminated” the plaintiff from the new company was contrary to that good faith and fairness that usually obtains among business men. It is not necessary to go into various other matters discussed in the briefs and at *256the hearing. The case was argned with ability on each side.
5. The receipt mentioned in the fourth, assignment of error had no relevancy to the plaintiff’s right to recover this stock. The receipt was not intended to apply to a suit for said stock, which was supposed, at that time, to be be held by the defendant Mahon.
This stock was issued to Mahon in trust for the plaintiff, and Mahon had no right to transfer it to the defendant Wentworth. The plaintiff, when said receipt was signed, had a right to believe, and did believe, that said stock still stood in Mahon’s name, and this fact is shown by the last clause of said receipt.' The transfer was secret. When this cause was commenced, the plaintiff believed, as he had a right to believe, that Mahon still held the stock, and he sued Mahon alone; but, when he learned that Mahon had assigned the stock to Wentworth, he amended his complaint, and made Wentworth a party. The receipt was not given to Wentworth, and his name is not mentioned in it. Lane had a judgment against the Sunset Lumber Company, and had an action pending against the Coast Range Lumber Company. The latter company paid Lane the money for which the receipt was given, in full for payment of said matters. Said receipt states, also, that said money was received in full of all demands against the Coast Range Lumber Company or any stockholder therein, excepting H. C. Mahon, for accounting, or for any part of the capital stock of said Coast Range Lumber Company, and then the receipt adds: “But this receipt shall not be taken as waiving any right on my part hereafter to proceed against said H. C. Mahon, in any suit for accounting or otherwise, for the purpose of obtaining part of the said H. C. Mahon’s capital stock in said *257company or its value, or any cause of action which I may have against him.”
The foregoing clause of said receipt shows that Lane understood, as he had a right to understand, that Mahon still had the stock that he claimed to own, and Lane expressly reserved the right to sue him to obtain said stock. The secret and wrongful transfer of said stock by Mahon to Wentworth was unknown to him, and he was not guilty of negligence in not knowing it. Under these circumstances, said receipt is not a release of Lane’s right of suit to pursue said stock into the hands of Wentworth, who is a wrongful assignee, thereof from Mahon.
In Todd v. Mitchell, 168 Ill. 201, 202 (48 N. E. 35), the facts were, in brief, that there were matters of difference between the plaintiff and the defendant respecting some real estate transactions, and Mitchell had sued Todd for an accounting. They settled said action, and both signed a release, acknowledging the settlement of said controversy, and this release contained, also, the following words: “ * * And in consideration aforesaid [we] do hereby forever release and discharge each other from any and all claims and demands of any name and nature whatsoever which either may have against the other.” Subsequently Todd sued Mitchell for a breach of a covenant of warranty in a deed, executed prior to the signing of said release, and Mitchell relied on said release as a defense. Passing on said release, the court in said case says: “It [the release] relates to these particular matters [concerning the profits in a real estate transaction, etc.], and these alone. This construction is aided by the facts of the case which tend to show that the breach of the covenant of warranty could not have been in contemplation of the parties, *258because unknown to the appellant at that time as an existing claim. * * There is no pretense that this breach of the covenant of warranty had been compromised or adjusted, and such language cannot possibly be construed to have reference to that. ’ ’
In Grumley v. Webb, 44 Mo. 445 (100 Am. Dec. 304), the syllabus is: “A receipt given in full satisfaction of a certain judgment therein specified, and also of ‘all claims and demands,’ will not avail against another suit pending between the same parties, and not shown to have been intended by-them to be included in the receipt. Language, however general in its form, when used in connection with a particular matter, will be presumed to be used in subordination to that matter, and will be construed and limited accordingly”: See, also, on this point, Van Slyke v. Van Slyke, 80 N. J. Law, 382 (78 Atl. 179, Ann. Cas. 1912A, 498, 31 L. R. A. (N. S.) 778).
As the facts show that, when this receipt was signed, Lane did not know that the stock in dispute had been transferred by Mahon to Wentworth, and as he reserved, by the terms of the receipt, the right to sue Mahon to obtain this stock, it is clear that said receipt was not intended to settle or bar Lane’s right to pursue said stock into the hands of Wentworth, a wrongful assignee thereof, and recover said stock or its value from him. It was not the intention of the parties, by said receipt, to bar Lane from recovering said stock wherever it should be found to be.
It is not necessary to go into other matters referred to in the brief and at the hearing. We hold that the findings and the decree of the court below are correct, and we affirm them.
The value of the stock is not clearly shown by the evidence; but stock is presumed, prima facie, to be worth its face. There is evidence showing that some *259of the stock of the company sold for $2 a share; but this is not shown to be its reasonable value. We will let the matter of value stand as it was found by the court below. The defendant Wentworth has a large amount of the stock of the Coast Range Lumber Company, and he can deliver 6,500 shares thereof to the plaintiff, and thereby satisfy the decree, excepting as to costs and disbursements.
We find that, of the capital stock of the Coast Range Lumber Company held in his name by the defendant G. K. Wentworth, at the time this suit was begun, said defendant held, and now holds, 6,500 shares thereof in trust for the plaintiff, I. W. Lane, and that Lane is the owner of said stock, and entitled to have the same duly transferred to him by the defendant Wentworth at once; that said stock is worth $10 per share; and that the plaintiff is entitled to a decree of this court affirming the decree of the court below, and a decree of this court against the appellant, G. K. Wentworth, and his surety on his undertaking for the appeal, and for a stay of proceedings, for costs and disbursements in the court below and in this court, and for the delivery to the plaintiff, I. W. Lane, within 20 days from the date of the entry of the decree of this court in the journal of the court below of 6,500 unencumbered shares of the capital stock of the Coast Range Lumber Company in due form of the par value of $65,000, or, upon his failure to do so, that the plaintiff have and recover of and from said G. K. Went-worth and of and from his surety, the NUtna Accident and Liability Company, the sum of $65,000, the value of said stock.
The decree of the court below is affirmed.
Affirmed.
Mr. Chief Justice McBride, Mr. Justice Moore and Mr. Justice Burnett concur.