Topeka Manufacturing Co. v. Hale

Opinion by Clogston, C.: The correctness of the judgment of the court below depends upon the question whether or not Mills was a stockholder of the Topeka Manufacturing Company at the time of the contracting of the debts and the rendition of this judgment. If he was, then this judgment is correct. It is claimed by the plaintiff in error, (and the evidence on his part tends to establish that fact,) that some time after the organization of the Topeka Manufacturing Company, trouble arose between some of its officers and its president, and that plaintiff was induced to become a stockholder in the company for the purpose of being elected president of the company, and that for such purpose he subscribed for ten shares, of the value each of $100 of the capital stock, which subscription upon its face shows such subscription to have been unconditional; and after such subscription he was duly elected president of said corporation, and continued to act as such president until the 29th day of December, 1883. He alleges and claims that at the time of making said subscription there was a verbal understanding between himself and some members of the company that he should be relieved of his stock after the difficulties were settled in the company, and [26] that he paid on said stock and subscription but $150, being the first installment due thereon; that he was notified to pay the remainder of said stock, which he refused to do, and afterward his stock was canceled. He also claims that he afterward turned over his receipt for the money so paid to Mr. Bean, a stockholder in said company, and that Bean paid him $150 for his interest. The testimony of the secretary of the company shows substantially that no written notice was ever served upon the plaintiff in error notifying him to pay in the remainder of his assessments, or that his stock had been canceled, but does show that at some meeting of the directors of the company Mills was present, and by some mutual understanding it was agreed that Mills might turn over his interest to Bean, and that his stock might then be canceled; but no record was, made of this understanding, and in fact no resolution or motion was made to that effect. It was also shown that the corporation was at that time, and ever since has been, insolvent. Plaintiff’s first claim is that his subscription to said capital stock was conditional; and second, if not conditional, then it was canceled by his failure to pay the amount due on said subscription; and third, if not so canceled, then by the consent of the directors his stock was transferred to Bean, and he was released from liability. It further appears that the indebtedness upon which this judgment was obtained and execution issued was contracted after said claim of transfer of said stock from Mills to Bean. We are of the opinion that the claim of the plaintiff is not well taken. The stock books of the company, which were offered in evidence, clearly showed that the subscription was made unconditionally. He subscribed for ten shares of the stock, and agreed to pay the amount due on said subscription to the company; no qualification is attached to it, and no mere understanding, in fact no action of the board of directors, could cancel this subscription or change its effect, or release the plaintiff from liability, except for non-payment. The power to release from liability as a stockholder can only be exercised by the stockholders, or by [27] the directors of a company by the authority of the stockholders; and nothing of that kind was shown in this case. The evidence shows that there was no cancellation; no record of any such transaction was shown to exist; and while it is claimed on the one hand that there was a mutual agreement that the stock should be canceled, yet after that we find plaintiff attempting to transfer to Bean whatever interest he may have had, and claiming himself that Bean paid him $150, the amount paid on said stock by him. This then shows that plaintiff did not understand that this stock was canceled by reason of non-payment. If it was canceled for non-payment, the amount paid in on the stock would have become the property of the company, and neither Mills nor the directors of the company could have transferred or given credit for that sum to anyone else; and any contract or arrangement of that kind, by which it was to be transferred to Bean after it was canceled, would be ultra vires. Then, was there a transfer? The statute provides how stock may be transferred, and that it can only be done upon the books of the company. Now there is no pretense in this case that a transfer on the books of the company had ever been made; the stock in fact was never issued, and no transfer of the right to receive the stock is shown by the record to have been transferred to anybody. What arrangement Mills may have had with Bean was a matter between themselves. Mills could have directed that the stock be issued to Bean, if he wished to, but that would not have released him. Bean may have agreed to release Mills by the payment of this $150; that was a contract between themselves. Bean may be liable on that contract to Mills; but if he is, that would not protect Mills in this action. We are therefore of the opinion that the findings of fact by the court are sustained by the evidence. It was a question of fact to be found by the court, and its findings of fact upon the evidence are conclusive. We therefore recommend that the judgment of the court below be affirmed. By the Court: It is so ordered. All the Justices concurring.