Woolfolk v. January

• Decision Date: 17 December 1895
• Citation: 33 S.W. 432,131 Mo. 620
• Parties: WOOLFOLK v. JANUARY.
• Court: Missouri Supreme Court

33 S.W. 432

131 Mo. 620

WOOLFOLK v. JANUARY.

Supreme Court of Missouri, Division No. 2.

December 17, 1895.

PRIVATE CORPORATION — SHARES OF STOCK — PAYMENT FOR IN PROPERTY AND SERVICES — ASSIGNEE — VALIDITY.

1. In an action to charge defendant as stockholder in a corporation to the extent of an unpaid subscription of 101 shares of stock, it appeared that the corporation, with consent of all its officers and stockholders by contract spread on its records, issued 590 $100 shares of its stock, "fully paid and nonassessable," and $20,000 worth of bonds, to defendant's assignor in exchange for an unincumbered gas plant worth $34,000, and a city franchise for 21 years, and mortgaged the plant to secure payment of the bonds; that no allegation of fraud in this transaction was made; that defendant, as assignee for value, held 101 of these shares; that plaintiff, with notice of the contract, and of default in payment of the bonds, purchased some of them before, and some after, foreclosure of the mortgage was decreed. Held, that plaintiff was estopped from claiming that defendant's stock was not fully paid up.

2. Stock of a corporation may be paid for in property or services.

Error to circuit court, Vernon county; D. P. Stratton, Judge.

Action by John L. Woolfolk against Macher T. January to charge defendant, as stockholder in a corporation, to the extent of the unpaid subscription price of the stock, with the payment of plaintiff's judgment against the corporation. From a judgment for defendant, plaintiff brings error. Affirmed.

In this action plaintiff in error sought to charge the defendant, as a stockholder, on certain shares in the Nevada Gas & Coal Company, to satisfy a judgment obtained by plaintiff against said company. The proceeding is by motion for an execution against the defendant as holder of 101 shares of the capital stock of said company. Plaintiff obtained judgment for $7,266.96. Execution issued and was returned nulla bona. Plaintiff averred that defendant's stock was wholly unpaid. Defendant denied that he owed any sum whatever on the stock. For a second defense, the answer avers that plaintiff's judgment is founded on 18 certain bonds of $1,000 each, made by the company and delivered to P. Roberts, D. H. Irland, and J. H. Andrews, in part payment of the purchase price of certain gas works and the properties and franchises thereto belonging, sold by said Roberts, Irland, and Andrews to said company; that the balance of the purchase price was 590 paid-up shares in the capital stock of said company, which shares were issued and delivered to said Roberts, Irland, and Andrews as fully paid and nonassessable, and were so received by them, and it was understood and agreed by and between said company and said Roberts, Irland, and Andrews, that said bonds were to be a charge upon the property of the company only, and not upon any of the shares of the capital stock; that afterwards Roberts sold defendant the 101 shares sued on, being part of said 590 shares, and at the time of the sale represented to defendant that said shares were fully paid and nonassessable, and the same so appears upon the certificates thereof, and defendant, so believing, purchased the same in good faith and for value; that plaintiff purchased the said 18 bonds with full notice of the said alleged facts, and is thereby estopped from maintaining this motion. For a third defense the answer avers that defendant purchased his shares for value and in good faith, believing that they were paid up and nonassessable. For a fourth defense the answer avers that the debt upon which plaintiff recovered his judgment was not to be paid within one year from the time it was contracted. For a fifth defense the answer avers that said debt became due and payable on the 1st day of January, 1885, and suit thereon was not brought against the company until January 2, 1889. The reply admits that the judgment was founded on the 18 bonds, as alleged, but denies that the 590 shares were paid-up stock, or were issued or delivered to said Roberts, Irland, and Andrews as fully paid and nonassessable, or were so received by them, or that it was understood and agreed between them and the company that the bonds were to be a charge upon the property of the company only, and not upon the stock, or that Roberts and Irland represented to defendant that the 101 shares sold to him by them were fully paid and nonassessable, or that defendant purchased the stock in good faith, believing the same to be full paid and nonassessable, or that plaintiff purchased the bonds with notice of the alleged facts pleaded in the second defense. The reply further denies, generally, the third, fourth, and fifth defenses. Besides this action against January, there were pending, at the same time and in the same court, actions of the same kind by the same plaintiff against Joseph E. Harding, John A. Tyler, Michael Jordan, Thomas E. Stokes, and Ed. J. Dickinson. By agreement of counsel for all the parties, the cases, except that against Stokes, were all tried together, the evidence was taken in all together, they were submitted together, and the same bill of exceptions applies to all. The cause was heard by the circuit court, with a finding and judgment for the defendants, and plaintiff sued out his writ of error.

From the record we gather that in 1882 D. H. Irland, of St. Louis, Preston Roberts, of Independence, and J. H. Andrews obtained from the mayor and city council of Nevada a franchise to construct gas works in said city, and the exclusive privilege of laying the mains in the streets and alleys of said city for a period of 21 years. The ordinance limited the charge for gas for 5 years to $3.50 per 1,000 feet, and after 5 years to $3 per 1,000 feet. The city was bound to use 25 lamps for 5 years, at $30 per year per lamp, and each extension of 380 feet bound the city to use an extra lamp at $25 per year. Irland and Roberts paid Andrews for the franchise thus obtained between $1,200 and $2,000. Irland and Roberts then proceeded to, and did, erect the works, and laid the mains in the streets. Irland and Roberts then became the promoters of a corporation to operate these gas works. At their instance articles for the company, to be known as the Nevada Gas & Coal Company, were drawn. The stock was divided into 600 shares, of the par value of $100 per share, and the association was organized under article 8, c. 21, Rev. St. 1879, entitled "Manufacturing and Business Companies." The names and places of residence of the shareholders, and the number of shares subscribed by each, were given as follows: D. H. Irland, St. Louis, 295 shares; P. Roberts, Independence, Mo., 295 shares; J. A. Tyler, of Nevada, 5 shares; and P. T. Thornton, Joseph E. Harding, Charles G. Burton, M. Jordan, and C. A. Rockwood, each 1 share. The articles recited the shares were bona fide subscribed, one-half actually paid up in lawful money. The certificate of incorporation from secretary of state bore date October, 1882. At the meeting of the incorporators the articles were read, reciting the payment of one-half cash, and thereupon judge Burton, the attorney who had drawn the articles, at once said: "Gentlemen, that recital is not true. No cash has been paid in." Whereupon Irland inquired: "Is it necessary that it should be paid in money?" To this Judge Burton answered: "No; the supreme court of this state has held it may be paid in property." Irland then said "We have already paid over half of it in this way." But, said the attorney, "That is your property, and not the property of the corporation." Whereupon Irland said he would turn it over, and stated there that from that time the board of directors had charge of it. It was the understanding of all present that the whole property belonged to Irland and Roberts, and the 10 shares subscribed by the others were to be given to them by Irland and Roberts. Irland, then, upon inquiry as to his reason for capitalizing the corporation at $60,000, said the plant alone had cost $34,000, and the franchise was for 21 years, and in a live, progressive city like Nevada, made it very valuable. "These works," he said, "with the franchise, will be worth from $80,000 to $100,000 the moment they are ready to operate." That the Independence works paid 6 per cent. on $100,000, and were not as good as these. With this explanation, the corporators signed and executed the articles. The meeting was adjourned to December 12, 1882.

On that day Irland, Roberts, and Andrews submitted the following proposition: "To the Stockholders of the Nevada Gas & Coal Company: The undersigned hereby submit for your consideration and action the following proposition, viz.: We will sell and assign to said corporation all of our interest in the stock, gas works, pipes, real estate, and fixtures thereto belonging, provided the stockholders of said corporation shall, by resolution, authorize and bind the board of directors to issue to J. S. Chick and E. K. Thornton, or bearer, of Kansas City, Missouri, twenty bonds, each for the sum of $1,000, due twenty years after date, and bearing interest from date at the rate of six per cent. per annum, which shall be payable semiannually at the banking house of Donnell, Lawson & Simpson, in the city of New York, which said bonds shall be secured by first mortgage on said gas works and real estate and fixtures, and shall issue to us stock in said company amounting to the sum of $59,000. [Signed] D. H. Irland. J. H. Andrews. P. Roberts. Witnessed by E. E. Kimball." On the same day the following resolution of acceptance was passed by the stockholders: "Resolved, that we, the stockholders of the Nevada Gas & Coal Company, do hereby accept the foregoing proposition made to us by Messrs. D. H. Irland, J. H. Andrews, and P. Roberts, and do hereby authorize, empower, and direct the board of directors of said corporation to issue said bonds for the sum of $20,000, and execute...