Levy v. Sattler

Winslow, C. J. The evidence in the case is voluminous, and the briefs discuss many questions which we do not find it necessary to consider. The fundamental question in the case is, in our judgment, a question of fact pure and simple, and that question is whether the agreement of August, 1916, between the plaintiff on one side and the defendants Sattler and H. M. Levy on the other was that said defendants would each sell to the plaintiff twenty-five shares out of the 250 shares which said defendants had already paid for, or twenty-five shares of the so-called treasury stock, not yet issued or paid for, but which said defendants had agreed between themselves to take. There was, of course, a considerable difference between the character and value of the two propositions. Under the first proposition the plaintiff would secure fifty out of 250 shares, or a one-fifth interest in the corporation, with the resulting right to take his proportionate share of any stock subsequently issued, thus preserving his voting power intact; under the second proposition he would simply acquire fifty shares of stock without the right to participate in any issues of stock made before his agreement of purchase was carried out. Luther v. C. J. Luther Co. 118 Wis. 112, 94 N. W. 69; Dunn v. Acme A. & G. Co. 168 Wis. 128, 169 N. W. 297. Had a stock book been kept with stubs and certificates issued as stock was subscribed, there would probably be little difficulty in deciding the question, but this was not done, and the only record of stock transactions is contained in the capital and stockholders’ accounts in the books of account. The trial court very distinctly found, however,- as we read the findings, that the agreement between the parties was that the plaintiff was to receive fifty shares of the unissued stock [313] still in the treasury and not any part of the original 250 shares which Sattler and H. M. Levy had paid for. A very ingenious argument was made by appellant’s counsel to the effect that the findings should be construed as finding that the contract was to sell the latter class of stock, but it fails to convince us, especially in view of the conclusions of law reached by the court, which could not be justified if the facts were found as claimed,by the appellant. The testimony in support of this finding was amply sufficient to sustain it; certainly it cannot be said that it is against the preponderance of the evidence. The initial conversation on the subject between Sattler and the plaintiff took place at Duluth, where the plaintiff was' engaged in business, in the summer of 1916. Sattler testifies positively that he stated to the plaintiff that the total capitalization was $50,000, of which $25,000 was paid up; that he proposed to sell him twenty-five shares of the treasury stock, and that if his brother would also sell him twenty-five shares that would give him fifty shares; that no stock was to be turned over till after New Years, after inventory was taken and the amount earned on the paid-up stock ascertained, and that such bonus should be paid on the twenty-five shares sold when they were turned over in 1917; that there was $25,000 in the treasury, and that he had subscribed $12,500 of the treasury stock and H. M. Levy $12,500. Two apparently disinterested witnesses who were present during all or a part of the conversation corroborated Sattler’s testimony quite satisfactorily. This conversation was preliminary only, and in pursuance of it the plaintiff came to Milwaukee and made the final oral arrangement August 16, 1916, at which time he saw and talked with both Sattler and his brother, H. M. Levy. Sattler testifies that at this time the plaintiff, after talking with his. brother, distinctly stated that he accepted the proposition. The plaintiff and his brother testified in substance that a proposition was then made to the plaintiff that he buy twenty-five shares of stock from Sattler and a like amount [314] from his brother, H. M. Levy, at par, with a bonus based on profits declared for 1916, and to enter into service as a salesman December 1, 1916. This in substance is the direct testimony on the subject. It appears further, however, that when the plaintiff paid for his stock, January 24, 1917, the amount was paid directly into the treasury'of the company and not to Sattler and H. M. Levy individually, as would naturally be the case if the stock purchased by the plaintiff was paid-up stock owned by them. The entries on the books of account point rather to this view of the transaction than to the other, and we find that H. M. Levy, in a deposition taken under sec. 4096, Stats., before trial of the case, testified as follows with regard to the entries made by him on the books: “Q. And in undertaking to make your brother a stockholder you caused 'to be transferred to him fifty shares of stock that had heretofore been unissued? A. Yes, sir. Q. And that was done,, as your books show, upon the assumption that you and Mr. Sattler were entitled to all the stock that had been unissued ? A. Yes, sir.” It will be remembered that prior to January 24, 1917, the defendants Sattler and H. M. Levy had, by charging up to themselves certain credits for salaries and advances, paid for 134 additional shares of stock, the same being divided equally between them. The court expressly found that these shares of stock were paid for January 2, 1917, and also that the defendants acted in good faith in these various transactions, and we are unable to say that these findings are not supported by the evidence. No certificates were in fact issued at the time, but of course Sattler and H. M. Levy owned the stock notwithstanding that fact. In legal effect it was issued when fully paid for. The certificate is simply evidence of the essential fact, not the fact itself. There were therefore in existence at the-time the plaintiff took his stock 434 shares of paid-up stock and none has been [315] issued since. The plaintiff has precisely the same voting power now that he had when he took and paid for his stock. It is true that the defendant Trevett had not been consulted with reference to the issuance of the additional stock to Sattler and Levy nor had he been offered an opportunity to take his share of the new issue, an opportunity to which he was entitled under the Luther Case, above cited. In this question, however, only Mr. Trevett himself was interested, and he has obtained a satisfactory adjustment of his claims by the agreement of settlement in the action brought by him, and thus the matter drops entirely out of consideration. The court further found that in March, 1917, the plaintiff was fully informed of the subscription attempted to be made by Sattler and H. M. Levy for the unissued stock and that the fifty shares assigned and transferred to him had no subscription rights attached thereto, and with that knowledge assented to the transaction and accepted the shares transferred to him on the books of the corporation as the stock purchased by him. This finding is supported by sufficient evidence and seems entirely sufficient to fix the rights of the parties even if the terms of the original agreement were in doubt. These conclusions really dispose of the case. The trial court having found on sufficient evidence that Brin became a stockholder on January 6, 1917, the objections raised by plaintiff to the legality of his election as director and vice-president practically disappear. No actual fraud or mismanagement of the affairs of the corporation is alleged, and the judgment must be affirmed. By the Court. — Judgment affirmed, with one bill of costs to the respondents to be taxed against the plaintiff appellant. Eschweiler, J., dissents.