Porter v. Northern Fire & Marine Ins. Co.
| Decision Date | 07 March 1917 |
| Docket Number | 1915 |
| Citation | 161 N.W. 1012,36 N.D. 199 |
| Court | North Dakota Supreme Court |
Appeal from the District Court of Pembina County, Honorable W. J Kneeshaw, Judge.
Affirmed.
Bangs Hamilton, & Bangs (C. J. Fisk, of counsel) for appellant.
The object of our statutes is to provide a simple method by which the capital of a corporation might be kept intact, and not become impaired. Comp. Laws 1913, §§ 4864 and 4866.
Like statutes exist in many of the states, and have been construed in keeping with appellant's contentions made in this case. Rev. Stat. § 5205; Comp. Stat. 1916, § 9767; Corbin Bkg. Co. v. Mitchell, 141 Ky. 172, 31 L.R.A.(N.S.) 446, 132 S.W. 426; Dewey v. St. Albans Trust Co. 57 Vt. 332; 3 R. C. L 387; Northwestern Trust Co. v. Bradbury, 117 Minn. 83, 134 N.W. 513, Ann. Cas 1913D, 69; Slette v. Larson, 125 Minn. 263, 146 N.W. 1093.
The power to pass such laws rests within legislative discretion. Noble State Bank v. Haskell, 219 U.S. 104, 55 L.Ed. 112, 32 L.R.A.(N.S.) 1062, 31 S.Ct. 186, Ann. Cas. 1912A, 487.
"A corporation cannot levy an assessment upon the holders of fully paid stock, unless the power to do so is conferred by the charter, or articles of association, or by a valid statute, or by consent of the stockholders." 2 Clark & M. Corp. §§ 402, 404, p. 1270; Minn. Stat. 1905, § 3000; 7 R. C. L. pp. 211, 212; Corbin Bkg. Co. v. Mitchell, 141 Ky. 172, 31 L.R.A.(N.S.) 446, 132 S.W. 426; Dewey v. St Albans Trust Co. 57 Vt. 332; Delano v. Butler, 118 U.S. 634, 30 L.Ed. 260, 7 S.Ct. 39.
In fact that stock is fully paid up is no reason why it cannot be assessed, when necessary, to keep the capital intact and unimpaired. Sullivan v. Triunfo Gold & S. Min. Co. 39 Cal. 465; Santa Cruz R. Co. v. Spreckles, 65 Cal. 193, 3 P. 661, 802.
McIntyre & Burtness and J. L. Cashel, Jr., for respondents.
Fully paid up stock is nonassessable in the absence of statutory authority, or special power conferred upon the directors. More v. The Courier News, 29 N.D. 385, 151 N.W. 2; Enterprise Ditch Co. v. Moffit, 45 L.R.A. 648, note; Wall v. Basin Min. Co. 22 L.R.A.(N.S.) 1013, note; Cook, Corp. 6th ed. §§ 241 et seq.; Comp. Laws 1913, §§ 4570 and 4571.
A corporation has the right to waive the benefit of any and all statutes, unless such act is contrary to public policy. In other words, a contract making the stock nonassessable is valid and controlling between the stockholder and the corporation, and the courts will enforce such contracts. Wall v. Basin Min. Co. 16 Idaho 313, 22 L.R.A.(N.S.) 1013, 101 P. 733; Lum v. American Wheel & Vehicle Co. 165 Cal. 657, 133 P. 303, Ann. Cas. 1915A, 816; Browne v. San Gabriel River Rock Co. 22 Cal.App. 682, 136 P. 542; Garey v. St. Joe Min. Co. 32 Utah 497, 12 L.R.A.(N.S.) 554, 91 P. 369; Dickerman v. Northern Trust Co. 176 U.S. 181, 200, 44 L.Ed. 423, 434, 20 S.Ct. 311; Scovill v. Thayer, 105 U.S. 143, 26 L.Ed. 968.
Both forms of assessment as framed by our statutes may be so waived. Comp. Laws 1913, §§ 4570, 4865 and 4866; Wall v. Basin Min. Co. 16 Idaho 313, 22 L.R.A.(N.S.) 1013, 101 P. 733; Lum v. American Wheel & Vehicle Co. 165 Cal. 657, 133 P. 303, Ann. Cas. 1915A, 816; Browne v. San Gabriel River Rock Co. 22 Cal.App. 682, 136 P. 542.
No statutory enactment can be valid that would destroy the contract between the corporation and the stockholder which was made at the time of the sale and purchase of the stock. State ex rel. Miller v. Leech, 33 N.D. 513, 157 N.W. 492; State ex rel. Miller v. Taylor, 27 N.D. 77, 145 N.W. 425; State ex rel. Standard Oil Co. v. Blaisdell, 22 N.D. 86, 132 N.W. 769, Ann. Cas. 1913E, 1089; Garey v. St. Joe Min. Co. 32 Utah 497, 12 L.R.A.(N.S.) 554, 91 P. 369.
Stock which is fully paid up is nonassessable, and unless there is some express provision of law authorizing an assessment none can be levied. 1 Cook, Corp. 6th ed. §§ 241 and 242; Enterprise Ditch Co. v. Moffit, 58 Neb. 642, 45 L.R.A. 648, 76 Am. St. Rep. 122, 79 N.W. 560; Wall v. Basin Min. Co. 16 Idaho 313, 22 L.R.A.(N.S.) 1013, 101 P. 733, Ann. Cas. 1915A, 816.
"That it was the intention of the legislature to make an assessment under the provisions of § 4866 permissible, and not mandatory, is shown by the history of this statute." Laws of 1883, § 31; Comp. Laws 1913, §§ 4865 and 4866; Comp. Laws 1887, § 3067; Wall v. Basin Min. Co. 16 Idaho 313, 22 L.R.A.(N.S.) 1020, 101 P. 733; Lum v. American Wheel & Vehicle Co. 165 Cal. 657, 133 P. 303, Ann. Cas. 1915A, 816.
A corporation can contract with persons subscribing to the capital stock not to do a discretionary act, and hence it can contract that its stock shall be nonassessable. Browne v. San Gabriel River Rock Co. 22 Cal.App. 682, 136 P. 542; Lum v. American Wheel & Vehicle Co. supra.
The personal liability of the stockholder as to the corporation is the subscribed price of the stock; as to creditors it is fixed and limited by law. Comp. Laws 1913, § 4554; Wall v. Basin Min. Co. 16 Idaho 313, 22 L.R.A.(N.S.) 1013, 101 P. 733.
The state has no greater general interest in an insurance corporation than it has in any other corporation. The state's interest is that, if the corporation itself desires to continue in business, it must be in a solvent condition. Courts have frequently held to this reasoning. Garey v. St. Joe Min. Co. 32 Utah 497, 12 L.R.A.(N.S.) 554, 91 P. 369.
A contract that stock shall be nonassessable is a valid, legal engagement. The statute does not prohibit such a contract. The only limitation is that no agreement shall be made that the full par value shall not be paid. Comp. Laws 1913, § 4527.
Valid contracts made between parties cannot be impaired or changed, except by the act of the parties. N.D. Const. §§ 13 and 16.
The Commissioner of insurance is an administrative officer, rather than a judicial officer. He is not vested with any judicial power.
If this be not true, then §§ 4865 and 4866, Compiled Laws, are unconstitutional and void. State ex rel. Miller v. Leech, 33 N.D. 513, 157 N.W. 492; State ex rel. Miller v. Taylor, 27 N.D. 77, 145 N.W. 425; State ex rel. Standard Oil Co. v. Blaisdell, 22 N.D. 86, 132 N.W. 769, Ann. Cas. 1913E, 1089; Garey v. St. Joe Min. Co. 32 Utah 497, 12 L.R.A.(N.S.) 554, 91 P. 369.
This is an appeal from an order of the district court of Pembina county, enjoining appellants from taking further proceedings to collect an assessment levied upon the stock of the respondents and other stockholders by the directors of the Northern Fire & Marine Insurance Company, a domestic corporation. The facts are as follows: The defendant insurance company was organized about five years ago; and, in order to obtain capital with which to do business, it sold stock to a large number of individuals, including the plaintiffs (sixty-four in number), who purchased 1,355 shares of stock at the par value of $ 10 each. The subscription agreements provide that the stock shall be "fully paid and nonassessable," and in pursuance of these agreements certificates of stock have been issued to the plaintiffs upon the face of which are printed or stamped the following words: "Fully paid and nonassessable." The plaintiffs paid for their stock an amount in excess of the par value thereof, and the stock certificates bear evidence of this fact in the statements contained thereon that the par value is $ 10 and the market value $ 25.
During the year 1916 the insurance company met with extraordinary losses, which resulted in financial embarrassment. Its condition became known to the Commissioner of Insurance, and in the exercise of his statutory authority a notice was given to the company on December 2, 1916, as follows: "An examination of your company made by this department as of September 20, 1916, discloses the fact that the capital stock was impaired in an amount of substantially 100 per cent.
On December 7, 1916, the company's board of directors levied an assessment of 100 per cent upon the capital stock, and gave the following notice thereof to the stockholders:
Notice is hereby given that at a meeting of the directors of the Northern Fire & Marine Insurance Company, held on the 7th day of December, 1916, an assessment of $ 10 per share was levied upon the capital stock of the corporation, pursuant to notice received from the Commissioner of Insurance of the state of North Dakota, that the capital of said company was impaired and would have to be made good.
Further, said assessment is made payable on the 12th day of December, 1916, to the treasurer of said corporation at its office in the city of Grand Forks, state of North Dakota, and any stock upon which this assessment is not paid within sixty days after the 12th day of December. 1916, shall be forfeitable, and may be canceled by a vote of the directors, and new shares issued to make up the deficiency.
Dated this 8th day of December, 1916.
Grand Forks, North Dakota.
Pursuant to the above levy and notice, the company has collected a portion of the assessment so made, but the 64 plaintiffs owning 1355 shares, above referred to and 81 additional stockholders, owning 1486 shares, who were subsequently made parties to the action by stipulation, seek to enjoin the collection of the...
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