Whitewater Tile & Pressed Brick Manufacturing Co. v. Baker

Winslow, C. J. There is no express allegation that there was any overissue of stock, nor can that fact be legitimately inferred from anything stated in the complaint; therefore it must be assumed that the six shares of stock issued to the defendant were legally issued except for the fact that they were not paid for. The simple question presented, therefore, is whether the corporation may elect to affirm the transaction, treat the stock as valid, and sue the person who received the stock either for the par value or for the par value and the profits made by him on its resale. As to the recovery of the par value at least, we can entertain no doubt. It is true that sec. 1753, Stats. (1898), forbids the issuance of stock “except in consideration of money or labor or property, estimated at its true money value, actually received by it, equal to the par value thereof,” and provides that all stock not so issued shall be void; but this does not mean that every stock subscription must be paid in full before the subscriber becomes a stockholder, but only that the consideration paid or to be paid must be equal to the par value. The statutes contemplate that stock may be sold in part at least upon credit, and that the balance due may be called in from time to time, and even that such stock may be transferred and the original holder released from liability for the amount unpaid thereon. Secs. 1754, 1756, 1757, Stats. (1898); Shannon v. Stevenson, 173 Pa. St. 419, 34 Atl. 218. [423] This court held in Haynes v. Kenosha E. R. Co. 139 Wis. 227, 119 N. W. 568, 121 N. W. 124, that the word “void,” as used in this section, did not mean, incapable of validation, but that bonds issued in violation of the section could be thereafter validated by payment of full consideration therefor. The same reasoning applies with equal force to stock. If, therefore, Mr. Baker at any time before suit brought had paid for this stock it would have been validated. Such being the case, it is impossible to see why the corporation, after knowing the facts, might not elect to ratify the transaction (the stock not being an overissue), treat the stock as validly issued, and sue to recover what the defendant .owes on the basis that the stock is valid. In such an action the defendant could not be heard to say that the stock was void simply because of his own wrongful act. He would be taking advantage of his own wrong. Nor does the case of First Avenue L. Co. v. Parker, 111 Wis. 1, 86 N. W. 604, lay down any different doctrine. That was an action against the bondsmen of a secretary of a corporation to recover the value of stock issued to himself without consideration and alleged to have been sold to innocent purchasers. There having been no validation of the issue of the stock by payment of its price or by action of the corporation, it was held that no injury to the corporation was shown, because the stock was void in whosesoever hands it was. The distinction between the two cases is manifest. Whether the defendant, being an officer of the corporation, may be compelled to account for profits made by him upon his resale of the stock over and above the par value is a question which'was not adequately argued and which we do not decide. On the facts stated he is liable for the par value at least. By the Court. — Order reversed, and action remanded with directions to overrule the demurrer.