Ruffner v. Sophie Mae Candy Corp.

Stephens, J. 1. “A corporation does not reduce its capital stock . . by purchasing shares thereof, where it does not retire them, but sells and transfers them to others or holds them ready for such sale and transfer.” 14 C. J. 492. 2. Where a corporation, before executing a contract by which it purchases 516 shares of its own capital stock for a consideration of $40,000 (of which sum it pays in cash $20,000, and for the balance of which it executes notes), has received from a prospective purchaser of its capital stock $25,000, which he has deposited with it for the purpose of being applied upon the purchase of 500 shares of the stock, for which he agrees to pay $35,000, and where the stock purchased by the corporation is purchased not for the purpose of being extinguished or retired, but for the purpose of being reissued or resold, and where the corporation, after purchasing the 516 shares, provides for an increase of its capital stock from $100,000 to $150,000, accepts the offer of the prospective purchaser for 500 shares, retains the money deposited, and issues the stock, and where at the time the outstanding capital stock of the corporation amounts to $77,350, the transaction does not amount to a reduction by the corporation of its capital stock below the minimum of $60,000 provided in its charter. 3. A corporation which is not insolvent may in good faith and to serve its best interests accept the resignation of one of its officers as its president, and, in consideration of his resignation, purchase from him his shares of the capital stock of the corporation at an agreed valuation, [115] where the stock is not retired but is held for resale or reissue. Joseph v. Raff, 82 App. Div. 47 (81 N. Y. Supp. 546) ; Gilchrist v. Highfield, 140 Wis. 476 (123 N. W. 102, 17 Ann. Cas. 1257) ; In re Castle Braid Co., 145 Fed. 224 (3) ; Copper Belle Mining Co. v. Costello, 11 Ariz, 334 (95 Pac. 94). Decided February 26, 1926. 4. A stockholder owning a majority of shares of the capital stock of a corporation may,- at a stockholders’ meeting regularly held, bind the corporation to contract with him for the purchase of his property, provided the contract is made for a fair consideration representing the true value of the property, is not detrimental to the interests of the minority stockholders, and is not the result of fraud. 7 R. C. L. 309; Wheeler v. Abilene National Bank Bldg., 159 Fed. 391 (89 C. C. A. 447, 16 L. R. A. (N. S.) 892, 14 Ann. Cas. 917); Gamble v. Queens County Water Co., 123 N. Y. 91 (25 N. E. 201, 9 L. R. A. 527). 5. It does not appear as a matter of law that the plaintiff obtained the contract by fraud. 6. There being evidence to authorize the inference that the notes sued on, which were given by the corporation for the purchase price of its own capital stock, were, under the above rulings, valid and binding obligations against the corporation, the court erred in directing a verdict for the defendant corporation in the suit upon the notes, and also in directing a verdict for the plaintiff upon the corporation’s counterclaim against him. 7. See McGregor v. Fitzpatrick, 133 Ga. 332 (65 S. E. 859, 25 L. R. A. (N. S.) 50, note); Dalton Grocery Co. v. Blanton, 8 Ga. App. 809 (70 S. E. 183). Judgments in both cases reversed. Jenkins, P. J., and Bell, J., concur. Neufville & Neufville, Colquitt & Conyers, for Ruffner. Horace Bussell, WatTcins & AsbiTl, for Sophie Mae Candy Corporation.