Kimball v. Success Mining Co.

MoOÁRTY, J. This is a suit in equity in which plaintiff seeks to be adjudged the owner of, and entitled to have issued to him, 1,060 shares of the capital stock of the Colorado Mining Company, a corporation organized under the laws of this state. Service of summons was had on Jesse Knight and the Colorado Mining Company, each of whom filed an answer to plaintiff’s complaint. The other defendants were not served — 82 — with process, nor did they appear in the action. A trial was had, and the court found in favor of the defendants Knight and the Colorado Company on the issues presented by the pleadings, and dismissed plaintiff’s complaint for want of equity. From the judgment rendered plaintiff prosecutes this appeal. In order to understand the points 'and questions involved, it is necessary to make a somewhat elaborate and detailed statement of the issues and facts. The Success Mining Company was incorporated under the laws of this state, with its general place of business in Salt Lake City. It 'had a capital stock of thirty thousand dollars divided into three hundred thousand shares of the par value of ten cents per share. The capital stock was all subscribed for and fully paid up by the incorporators, six in number, by the conveyance to the corporation of the Success mining claim situate in the Tintic mining district,' this state. The articles of incorporation were filed December 7, 1898. There were five directors, three of whom resided at Eureka, and one at Robinson, in Juab County, Utah, and the other, Ernest Williams, who was also secretary and treasurer of the company, lived in Salt Lake City, Utah. The articles of incorporation provided that the persons therein named as officers should continue in office until the annual stockholders’ meeting, and until their successors were elected and qualified. No election of officers was held until October 3, 1906, and the persons rained as officers of the company in the articles of incorporation continued to be the officers of the company until that date. The company was unable to find any ore or valuable minerals in its ground, and therefore was not a financial success. There were eight assessments levied upon the capital stock. The eighth and last assessment was levied at a meeting of the board of directors held at Eureka, Juab County, February 10, 1900. This was the last meeting held by the board of directors first appointed, and with the exception of an entry made by the secretary in the minute book of the company April 14, 1900, reciting that certain stock had been sold to pay the eighth assessment levied thereon, there was — 83 — no other or further business transacted in the name of the company thereafter for a period of more than six years. There was not a single transfer of stock made on the books of the company from April 14, 1900, until May 3, 1906. And the undisputed evidence tends to show that during this time the stock had practically no market value whatever. On February 6, 1899, there was issued to plaintiff two thousand shares of the capital stock of this conlpany represented by certificates two hundred and fifty-two and two hundred and fifty-three for one thousand shares each. On March 3, 1898, there was issued to one George W. Heintz certificate number three hundred and four for two thousand shares of said stock. About three weeks prior to the commencement of this action (March 5, 1908) Heintz assigned certificate three hundred and four to plaintiff. On April 14, 1900, there was issued to one O. E. Pearson certificate number three hundred and sixty-five for eighty-four thousand nine hundred and twenty-five shares of stock. On the stub from which the certificate was detached is listed in the handwriting of Ernest Williams, then secretary of the company, certain stock, including the four thousand shares held by plaintiff. The stock so listed was merged in certificate three hundred and sixty-five issued to Pearson. On each of the stubs from which the certificates representing this stock was taken is an indorsement or notation, made with a blue pencil and in the handwriting of the secretary, reciting that the stock was “sold at eighth sale.” And on each of these stubs there is also a cross made with a blue pencil. The record book of the company, on page twenty-six, contains the following entry in the handwriting and over the signature of Williams, as secretary: “No. 8. April 14r.1900, Salt Lake City, Htah. The assessment not having been paid on the following described stock, same was sold according to law for assessment and costs.” Then follows a description of the certificates, about seventy in number, representing stock alleged to have been sold, the number of the certificate, the number of shares for which it was issued, to whom issued, and the amount of the assessment for — 84 — wbicb it was sold. Tbe three certificates held by plaintiff are listed thereon as follows: A copy of a printed notice purporting to contain a list of the certificates representing stock on which the eighth assessment had become delinquent, and which was published in one of the daily papers of Salt Lake City, with the publisher’s affidavit attached thereto, was introduced in evidence by plaintiff, and was made part of the bill of exceptions. The notice did not include any of plaintiff’s stock. While we think it may be fairly inferred from this that no publication of plaintiff’s stock was made as required by law, yet it does not necessarily follow that, because of this, plaintiff is entitled to recover in this action. If this were a suit for the conversion of plaintiff’s stock, or to compel the Success Mining Company to replace the stock and make an entry of plaintiff’s ownership on the books of the company, the fact that the stock was not advertised and sold as required by law might be a controlling feature in the case. But, as we have observed, this is a suit to compel the Colorado Mining Company to issue to plaintiff one thousand and sixty shares of its stock. Therefore the fact that plaintiff may have been unlawfully deprived of his stock in the Success Mining Company by a void sale which the record shows was made, if made at all, more than eight years before the commencement of this action, is not necessarily decisive of the case. This phase of the case will be more fully discussed further along in the opinion. Again reverting to the facts: We find that on or about May 3, 1906, the eighty-four thousand nine hundred and twenty-five shares of the stock of the Success Mining Company, represented by certificate three hundred and sixty-five issued to C. E. Pearson, were purchased from Pearson by — 85 — defendant Jesse Knight, and certificate three hundred and sixty-seven was issued for the stock, which also includes sixteen thousand and seventy-five shares that he purchased at about the same time from other parties, and recorded in his name upon the books of the company. Defendant Knight, prior to the purchase of the Pearson stock, had had no interest in or connection with the Success Mining Company. On October 3, 1906, in pursuance to a call theretofore made, a stockholders’ meeting of the Success Mining Company was held in Salt Lake City at which a full board of directors was elected. Jacob Evans, Lester Mangum, and defendant Jesse Knight were three of the five directors elected. Knight (who at the time was president of the Colorado Mining Company) was mad^president and Mangum secretary of the company. At that meeting the following resolution was introduced and adopted by the stockholders: “Whereas, the officers of the Success Mining Company have received a proposition in words and figures as follows', to wit: ‘Pursuant to a resolution duly adopted, the Colorado Mining Company, a ITtah corporation,' does hereby offer the sum of fifteen thousand dollars cash, or seventy-nine thousand and five hundred shares of the treasury stock of the Colorado Mining Company, as the purchase price for the Success mining claim, IT. S. lot No. 260, together with all other real and personal property owned by said Success corporation. The Colorado Mining Company by Jesse Knight, Prest. W. Lester Mangum, Sec’y.’ And whereas, the Success Mining Company is not a financial success, and is not a going concern, and has been unable to find any ore or valuable minerals in its ground, and in order to conduct its business it has been, and will be in the future, necessary to levy and collect assessments from its stockholders. And whereas, the stockholders are desirous of discontinuing operations of the company’s property: Now, therefore, be resolved: That the president and secretary be, and they are thereby, authorized to- accept seventy-nine thousand and five hundred shares of the treasury stock of the Colorado Mining Company, a Utah corporation, as the full purchase price for the Success mining claim, TJ. S-. lot No. — 86 — 260, together with all other real and personal property owned by this corporation, and that the president and secretary of this corporation be, and they are hereby, authorized and directed to make, execute and deliver, for and on behalf of this corporation, deeds of conveyance of all the real and personal property belonging to this corporation, and to deliver the same to the Colorado Mining Company, upon receiving for the use and benefit of this corporation seventy-nine thousand and five hundred shares of the treasury stock of the said Colorado Mining Company. And be it further resolved, that the board of directors of the Success Mining Company be and it is hereby requested, after it has received for the use and benefit of this corporation the said seventy-nine thousand and five hundred shares of the treasury stock of said Colorado Mining Company, from the sale of real and personal property of this corporation, to declare a dividend of all said treasury stock so received, and to pay the same to the stockholders of this corporation pro rata with their holdings as shown by the books of this corporation upon delivery by said stockholders to the secretary of this corporation for cancellation all their properly endorsed certificates of stock in the Success Mining Company.” In pursuance of the foregoing resolution, the president and secretary of the Success Mining Company duly conveyed to the Colorado Mining Company all the real and personal property owned by the Success Mining Company and received from the Colorado Mining Company a certificate for seventy-nine thousand five hundred shares of its stock issued in favor of the Success Mining Company. On October 18, 1906, at a meeting of the board of directors of the Success Mining Company, the following resolution was adopted. “Be it resolved, that a dividend of the seventy-nine thousand and five hundred shares of the Colorado Mining Company’s stock, ^received as the purchase price for the company’s real and personal property, be and it is hereby declared, and that the same be paid on the basis of two hundred and sixty-five shares of said Colorado company’s stock for every one thousand shares of this company’s stock, and that said dividend be paid — 87 — by tbe secretary to the stockholders of this corporation pro rata with their holdings as shown by the books of the company upon delivery by said stockholders to the secretary of this corporation for cancellation, all their endorsed certificates of stock in the Success Mining Company.” The secretary of the Success Mining Company, pursuant to and in accordance with the terms of the resolution mentioned, distributed as a dividend the seventy-nine thousand and five hundred shares of the stock of the Colorado Mining Company to the stockholders of the Success Mining Company as shown by the books of the latter company. This was done by the Success Mining Company taking up' and cancelling the outstanding certificates of its stock as the same were presented by its stockholders shown to be such by the records of the company, and having the Colorado Mining Company issue, in lieu thereof certificates of its stock on the basis of two hundred and sixty-five shares of the Colorado for every one thousand shares of Success Mining Company’s stock. Neither plaintiff nor his assignor, George W. Heintz, appeared on the books of the Success Mining Company as stockholders of the company, and no distribution of Colorado stock was made to them or either of them. The record shows that no demand was made by plaintiff for Colorado stock claimed by him until after the seventy-nine thousand and five hundred shares of Colorado stock issued to the Success Mining Company had practically all been distributed to the stockholders thereof. Plaintiff, after alleging in his complaint the corporate existence of the mining companies mentioned, and setting forth the substance of the foregoing resolutions, alleged, among other things: That the Colorado Mining Company delivered to the said Success Mining Company and its officers, “among whom were the said Jesse Knight and Lester Mangum, a certificate for seventy-nine thousand and five hundred shares of the capital stock of the Colorado Mining Company, which said certificate was made out in the name of the said Success Mining Company. . . . That the Colorado Mining Company well knew that the said Success Mining Company and its officers . . . held said stock simply as trustees for the — 88 — stockholders of the Success Mining Company legally entitled thereto. . . . That the Success Mining Company and its officers and directors have caused the stock in the Colorado Mining Company, to which this plaintiff is entitled, to be issued to some person or persons other than the plaintiff or his assigns, and to this plaintiff unknown; and that, in causing said transfer to b.é made, the said named officers of the Success Mining Company have been guilty of gross negligence in failing to1 make proper or any inquiry as to the true ownership of plaintiff’s stock in the Success Mining Company; and, if the said officers and directors have issued the stock rightfully belonging to plaintiff to some person or persons who appear by the books, records, and papers of the said Success Mining Company to be entitled thereto, the plaintiff alleges on information and belief that the books, records, and papers of the said defendant the Success Mining Company were and are so obviously and evidently incomplete, fragmentary, and erroneous as to give notice to the said officers and directors of the said Success Mining Company that they could not and cannot be relied upon to show the names of the true owners of the Success- stock, or the number of shares held by each; . . . and the plaintiff alleges that notwithstanding the evident incompleteness, fragmentary character and error of said books, papers, and records of the said Success Mining Company, the said named defendants, the officers and directors of the said Success Mining Company, did, without making any effort whatever to learn the names of the true and legal stockholders in said Success Mining Company, surrender the certificate for seventy-nine thousand and five hundred shares of Colorado Mining Company’s stock herein-before referred to, to the said Colorado Mining Company, and procured the issuance by the said Colorado Mining Company of certificates for one thousand and sixty of said shares to which plaintiff was and is entitled, to some person or persons to the plaintiff unknown.” Plaintiff also averred “that the value of the stock to which plaintiff is entitled, together with the dividends which have been declared thereon since the 18th day of October, 1906, is six thousand dollars,” and — 89 — prayed “that he may have an accounting with the said defendants, and that, the total amount of the stock of the Colorado Mining Company, to which he is entitled, be determined by the court, and the defendants be required to issue the same to him, or that he have judgment for the value thereof.” Both Knight and the Colorado Mining Company in their respective answers denied the allegations of negligence contained in plaintiff’s complaint respecting the distribution of the seventy-nine thousand and five hundred shares of the Colorado stock, and as an affirmative defense set out the resolutions hereinbefore mentioned that were adopted by the Success Mining Company and upon which the plaintiff mainly predicated his right to recover in this action, and then alleged that, in pursuance of the resolutions, the secretary of the Success Mining Company duly distributed to the stockholders of record as shown by the books of the company the seventy-nine thousand and five hundred shares of the stock of the Colorado Mining Company, and that the Colorado Mining Company issued certificates of its stock to parties as directed by the Success Mining Company, and that neither plaintiff nor his assignor, George W. Heintz, appeared of record as a stockholder as shown by the books of the Success Mining Company to be the owners of any stock in the Success Mining Company. The position taken by appellant and the contention made by bim on this appeal is clearly set forth in his brief in the following language: “Thus the action of the stockholders and directors of the Success Mining Company, and the delivery to it by the Colorado Mining Company of the certificate for seventy-nine thousand and five hundred shares of the Colorado stock, made each of the stockholders in the Success Company a stockholder in the Colorado, on the basis of two hundred and sixty-five shares of Colorado for each one thousand shares of the Success held by him, and made the Success-Mining Company the holder of the legal title only, in trust for its several stoqkholders. Therefore the duty of the Colorado Mining Company was not a duty that it owed to a stranger, or to the stockholders of some other corporation, but — 90 — was a duty' that it owed to its own stockholders, who bad recently become such by reason of this transaction.” And again: “Each individual stockholder had a right to a certificate representing his pro rata proposition of the Colorado stock which he could enforce in an action at law.” In support of this contention counsel for appellant have cited many authorities. While the authorities cited hold generally that it is the duty of a corporation acting through its officers, to protect the rights of its stockholders from unauthorized transfers by seeing to it that all transfers of its stock are made either by stockholders, themselves or persons having authority from them, none of the cases go to the extent of holding that a corporation by a mere resolution respecting stock which it holds in another corporation and concerning the disposition of such stock makes of its individual shareholders stockholders in the corporation which issued the stock. Of the cases cited the one most favorable to appellant’s contention is the case of Geyser-Marion Gold Min. Co. v. Stark, 106 Fed. 558, 45 C. C. A. 467, 53 L. R. A. 684. In that case the Geyser-Marion. Gold Mining Company, a corporation, had issued a certificate for a number of its shares of stock to Eelix J. Stark, trustee, and the boobs of the company showed Eelix J. Stark, trustee, to be the owner of the stock. He did not own the stock but held it as trustee for his brother, Charles E. Stark. This fact, however, was not disclosed by the certificate. Eelix J. Stark, without any authority from his cestui que trust, sold and assigned the stock to third parties by means of the signature of Eelix J. Stark, trustee and appropriated the proceeds of the sale to his own use. The corporation accepted these certificates as presented by the transferees, duly canceled them, and issued new certificates to the purchasers, and made entries upon its books showing the ownership of the stock to be in the purchasers, instead of in Eelix J Stark, trustee. Charles B. Stark brought suit against the corporation to compel it to enter upon its books the registry of his ownership of stock equal in amount to that of which he had been deprived by the unauthorized sale, or to pay him the value of his stock which he alleged the corporation had — 91 — negligently permitted to be transferred upon its books to third parties. Tbe court held that, the company before accepting the surrender of the certificates with an assignment from Felix J. Stark, trustee, was required to make some inquiry as to who in fact was the true owner of the stock, and, as the company had failed to make any such inquiry, it was liable to account to Charles B. Stark for the stock. It will thus be seen that the facts in the Geyser-Marión Case are entirely different from the facts in this case which 1 in any way involve the Colorado Company. If appellant had prosecuted his case against the Success Company instead of the Colorado Company, the principles invoked in the Geyser-Marión Case, as well as those invoked in many of the other authorities cited by counsel, would be applicable, because the Success Company and not the Colorado Company was charged with the duty of distributing the 2 seventy-nine thousand and five hundred shares of the Colorado stock to the stockholders of the Success Company, and the only duty the Colorado Company owed the Success Company and its stockholders was to distribute the seventy-nine thousand and five hundred shares as directed by the Success Company. It is admitted that this stock when is-/ sued was an asset of the Success Company and was not in any sense the individual property of its stockholders. Counsel for appellant in their reply brief say: “It was perfectly competent for the Success Mining Company, through its board of directors, to make any lawful disposition of the Colorado stock received in exchange for its assets. It might have elected to sell the stock and divide the proceeds among its stockholders. It might have elected to sell the stock and invest the proceeds in other property. It might have elected to hold the stock and collect the dividends. It might have elected to trade the stock for some other property. ... It made an election by a formal resolution of its hoard of directors which it was perfectly lawful for it to make, and which could not be changed except by an action of the board equally formal.” It is equally clear that the company, acting through its board of directors, could, at any time before the certificate — 92 — of seventy-nine thousand and five hundred shares of stock was surrendered to the Colorado Mining Company to be divided into the requisite number of certificates with the proper number of shares in each for the stockholders, have rescinded the resolution of October 18, 1906, declaring the stock a dividend, and made some other disposition of the stock. Therefore it necessarily follows that the resolution, without any further act on the part of the company or its officers, did not invest the individual stockholders of the Success Company with either the legal or equitable title to the stock; hence the contention that the resolution in effect made the stockholders of the Success Company stockholders in the Colorado Company is wholly untenable. To further illustrate, suppose the Success Mining Company, instead of accepting the seventy-nine thousand and five hundred shares of Colorado stock, had passed a resolution accepting the offer of fifteen thousand dollars in cash, and in the same resolution had declared it to be a dividend to be divided among its stockholders pro rata according to “their holdings as shown by the books of the corporation;” would it be seriously contended that the Colorado Company, under such a state of facts, would owe any duty to the stockholders of the Success Company to see that the proper persons were recognized as stockholders, and that each received his proper proportion of the fifteen thousand dollars ? Certainly not. There can be no distinction in a legal sense between the distribution of 3 stock as a dividend and the distribution of the equivalent in money. As stated by counsel for respondents in their brief, “the Success Company and the Colorado Company were separate and distinct corporations, and in the transaction between them it was no more the duty of the Colorado Company to see to it that the Success Company made proper distribution of the seventy-nine thousand and five hundred shares than it was the duty of the Success Company to see to it that the Colorado Company made proper use of the property it had conveyed to the Colorado Company in exchange for the seventy-nine thousand and five hundred shares of stock.” Assuming, however, but not conceding, that appellant — 93 — is right in bis contention that it was the duty of the Colorado Company to use reasonable diligence to see that the stock in question was issued to stockholders of the Success Company who were entitled thereto, the facts in the case preclude him from recovering in this action. The evidence, without conflict, shows that the seventy-nine thousand five hundred shares of Colorado stock were distributed to parties only who were stockholders of record in the Success Company as shown by the books of the company, and in compliance with the terms of the very resolution upon which appellant bases, his right to recover. When a party presented for cancellation a certificate of Success mining stock and demanded in lien thereof Colorado stock, Mr. Mangum, secretary of the Success Mining Company, who was also secretary of the Colorado Company, with the assistance of Jacob Evans, who was a director in and also the attorney for the Success Company, would examine the books, records, and papers of the Success Company, and, if these •showed that the party presenting the certificate was the owner thereof, and there was no record on the books showing that the stock had been sold for assessment, the certificate would be taken up and canceled, and the party presenting it paid his pro rata share of the seventy-nine thousand five hundred shares of Colorado stock. On this point Jacob Evans testified, and his testimony is not denied, that : “We presumed the books stated the truth and facts and relied upon the books. We had only so many shares to distribute, and our books showed every share of stock was owned by stockholders as recognized by the books of the corporation, and we distributed the stock as best we could to the stockholders as the book showed.” Section 330, Comp. Laws 1907, so far as material here, provides as follows: “That for the purpose of voting, and of receiving dividends, and of levying and collecting assessments, and wherein the corporation is otherwise interested, the holder of record, as shown by its hooks, shall be treated and considered as the holder in fact, and the transferee shall have no rights or claims as against the corporation until transfer thereof be made upon the — 94 — books of the corporation or a new certificate be issued to him.” [Italics ours.] Therefore the stock was not only distributed in accordance with the terms of the resolution, but also in* accordance with the plain provisions of the statute respecting who shall receive dividends, (hfor. Private Corps., sec. 162.) Suppose the directors and officers of the Success Company had adopted the theory of appellant, namely, that the resolution declaring the seventy-nine thousand five hundred shares of Colorado stock a dividend in effect made the stockholders in the Success Company stockholders in the Colorado Company, and had turned over to that company the books and records of the Success Company, and the Colorado Company had assumed the responsibility of distributing the stock in question, the result, as we view the case, would necessarily have been the same'. What information, if any, the Colorado Company could have obtained that plaintiff was a stockholder in the Success Mining Company and entitled to a part of the dividend other than that furnished by the books and records of the company is not made to appear. Furthermore, the Success liming Company at the time the resolution was adopted had practically ceased doing business, and had not been a going concern for more than six years. The certificates representing the four thousand shares of Success stock claimed by appellant had been issued to him and his assignor more than seven years and six months before the adoption of the resolution, and during all this time neither of them, so far as the record shows, made any investigation or inquiry whatever of the officers of the company respecting their stock or the affairs of the company. A mere inspection of the books, which they could have examined any time, would have advised them that no entry or registry of their stock had been made on the stock ledger, and that their names did not appear on any of the books or records as stockholders of the company. And it was nearly two years after the resolution declaring the seventy-nine thousand ofive hundred shares of Colorado stock a dividend, and after the stock had practically all been distributed, before appellant presented his certificates for — 95 — cancellation, and made a demand for bis alleged pro rata share of the dividend. And, moreover, notwithstanding the 'alleged “incomplete and fragmentary character of the boohs, papers, and records of the Success Alining Company,” such as they were, they showed that appellant’s stock was sold for assessment in April, 1900, more than six years and six months before the adoption of the resolution. Therefore, assuming, as we have stated, that the Colorado’ Company was charged with the duty of distributing the seventy-nine 4 thousand five hundred shares of its stock to the stockholders of the Success Company, under these circumstances, it could not be charged with knowledge that appellant was a stockholder in the Success Company and entitled to a part of the dividend. It necessarily follows from what we have said that, if appellant’s failure to be recognized as a stockholder in the Success Company in the distribution of Colorado stock was due to negligence at all, it was due to his own indifference and inaction in the premises rather than that of the Colorado Company. Nor do we think that Jesse Knight can be successfully charged with negligence because he failed to see to it that appellant and his assignor, George W. Heintz, received their proportion of the Colorado stock. As we have observed, the stock certificate book of the Success Mining Company shows that the stock of plaintiff and his assignor 5 ultimately went to Knight, and shows how he obtained certificate No. 367 bearing date of May 3, 1906, which was the first certificate issued to Knight. In this certificate was merged the stock represented by certificate 365 issued to Pearson, who appeared on the books of the Success Company as a stockholder. This appeared from the stub of the stock book. The stub to certificate 365 showed that the shares of stock represented by certificates two hundred and fifty-two, two hundred and fifty-three, and three hundred and forty-four (appellant’s stock) went into certificate three hundred and sixty-five; in fact, the stubs and record books show that all the shares that went into that certificate were sold for the eighth assessment. The record or minute book also con96 tamed a record of tbe levy of the assessment and of the sale. Prior to May 3, 1906, Knight was not a stockholder in the Success Company, and had nothing whatever to do with the levying of the eighth assessment, and knew nothing of the sale, except what the books of the company disclosed. True, the notice hereinbefore mentioned of the time and place of the sale of stock under the eighth assessment as published did not include plaintiff’s stock, but the record shows that no copy of this notice was with the books, papers, and files of the Success Mining Company until after the distribution of the Colorado stock was made. And we think that it may be fairly said from the evidence that none of the officers of either the Success or the Colorado Company, including Knight, knew of its existence until about the time the case was tried in the lower court. Under these circumstances, Knight was authorized in relying upon the fact that the Success Company had recognized Pearson as a stockholder, and had issued to him a certificate. And the fact that Knight, six months later, became a director and officer 6 in the Success Company in no way affected his title to the stock, as counsel for appellant seem to contend. In 10 Cyc. 634 it is said: “Where the shares of a corporation are offered for sale by the person named in the certificate, an intending purchaser is not required to look beyond the recitals of the certificate in regard to his title or the equities • of the corporation, or to suspect fraud in the issuing of the shares, where all seems fair and honest. He is not bound to examine the books of the corporation to ascertain the validity of the transfer.” And on page 636 of the same work the doctrine is restated in the following language: “Where a certificate of shares, regular on its face, imparts ownership in its holder, and contains no intimation of any equities impairing such ownership or full title, whether in the corporation or in third persons, an intending purchaser is not bound to suspect fraud or infirmity of title, or to go back and search the register, but may rely upon the disclosures of the certificate.” (1 Cook, Corp. [4th Ed.], sec. 367; 1 Mor. Priv. Corp., sec. 210; 19 A. & E. Enc. Law, 554; — 97 — Mandlebaum v. North Am. Min. Co., 4 Mich. 465; Scarlett & Scarlett v. Ward, 52 N. J. Eq. 197, 27 Atl. 820; Winter v. Montgomery Gaslight Co., 89 Ala. 544, 7 South. 773.) Even if Knight had made an examination of the boohs and records of the Success Company before purchasing the eighty-four thousand nine hundred and twenty-five shares of stock represented by certificate three hundred and sixty-five issued to Pearson, he would have found that Pearson was the stockholder of record of the stock, and that neither plaintiff nor his assignor was a stockholder of record. Therefore we have a case in which a bona fide purchaser of stock for value is not only protected by a certificate which was issued by the proper officers of the company, and in every respect regular on its face, but by the books and records of the company which show that the person named in the certificate was the stockholder of record of the stock represented by the certificate. Counsel for appellant invite attention to the fact that no entry was made in the stock ledger of the Success Company of certificate three hundred and sixty-five issued to Pearson, and that Pearson’s name does not appear thereon as a stockholder. This is referred to, if we correctly understand counsel’s position, as a circumstance sufficient to put Knight upon inquiry as to the validity of the Pearson certificate. Two answers can be made to this contention. The certificate, which had been issued for more than six years, being regular upon its face, Knight had the right to assume, and to act upon the assumption, that Pearson was the true owner of the eighty-four thousand nine hundred and twenty-five shares of stock represented by the certificate,, and under the well-settled rule as announced by the text-writers and declared by the courts he was not required to examine the books and records of the company to ascertain if there was any infirmity in Pearson’s title to the stock; and, second, as we have stated, if Knight had examined the books, he would have found that Pearson was the stockholder of record of this particular block, of stock. Moreover, the record shows — 98 — that no entry was made in the stock ledger of plaintiff’s stock, nor does his name or that of his assignee appear.thereon. Therefore, if this fact is evidence of infirmity of title in the one case, it must also be accepted as evidence of infirmity of title in the other. This being so, ap- 7 pellant is not in a position to successfully claim that this was sufficient to p-ut Knight upon inquiry, even if he had made an examination of the books before purchasing the Pearson stock, which, under all the authorities, in view of the circumstances in this case, he was not called upon to do. But, as we have stated, this suit was not brought to recover against Knight because of any fraud or bad faith on his part in acquiring the stock; nor was it brought on the theory that either Knight or Pearson converted plaintiff’s stock. The suit was brought and tried by appellant upon the theory that Knight is liable because of his negligence and dereliction as an officer of the companies mentioned in failing to see to it that plaintiff and his assignor received their proportion of the Colorado stock distributed as a dividend. Therefore the facts and circumstances under which Knight acquired his stock in the Success Company are mentioned only for the purpose of showing the good or bad faith of Knight in his acquisition of Success stock, and in the part he took as an officer of each of the companies in the transactions involved in this action. The resolution upon which appellant bases his right to recover provided “that said dividend be paid by the secretary to the stockholders of this corporation pro rata with their holdings as shown by the books of the company upon delivery by said stockholders to the secretary of this corporation for cancellation all their indorsed certificates of stock in the Success Mining Company.” It will therefore be seen that no duty was imposed upon Knight by the resolution to examine and check up the books of the Success Company and to personally distribute the seventy-nine thousand, five hundred shares of Colorado stock to the persons found to be entitled thereto. If Knight had received some information before or even during the time the stock was being distributed that some one not — 99 — appearing on the books as a stockholder was, in fact, entitled to appear thereon as a stockholder, and he had failed to take the necessary steps to protect the rights of such stockholder, he might under certain circumstances be held liable to the stockholder for such failure. We have carefully examined the record in this case and fail to find any evidence tending to show negligence or bad faith on the part of Knight. Counsel for appellant in their printed brief have with much severity denounced the action of the stockholders and officers in passing the resolutions which culminated in the transfer of the assets of the Success Company to the Colorado Company in exchange for Colorado stock. These criticisms are mainly directed against Knight, who was at the time the resolutions were adopted president, director, and the principal stockholder in each of the companies. If this were a suit in which the validity of the resolutions was assailed or called in question, there might be some justification as well as foundation for the criticisms made, and the transactions themselves would call for the closest scrutiny by the court. But, as we have repeatedly pointed out, appellant, by bringing this action and basing his right to recover upon the strength of these resolutions, has ratified them as 8 fully as he would have done had he been present at the stockholders’ meeting in which the first of the resolutions was passed and voted for its adoption. Therefore he cannot be heard to complain of the resolutions, nor of the exchange of property that was made by the companies in pursuance of the resolutions. It has been suggested that, because Knight received the proceeds of the stock in issue, he ought to be compelled to account to plaintiff therefor. This can only be done, if done at all, on the theory that plaintiff’s stock was converted, and that Knight failed to acquire title to the full eighty-four thousand, nine hundred and twenty-five shares of stock that he purchased from Pearson. We again in- 9 vite attention to the fact that this is not a suit for conversion, and a finding made by a court in harmony with the suggestion that Knight should account to plaintiff for the — 100 — proceeds of tbis stock on that ground would be entirely outside of the issues of the case and contrary to the theory upon which the action was based. The judgment is affirmed, with costs to respondents,