Morgan v. Howland

Haskell, J.

November 10, 1891, three men, Morgan, W. F. and F. L. Davis, organized a corporation with 200 shares of stock at a par value of $50 each, $10,000. Each one subscribed for two shares. January 15, 1892, Morgan sold his publishing plant to the corporation for 101 shares of stock, and one share was issued to Bailey, the book-keeper, for services. Shares apparently issued, 108.

March 24, 1892, there was a re-organization of the company by F. L. Davis and Bailey retiring and Pitman and Howland taking their places. The arrangement was, and it was voted at directors’ meeting, to give Pitman 98 shares and Howland one share, but as there only remained 92 shares of treasury stock it became necessary to increase the number of shares for the purpose, and so it was voted by the directors to purchase F. L. Davis’ two shares and Bailey’s one share and accept the surrender of W. F. Davis’ one share, for which he had not paid, thereby making in all 96 shares, an insufficient number to comply with the vote, if the two shares originally subscribed for by Morgan had been paid for by him and issued, — which is not probable, — nor unless one more share should be returned to the treasury. The records says Morgan transferred to Pitman and Howland one share each, thereby giving Pitman 99, Howland 1, Morgan 99 and Davis 1, total 200 shares, equally divided between the new and old stockholders, 100 shares each. The record seems to indicate that Howland’s share was transferred to him by Morgan, but that the directors “ voted to give Pitman 98 shares and Morgan one share.” Taken altogether, the proceedings seem to show that Morgan’s one share was given to him from the corporation, and that 98 shares were given to Pitman for which nothing was paid.

Prior to November 19, 1892, Pitman’s 99 shares were pledged to Howland for indorsements for the company, and then were transferred to him absolutely. This debt, together with other indorsements amounting to $7005, was secured to Howland by a mortgage of the assets of the corporation, the plant, which was foreclosed by sale at auction in July, 1898, and purchased by one Sanderson for the sum of $7000, the receipt of which Howland acknowledged in his deed of the property to Sanderson. This sale substantially satisfied the mortgage debt, and left Howland holding 99 shares of stock received from Pitman, one from the company and two from other sources, in all 102 shares. While holding at least 100 shares the plaintiff’s bill for services accrued. She was the wife of Morgan. Morgan testified that Pitman’s 99 shares and his own 99 shares were surrendered to the company and issued by the company to Howland as security during the season of 1892, for the indorsements then made by him and afterwards satisfied by the mortgage. Howland denies this, and Pitman, who must know, does not testify.

Morgan purchased his 101 shares for value — the plant — and that may be the reason why his 99 shares pledged to Howland with Pitman’s 99 shares were returned to him, and Pitman’s transferred to Plowland, they having been issued' to Pitman without cost. Still, we cannot say from the evidence that Pitman’s stock had not been issued to him in good faith. He became president of the company, and retired when Howland appears to have furnished means for the business to an extent beyond the ability of the corporation to pay, so that Pitman might well transfer his stock to Howland and be relieved from liability thereon to him by his securing the payment of his debt from the corporation assets by way of mortgage.

If Pitman’s stock was really given. to Howland, but in Pitman’s name, then Howland would become liable for the par thereof. Barron v. Burrill, 86 Maine, 66-72. Plaintiff’s counsel does not squarely so contend, nor are we satisfied of the fact. Pie does contend that the assignment to Howland, with knowledge that Pitman paid nothing for his stock, casts a liability upon Howland as if he had been the original subscriber therefor; but that is not the law of this state. The shares were not assessable, and if issued in good faith to Pitman and afterwards transferred to Howland, Pitman remains liable; but Howland does not become so. Libby v. Tobey, 82 Maine, 397.

The evidence shows that whatever Howland’s liability may have been touching his other three shares of the aggregate par value of $150, he has paid unsecured debts of the corporation in excess of that sum and, therefore, under the statute, R. S., c. 46, § 48, cannot be held in this action. Appleton v. Turnbull, 84 Maine, 72.

Judgment for defendant.