Jonas v. Frost

• Decision Date: 31 March 1919
• Citation: 32 Idaho 214,179 P. 949
• Parties: R. A. JONAS, Appellant, v. M. W. FROST and the RED HORSE MINING COMPANY, a Corporation, Respondents
• Court: Idaho Supreme Court

179 P. 949

32 Idaho 214

R. A. JONAS, Appellant, v. M. W. FROST and the RED HORSE MINING COMPANY, a Corporation, Respondents

Supreme Court of Idaho

March 31, 1919

CORPORATIONS-CORPORATE STOCK-ASSESSMENTS-INJUNCTION-ESTOPPEL.

1. On motion to dissolve a preliminary injunction, evidence cannot be considered which is foreign to the issues raised by the pleadings.

2. Where neither the articles of incorporation nor the by-laws provide that the stock of a corporation shall be nonassessable, but where the stock is issued as nonassessable to an original incorporator, and is still owned by such incorporator, he may waive his right to claim that his stock is nonassessable, and he does so waive such right when he knows all of the conditions and when he meets with the directors and stockholders where a by-law is authorized and enacted making the stock assessable, and where with full knowledge he acquiesces in the payment of several assessments and makes no objection to the enactment of such by-law.

[As to definition of assessment, see note in 76 Am.St. 126]

APPEAL from the District Court of the Eighth Judicial District, for Kootenai County. Hon. R. N. Dunn, Judge

Appeal from an order dissolving a temporary injunction. Affirmed.

Order affirmed. Costs awarded to respondents.

J. F Ailshie and T. C. McDonald, for Appellant.

When stock certificates are delivered to all stockholders stating on their face that the stock represented by them is "fully paid up and nonassessable" (there being no contract to the contrary), none of the capital stock of such corporation is subject to assessment. (Wall v. Basin Mining Co., 16 Idaho 313, 101 P. 733, 22 L. R. A., N S., 1013.)

In the absence of statutory authority or power given in and by the articles of incorporation, such nonassessable stock cannot afterward be made assessable by amendment of the corporation's by-laws against the will and consent of the owner of such stock. (Wall v. Basin Mining Co., supra; Garey v. St. Joe Mining Co., 32 Utah 497, 91 P. 369 12 L. R. A., N. S., 554.)

A court having proper jurisdiction will restrain any corporation seeking to assess such nonassessable stock from selling it for nonpayment of an alleged assessment. (Porter v. Northern Fire & Marine Ins. Co., 36 N.D. 199, 161 N.W. 1012; Lum v. American Wheel & Vehicle Co., 165 Cal. 657, Ann. Cas. 1915A, 816, 133 P. 303.)

An illegal assessment is not made good by assent to former illegal assessments. (Atlantic De Laine Co. v. Mason, 5 R. I. 463 (referred to in note, 45 L. R. A. 648); Somerset & K. R. Co. v. Cushing, 45 Me. 524.)

C. H. Potts, for Respondents.

"An objection to an assessment on corporate stock, not within any issue raised by the pleadings, will not be considered on appeal." (Smith v. Sinaloa Land & Fruit Co., 42 Utah 445, 132 P. 556.)

"A shareholder may by his conduct validate an irregular assessment; as by participating in a meeting called for the purpose of organization, submitting to be elected director, and acting as such; or by assisting in framing the by-law under which the assessment was levied, and voting for its adoption." (10 Cyc. 527, note 56; Green v. Abetine Medical Co., 96 Cal. 322, 31 P. 100; 2 Pomeroy on Equity Jur., sec. 816; 22 Cyc. 777; 7 R. C. L. 180; Ireland v. Palestine etc. Co., 19 Ohio St. 369.)

STEELE, District Judge. Morgan, C. J., and Rice, J., concur.

OPINION

STEELE, District Judge.

--This appeal was taken from an order of the district court of the eighth judicial district, dissolving a preliminary injunction, granted upon the sworn complaint of the appellant.

The controversy arises over the proposed sale of stock of the Red Horse Mining Company for nonpayment of assessments. The appellant in his complaint relied upon three grounds for temporary injunction: First, that the stock of the corporation was issued as fully paid up and nonassessable; second, that the meeting at which the assessment complained of was levied was not a legal meeting, because of lack of notice to all the directors; third, that the defendant, M. W. Frost, as president of the mining company, executed a false proof of labor, and made certain false representations, inducing the levy of said assessment.

The respondents moved to dissolve the injunction, and based their motion upon the sworn answer filed therewith, and two affidavits in support of the answer. In such answer the respondents denied each and all of the material allegations of the complaint, and set forth two affirmative defenses, the first of which, in substance, was that at the meeting at which the assessment was made all of the directors except two were present, one of whom was the wife of the appellant, and that all were notified; that the appellant was present, participated in all of the proceedings; did not, at any time, prior to the commencement of this action, object to the holding of the meeting or of the transaction of any business therein, and assented to all proceedings taken at the meeting; that the appellant seconded the motion made to levy the assessment, and that all of the directors present, including the appellant, voted for the motion; that the appellant authorized the defendant Frost to execute the proof of labor, and by reason of such acts was estopped from questioning the validity of the meeting or any of the proceedings taken.

The second affirmative defense alleges, in substance, that the appellant was one of the original incorporators, and that he was issued 230,000 shares of stock as one of the incorporators; that none of the stock which he holds was purchased, but was merely issued to him as one of the original incorporators, as promoter's stock; that at the time of the issuing of said stock the corporation had not, by its by-laws, or by its articles of incorporation, provided that the stock should be nonassessable, but that the stock was so issued by inadvertence, stating that the stock was nonassessable; that thereafter, the appellant, in a meeting of the stockholders called to make the stock assessable voted for the calling of the directors' meeting, was present at the stockholders' meeting, voted to make the stock assessable and for the adoption of a by-law so providing; that immediately afterward the appellant surrendered all of his stock except one certificate for a thousand shares, and accepted in lieu thereof...