Merchants' & Mechanics' Sav. Bank v. Belington Coal & Coke Co.

• Citation: 41 S.E. 390,51 W.Va. 60
• Parties: MERCHANTS' & MECHANICS' SAV. BANK OF GRAFTON v. BELINGTON COAL & COKE CO. et al.
• Decision Date: 08 March 1902
• Court: West Virginia Supreme Court

41 S.E. 390

51 W.Va. 60

MERCHANTS' & MECHANICS' SAV. BANK OF GRAFTON v. BELINGTON COAL & COKE CO. et al.

Supreme Court of Appeals of West Virginia.

March 8, 1902

Syllabus by the Court.

1. In the absence of actual fraud or mistake, a court of equity will not interfere with a contract made between parties competent to contract.

2. Under section 24, c. 53, Code, a mining corporation, after it is fully organized, may purchase real and personal estate for the use of such corporation, and for its other corporate purposes and business, at such price, and upon such terms and conditions, as may be agreed upon by the owners and directors or stockholders of such corporation, and may pay for such property by issuing so many shares of its capital stock to the vendor as are equal in amount at par value to the price agreed upon for such property, but not to exceed its authorized capital.

3. The fact that property so received by a corporation in full payment for stock issued is taken at an overvaluation will not make the holder of such stock liable as for unpaid subscription until the transaction has first been impeached for fraud upon the corporation.

Appeal from circuit court, Barbour county; John Homer Holt, Judge.

Bill by the Merchants' & Mechanics' Savings Bank of Grafton against the Belington Coal & Coke Company and others. Decree for plaintiff, and defendants appeal. Affirmed.

S. V Woods, for appellants.

J. A Bent, A. G. Dayton, and Fred O. Blue, for appellee.

MCWHORTER J.

A Custer, doing business as A. Custer & Co., took options upon various tracts of land in Barbour and Randolph counties aggregating about 3,000 acres of coal and coal lands. The price to be paid was about $20 an acre, of which 10 per centum was to be paid in cash and the residue in three equal annual installments, with interest. Said Custer succeeded in interesting I. V. Johnson, J. N. B. Crim, J. E. Hall, A. G. Dayton, William Watkins, George W. Hoover, W. W. Teter, Floyd Teter, and C. F. Teter in said purchases. On the 26th day of January, 1892, said Hall, Crim, Johnson, Charles F. Teter, Watkins, and Hoover filed their agreement with the secretary of state, agreeing to become a corporation by the name of the "Belington Coal & Coke Company," "for the purpose of mining coal, manufacturing coke, selling and shipping the same, buying and leasing lands and mineral rights, constructing tram roads, shafts, coke ovens, and engaging in a general merchandising business, and acquiring such other property and rights, and the construction of such other works, as may be necessary or advantageous for the proper conduct of said company's business," and subscribed thereto 10 shares of stock each, making $6,000, and paid in 10 per centum thereon, and asked the privilege of increasing their capital stock, by the sale of additional shares from time to time, to $500,000. On the next day, January 27th, the secretary of state issued to them their charter accordingly. On the 9th day of February, 1892, the said corporators, together with A. G. Dayton and A. Custer, then stockholders, met and organized the company by the election of said Watkins, Crim, C. F. Teter, Floyd Teter, Dayton, Hall, and Hoover to be board of directors, which board organized by electing Crim president, Watkins vice president, Johnson secretary and treasurer, and Custer general manager, and at which meeting a proposition was made to the said company, which, together with the action of the company thereon and in relation thereto, are as follows: "Whereas, A. Custer, I. V. Johnson, J. E. Hall, J. N. B. Crim, William Watkins, G. W. Hoover, Floyd Teter, W. W. Teter, C. F. Teter and A. G. Dayton control a body of 3,000 acres of coal and coal land, lying and being in the counties of Barbour and Randolph, state of West Virginia, lying generally on the Tygart's Valley river and Beaver creek; and whereas, the said above-named parties have agreed to sell their said interest in and to said 3,000 acres of coal and coal land at the price of $73 per acre, or at a total of $219,000, to this company, and to accept in part payment thereof the paid-up certificates of the capital stock of this company to the amount of $159,000, to be issued to said parties, in the following sums and amounts, viz.: To A. Custer, $78,000; to J. N. B. Crim, $9,000; to C. F. Teter, $9,000; to W. W. Teter, $9,000; to Floyd Teter, $9,000; to A. G. Dayton, $9,000; to I. V. Johnson, $9,000; to William Watkins, $9,000; to G. W. Hoover, $9,000; to J. E. Hall, $9,000, equal to $159,000.00; and said parties have further subscribed each 10 shares to said capital stock, or in all $10,000. It is further stipulated that $100,000 of the capital stock of this company be sold at a discount, not to exceed 20 per cent., and out of the proceeds of the sale of such stock and the $10,000 subscribed by the said parties, the residue of $60,000 due upon said lands and coal shall be paid to the parties to whom the same shall be owing, and the residue shall be expended in developing said property, in the opening of mines, and the erection and operation of coke ovens, all other things necessary. Signed, February 9th, 1892, by the above-named parties, A. Custer, C. F. Teter, J. N. B. Crim, I. V. Johnson, Floyd Teter, W. W. Teter, A. G. Dayton. Upon consideration of the foregoing proposition it is unanimously ordered that the same be accepted and spread upon the records of this company, and that, in compliance therewith, it is further ordered that A. Custer, general manager of this company, be at once authorized to sell $100,000 of the capital stock of this company at a discount below par value of not to exceed 20 per cent.; that so soon as said capital stock is sold this company will issue to said parties certificates of paid-up capital stock of this company to the amounts set forth in said proposition,--that is to say: To said A. Custer, $78,000; to I. V. Johnson, $9,000; to C. F. Teter, $9,000; to W. W. Teter, $9,000; to Floyd Teter, $9,000; to A. G. Dayton, $9,000; to G. W. Hoover, $9,000; to William Watkins, $9,000; to James E. Hall, $9,000; to J. N. B. Crim, $9,000; and will out of the proceeds of the sale of said $100,000 of the capital stock pay the residue of $60,000 due for said coal and coal lands, and expend the residue in developing said property at once by opening mines, erecting and operating coke ovens and all other things necessary; and it is further ordered that a certificate be written and signed by the president of this company, and attested by the secretary, under the seal of this company, and be delivered to A. Custer, general manager of this company, showing his authority to sell and negotiate according to the above order the said $100,000 of the capital stock of this company."

The company proceeded, under the management as organized, to carry out the object of the organization, and on the 29th of November, 1892, at a meeting of the board of directors, the following order was made: "It appearing to the company that it is indebted to A. Custer, general manager of the company, in the sum of $3,021.44 upon settlement made this day, it is ordered that the company execute, by its president, its note, payable in six months, to the said A Custer for the said sum, $3,021.44,"--which note was accordingly executed, bearing date the 3d day of December, 1892, under the seal of said company, by J. N. B. Crim, the president, which note, being nonnegotiable, was sold by the payee, A. Custer, to the Merchants' & Mechanics' Savings Bank of Grafton. The note not having been paid when due, and the maker having become largely indebted to insolvency, the said bank, the holder of the note, instituted its suit in the circuit court of Barbour county in behalf of itself and all other creditors of the said Belington Coal & Coke Company who would come in and join the plaintiff in the costs of the suit, making all the stockholders and creditors of said company parties defendant thereto; alleging the contract taken by the said Custer for the several tracts of coal lands, amounting in all to some 3,000 acres at the rate of $20 per acre, 10 per centum of the price to be paid down, the residue in three equal annual installments, with interest, and that he had written contracts for the purchase of the same; that before the incorporation of said company, on the 23d of December, 1891, said Custer, as A. Custer & Co., by a written contract of that date, sold to said Johnson, Crim, Hall, Dayton, C. F. Teter, Watkins, Hoover, W. W. Teter and Floyd Teter all of said 3,000 acres at the price of $40 per acre; that the said purchasers from Custer thereby assumed to pay and perform all the obligations of A. Custer & Co. to the landowners, according to his several contracts with the original landowners, and in addition thereto undertook and promised to pay to the said Custer, as A. Custer & Co., $60,000 of the paid-up capital stock of a corporation shortly to be formed by the said persons for the purpose of mining and operating the mines to be opened in said coal and coal lands; that said contract of the 23d of December was signed by all of said parties, and by A. Custer & Co., and was left with A. G. Dayton, C. F. Teter, and J. E. Hall, three of the parties thereto, for the purpose of being preserved as a link in the chain of title to said lands, to be entered of record in Barbour and Randolph counties, but was never recorded, and was still in the possession of said parties, or some of them; and files with the bill what is charged to be a copy of the same, and alleging the incorporation and organization, as hereinbefore set out, and sets up the proposition and acceptance of the same, and the issuance of the 90 additional shares to each of the stockholders mentioned, reciting the same to...