Griswold v. Seligman

• Decision Date: 31 October 1880
• Citation: 72 Mo. 110
• Parties: GRISWOLD, Appellant, v. SELIGMAN.
• Court: Missouri Supreme Court

72 Mo. 110

GRISWOLD, Appellant,

v.SELIGMAN.

Supreme Court of Missouri.

October Term, 1880.

Appeal from Jasper Court of Common Pleas.--HON. E. O. BROWN. Judge.

REVERSED.

The facts are stated in the opinions.

W. H. Phelps for appellant.

One who holds and uses stock, and so gets the benefit of it, is liable to the creditors of the corporation, even though it be issued as collateral security, or in trust to secure a debt due the corporation. Wheelock v. Kost, 77 Ill. 296; Pullman v. Upton, 96 U. S. 329; National Bank v. Case, 99 U. S. 628. Respondents having voted the stock and enjoyed the privileges of stockholders, they should be held to a stockholder's liability as to creditors, although the stock was originally given to them as collateral security. Adderly v. Storm, 6 Hill 624; Rosevelt v. Brown 11 N. Y. 149; In re Empire City Bank, 18 N. Y. 199; Hale v. Walker, 31 Iowa 344.

John P. Ellis also for the appellant.

1. In order that a creditor of a corporation may hold one liable as a stockholder, who is not a subscriber, it is not essential that the creditor shall have become such by reason of the conduct of the other party or the facts relied upon as constituting an estoppel. Sanger v. Upton, 91 U. S. 63; National Bank v. Case, 99 U. S. 631.

2. Delivery of the stock to the defendants vested the title in them. Moss v. Riddle, 5 Cranch 351; Flay v. Maim, 2 Sumner 510; Henshaw v. Dutton, 59 Mo. 139. In order to be in escrow the delivery should have been to a stranger.

H. H. Harding and Broadhead. Slayback & Hauessler for respondent.

Our statutes make a clear distinction between mere stockholders and stock-owners. The latter only are qualified to be direetors; (Wag. Stat., 299, § 6,) while any stockholder may vote at elections, though he be not the absolute owner of the stock. It is stock-owners only whe can be made liable for the debts of the corporation. Wag. Stat., 291, § 13; R. S., § 736.

Neither according to common law, nor under our statute, can a man become legally a stockholder, so as to enable him to participate in the management of the affairs of the corporation, merely by becoming the holder of a certificate of stock, even though the certificate may be transferred to him in writing by one who is a member of the corporation; it requires the consent of the corporation before an individual can become a member of it, and this generally must be done either by subscription to the stock of the corporation, or by transfer to him on the books of the company and with its consent by a person who is the owner of stock. Both modes of becoming a member of the body corporate require the concurrence of the corporation. In this case there is no transfer of ownership, either by an individual who had acquired the stock or by the corporation. Defendants took the stock to hold as trustees for the benefit of such persons as might advance money to the company. If because they accepted the certificate, they became owners of 60,000 shares of the stock, instead of getting security, they were contracting an immense liability. The fact that the certificate was absolute and unconditional on its face, does not estop them from showing that they did not hold it as owners; ( McMahon v. Macy, 51 N. Y. 155; Tonica & Pet. R. R. Co. v. Stein, 21 Ill. 96; Lathrop v. Kneeland, 46 Barb. 432; Jones v. Portsmouth R. R. Co., 32 N. H. 544;) especially since the evidence was in writing.

It is claimed that inasmuch as the stock certificate was absolute on its face, persons dealing with the corporation had the right to infer that the defendants held the stock absolutely. But it is not pretended that any one was deceived or misled by this fact; besides, the stock register or transfer book is the place to look for the purpose of finding out who are stockholders. The certificates of stock issued are no part of the records of the corporation; they belong among the private papers of the individuals holding them for any purpose, and are not open to public inspection, but the stock register is the place for persons dealing with the corporation to see who are members, (Thompson on Stockholders, § 177,) and when we come to look at the stock register in this case it shows that this stock was held in escrow by the defendants, not in their own right. But there is no rule, statutory or otherwise, requiring notice to be given to the world as to who is the owner of stock in a corporation, nor as to how the stock is held, and in the absence of any such rule, it must be a matter depending upon the contract between the corporation and the stockholder, as to who is the owner of stock.

It is claimed that the exemption from liability provided in the first clause of section 9, page 301, Wagner's Statutes, is limited to cases where there is some one to respond to liability under the second clause of the section. But the first clause of the section referred to is broad enough to cover the case of the trustee, and the statute clearly means that no person is liable unless he holds the stock in his own right. Of course, if he holds it for any one, the person for whom he holds it, and who is the real owner, is and ought to be liable. Matthews v. Albert, 24 Md. 527; Guest v. Worcester R. R. Co., 38 L. J. (C. P.) 23; Thompson on Stockholders, § 224; McMahon v. Macy, 51 N. Y. 155.

1. CORPORATION: how liability as stockholder may be assumed.

SHERWOOD. C. J.

This appeal questions the correctness of the ruling which denied plaintiff's motion for execution against defendants. The point thus presented for determination is, whether the defendants are answerable as stockholders. The relation of stockholder may be created not only by the usual formalities of subscription and the acceptance of stock, but other acts are, in contemplation of law, the legal equivalent of those just mentioned. That is to say, conduct on the part of the person sought to be charged is, of itself, sufficient to accomplish all that could be accomplished by the rigid observance of those formalities usually attendant on becoming a stockholder.

The law declaratory of this position is well settled in America and by the earlier authorities in England. Thomp. on Stock., § 150.

Thus, in action of debt for calls, one who, though not a subscriber had paid a call as such, was held estopped to deny his membership, and a like ruling was made in a similar instance, where the defendant had attended the half yearly meeting of the proprietors. Railway Co. v. Graham, 2 Eng. Ry. Cas. 870; Railway Co. v. Gunstone, 2 Eng. Ry. Cas. 870. So, also, where the issue raised, as in the cases cited, was, whether the defendant was the proprietor of shares and consequently liable for calls, and it appeared that he had represented himself to the company in that capacity, claiming to be registered as such in consequence of scrip certificates purchased by him and sent in to the company, for which he had received receipts and a notice from the company that the scrip would be exchanged for sealed certificates on demand, he was held estopped to deny his liability for calls, though the provisions of the act necessary to make him proprietor had not been complied with by the registry of his name or the entry or any memorial of transfer, Lord Denman, C. J., remarking: “A party cannot, by his own conduct, change his liability at pleasure. * * All the machinery which the legislature renders necessary to constitute a member is in this instance dispensed with by the conduct of the parties.” Railway Co. v. Daniel, 2 Eng. Ry. Cas. 728. And that case was held not distinguishable from one decided at the same time, where, in addition to the facts first noted, the defendant had paid calls on some shares and begged time as to others. Railway Co. v. DeMedina, 2 Eng. Ry. Cas. 735. In such cases it is held that a “valid and binding contract” is formed between the company and the person sought to be charged as contributory if there has been a course of dealing with the company wherein they have permitted the alleged transferee to become a shareholder de facto. Straffon's Extrs. Case, 1 DeG., Mac. & G. 576, and cases cited. The beneficial use of stock will also render the person so using it liable as shareholder. This is well illustrated in Maguire's case, 3 DeG. & Smale 31, where the son, unaware that two shares had been transferred him by his father, signed certificates obtained from the company's office as proprietor, and on several occasions by this means secured a free passage in the vessels of the company, was held properly placed on the list as contributory, the vice-chancellor saying: “This gentleman is shown so plainly and distinctly to have represented himself and to have acted as proprietor, that in my opinion it is established that he is a proprietor, and if a proprietor, a partner and a contributory.

In this country instances are abundant where parties sued as shareholders at the instance of the corporation or of creditors, have been held either estopped by their conduct from denying their liability, or that their conduct was cogent evidence of such liability. Thus, where a party who, though released from the obligation of his subscription, had subsequently voted at the annual meeting for directors, was himself elected as a director, acted in that capacity and as a stockholder, and paid money to the company, although no call was made therefor, it was held in an action for calls that these acts very strongly warranted the presumption that he had resumed his original obligation as a stockholder. Railroad Co. v. Stewart, 41 Pa. St. 54. Upon analogous grounds, one who had been voted a member of a New England parish, had in that capacity attended and voted at parish meetings and acted as trustee of the parish funds, was held a member, and that his body could be taken in execution for a parish debt, though he had not, in compliance with statutory requisition, filed any certificate of membership. Chase v. Bank, 19 Pick. 584. And the enunciation of a similar...