Walter v. Merced Academy Ass'n

Heretofore the plaintiff had recovered judgment against the defendant corporation in a foreclosure suit, and, after sale of the premises involved, a deficiency judgment was duly docketed against said corporation for five thousand five hundred and eighty-seven dollars and twenty-five cents. Plaintiff prosecuted this action against the appellants to ascertain the amount due from each of them on said deficiency judgment as owners and holders of the stock of the said defendant corporation, and to obtain judgment and execution for the amount of her claim against each of them, not to exceed the amount that should be found due on their several subscriptions to the said stock of said corporation. The case was tried without a jury, and from a judgment for plaintiff and an order denying a new trial the defendant stockholders above named appeal.

It appears from the pleadings and evidence that the Merced Academy Association was incorporated in 1890, with a capital stock of twenty-five thousand dollars, divided into two hundred and fifty shares of the par value of one hundred dollars each. Its purposes, as stated in its articles of incorporation, were "to buy or acquire the Merced academy property . . . . situated in the city of Merced . . . . together with the academy building and furniture and improvements connected therewith; and to own, use, improve, mortgage, lease, sell, and deal with said property, and to borrow money thereon and to carry on a school or boarding-house, or to lease the same for said purpose or any other purpose." All the appellants were named in the articles as stockholders, and Applegate, Lyons, Simonson, Law, and Landrum were mentioned as directors for the first year, and to the articles these five persons mentioned subscribed their names and duly acknowledged the execution of the same. Some time prior to incorporation the appellants had signed a subscription agreement in which the objects of the proposed corporation were stated as follows: "To acquire the Merced academy property by purchase or otherwise and conduct thereon a school, or to use the said property for such other purpose or purposes as the stockholders of said corporation may determine." Soon after incorporation certificates of stock were issued, and each of the appellants, excepting those who signed the articles, received one of these certificates representing a stated number of shares and signed a receipt therefor, which receipt, after describing the certificate delivered, contained the following language: "Received the above certificate subject to the articles of incorporation and by-laws of the company." The appellants retained these certificates in their possession from 1890, when they received them, down to the time of the trial of this action in 1897, holding themselves in readiness, as it is admitted, to share in the dividends of the concern should any accrue. Appellants seek to avoid liability as stockholders and contend that they are not stockholders in fact for the reason of variance in the purposes of incorporation as set forth in the subscription agreement and as declared in the articles of incorporation, and to sustain this position they cite Marysville Electric Light etc.Co. v. Johnson, 109 Cal. 193, 50 Am. St. Rep. 34, and many other cases. In none of these cases was the action against the defendant as an owner of shares or as an owner of stock in the corporation, but most of them are similar to the Marysville Electric Light case, supra, and are based solely on the original subscription agreement, the defendants refusing to accept or pay for the stock of the corporation. In the case at bar, however, the complaint sets out, and the evidence shows, that appellants were at all the times mentioned in the complaint and still are the owners of shares in the corporation. To become the owners of shares and the holders of original certificates of the first issue it was not necessary that appellants should have subscribed to any subscription agreement at all. "It would be a mockery of justice to permit such an objection to prevail." (Sanger v. Upton,91 U.S. 56.) "Merely accepting and holding a certificate of stock is sufficient to constitute one a shareholder." (Cook on Stock and Stockholders, sec. 52; Upton v. Tribilcock, 91 U.S. 45.) It becomes unnecessary to determine whether there was a material variance between the subscription agreement and the articles as to the purposes of the corporation, because we may admit that there was such variance and that appellants never signed any subscription paper for stock in the corporation which was in fact incorporated, and yet they are owners of such stock by virtue of receiving and paying for the same. Another answer to appellants' objections is that it would have been perfectly proper for appellants to have informed themselves as to the contents of the articles of incorporation when they received their stock, and they will certainly not be heard after six years to urge for the first time an objection of the character made here in a suit by one who, no doubt credited the corporation on the faith of the appellants being, as the books showed them to be, stockholders of the corporation. (Thompson's Liability of Stockholders, secs. 150, 151, 152.) It seems to be admitted, or at least not denied, that the five appellants who subscribed the articles of incorporation are to be treated as stockholders in the amounts set out in such articles.

No statute of limitations being pleaded in the answer, and the complaint not showing on its face that the claim of plaintiff is barred by any statute, it is therefore not necessary to further notice any objection based on the statute of limitations.

On the evidence presented the court properly found that thirty-three and one-third dollars per share and no more had been paid, and that sixty-six and two-thirds dollars per share had not been paid, and was due and unpaid. It was also alleged in the complaint, and not denied in the answer, that "upon the shares owned by each of said defendants the sum of thirty-three and one-third dollars per share and no more" had been paid. Hence, appellants' contention that their stock was fully paid for is not supported by the record.

Many of the minor points made by appellants are disposed of by the position we assume in holding the liability of appellants to arise out of the fact of their being stockholders and owners as shown by the record on appeal, and it will be unnecessary to notice such points in detail.

Appellants are mistaken in supposing that the stockholders are not liable for debts of the corporation until all the stock is subscribed. When one-fourth of the capital stock is subscribed their liability begins. (Civ. Code, sec. 331)

The contention that an action will not lie against the stockholders personally, and that the remedy is by sale of the stock, is disposed of in Baines v. Babcock, 95 Cal. 582; 29 Am. St. Rep. 158.

The amount of plaintiff's recovery is expressly limited by the judgment to the amount found to be due from the stockholders.

As we have already seen, the record shows that appellants had paid thirty-three and one-third per cent of the par value of their stock. They cannot, therefore, be treated as holding their stock as a mere gratuity.

Plaintiff's right to recover does not depend upon, nor is it limited in any way by, the other debts of the corporation, and an accounting was entirely unnecessary. Neither was it necessary that all the stockholders should be made parties defendant.(Hatch v. Dana, 101 U.S. 205; Baines v. Babcock, supra.)

The testimony of Simonson shows that the directors had no meeting, and that no assessment was levied to pay plaintiff's claim. This action is not barred by the provisions of section 726 of the Code of Civil Procedure. (Baines v. Babcock, supra;Blumberg v. Birch, 99 Cal. 416; 37 Am. St. Rep. 67.)

The findings cover the material issues; the decision, therefore, is not against law. There was no irregularity in the trial judge making and signing the decision and decree in Stanislaus county. Until the decision and decree were filed by the clerk in Merced county they were not in force. (Comstock etc.Co. v. Superior Court, 57 Cal. 625.)

There was no material error in the rulings of the court on objections to the introduction of evidence.

The judgment and order are affirmed.