Gresham v. Island City Savings Bank

WILLIAMS, Associate Justice. Van Sickle and Corbin were stockholders in the Island City Savings Bank at the time of its suspension of business in January, 1885. After the failure of the bank a proposition was made to a meeting of its stockholders by S. Heidenheimer and others, which was, in substance, that if the owners of all of the stock of the bank would transfer and deliver to the signers of the communication all of the shares, and if the creditors of the bank would consent to accept 74 peícent of the amounts due them in full settlement, such signers would provide the sum of $100,000 for the purpose of carrying on the business of the bank, under a new organization and by the issuance of new stock, *56 under the charter of the bank, and would settle the debts on the proposed basis. It was also proposed, that ten days be allowed in which the stockholders and depositors might subscribe for the $100,000 of new stock, and that the proposers would take such balance as might be left untaken at the expiration of that time. By resolution this proposition was accepted by the unanimous vote of the meeting, at which more than three-fourths of the stockholders were present, and the directors were authorized to do all that was necessary to carry into effect the proposed arrangement. The resolution recited that the stockholders should surrender their certificates for such disposition as Heidenlieimer and his associates might see proper to make, and directed that such stockholders deliver their certificates transferred in blank to the Island City Savings Bank, that they might thereafter be disposed of to carry out the object in view. Thereafter, on February 21, 1885, the board of directors by resolution authorized the president and cashier of the bank to transfer and deliver to Heidenkeimer and his associates all the property of the bank, in consideration of their undertaking to settle with the creditors. The property was in fact delivered to the subscribers of the proposition and they discharged the debts, raising $22,000 as a donation to aid in so doing, the assets lacking that amount to pay 74 per cent of the liabilities. All of the old stockholders, except Corbin, Van Sickle, and one other, surrendered their stock as contemplated by the proceedings. One thousand shares of $100 each of what is called the new stock were issued, some of which were taken by old stockholders and the remainder by others. The holders of this new stock assumed control of the bank, treating it as the only stock of the corporation entitled to recognition. On March 10, 1885, the directors of the bank, by resolution, undertook to make an assessment of 8100 on each share of the original stock, and declared that unless payment thereof was made in thirty days by the owner of said stock, it should be thereafter forfeited, and new stock was authorized to be issued and sold in lieu thereof. Notice was given to Corbin and Van Sickle of this action. Neither of them was present at any of the meetings, and never in any way consented to or ratified the action of the other stockholders and board of directors. They had paid in full for their stock, and advanced no additional sum and took none of the new shares. The charter of the organization authorized its capital stock to be increased to $200,000. Before the proceedings above recited there were 1141 shares of $100 each, all of which had been fully paid for. Corbin and Van Sickle, in 1889, transferred their certificates to appellant. He made demand of the defendant company for the transfer to be made upon the books and for recognition as a shareholder. This was refused, and he brought this suit *57 to compel the bank to execute such transfers and to reinstate him as a stockholder; and in case that could not be done, to recover damages for the conversion of his stock. The defendant answered, and all of the holders of new stock intervened, setting up the proceedings above stated in bar of the action. The court below instructed the jury to find for appellant the highest market value of thirty-two shares of stock between the time of conversion and the trial, and to deduct therefrom 8100 per share, with interest from 1885, in order to put him on an equal footing with the intervenors. The jury found for appellant 8448. We think it clear that the actions taken by the stockholders and directors of the bank did not have the effect to cancel the stock held by Corbin and Van Sickle. Without their consent their shares could not be thus forfeited. 1 Mora, on Priv. Corp., 208. Having paid the par value of the stock, it was not subject to further assessment for any purpose. Id., 131. The existence of the corporation, with the powers conferred by its charter, continued, notwithstanding the insolvency of the bank and its consequent suspension of business, and the legal rights of individual shareholders could not be taken from them by the majority, however large, and the attempt of such a majority was beyond the power of the corporation. Bank v. Sachtleben, 67 Texas, 425. The shares upon which this suit is based, therefore, continued in full force, notwithstanding the declaration that they were worthless and would be considered cancelled. By the arrangement, however, between the promotors of the new organization, if such it may be called, and those shareholders who assented to the proposition made to them and surrendered and transferred their stock, the former acquired all the rights which such stock represented; and in order to arrive at the right of appellant it is necessary to take the old stock thus transferred into consideration. For it can hardly be contended that by such transfer and surrender Corbin and Van Sickle acquired any additional interest in the concern. It seems equally true that they are not entitled to be placed upon an equal footing with the holders of new stock; for these acquired all the rights of the other old stockholders "and contributed 8100,000 to the capital stock with which the business was resumed. Thus the new shares when issued represented both the rights of the old stockholders who transferred their shares, and those acquired through the new subscription. Counsel for appellant, in their brief, treat the issuance of the new certificates as being, in legal effect, an increase of the capital stock under the power given in the charter; and for the purpose of ascertaining the relative rights of appellant and other stockholders, this seems to us the true light in which to regard it. But if we should hold that appellant’s shares are equal to the others, this *58 would give to the transaction the effect of a reduction of stock; for there would then be only 1036 shares of $100 each, whereas there were formerly 1141 shares of the same denomination. It is evident that the purpose of the negotiation was that Heidenheimer .and those acting under him should secure all the rights of the old stockholders, and also an interest equal to their subscription of $100,000. They did acquire the interest of all holders of stock who assented. The new stock was then issued to represent all of the rights which thus arose. This was binding on the holders of the old stock who gave their assent, creditors were all satisfied, and the rights of Corbin and Van Sickle were therefore as 32 to 2141. It is true, if 1000 shares in addition to 1141 had been actually issued, this would exceed the maximum limit fixed by the charter for the capital stock. This was not really done. By the consent of all persons concerned, but the three nonassenting members, the stock was fixed at $100,000, represented by 1000 shares. It is necessary to ascertain the proportionate interest which appellant’s stock continued to represent as against the holders of the new stock, and this is arrived at in the way indicated. The questions remain, Is the appellant still in an attitude to maintain his right as a stockholder, and if so, what relief should be granted to him ? Appellee contends that appellant’s assignors should be held to have acquiesced, by their delay to sue, in the action by the stockholders and directors. They did nothing affirmatively showing an intent to do so. The acceptance by Corbin of the money paid him as a creditor of the bank can not be held to have such effect. The nature of the demand made upon them was such as to call for positive action, rather than mere silence, to signify assent to the transaction. Their failure to transfer and surrender their stock prevents any inference of acquiescence from their silence. As to their failure to sue, the statute of limitations prescribes the time which would constitute a bar. The well settled principles of equity, by which a party may be precluded by loches from attacking unauthorized acts of a corporation of which he is a member, do not apply to the facts of this case. Because of such delay, however, if for no other reason, we think the aid of equity to reinstate him in the enjoyment of the • privileges of a stockholder should be withheld. The managers of the bank have been allowed to go on and establish its organization in accord.anee with the arrangements made in 1885; the business of the bank is doubtless readjusted to the conditions arising out of them. The consequences of forcing appellant into the corporation as a shareholder upon the basis of his right, as we find it to be, may not be easily foreseen. He can be compensated in money for any damages which he has sustained, and we think, under the circumstances, that should be his remedy. The measure of damages should be the value of the stock, treating it as 32 *59 shares in 2141, at the time of its conversion, with legal interest thereon to the date of trial. A majority of the court hold, that under the facts of this case, such conversion took place at the date of demand by appellant for recognition- as a stockholder and the issuance of certificates to him, and the refusal of defendant to accord to him such right. The value at that time should be ascertained and form the basis of recovery at another trial. Cook on Stock and Stockh., sec. 581, and notes. Plaintiff’s exceptions to the plea of intervention should have been sustained, in the absence of allegations showing that the defense would not be properly conducted by the defendant. The stockholders are not ordinarily proper parties in such a case. From what we have said, it follows that the court should have sustained plaintiff’s exceptions to the third and fourth subdivisions of defendant’s answer, in which the resolutions of the board of directors attempting to assess and cancel the stock were relied on as a bar to the action. The defendant, however, adopted the plea of interveners, and the proceedings of the stockholders’ meeting therein set up, showing the proposition of Heidenheimer and others, and its acceptance, while constituting no bar to the suit, are proper to be considered in determining the rights thereby acquired, as we have defined them, as are all other facts affecting that question. Upon the written transfers of the stock appellant was entitled to maintain the action. He acquired only such rights as his assignors had, and he can not be considered an innocent purchaser. Evidence therefore as to the agreement with his assignors, under which he acquired the certificates, under present issues, would be immaterial. While we have not followed in their order and in detail the points raised in the briefs, what has been said disposes of all 'questions necessary to a decision. ■ The judgment will be reversed and the cause remanded, in order that inquiry may be made as to the value-of the stock at the date of conversion as above indicated. That seems to be the only issue that needs to be submitted to the jury. Reversed and remanded. Delivered January 19, 1893.