Foote v. Anderson

• Decision Date: 16 June 1903
• Docket Number: 26.
• Citation: 123 F. 659
• Parties: FOOTE v. ANDERSON.
• Court: U.S. Court of Appeals — Third Circuit

123 F. 659

FOOTE v. ANDERSON.

No. 26.

United States Court of Appeals, Third Circuit.

June 16, 1903

Howard W. Page, for plaintiff in error.

E Spencer Miller, for defendant in error.

Before ACHESON, and GRAY, Circuit Judges, and BUFFINGTON, District judge.

BUFFINGTON District Judge.

In the court below the plaintiff in error, George T. S. Foote, a judgment creditor of the Howard State Bank, a corporation of Kansas, brought suit against Joseph Anderson, executor of Eber Anderson, an alleged holder of 135 shares of its stock to enforce a shareholder's double liability imposed by a statute of that state. The defense was that Eber Anderson was not a stockholder. At the conclusion of the testimony on the part of the plaintiff a compulsory nonsuit was entered, the refusal of the court to take which off is here assigned for error.

Examination of the testimony shows the case turns on the question whether the entry by the bank of the name of the decedent in its stockbook as a shareholder constitutes as against him evidence of ownership. The proofs were that in 1886, when the capital of the bank was $50,000, decedent owned 10 shares of its stock; that while the bank was solvent these shares were returned to it, were marked canceled, and were found in the book offered in evidence. It was also shown that the bank was subsequently reorganized by increasing its capital to $100,000, and certificates of stock to that amount issued that it was again reorganized by increasing its capital to $150,000; and that subsequently it was reorganized as a corporation of Missouri with a capital of $150,000. At each of these reorganizations the former certificates were marked canceled. Other than the entries contained in the stockbooks of these reorganized issues, there was no proof that Anderson owned any stock except the original 10 shares, which, as noted, were canceled and surrendered during the solvency of the bank. No evidence was shown that he participated in any of these changes of capital. Lambert, the only witness called by the plaintiff to prove decedent's ownership testified, 'All the knowledge I have of the stock that Eber Anderson held in this corporation, outside of the one thousand dollars I sold him individually, is the records entirely. ' The decedent's executor was called by the plaintiff, and proved that in his effects he found no evidence or reference of any kind to ownership of stock. There was proof Anderson had at one time acted as a director, but the witness was unable to fix the time as being other than during his holding of the original 10 shares. It was also shown he signed some paper, which paper was not proved or its loss accounted for, agreeing to the change to the Missouri corporation, but it was also shown he was then a creditor of the company. Whether his action in that regard was as a creditor or shareholder was not proved.

Now, it is evident that the right of the plaintiff to recover depended on his establishing the relation of corporation and shareholder between Anderson and the bank. That relation was a contractual one if it existed, it was created by agreement of both corporation and shareholder. Such a contract may be express or implied, but it exists only when both parties have expressly consented to its creation, or have so acted that the law implies consent. It is clear that a corporation by its own act cannot make one its shareholder, nor can one make himself a shareholder without the consent of the corporation. The corporation may evidence its assent to the creation of the relation by placing on its books the name of one as a shareholder, and that act may evidence, as against the company, the contract, and a person, by knowledge of an acquiescence in such act, may be held a stockholder; but it is equally clear that, this relation being one based on mutual consent, neither party by its or his own separate act can create it. It requires assent of both to bind. If, now, the act of the corporation in placing one's name in its list of stockholders is accepted by the court as evidence that the person named is a shareholder, and if a jury is permitted to find a verdict based alone on proof of such act, it is clear that the so-called contract thus enforced is made for the defendant, not by his own act or consent, but by a rule of evidence. That such should be the case is contrary to our sense of right. The essence of a contract is consent to be bound. Contracts are enforced because they represent the undertakings of the contracting parties. Representing the agreements of the parties thereto, their sanctity is such that the federal Constitution forbids their impairment by the state. Assuredly the law which affords them this high regard, and prevents their impairment because they represent the assent of the contractors, should not by a rule of evidence force into a contract one who has given no consent or done no act or omitted to do nothing from which consent could be implied. If, however, the act of the corporation, alone in entering one's name as a stockholder is evidence of a contract, it is clear that the law by its rule of presumption, and not the party by his act or will, has created the alleged contract. We cannot sanction any course which thus dispenses with the element of consent, express or implied, as the basis and groundwork of a contract. Moreover, to make the entry by the corporation evidence for itself is contrary to the rule that self-made evidence will not avail. 2 Phillips, Evidence, 122. Indeed, the intolerable effect of such a holding is shown in this case, where death has closed the mouth of the alleged shareholder, and his estate is deprived of ownership raised by the entry. We are therefore of...