Stephenson v. Dodson

• Court: Pennsylvania Superior Court
• Writing for the Court: ORLADY, J.
• Citation: Stephenson v. Dodson, 36 Pa.Super. 343 (Pa. Super. Ct. 1908)
• Decision Date: 15 July 1908
• Docket Number: 185-1907
• Parties: Stephenson, Appellant, v. Dodson

36 Pa.Super. 343

Stephenson, Appellant, v. Dodson

No. 185-1907

Superior Court of Pennsylvania

July 15, 1908

Argued December 5, 1907 [Syllabus Matter] [Syllabus Matter] [Syllabus Matter]

Appeal by plaintiff, from judgment of C.P. Northampton Co.-1906, No. 14, for defendants on case tried by the court without a jury in suit of L. B. Stephenson v. Truman M. Dodson and Josiah Bachman, partners, trading as The Dodson Lead and Zinc Co.

Assumpsit to recover money paid for a bond of a nonregistered corporation.

Scott, P. J., filed the following opinion:

THE FACTS.

From admissions in the pleadings, and from testimony, where disputed, I find them to be:

1. The plaintiff, above named, is the holder for value of a bond (No. 76), purporting to be the obligation of the " Dodson Lead and Zinc Company," issued at Bethlehem, this county. It is one of a series of 200, each in the sum of $ 500, dated March 1, 1894, signed by Truman M. Dodson, as president, attested by Josiah Bachman, secretary (these two defendants), and payable " At its office in Bethlehem, Penna., on the first day of March A. D., 1914." The payment of these bonds was secured by a trust mortgage of the corporation, executed the same day, upon all its real estate, appurtenances and plant equipments in the state of Missouri. Coupons for semiannual payments of interest, on the first day of March and September, were attached to each bond, signed by " Josiah Bachman, Treasurer."

2. The Dodson Lead and Zinc Company is a corporation, created and organized in the state of West Virginia, September 8, 1891, " For the purpose of mining, preparing for market and selling lead, zinc and other mineral in Wright County, Missouri, and elsewhere; and manufacturing and selling the products thereof, and of purchasing lands, and erecting buildings and machinery for the purpose of such mining and manufacture." The incorporators were all citizens of Pennsylvania. It was stipulated in the certificate of incorporation, approved and issued by the secretary of state of West Virginia, that it " Shall keep its principal office or place of business at Bethlehem in the County of Northampton and State of Pennsylvania." It was admitted to do business in the state of Missouri, pursuant to certificate of the secretary of state, dated November 28, 1892. It was not then nor since registered in the state of Pennsylvania, as required by the Act of assembly, April 22. 1874, P. L. 108, relative to foreign corporations.

3. The bonds contain, upon their face, the recital that they are issued in pursuance of the resolution of the board of stockholders, " Held at the principal office of the Company at Bethlehem, Penna.," on January 22, 1894, and of the action of the board of directors of said company, held at the same place February 5, 1894. They contain also the following provision: " Upon default being made in the payment of any coupon or semiannual payment of interest hereon for the period of six months after the same is due, the whole principal sum hereof and interest to said date will become due and collectible upon the request of one or more bondholders holding an amount in the aggregate of Ten Thousand Dollars made to said Trustee, as specified in said Mortgage or Deed of Trust."

No request has been made to the trustee, according to this stipulation. Default has existed in payment of the interest aforesaid, since March 1, 1904, and this suit was instituted December 21, 1905.

4. The money loaned upon the bond now held by plaintiff, and all others of the issue, secured by the mortgage aforesaid, was not loaned to, or received by, either of these defendants individually, nor as agents of the Dodson Lead and Zinc Company. It was borrowed by the company, and applied to the improvement and development of its property in the state of Missouri. Truman M. Dodson signed the bonds, as president, and Josiah Bachman attested them, as secretary, affixing the corporate seal thereto, in compliance with the instructions, and by virtue of the supposed authority, embraced in the resolutions of the meeting of stockholders, and board of directors, specified in the last preceding paragraph, and without any fraudulent purpose or deceit. I cannot find that either of them had any further or personal agency in negotiation of the bonds.

5. The company's property is situated in Missouri, and its capital, from the time of incorporation, invested there. But its funds were deposited here, and the treasurer paid out annually $ 6,000 for ten years, as interest on its bonds, issued as above mentioned. It maintained at that place a business office, with superintendent, who employed a clerk, in the city of Mansfield, where accounts were kept in ledger, journal and daybook, and the product of the mines and manufactory sold. The general superintendent was employed by resolution of the board of directors, at a meeting in Bethlehem. He made report of his business affairs at intervals of time, longer or shorter in duration, to the secretary in Pennsylvania, who from them kept accounts of his own. Stock was issued by corporate action at Bethlehem, largely for the property purchased in Missouri, but some of it was sold to subscribers here. Employees were hired and paid at the superintendent's office, but money was borrowed in considerable sums at Bethlehem, upon the company's note, and the proceeds remitted to him for the pay-roll accounts, during the periods of development, and afterwards the machinery was purchased by him, and contracts made therefor, but the directors had set a limitation upon the price. More available assets were required, and the bonds were issued for that purpose by the action of stockholders and directors at Bethlehem, as hereinbefore stated. No corporate or business meeting of the stockholders or directors was ever held in Missouri, or West Virginia, but all of them in Pennsylvania, at the office established at Bethlehem. This office building did not belong to the corporation, but to Dodson and Company, coal dealers, by whom it was used. The secretary was their employee. He kept in his desk there, the corporate seal, stock ledger, transfer books, ledger and daybook of the business affairs at the mines, made up in abbreviated form from the reports of the superintendent. The directors and other officers were all residents of Bethlehem, or near its vicinity; and all the stockholders, with one or perhaps two exceptions, were citizens of Pennsylvania. At the corporate meetings, the company was organized, and by-laws adopted, options accepted, stock issued and subsequently increased; land purchased by assessment of the shares and otherwise; an agent appointed in West Virginia to accept service; debenture bonds were exchanged for the first mortgage bonds; the price of the latter fixed with rebate allowance, and a sinking fund created. The superintendent's authority in Missouri, was subject to that of the stockholders, and his action, at different times, was approved. These specific findings are not required to be prefaced by a statement of all the testimony, respecting them, in detail: Eichman, Receiver, v. Hersker, 170 Pa. 402. They are based upon the evidence, relating to a period of time prior to or closely contemporaneous with the date of these bonds. That which refers to time subsequent thereto, admitted under objection, is disregarded as irrelevant; the motion to strike it out is allowed, and under the reservation at the trial, it will be considered as again offered, and a bill sealed for the plaintiff. The operations of the company in Missouri ceased in 1898.

If it be a fact, and not a conclusion of law, I further find that the Dodson Lead and Zinc Company was " doing business" in Pennsylvania in January, February and March, 1894.

CONCLUSIONS OF LAW.

1. The Dodson Lead and Zinc Company, a foreign corporation, was " doing business" generally in Pennsylvania (without registration), at the time the bond in suit was issued; and the issue of which it is one, was part of that business for the purpose expressed in the resolutions by which it was authorized: Steel Tube Co. v. Riehl, 9 Pa.Super. 220.

2. The members of a foreign and unregistered corporation in Pennsylvania are not liable as partners, upon negotiable bonds, issued under the seal of said company.

3. The president and secretary, who affixed the corporate seal to them, and attested it by their signature in these capacities, pursuant to a resolution of stockholders, but did not negotiate the bonds personally, nor receive the money, are not individually responsible for payment to the holders, as agents, without authority from an unknown or unrecognized principal.

Error assigned was the judgment of the court.

George R. Booth and H. J. Steele, for appellant. -- The fact that the bond in suit is in form the bond of the Dodson Lead and Zinc Company, a corporation of West Virginia, does not estop the plaintiff from recovering against the defendants Sheble v. Strong, 128 Pa. 315; ...