Yeaton v. Eagle Oil & Refining Co.

• Decision Date: 22 April 1892
• Citation: 4 Wash. 183,29 P. 1051
• Court: Washington Supreme Court
• Parties: YEATON v. EAGLE OIL & REFINING CO.

29 P. 1051

4 Wash. 183

YEATON v. EAGLE OIL & REFINING CO.

Supreme Court of Washington

April 22, 1892

Appeal from superior court, King county; T. J. HUMES, Judge.

Hill, Gilliam & Benson, for appellant.

Thompson, Edsen & Humphries, for respondent.

HOYT J.

The appellant, a corporation organized under the laws of California, had a branch house for the sale of oils at Seattle. In the spring of 1890 the vice president and manager of such corporation, in behalf of the company, entered into a contract with respondent to the effect that the respondent should pay to such corporation the sum of $5,000, and should receive therefor 50 shares of stock, of the par value of $100 each, and that, in consideration of so doing, he should be appointed manager of the branch house in Seattle. It was further agreed, as part of the same transaction, that if at any time the respondent should be discharged by the corporation from his position, as such manager, he should return such shares of stock to the corporation, and receive back from or through it said sum of $5,000. It is contended by respondent that such transaction between the parties established the relation of debtor and creditor between them that in contemplation of law the $5,000 so advanced by respondent was a loan to the company, secured by the certificates of stock, and payable upon the discharge of respondent from the managership of said Seattle branch. On the other hand, it is contended by appellant that by such transaction the respondent became a stockholder of such corporation, with all the rights and duties attaching to such relation. We think the contention of the appellant is correct, and that the rights of the parties must be investigated as being that of a stockholder, on the one hand, and the corporation from which the stock was issued, on the other.

Some question is made in the briefs as to the authority of the vice president and manager to enter into the contract; but we think that enough appears in the case to show a ratification on the part of the corporation of the acts of such vice president and manager, if the transaction was of such a nature that ratification thereof was possible. The controlling question is as to the nature of the contract. Briefly stated, it was a sale of stock on the part of the corporation, with an agreement that, in a certain contingency, it would buy it back at its par value. There is nothing in the record, as seems to be claimed by the respondent, to show what was the nature of this issue of stock. It nowhere appears that it was or was not the original issue thereof. In relation to this subscription, appellant contends that the condition attached thereto for the repurchase of the stock was absolutely illegal and void. That such would be the fact if such sale constituted an original issue of such stock, as a part of the organization of the corporation, is practically conceded by the respondent, and seems to be established by the authorities. Appellant contends that it matters not whether it is an original subscription of stock or a resale thereof that in either case a contract of this nature would be a fraud upon the other stockholders of the corporation, and void as against public policy. It is claimed in that behalf that a corporation has no authority to deal in its own stock. Upon this question, there is much diversity of opinion, as shown by the authorities. The weight of authority, however, seems to be that a corporation can deal in its own stock, if specially authorized so to do by its charter, and that, whether so authorized or not, it may lawfully receive shares of its stock in payment of a claim against an insolvent debtor. And, from such authorities, we feel bound to hold that the charter of a corporation might be such as to authorize it to buy and sell its own stock,...