Greene v. Sigua Iron Co.

• Decision Date: 21 October 1896
• Citation: 88 F. 203
• Parties: GREENE v. SIGUA IRON CO. [1]
• Court: U.S. Court of Appeals — Second Circuit

88 F. 203

GREENE v. SIGUA IRON CO. ^[1]

United States Court of Appeals, Second Circuit.

October 21, 1896

Kellogg Rose & Smith, for plaintiff in error.

Wm. B Hornblower and Howard A. Taylor, for defendant in error.

Before WALLACE and LACOMBE, Circuit Judges, and TOWNSEND, District Judge.

WALLACE Circuit Judge.

This is a writ of error by the defendant in the court below to review a judgment for the plaintiff entered upon a verdict of a jury. The action was brought to recover of the defendant, as a stockholder of the corporation plaintiff, the amount of certain calls for installments due and unpaid upon 400 shares of stock. The assignments of error raise the question whether there was sufficient evidence in the case to support the ruling of the trial judge refusing to direct a verdict for the defendant, and leaving it to the jury to determine as an issue of fact whether the defendant ever became a stockholder of the plaintiff. It is not alleged that the defendant was liable for the calls as a stockholder of the corporation by original subscription, but the theory of the action was that he became a purchaser of 1,000 shares, and a stockholder by the transfer of those shares to him upon the books of the corporation. It appeared in evidence that certain individuals known as the 'Sigua Syndicate,' the promoters of the enterprise which the corporation was organized to carry on were, by an agreement with the corporation, entitled to 29,995 shares of its capital stock, of the par value of $100 per share, subject to calls and assessments to the extent of 35 per cent. In May, 1890, the plaintiff and certain other persons severally signed an instrument which read as follows:

'We, the undersigned, hereby agree with the Sigua Syndicate to purchase from them, at $35 per share, the number of shares (of the par value of $100 each) set opposite our names, respectively, the same being 65 per cent. paid, and liable to further calls and assessments to the extent of 35 per cent.; said 35 per cent. being payable one-tenth, or ten per cent. thereof, on call, and the remainder as required, probably at the rate of one-tenth, or ten per cent., of said 35 per cent. every two months, or a proportionate part in case of oversubscription.'

The defendant subscribed for 1,000 shares. The instrument was delivered to one Smith as trustee for the syndicate. July 8, 1890, the corporation duly issued a certificate to Smith, as trustee for the syndicate, for the 29,995 shares. July 9, 1890, Smith, as trustee, executed an assignment of 1,000 shares to the defendant, and issued two certificates therefor in the name of the defendant, one for 600 and the other for 400 shares. The defendant had previously declined to take the 400 shares, insisting that the subscription was made upon the condition that he should not be required to pay for any of the shares which he might not be able to place with or sell to other persons, and that he had been unable to dispose of 400 shares. He afterwards accepted the certificate for 600 shares, but did not take the one for 400 shares, and it was not delivered to him, but thereafter always remained in the possession of the corporation. Calls for payment of installments were duly made by the board of directors from time to time, but no notice of a call was ever sent to the defendant. The amount due on unpaid installments of 400 shares at the time of the trial was $14,000 principal and $5,790.96 interest; in all, $19.790.96. For this amount the jury rendered a verdict for the plaintiff. The trial judge seems to have assumed that the subscription by the defendant evidenced a purchase of the shares, and instructed the jury that it was of itself a sufficient authorization to the corporation to make the transfer upon its books to defendant.

It is entirely clear that a person cannot be constituted a shareholder in a corporation by a transfer of shares without his consent. The transfer of shares on the books to a person who refuses to accept them or recognize the act in any way does not change his position in regard to the corporation. That a purchase of shares from an existing stockholder, which is sufficient, as between the parties, to devest the title of the vendor, and vest it in the vendee, and is intended to do so, is of itself an implied delegation of authority to the vendor, consequently to the corporation, to cause the requisite transfer to be made upon the books of the corporation, we do not doubt. The vendor is entitled, as against the vendee, to be relieved from further liability as a stockholder, and the vendee is entitled, as against the vendor, to all the rights of a stockholder; and the intention of the parties cannot be fully effectuated without the transfer upon the books. The very essence of such a contract is that the seller shall relinquish and be relieved from, and the purchaser assume, all future benefits and liabilities in respect of the shares. Grissell v. Bristowe, L.R. 3 C.P. 112. Because the vendor is entitled to be relieved from these liabilities, it has been held that, where he has been obliged to pay the debts of the corporation in consequence of the failure of the vendee to cause the transfer to be made upon the books, he may recover the amount so paid in an appropriate action. Johnson v. Underhill, 52 N.Y. 203; Castellan v. Hobson, L.R. 10 Eq. 47; Walker v. Bartlett, 18 C.B. 845; Wynne v. Price, 3 De Gex & S. 310. In Webster v. Upton, 91 U.S. 65, the court declared that it was the duty of the vendor of shares to make the transfer to the purchaser on the books of the company, and that...