Gilmore v. Smathers
| Decision Date | 23 December 1914 |
| Docket Number | 590. |
| Parties | GILMORE v. SMATHERS ET AL. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Haywood County; Carter, Judge.
Three actions by Harry M. Gilmore, trustee in bankruptcy, against W. M. Smathers and others. Judgment for plaintiff for an insufficient amount, and he appeals. Affirmed
Where the stock of a corporation is subscribed for by persons acting as agents, under a prior agreement with their principals, and the stock subscribed is issued to and paid for by their principals, the agents are not personally liable upon the subscriptions.
These are three actions brought by the plaintiff, as trustee in bankruptcy of the Canton Co-operative Company, against W. M Smathers, M. V. Moore, and Geo. J. Williamson, severally and respectively, to recover the amount of the subscription made by each of them to the said company. It was agreed that they should be heard together, and "any necessary and pertinent facts, which are not expressed in the stipulation between the parties shall be found by the court without a jury." The stipulation, mentioned above, is as follows:
"It is admitted that at the time of the adjudication in bankruptcy, the Canton Co-operative Company owed the sum of $8,045.39, and that the entire assets of the said company were sold by the trustee in bankruptcy on February 10 1912, for the sum of $5,387.13; that M. V. Moore & Co. paid the said Canton Co-operative Company the sum of $5,100 for 510 shares of the capital stock of said company, said payment being made in cash."
The case came on to be heard before his honor, Judge Frank Carter, and much testimony was taken, whereupon the judge found the following facts, and entered judgment thereon:
"The above three causes coming on to be heard by the court, the same having been consolidated by consent of parties hereto and tried together, and the parties hereto having agreed on certain facts as set forth in an agreement of writing filed herein, and having agreed that the court should find the additional facts raised by the pleadings from the testimony offered by the plaintiff and the defendants. And the plaintiff having offered in evidence certain documentary testimony and both plaintiff and defendants having introduced and examined certain witnesses in their behalf and after due consideration thereof the court finds the facts as follows:
(1) That the plaintiff is the duly qualified and acting trustee of the Canton Co-operative Company, a North Carolina corporation, which became bankrupt and was so adjudicated on or about December 5, 1911, upon the petition of certain of its creditors, and the debts of said corporation exceed its assets by $2,658.17.
(2) That the only parties named as incorporators and subscribers to the capital stock of the Canton Co-operative Company in its certificate of incorporation were M. V Moore, who is named therein as a subscriber for 510 shares of the par value of $10 each, and that he signed said articles of incorporation for that number of shares; W. M Smathers, who is named therein as a subscriber for 250 shares of the par value of $10 each, and that he signed said articles of incorporation for that number of shares; and Geo. J. Williamson, who is named therein as a subscriber for 240 shares of the par value of $10 each, and that he signed said articles of incorporation for that number of shares.
(3) That the certificate of incorporation or letters patent of the Canton Co-operative Company bear date April, 1910.
(4) That in appearing as subscribers as above named, said Moore, Smathers, and Williamson were representing as a matter of convenience, M. V. Moore & Co., a partnership of Asheville, who had agreed to take 51 per cent. of the capital stock of said corporation, and were also representing Clark, Daley, Champion Fibre Company, and others at Canton, who had agreed to take 49 per cent. of said stock, the agreements aforesaid having been entered into prior to said subscriptions. Said agreement was not, however, incorporated nor referred to in any of the minutes, records, or proceedings of said corporation, nor any notice thereof given to any creditor. That no record transfer of said subscriptions, or their interest therein, was ever made by said M. V. Moore, W. M. Smathers, and Geo. J. Williamson.
(5) That the amount of stock to be subscribed before said corporation could begin business was $10,000, and the amount named as its authorized capital stock was $25,000; that M. V. Moore & Co. paid into the treasury of Canton Co-operative Company the sum of $5,100 in cash on account of the subscription of Moore, Smathers, and Williamson above mentioned, and the Canton parties above mentioned caused and procured parties at Canton to pay into the treasury of said corporation the sum of $4,700, all the aforesaid payments being made in pursuance of the agreements set out in the fourth finding above.
(6) That neither the board of directors nor stockholders of said Canton Co-operative Company ever attempted to issue stock on any other account or in excess of $10,000.
(7) That all the money called for in the subscriptions above mentioned have been paid in cash into the treasury of Canton Co-operative Company, except the sum of $200.
(8) That Moore, Williamson, and Smathers, and M. V. Moore & Co. offered, in writing, to submit to judgment on May 6th for the sum of $200, with interest and costs, as shown in said tender, but plaintiff declined said offer.
Upon the foregoing findings of fact, the court concludes as a matter of law that the defendants, William M. Smathers, M. V. Moore, and Geo. J. Williamson, are only liable to the plaintiffs for the unpaid subscription of $200 of the $10,000 subscribed together with interest on the sum of $200 from April 20, 1910, and the cost of this action up to May 6, 1914, and it is therefore considered, adjudged, ordered, and decreed by the court that the plaintiff Harry M. Gilmore, trustee, have and recover judgment against the defendants, William M. Smathers, M. V. Moore, and Geo. J. Williamson, for the sum of $200, with interest thereon from April 20, 1910, together with the cost of this action up to and including May 6, 1914, and that the plaintiffs pay the cost of this action accrued since May 6, 1914, to be taxed by the clerk."
Plaintiff, having duly excepted to the findings and judgment, brought this case here by appeal.
Merrimon, Adams & Adams, of Asheville, for appellant.
Bourne, Parker & Morrison and Smathers & Ward, all of Asheville, and Morgan & Ward, of Waynesville, for appellees.
WALKER, J. (after stating the facts as above).
It may be said, imprimis, that we are concluded by the findings of the judge as to the facts, and can only review his conclusions of law therefrom, there being evidence to support the findings of fact, and no incompetent evidence, duly objected to, having been heard. Branton v. O'Briant, 93 N.C. 99; Shoaf v. Frost, 127 N.C. 306, 37 S.E. 271; Travers v. Deaton, 107 N.C. 500, 12 S.E. 373; Matthews v. Fry, 143 N.C. 384, 55 S.E. 787.
It seems to us that the findings of fact are a complete answer to the plaintiff's contentions. The proposition cannot be gainsaid that M. V. Moore & Co. had the right to subscribe for 51 shares of the capital stock through M. V. Moore, W. M. Smathers, and Geo. J. Williamson, if the latter were authorized to make the subscription for that copartnership, for what a man can do by himself, he may generally do through an agent, if so minded, and what he does through another, as his agent, is just as binding as if he had performed the act in person. And so it follows, that Jos. Clark, M. R. Daley, M A. Dudley, the Champion Fibre Company, and others could subscribe for the stock of the company through the same parties.
"A contract of subscription, like any other contract, may be made by one person as agent for another, if he has authority, and the subscription being accepted, and the shares being apportioned to the agent for the principal, or to the principal, the latter becomes a stockholder as fully as if he had subscribed for himself." Clark on Corporations, p. 292.
When the subscriptions were thus validly made, certificates issued, and the stock paid for, these stockholders were discharged from any further liability to the company and its creditors on their subscriptions, because they had done all that they had contracted to do. If a person has subscribed for stock, he is liable to the corporation and its creditors upon his subscription, and he cannot be relieved of this liability until he has paid for the stock taken by him.
The following principles were declared in Marshall Foundry Co. v. Killian, 99 N.C. 501, 6 S.E. 680, 6 Am. St. Rep 539: (1) The capital stock, including unpaid subscriptions therefor, of a corporation constitute a trust fund for the benefit of creditors of the corporation, and the creditors have a right to examine into the affairs of the corporation, to ascertain if the subscriptions of stock have been paid, and how. (2) Each subscriber for stock in a corporation thereby becomes liable for the amount of stock subscribed by him, and he can only be discharged by paying money or money's worth in the manner provided by the charter and by-laws. (3) A subscriber cannot discharge his liability as against creditors for his subscription by substituting shares paid up by another subscriber. (4) Parol evidence will not be received to vary the terms of subscription or to show a discharge from liability on the part of a stockholder, in any other way than that prescribed by the charter and by-laws. That decision was largely based upon the principles announced, or rather reiterated, in Sawyer v. Hoag, 17 Wall. at page 620, 21 L.Ed. 731, by Mr. Justice...
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