Wells v. Green Bay & Mississippi Canal Co.

Pinney, J. 1. The vital point in this case is whether the plaintiff’s ninety-two shares of stock in the defendant corporation were full-paid when the corporators had conveyed or caused to be conveyed to the company the property they had purchased at the foreclosure sale, and had executed the declaration and agreement of September 11, 1866, stating and defining their respective contributions to and proportionate interests in the property and franchises of the company. The plaintiff’s interest was therein stated to be of the entire property, or three shares, equal to ninety-two shares of the capital stock of the corporation. Provision having been made for the completion of the works of improvement and the payment of the evidences of state indebtedness, as provided by ch. 289, Laws of 1861, the purchasers, as authorized by the second section of that — 449 — act, sealed and acknowledged a certificate of incorporation, and filed it with the secretary of state August 15, 1866, by which they declared their acceptance of the rights, franchises, etc., granted and conferred by that act, and that they united and formed themselves into a corporation under it for the purpose and with the powers therein expressed, “ that the capital stock of the corporation so formed and created is $1,000,000, divided into 10,000 shares of $100 each.” . It named nine directors, and made provision for partition among them of certain lands, granted by the state and by the United States and bid off at said sale, not required for the public improvement of the company and for the purposes of its water power. This certificate or agreement of incorporation did not contain any provisions on the subject •of stock subscription or for issuing any stock, either common, preferred, or special, nor did it or the act define in any manner the powers and authority of the directors. The agreement as to the division and conveyance to the said purchasers of their respective proportionate shares of said lands was carried into effect upon the basis of the declaration of September 11, 1866, and the plaintiff received a conveyance of his proportionate share, of the whole. It is a conceded fact that, exclusive of these lands, the property retained by the corporation, and so conveyed to it, consisting of canals, improvements, etc., had cost over $1,000,000, and that the lands thus divided had been bid off at about $135,000 of the purchase price of the entire property, which, was $326,086.30. Subsequently, and on the 26th of September, 1866, the directors passed resolutions, in substance, that the whole capital stock be distributed among the incorporators in proportion to their cash contributions for the purchase of the property; that no scrip or certificate should be issued for such stock until $5 per share should be paid in by the cor-porator or his assigns, on or before December 4, 1866, when — 450 — a certificate should be issued to the person entitled thereto that eighty-five per cent, had been paid on account of said stock, and that the same “ is subject to further calls of $15, in the aggregate, per share, in not more than $5 at a time,” and if the payments thus required and to be required were not made within sixty days after notice and demand by the treasurer, then such stock should be forfeited to the use of the company. Subsequent calls to the first were made, with it, in all, amounting to twenty per cent. April 16,1868, the directors passed a resolution reciting that two calls had been made on the stock standing in the names of A. G. Binninger and of the plaintiff, and that, if not paid with interest within ten days after notice by mail from the president, the said stock “ should become and is hereby declared forfeited to the company.” The imposition of $20 per share is pleaded and sought to be maintained, both on the ground that it was for lawful calls on the stock, and that it was a valid assessment. It does not appear that there was any stock subscription prepared or made, or that the corporation had passed any bylaws. The contract relations between the corporation and its stockholders depend wholly on the certificate of incorporation signed and acknowledged by them and the instrument of September 11, 1866. It does not appear that they ever after acted in an aggregate capacity on that subject, or that they ever delegated any authority to the directors to act for them. The act under which the corporation was organized (Laws of 1861, ch. 289, sec. 2) provided that the purchasers at the sale might form a corporation “ by filing in the office of the secretary of state a certificate declaring the name of the said corporation, the amount of the capital stock and the number of shares into which the same shall be divided, and what portion, if any, shall be entitled to a preference in dividends or otherwise, the number of the directors and the names of the directors for the first year; . . . and — 451 — upon the filing of such certificate the persons who shall have signed the same shall he a body politic and corporate, by the name stated in said certificate. . . . The said corporation shall also have power to create special stock, in addition to the capital stock mentioned in the said certificate, and to issue the same in payment and discharge of such obligations of the said Fox & Wisconsin Improvement Company as the said corporation may, by the consent in writing or by vote of a majority in interest of its stockholders, assume to pay and discharge, which special stock shall be entitled to dividends in such cases, at such times, and to such amounts, and to such privileges only, and shall be subject to such conditions, restrictions and liability to assessments and forfeiture as shall be prescribed and provided by the act or resolution of said corporation creating such stock.” After the apportionment and conveyance of its lands, as provided, the resources and prospects of the corporation were in such a depressed condition that its stock was not worth, in the market or for sale, to exceed five or six per cent, of its face value, although it had power to issue preferred stock, which is usually issued by companies which have expended their original capital for the purpose of obtaining other capital, and the affairs of the corporation are in that situation that the stockholders are unable or unwilling to risk any more money in the enterprise, but yet are willing to give those who will do so a preference as to future profits (2 Beach, Priv. Corp. § 497; Lockhart v. Van Alstyne, 31 Mich. 76; New York, L. E. & W. R. Co. v. Nickals, 119 U. S. 308, 311); and it had the power to create “ special stock ” subject to assessment, by consent in writing or vote of the stockholders. There is nowhere, either in the statute under which the corporation was organized, or in its articles of organization, anything to indicate any other conclusion than that the common stock of the company was to be regarded as full-paid, in consideration of the conveyance to the company — 452 — of the property purchased by the incorporators. It seems clear that the stock was based on the property so conveyed at $1,000,000 in 10,000 shares of $100 each. The stock contract between the incorporators was embodied in their certificate or agreement, and the plaintiff became and was the absolute legal owner of ninety-two shares of stock, the equivalent of his -yf-g- interest in the entire property, and entitled to a certificate of that fact immediately upon the organization of the company. No authority was conferred by the act under which the company was organized to raise any capital other than that so contributed, except by preferred or special stock. There is nothing to show that it was ever intended by the incorporators, as such, that they should ever pay any other sum. or consideration for the shares to which they became respectively entitled than the transfer to the company of the property purchased and owned in the proportion stated, except that, perhaps, they had an option to issue some part thereof as preferred stock; but no such action appears to have been taken. The conveyance to the company was, in any event, a sufficient consideration, as between the stockholders and the corporation, for the issue of the stock as full-paid. None but creditors could be heard to object to its adequacy, if, in such case as the present, 'that question could be mooted at all, and then only on the ground of fraud. Beach, Priv. Corp. §§ 559, 561; Scovill v. Thayer, 105 U. S. 153. There is a distinction between the capital and the capital stock of a corporation. The capital of a corporation is the property of means which the corporation owns, and it may vary in amount, while the capital stock is fixed, and represents the interests of the stockholders, and is their property. Van Allen v. Assessors, 3 Wall. 573, 584; Wetherbee v. Baker, 35 N. J. Eq. 505; People v. Comm’rs, 4 Wall. 244; People ex rel. Union T. Co. v. Coleman, 126 N. Y. 433, 437; Burrall v. Bushwick R. Co. 75 N. Y. 211. In Bailey v. Clark, 21 — 453 — Wall. 286, it was said by Field, J., that: “The term ‘capital’ applies o'nly to the property or means contributed by the stockholders as the fund or basis for the business or enterprise for which the corporation or association was formed.” The property conveyed to the corporation became its capital; and, as there was no provision or agreement by which the incorporators or others were to make other or further contributions, except upon the issue of preferred or special stock, we hold that the stock of the corporators was full-paid, to the entire amount specified in the certificate of incorporation. The company had no right to withhold from the plaintiff a certificate of his ninety-two full-paid shares. For want of special authority for that purpose, the directors had no power to make calls or assessments on his.stock,.or to subject it to sale or forfeiture for nonpayment. He had not entered into any such contract, or consented to or conferred upon them-any authority for that purpose; and without such consent or authority such calls or assessments were absolutely void. 1 Morawetz, Priv. Corp. §§ 55, 56, 122, 130, 131; Perrin v. Granger, 30 Vt. 595; In re Long Island R. Co. 19 Wend. 37. Liability to calls is the result of contract, such as an agreement of subscription or the like. The power to make assessments is wholly statutory. Beach, Priv. Corp. § 590. The evidence does not show that the plaintiff ever consented to or affirmed the action of the directors. 2. It was not essential to the title of the plaintiff to his ninety-two shares that he should have had a certificate of his ownership of them. It was a convenience, not a necessity. There was no adverse claim or holding of the shares until the defendant corporation denied his right to them, less than a year before this action was commenced. Until then he had- no right of action to compel the execution and delivery of the proper certificate. There is no ground for saying that he had lost a strictly legal right to the shares — 454 — by estoppel 'for laches, or that it had been, barred by the Statute of limitations. The title to the shares has been all the time in the plaintiff, and upon demand it became and was the duty of the defendant to furnish him with the appropriate evidence of it, independent of the records of the company. Por these reasons, the case of Rogers v. Van Nortwick, 87 Wis. 414, is not applicable. As stated by Campbell, J., in Kobogum v. Jackson Iron Co. 76 Mich. 498: “ The corporation held all its property in trust for the parties interested, and whether treated as tenants in common Or as stockholders could make no particular difference. There is no law which terminates .the interest of a stockholder without some adverse action asserting its extinguishment or denying its existence, or which compels him to seek aid from courts when no such adverse position, is taken.” 3. The directors, though not necessary, were proper parties defendant, to enable the plaintiff to obtain discovery under sec. 4096, R. S. Story, Eq. Pl. (10th ed.), § 235; Wood v. Union G. C. B. Asso. 63 Wis. 9. If it appeared that they refused from improper motives to direct the issue of the certificate, they might be charged with costs. The appeal is jointly by all the defendants, and it appears all were jointly charged with costs; but before it was taken the judgment for costs against the directors had been released, and they cannot now complain of the judgment. 4. At or about the time the plaintiff offered to pay the company such siim as would make his contribution substantially equal to those of other stockholders, one of the stockholders, Mr. Smith, an officer and director of the company, was allowed a certificate, as assignee of Binninger, for the 122 shares of Binninger’s stock, upon which no part of the twenty per cent, calls had been paid, upon the payment to the company of $14.52£ per share,— in all, $1,772.52. The Circuit court, acting doubtless upon the ground that equality is equity, and that directors who are trustees for all would — 455 — not make any unfair discrimination between the stockholders, made it an equitable condition of giving judgment for issuing to the plaintiff a certificate of his ninety-two shares that he should first pay to the defendant company, or to its use, at the same rate on his shares,— in all, the sum of $1,335.86. It is now claimed that, upon a proper computation, a much larger amount should have been adjudged to be paid by the plaintiff; but, as the alleged calls or assessments were absolutely void, we do not think the defendant company is in any position to complain of the judgment in this respect. It follows that the judgment of the circuit court is correct. By the Court.— The judgment of the circuit court is affirmed.