White v. Green

• Decision Date: 08 April 1898
• Citation: White v. Green, 105 Iowa 176, 74 N.W. 928 (Iowa 1898)
• Parties: WHITE ET AL. v. GREEN.
• Court: Iowa Supreme Court

105 Iowa 176

74 N.W. 928

WHITE ET AL.

v.GREEN.

Supreme Court of Iowa.

April 8, 1898.

Appeal from district court, Polk county; W. F. Conrad, Judge.

Action at law on a judgment rendered against the Zoological Park Company of Des Moines, Iowa, to recover of the defendant, on account of capital stock of the company at one time owned by him, on which he is alleged to be liable as for unpaid stock. There was a trial by the court without a jury, and a judgment in favor of the plaintiffs. The defendant appeals. Affirmed.Bishop, Bowen & Fleming, for appellant.

Dowell & Parrish and Earl & Prouty, for appellees.

ROBINSON, J.

The Zoological Park Company was organized as a corporation for pecuniary profit, in the year 1889, with an authorized capital stock of $200,000. Before the organization was completed, a syndicate was formed for the purpose of organizing the company, and purchasing a tract of land then owned by L. M. Mann. An agreement was made, by virtue of which the land was conveyed to the company when its organization was perfected. The consideration for the conveyance was $20,000 in money and real estate, and $40,000 in bonds secured by a mortgage upon the land conveyed by Mann. The company was organized by the members of the syndicate, who issued to themselves capital stock to the amount of $120,000, for which they paid nothing except the $20,000 in money and real estate which were transferred to Mann as stated. The certificates of stock recited that the shares therein specified were held “subject to the articles of incorporation of the company and to the terms and conditions printed on the back” of the certificates. On the back of the certificates was printed the following: “This stock is fully paid up, but may be assessed at such times and in such amounts as may be necessary to meet the several payments of principal and interest upon the mortgage incumbrance upon the lands and personal property owned by the company, as such payments become due; said mortgage incumbrance being for the sum of forty thousand dollars. * * * It may also be assessed for the purpose of improving said property, and for other necessary expenses of the company; all such assessments for purposes other than the payment of the mortgage incumbrance and interest above referred to not to exceed in the aggregate ten per cent. of the capital stock outstanding. * * *” In September, 1890, the articles of incorporation were so amended as to permit the board of directors to assess the capital stock for the purposes enumerated, at such times and in such sums as might be necessary, to an aggregate amount which should not exceed “the unpaid installments of capital stock outstanding.” Assessments for the purpose of making improvements, for incidental expenses, and to make payments on the mortgage debt were made from time to time, and paid. The defendant was not one of the original stockholders of the company, but in March, 1891, he purchased from one H. L. Chaffee 10 shares of the capital stock of the company, each of which was of the par value of $100. In August, 1891, the company issued a new series of bonds, a part of which became the property of the plaintiffs. In March, 1892, the defendant sold his stock to one Frick, to whom it was duly transferred on the books of the company. In April, 1894, the plaintiffs obtained in the district court of Polk county a judgment on their bonds, and an execution was issued on the judgment, but no property was found, although demand was made of the last acting president of the company, and the execution was returned unsatisfied. The plaintiffs allege that but $200 have been paid on the stock which was owned by the defendant, and they seek to recover of him the unpaid portion. The district court rendered judgment against him for the sum of $700.52 and costs. This is the second submission of this cause, a rehearing having been granted after the filing of the opinion on the first submission.

1. It is first contended by the appellant that he purchased the stock in question in good faith, believing that it had been fully paid for, and that he should not be held liable in this action for that reason. It is only necessary to say, in response to that claim, that there is evidence which tends to show that the appellant, at the time he purchased the stock, had such knowledge of the facts in regard to the organization of the company and the consideration for the stock that he must be held to have taken it with notice of the fact that but a small part of the amount which it represented had been paid, and that he might be held liable on account of the debts of the company. The evidence to support that theory is sufficient to sustain the finding of the district court. There is also ample evidence to show that the company has received for the stock but a small part of its par value. See Wishard v. Hansen (Iowa) 68 N. W. 692.

2. The question of chief importance which we are required to determine is whether the sale of the stock made by the defendant terminated his liability for the debts of the company. The general rule, in the absence of statutory regulation, is that, where a stockholder makes an absolute transfer of his stock in good faith, and a record of the transfer is duly made in the books of the company, the transferror is thereby released from all liability on account of the unpaid part of the stock for which a call has not been made, and the transfereebecomes liable for the part of the stock remaining unpaid. 1 Cook, Stock, Stockh. & Corp. Law, §§ 255, 256; 1 Mor. Priv. Corp. § 159; Thomp. Corp. §§ 3221, 3222; Beach, Priv. Corp. §§ 125, 126. But it is claimed that this rule has been changed in this state by statute, and to ascertain if that claim be well founded it is necessary to examine sections 1078 and 1082 of the Code of 1873, contained in the chapter which relates to corporations for pecuniary profit. Section 1078 provides that “the transfer of shares is not valid, except as between the parties thereto, until it is regularly entered on the books of the company; * * * but such transfer shall not in any way exempt the person making it from any liability of such corporation created prior thereto.” Section 1082 is as follows: ...