Libby v. Tobey

• Decision Date: 21 February 1890
• Parties: LIBBY v. TOBEY.
• Court: Maine Supreme Court

19 A. 904

82 Me. 397

LIBBY

v. TOBEY.

Supreme Judicial Court of Maine.

Feb. 21, 1890.

(Official.)

Report from supreme judicial court, Sagadahoc county.

Spaulding & Buker and Holmes & Payton, for plaintiff. W. L. Putnam and G. C. Wing, for defendant.

FOSTER, J. This case comes before the court on report. The plaintiff, having recovered judgment against the Deer Isle Silver Mining Company for $5,634.69 debt and $116.10 costs of suit, claims the right to enforce his judgment against this defendant as a stockholder of the corporation by force of Rev. St. c. 46, §§ 46, 47.

The liability sought to be enforced is a statutory one, and in order to prevail the plaintiff must bring his case within the statute, by proving that he has a lawful and bona fide judgment against the corporation, "based upon a claim in tort or contract, or for any penalty" recovered within two years next prior to this action; that the defendant subscribed for, or agreed to take, stock in the corporation, and has not paid for the same as defined in section 45; that the cause of action upon which his judgment against the corporation was founded was contracted during the defendant's ownership of such unpaid stock; and that the proceedings to obtain this judgment against the corporation were commenced during the defendant's ownership of such unpaid stock, or within one year after its transfer was recorded on the books of the corporation. Grindle v. Stone, 78 Me. 176, 8 Atl. Rep. 183.

That there was a valid judgment in favor of the plaintiff against the corporation, recovered within two years next prior to the commencement of this action, is not in controversy.

By the certificate of organization, it appears that the corporation was organized in August, 1879, with what purported to be a paid-up capital of $300,000, divided into shares of the par value of $5 each, and that this defendant subscribed for, and agreed to take, 2,250 shares. An examination of the evidence satisfies us that payment for the stock thus subscribed was not made in cash, or in any matter or thing at a bona fide and fair valuation thereof, within the purview of section 45.

It appears that the associates voted to purchase the mineral right on Dunham point, Deer isle, for the sum of $240,000, and to issue stock to the several owners for their respective shares.

It becomes material to ascertain how this capital was paid up,—whether it was a payment in a "matter or thing at a bona fide and fair valuation thereof."

The case shows that 20 persons, of whom the defendant was one, joined together for the purpose of purchasing, opening, and developing this mineral right, and paid the owner, for three-fourths of the property, $5,000, —or at a valuation of $6,666.67 for the whole. It was this property alone for which the corporation paid $240,000 in its stock at par.

After the organization of the company the land was put in at $240,000, and the owners of three-fourths ratably returned 12,000 shares, amounting to $60,000, to the corporation as a working capital. Under that arrangement this defendant returned 600 shares as his proportion, and received a certificate of 1,650 shares of paid-up stock. The total actual cost to these associates, including $2,500 expended in improving and developing the property, was not over $375 each, or a fraction less than 23 cents a share for 1,650 shares each.

That the property was not actually worth the sum of $240,000 at the time it was purchased is too evident to require discussion. The price paid, as well as the acts of the purchasers, immediately after the organization, in voting to sell the capital stock of the company, to the amount of $45,000, at 50 cents a share, or at one-tenth its par value; the sale of a considerable portion of the treasury stock, within 60 days of the organization, at that figure; the fact that the whole $60,000 of treasury stock was sold at prices ranging from 50 cents to $1.50 a share; and the very low figure at which many of the stockholders sold their stock,—is evidence from which we may well infer that the value of $240,000 placed upon this property by the corporation was not a "bona fide and fair valuation thereof."

The payment of stock in anything but money will not be regarded as a payment except to the extent of the true value of the property or thing received in lieu of money. Rev. St. c. 46, § 45; Thomp. Liab. Stockh. §8 127, 201; Boynton v. Hatch, 47 N. Y, 225; Nathan v. Whitlock, 3 Edw. Ch. 215.

The cause of action against the corporation was contracted on the 18th day of November, 1882. On that day the defendant had standing in his name 400 shares only of the original stock for which he had subscribed, the balance having been transferred by him before that date. He also at that time had 1,000 shares purchased in the market, from Richardson, Hill & Co., of Boston, on March 23, 1882.

The defendant claims that, if liable at all, he is liable only upon this 400 shares of original stock.

This position we think is correct.

The individual liability of members for the debt of a corporation is a departure from the established rules of law, and is founded solely upon grounds of public policy, depending entirely upon express provisions of statute law. The defendant, if chargeable at all, is chargeable upon a statute liability, as having "subscribed for, or agreed to take, stock in said corporation," and who has "not paid for the same." The contract was not made with him, or on his account. There was no contract, express or implied, between him and the plaintiff. Such liability is "therefore to be construed strictly, and not extended beyond the limits to which it is plainly carried by such provisions of statute." Gray v. Coffin, 9 Cush. 192; Erickson v. Nesmith, 4 Allen, 233, 235; Knowlton v. Ackley, 8 Cush. 93. 96.

As early as 1836 the legislature of this state saw lit to provide a remedy in favor of creditors of corporations, whereby the stockholders of all corporations were made liable individually for the corporate debts to the amount of their several shares. The history of the numerous and somewhat complicated enactments upon this branch of the law may be found in an opinion by TENNEY, C. J., in Milliken v. "Whitehouse, 49 Me. 527; and it is unnecessary to enter upon...