Kimball v. New England Roller Grate Co.

Blodgett, C. J. In any permissible view, the validity of the issue of the 813 shares cannot be sustained. Numerous reasons lead to this conclusion. One is, that these shares constituted a part of the 1,497 shares, the issue of which is found by the referee upon competent evidence to have been without consideration and void. Such being the fact, that issue must be regarded as if it had never been made, and consequently no part of the shares constituting the issue could be reissued, even to bona fide purchasers, except upon payment of the par value, or $10 per share, unless at auction for non-payment of assessments; whereas, the sale'to Williams was for $4.50 per share. “ No corporation shall sell' or dispose of any of the shares of its capital stock at a price less than the par value thereof, except in sales of shares at auction for non-payment of assessments ” (P. S., c. 149, s. 9); and “ if a corporation . . . issues certificates of stock when the par value of the shares represented by the certificates has not been fully paid to its treasurer, all certificates issued for such unauthorized stock shall be void.” lb., c. 273, s. 11. Another reason is, that the shares were issued to Williams for the purchase of patents to engage in business outside of New England, contrary to the corporation articles of agreement, foreign to the businéss in which the corporators and their succes *489 ;sors, the stockholders, agreed to engage, and which could not be changed without the consent of all the stockholders. Dow v. Railroad, 67 N. H. 1-68. The contract with "Williams was never •submitted to the stockholders for approval; nor is there any-ground to claim that the plaintiffs in any manner assented to it. Still another reason is, it is found as a fact that the Williams contract, on account of which the shares in question were issued, was not an advantageous one for the corporation and was fraudulent in fact. As such, it will be set aside upon a bill in equity in behalf of a non-assenting stockholder. Pearson v. Railroad, 62 N. H. 537. And not only will the contract be set aside,’but us the issue of the stock was in connection with and constituted .a part of the same fraudulent transaction, it was not simply illegal as to Williams, but it was also illegal as to Stillings, Tuttle, and Ames, who, it is found, were not purchasers for a valuable consideration; and consequently it is the right of the plaintiffs to have their certificates cancelled. Finally, it may be observed that even if the defendants’ contention'— that the transfer of the 1,497 shares from Johnson and Williams was a gift to the corporation and subject to the order and disposition of the directors — be adopted, it cannot avail them, because the directors would in that case be bound to execute the trust in good faith and for the best interests of the corporation. They could neither give away the stock, sell it less than par, nor for engaging in business outside that specified in the corporate articles of agreement. In the second case it is apparent that the quo warranto proceeding, if sustained, will result in little or no practical benefit, for the reason that the defendants’ term of office is so near its expiration; but without regard to this consideration (as to which see Morris v. Underwood, 19 Ga. 559; People v. Sweeting, 2 Johns. 184; State v. Jacobs, 17 Ohio 143), or to the further one of the plaintiffs’ motives (State v. Brown, 5 R. I. 1; Rex v. Dawes, 1 W. Bl. 637), we are of opinion that the information must be dismissed. It is found by the referee that at the animal meeting of the corporation on May 3, 1898, the defendants voted 1,598 shares, and the plaintiffs, 1000. Deducting the 813 shares of Stillings, Ames, and Tuttle, 785 shares, to which no objection was then or is now made, were voted by and for the defendants. But 500 shares voted for the plaintiffs by the Eiders (and acquired by them under circumstances which should at least have put them upon inquiry) were illegaly voted, because it is found that they had been originally sold by the company less than par, in violation and contravention of the statute provisions before cited. See, also, Clark v. Lumber Co., 59 Wis. 655; Clark v. Pease, 41 N. H. 414, 422. Deducting these 500 shares, here was a valid *490 majority against the plaintiffs on all motions, elections, and other matters at the meeting. This being so, the election will not be set aside. It is superfluous to cite authorities to such a proposition, but see 1 Cook Stock '& Stockh., s. 620, and 1 Mor. Corn., s. 485. Decree for the plaintiffs in the first case. Information dismissed in the second case. Peaslbe, J., did not sit: the others concurred.