Court Opinion

ID: 6667580
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:07:13.615488+00
Date Added: 2024-06-11T16:00:23.223565
License: Public Domain

Opinion after re-argument by
Beatty, J.,
full Bench concurring.
When we wrote our former opinion in this case we left certain propositions undecided, and ordered the case on the calendar for argument upon the points suggested. By leave of the Court the counsel for appellant filed a brief on one point not left open by the order of the Court, resubmitting the case. That point was as to the alleged error of the Court below in rejecting the company books when offered in evidence by the appellant. As we understand the record, it shows that when the books were first offered, the Court ruled they were not admissible, on account of certain alterations and erasures contained in them. Afterwards wdien those erasures were explained, the books were admitted. Even admitting the Court erred in rejecting the books in the first place, the subsequent admission of them cured the error, and this was no ground for reversing the judgment. It was for the reason that these books were *430subsequently admitted that we failed to notice this point in our original decision.
This brings us back to the question propounded in our original opinion : “ Were the certificates issued to the locators other than Smith and Grottschall for their supposed proportion of the discoverer’s share absolutely void, or were they valid certificates issued to the wrong parties ? ” ■
Tlio briefs which have been filed, however able and ingenious in argument, have failed to furnish any authorities bearing on this point.
After mature reflection we are inclined to think and so hold that certificates issued under the circumstances of this case are not void, but valid certificates. That when certificates for four thousand two hundred shares of stock had been issued to those who signed the trust deed, the powers of the trustees in this regard were exhausted.
That no more shares could be issued, and those issued should be held to represent the valid stock of the company, and should be good in the hands of any party receiving them by regular assignment and transfer on the books of the company. Here are, say, thirteen persons who unite in a deed of all their interest in a mining claim, which may be treated as a piece of real estate, embracing a certain number of feet' or acres of land. The trustees are to hold this for corporate purposes, and issue stock or certificates of stock to each of the grantors in proportion to their respective interests in the real estate. It is the interest of all the members of the corporation that the certificates thus issued by the trustees of their own choice should be negotiable in the market. At least, if they do not acquire all the qualities of negotiable paper, that the public may rely with certainty on the proposition that certificates of stock issued by the trustees of a corporation to those who unite in the trust deed, and not exceeding in number of shares issued the limit fixed by the act of incoporation, should ever afterwards be held as valid evidence that the bona fide holders thereof are stockholders to the extent shown by the certificates. Any other rule would be highly prejudicial to the general interests of mining corporations.
The original stockholders in such associations almost uni*431versally wisli to sell portions of their stock to pay assessments and develop claims. If those who deal in stocks are required to go back of the action of the trustees in distributing their certificates of stock, and ascertain that they have made no mistake as to the number of shares issued to each stockholder, it would greatly interfere with the transfer of stocks and the safety of those who deal in them. It would also operate very injuriously, as we have before stated, on the original shareholders, by making their certificates less negotiable. Indeed, we cannot see well how we could go behind the distribution of the trustees in regard to stock scattered among a number of the assignees of the original stockholders.
Suppose A, B and C form a corporation to contain three hundred shares, and convey their mining claim to a trustee or trustees, who are to hold the realty for corporation purposes, and issue certificates of stock to those who sign the trust deed. The trustee issues to A ten certificates of stock for ten shares each; they are issued at the same time, but numbered one to ten. A goes into the market and sells these different certificates, the first certificate he sells is No. 10, the last, perhaps, is No. 1.
After he has sold all his stock it is discovered that he was entitled to only ninety shares of stock, while he got certificates for one hundred; on the other hand, 0 was entitled to one hundred and ten and only got one hundred. Will the Court direct one of A’s certificates to be canceled and one of the same kind issued to 0? If so, which one will be canceled? All are in the hands of innocent purchasers. If it is proposed to cancel No. 10, as the last one issued and the one which was in excess of A’s just proportion, the holder might well say, although highest in number it was issued simultaneously with all his other certificates, and as A was undoubtedly entitled to ninety shares when he sold ten to me, my certificate should be held good.
If you propose to cancel certificate No. 1, the holder might well say, when this was issued, A was entitled to ninety shares. This was probably the very first certificate issued. Its number indicates that it was first signed and made out, though delivered simultaneously with nine other certificates. It being *432the first certificate in order, and knowing that A was entitled to some stock, I had a right to buy it without inquiring what other stock A may have sold.
To determine in such cases which stock should be canceled in the hands of an innocent holder would sometimes be impossible. The safest and most convenient rule, we think, is not to go behind the distribution made by the trustees when the stock has passed into the hands of innocent holders.
In other words, we hold that all stock issued' by trustees, under the circumstances of this case, must be held as valid stock. If the full number of shares was issued before the filing of their bill, the Court cannot order the issuance of additional stock, and, therefore, erred in refusing to permit appellant to prove all the stock óf the company was issued and in the hands of the stockholders. Eor this reason the case must be reversed and a new trial granted.
The Court below will allow either party desiring it to amend their pleadings, and bring other parties before the Court. 'With proper parties before the Court it would doubtless be competent for that tribunal to order those who originally obtained more shares than they were entitled to (if they still hold them) to assign the surplus shares to plaintiffs upon plaintiffs paying the amount of any assessments with legal interest, which the holders have paid.
Of course, if the holders of those shares have received dividends they must account for them. "Where the parties who have received the excess of shares are no longer stockholders to a sufficient extent to replace the stock improperly received, the company must make good to plaintiffs the value of the stock not replaced or purchase other stock to replace it. The criterion of damages will be the value of the stock when the decree is made. The plaintiffs will also be entitled to any dividends made on this stock, and will be chargeable with any assessments paid. This is a mistake of the trustees who were the mutual agents of all parties. For this reason the criterion of damages is different from the case where a party is deprived of his stock by a wrong-doer.
If- the company is compelled to pay for any portion of the *433stock, it will be entitled to indemnity from the parties wlio received and sold the excess of stock.
As new parties will probably be before the Court on tlie next trial of this case, who may wish to introduce other and new evidence about the discovery of the claim, the Court below will try the whole case de novo.