Court Opinion

ID: 7967408
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:51:53.048436+00
Date Added: 2024-06-11T16:34:40.917780
License: Public Domain

Mitchell, J.
This was an action by the assignee of an insolvent corporation on a subscription for stock of the company. According to the complaint, the defendant had subscribed for a certain number of shares of the stock, payable “in such manner and at such times as the board of directors of the company might direct.” The corporation had made an assignment for the benefit of its creditors under the general insolvency law, and the plaintiff had been appointed and had qualified as assignee. The court in which the insolvency proceedings were pending had made an order requiring the stockholders, including this defendant, to pay forty per cent, of the amount of stock subscribed for by them. Notwithstanding' due and seasonable notice of this order, and a demand by plaintiff for pay*426ment, the defendant had neglected and refused to pay the same. We are unable to see why this does not state a cause of action. Some of counsel’s criticisms on the complaint proceed upon the assumption that the action is brought on the order of court, and that defendant’s liability is based upon that alone. This is clearly erroneous. The cause of action alleged is founded on the subscription contract. Of course, the money did not become due or payable until a call had been- made by the directors, or some authorized demand for payment made equivalent to such a call. But this is but a step in the process of collection, and the order of court,'which was equivalent to a “call,” was pleaded, not as the basis of defendant’s liability, but to show that the money had become due and payable according to the terms of the contract.
The authority and jurisdiction of the court in which the insolvency proceedings were pending to make an order requiring payment of unpaid stock subscriptions, as the directors might have done before the insolvency proceedings, is so well established as hardly to require the citation of authorities. The court will, in such cases, do, in behalf of creditors, what it is the duty of the corporation to do in respect to calls, and may itself make the call, although by the terms of the contract of subscription the money is payable on the call of the directors. Sanger v. Ufton, 91 U. S. 56; Hatch v. Dana, 101 U. S. 215; Scovill v. Thayer, 105 U. S. 155; Cook, Stocks, § 207.
It is urged that the complaint is defective in not alleging the issue and tender of a certificate for the stock. This “call” is only for forty per cent., and it does not appear that the other sixty per cent, had been paid. As a party is not entitled to a certificate until the stock is fully paid, the point, so far as the present appeal is concerned, might be disposed of by this statement of the facts. But there is a doubt, under our decisions, as to the precise position of this court upon the question as to whether it is any defense to an action on a stock subscription that no certificate has been issued and tendered, which had better be removed at this time.
In St. Paul, S. & T. F. R. Co. v. Robbins, 23 Minn. 439, (where the issue was of preferred stock after the whole of the original stock had been issued,) it was held that a tender of a certificate *427was necessary and should be pleaded. This case seems to put the subscription for the stock on the footing of a contract for the purchase of property, where the promise to sell and the promise to pay are concurrent and dependent, and where consequently neither party can compel the other to perform, without performing or offering to perform on his part. If the so-called “preferred stock” in that case was, as is often the fact, the obligations of the corporation, or merely pledges of its revenues, of course it stood on the same footing as any other purchase. But that the decision was understood as applying to subscriptions for stock, properly so called, is evident from what is said in Minneapolis Harvester Works v. Libby, 24 Minn. 327. Without having our attention called to these cases, and not having them in mind, we held in Columbia Electric Co. v. Dixon, 46 Minn. 463, (49 N. W. Rep. 244,) that it is no defense to an action on avstock subscription to allege that no certificate for the stock has been tendered. It would a fortiori follow that it was not necessary to allege a tender in the complaint. This is the rule generally, if not universally, laid down in the text books, and is supported by an almost unbroken line of decisions. The ground upon which it is put is that a subscription for the stock of a corporation does not stand on the footing of a purchase of property; that when the subscriber pays he is the owner of the stock; that it is the payment which makes him a stockholder, the certificate being merely the evidence of his right; that he is a full stockholder, with all the rights of one, even if a certificate is never issued to him; and therefore it is for him to demand the certificate when he wishes one, and not for the corporation to tender one. This doctrine being, as it seems, in accordance with the general current of the authorities, we shall follow it, and adhere to the decision in Columbia Electric Co. v. Dixon, supra.
And, so far as this question is concerned, we' can see no distinction between a subscription to the stock of a corporation already fully organized and a subscription made prior to and for the purposes of organization. The rule, of course, has no application to the case of a sale of stock, which stands on the same footing as any other contract of purchase of property. It is also undoubtedly true that parties *428may contract that the stock shall not be paid for until the certificate therefor has been issued and delivered or tendered. Compare Summers v. Sleeth, 45 Ind. 598, with Miller v. Wild-Cat Gravel Road Co., 52 Ind. 51.
(Opinion published 52 N. W. Rep. 38.)
Order affirmed.