Pietsch v. Krause

Cassoday, C. J. The first ground of demurrer is that the amended complaint fails to state a cause of action in equity in favor of the plaintiffs for the benefit of the corporation. This is put upon the ground “that none of the plaintiffs are holders of any valid stock in the corporation”; that “every certificate of stock held by every plaintiff is, under our stat [349] ute, absolutely void.” Tbe reason for tbis claim is that tbe respective plaintiffs only paid for tbeir stock at tbe rate of $34 per share. In support of sucb contention counsel rely upon tbe statute, wbicb declares: “No corporation shall issue any stock or certificate of stock except in consideration of money, or labor or property estimated at its true money value, actually received by it, equal to tbe par value thereof, . . . and all stocks . . issued contrary to tbe provisions of tbis section . . . shall be void.” Sec. 1153, Stats. 1898, and sec. 1, cb. 193,. Laws of 1899. Whether sucb claim of counsel can be maintained depends upon what is meant by tbe words “no corporation shall issue any stock or certificate of stock,” and that “all stock issued contrary” to that section “shall be void.” There can be no mistake as to tbe meaning of tbe words “certificate of stock.” Another section of tbe statute provides: “Tbe capital stock of every corporation, divided into shares, shall be deemed personal property, and when certificates thereof are issued, sucb shares may be transferred by indorsement of tbe owner . . . and delivery of tbe certificate.” Sec. 1151. Tbe section then provides for tbe delivery and transfer of such stock certificate. See Morey v. Fish Bros. W. Co. 108 Wis. 527, 528, 84 N. W. 862. Another section of tbe statute provides for tbe punishment of tbe issuance of a false certificate of stock. Sec. 4436. As recently stated by Mr. Justice Dodge, the object of sec. 1753 is to protect those dealing with corporations, “rather than those dealing in stock certificates.” First Avenue L. Co. v. Parker, 111 Wis. 7, 86 N. W. 606. It is stated by a standard author: [350] <ckises. It operates to transfer nothing from tbe corporation to tbe shareholder, but merely affords to the latter evidence of his rights. It should be clearly apprehended that the ■.certificate is not the stock, but merely written evidence of the ownership of shares. . . . The certificate, therefore, has value in itself only as evidence, and, apart from the shares which it represents, it is utterly worthless.” 1 Cook, 'Stock & Stockk. & Corp. Law, § 14 [349] “A certificate of stock is, from one point of view, a mere muniment of title, like a title deed. It is not tbe stock itself, but evidence of tbe ownership of tbe stock; that is to say, it is a written acknowledgment by tbe corporation of tbe interest of tbe shareholder in tbe corporate property and fran- [350] The question recurs whether the words of see. 1753 prohibiting the "issue” of “any stock,” and declaring “all stocks . . . issued contrary” to that section to “be void,” mean ■.anything different than a mere certificate of stock. In the sec•tion of Cook cited it is said that “it is not essential to the existence of the corporation that certificates of stock shall be issued,” and he speaks of the issue of stock as the issue of a certificate of stock. “The capital stock of a corporation is the money or property put into the corporate funds by the subscribers for their stock, which fund becomes the property of the corporation. A share of said capital stock is the right to partake, according to the amount put into the fund, of the surplus profits, •.and, upon dissolution of the corporation, of the fund remaining after payment of debts.” Burrall v. Bushwick R. Co. 75 N. Y. 211. “The interest of a stockholder in the corporate property •represented by his stock is nothing more than a pro raía share in the property of the company remaining after the payment of debts and expenses, with the intermediate right to share in the profits.” Van Brocklen v. Smeallie, 140 N. Y. 78, 35 N. E. 415; People ex rel. Wiebusch & H. Co. v. Boberts, 154 N. Y. 101, 47 N. E. 980; Flynn v. Brooklyn C. R. Co. 158 N. Y. 504, 53 N. E. 520. It is said in a Massachusetts case: . “The certificate, though convenient as evidence of title, does not itself constitute the title. The certificate is not :the stock. ... A share in a corporation is a right to participate in the profits, or in a final distribution of the corporate property, pro rata." Field v. Pierce, 102 Mass. 261. [351] Our statute cited declares that the “capital stock,” when “divided into shares, shall be deemed personal property,” and then prescribes the functions of certificates. Sec. 1751. Another section of the statutes contemplates that a cofporation may transact business with its own members before it is at liberty to transact business with others. Sec. 1773. We must hold that the words “issue any stock” and “'all stock . . issued,” in sec. 1753, mean the same, in effect; as the words “certificate of stock.” The distinction between stock in a corporation and a certificate or evidence of a right to such stock was not observed in Clarke v. Lincoln L. Co. 59 Wis. 655, 18 N. W. 492, nor Hinchley v. Pjister, 83 Wis. 64, 53 N. W. 21. In the first of these cases the action was to recover back money paid upon a contract void as against public policy. The other case related to bonds actually issued contrary to the statute, and void, and it was held that the plaintiff had no standing in equity upon several grounds. In so far as that case may be regarded as holding that persons who have subscribed for stock in a corporation and paid in their money, although not the full amount required by sec. 1753 of the statutes, can have no protection in a court of equity against promoters who have defrauded the corporation, it must be regarded as overruled. Under the repeated rulings of this court, we must hold that the complaint states a good cause of action, in equity, in favor of the plaintiffs for the benefit of the corporation. Pittsburg M. Co. v. Spooner, 74 Wis. 307, 42 N. W. 259; Fountain Spring P. Co. v. Roberts, 92 Wis. 345, 66 N. W. 399; Forest L. Co. v. Bjorkquist, 110 Wis. 551, 86 N. W. 183, and cases there cited. The complaint prays judgment in behalf of the corporation for the amount of the moneys which the defendants severally subscribed and pretended to pay in, but never in fact did pay in. 2. Another ground of demurrer is that two or more causes •of action are improperly united. It becomes important, [352] therefore, -to determine whether there is another good cause-of action alleged in the complaint which ought not to be joined with the one mentioned for the benefit of the corporation. The complaint also prays judgment “that the plaintiffs have and recover of the defendants any damages and losses sustained by them by reason of the fraud and deception aforesaid, to be fixed and determined by the court.” There are-numerous allegations in the complaint to the effect that the plaintiffs were deceived and defrauded by false representations knowingly made by the defendants as to the purchase-price of the lands, and upon which the plaintiffs relied, and were thereby induced to subscribe for stock in the corporation, and pay therefor $34 per share. This cause of action is one at law for damages and losses sustained by the plaintiffs. The complaint also prays judgment “that said board of directors and the defendants be restrained and enjoined from selling, advertising, or offering for sale the stock of the plaintiffs, or any part thereof, or any interests of the plaintiffs in said corporation, to pay said assessment levied as here-inbefore set forth, until the further order of the court.” This is a cause of action in equity to prevent the board of directors and the defendants from enforcing the collection of an assessment of the stock of the plaintiffs, and to enjoin the-board and defendants from making such collection by the sale of the stock of the plaintiffs. The complaint also prays judgment that the defendants be restrained from selling their own stock, or any part thereof. This may, perhaps, be regarded as ancillary to the first cause of action. Whether it is or not is unnecessary to here determine. There are at. least three good causes of action improperly united. By the Gourt. — The order of the superior court of Milwaukee county is reversed, and the cause is remanded, with direction to sustain the demurrer, and for further proceedings according to law.