Maynard v. Doe Run Lead Co.

The plaintiff, a stockholder in the defendant corporation, seeks by this suit to compel the issuance to him of certificates of stock to which he claims he is entitled by virtue of an increase of the capital stock.

The Doe Run Lead Company originally was incorporated in 1886, with a capital stock of $200,000. In 1888 the stock was increased to $500,000; in 1891 to $750,000; in 1898 to $1,500,000; in 1903 to $4,000,000. In 1906 the capital stock was increased from $4,000,000 to $10,000,000. The increase in 1898 and the increase in 1902, each, was on account of net surplus assets of the company, as was the last increase, April 24, 1906. The last increase gave rise to the claim upon which plaintiff sues.

After notice of the date of meeting and its purpose, the stockholders owning a majority of the stock in said company, April 24, 1906, passed a resolution to the effect that inasmuch as assets of the company in excess of its liabilities, as shown by its books, were more than ten million dollars, it was desired to convert the surplus assets into increased stock. Accordingly the increase was voted and certification of the fact duly made to the Secretary of State. The six-million-dollar surplus in the assets of the company was due to increase in the value of land held by the company on account of discovery of additional ore bodies. Before the last increase the capital stock was divided into forty thousand shares of one hundred dollars each. The increase added sixty thousand shares, so that after the increase the capital stock of the company was ten million dollars, divided into one hundred thousand shares of one hundred dollars each.

The stockholders at that meeting passed a resolution authorizing the directors to set apart six million dollars out of the surplus assets for the payment in full of the increased capital stock, "and that the said increased stock so paid be retained in the treasury of this company as treasury stock, either to be sold from time to time by the directors for the benefit of the company, or distributed pro rata among the stockholders as a stock dividend, or both, at the discretion of the board of directors, and at such times as the board may decide that such action will be to the best interests of the company."

On May 10, 1906, the board of directors held a meeting and passed a resolution, as follows:

"Whereas, the assets of this company in excess of its liabilities, and as shown by its books, are now over ten million dollars, leaving a surplus of $6,767,120.66; and,

"Whereas, in the judgment of the board of directors, it is for the best interests of the company that such surplus not be distributed in kind among the several stockholders, but should remain a part of the capital of the company, to be used in the further development of its business, and to be applied on account of the payment of the additional increased stock, authorized by the stockholders on April 24, 1906:

"Now, therefore, resolved, That out of the said surplus, the sum of six million dollars be, and the same is hereby, devoted and applied to the full payment of 60,000 shares of the capital stock of this company, being the entire amount of increase of stock authorized by a meeting of the stockholders of this company held on April 24, 1906.

"Resolved, That a pro rata stock dividend of fifty per cent of the outstanding capital of this company on June 1, 1906, be hereby declared to stockholders of record on that date, and that the officers of the company be authorized to issue, and the New York Trust Company be authorized to register, the issue of said stock."

The board of directors also adopted the following resolution:

"Resolved Further, That the balance of said increased stock be retained in the treasury of the company as treasury stock, to be either sold from time to time by the board of directors for the benefit of the company, or distributed pro rata among the stockholders as a stock dividend, or both, at the discretion of the board of directors, and at such times as the board may decide that such action will be to the interests of the company."

In pursuance of that resolution a stock dividend of fifty per cent of the outstanding stock was paid June 1, 1906.

The outstanding stock at the time was 39,375 shares, 625 of the 40,000 shares authorized being unissued. So, 19,687 shares were distributed that date as a stock dividend, making 59,062 shares then outstanding. Those figures should be kept in mind.

The plaintiff bases his right to recover on the theory that when the capital stock was increased and the increase paid for out of the surplus assets of the company, immediately each stockholder became entitled to a certificate for a share of stock representing his proportion of said increase, and neither the stockholders participating in the meeting at which the increase was voted, nor the board of directors, had any authority to make a different disposition of the increase so far as it affected the stockholders not present and voting at the meeting.

Plaintiff's petition sets out the history of the corporation, showing the different increases of capital stock, including the increase of 1906, paid for out of the assets of the company; alleges that Marion W. Maynard, plaintiff's predecessor in title at the time of the increase, owned 652 shares of stock in the company, fully paid; that by virtue of the two and a half times increase of the original capital stock she became entitled to one and a half times as many additional shares as she already had; that is, 978 additional shares. The petition further recites the action of the board in declaring the stock dividends to be distributed June 1, 1906, whereby she acquired 326 additional shares of stock, and alleges that by reason of that holding she was entitled to certificates representing in addition one and a half times that amount, or 489 shares. The prayer for relief demands the issuance of certificates evidencing the ownership in plaintiff of 978 shares and 489 shares.

The petition alleges that the defendant company and its officers and directors from time to time have made conflicting statements and misrepresentations whereby they sought to conceal the true facts as to the real ownership of the 60,000 shares increase; that the defendant company and its officers and directors now claim that the company has outstanding only 65,783 shares of full-paid stock, and the true facts are that there are outstanding 100,000 shares of stock, and they have illegally withheld issuing certificates representing 34,217 remaining shares of stock. It is further alleged that the stockholders attending the meeting April 24, 1904, who held more than 27,000 of the 40,000 shares of stock then outstanding, donated approximately 40,500 shares of stock to the company; that this stock became treasury stock.

The theory of that last allegation is that, by voting to turn the stock over to the treasury, those voting at the meeting donated their portions of the increase to the company as treasury stock; while those not voting at the meeting, holding approximately 13,000 shares, were not bound by that action and were entitled to their proportions of that treasury stock, about 19,500 shares. It is claimed in this connection that the stock dividend paid June first following the meeting was paid out of the treasury stock so donated.

The petition alleges that the plaintiff is the holder of 1100 shares of stock, having bought 122 shares besides the 652 originally owned, and 326 dividend declared.

The plaintiff seeks to avoid the bar of the Statute of Limitations, or the failure of his suit on account of laches, by alleging fraud and concealment on the part of the officers of the company so as to keep him and his predecessor in title in ignorance of the true condition of the company of the disposition of the stock and the number of shares outstanding, etc.

The answer of the defendant also sets out the history of the corporation, the several increases of the capital stock, and recites at length the proceedings at the stockholders' meeting and at the meeting of the board of directors May 10, 1906, and the distribution of 19,687 shares as stock dividends, being then fifty per cent of the stock outstanding. It further alleges that in July, 1906, 5906 shares of the unissued stock held as treasury stock were sold, each stockholder being granted the right and opportunity to subscribe and pay for a ratable part of the same; that the plaintiff, in response to the invitation, purchased his proportion, 98 shares, and then bought 24 shares in addition, making his total purchase 122 shares. That sale made a total of 65,783 shares issued, leaving 34,217 other shares of unissued stock in the treasury of the company.

The answer also pleads the five-year Statute of Limitations, laches, and waiver by plaintiff of his alleged right to the stock sued for, and sets out the particular facts which would give actual notice to the plaintiff and put him upon inquiry as to the exact situation in relation to the unissued stock and the claim of the company that it was treasury stock, so as to put in operation the Statute of Limitations.

The petition and the answer, both of great length, differ a little as to the actual facts alleged. The plaintiff filed a reply to the answer, also of great length, which sets up more in detail the facts and circumstances which the plaintiff claims show concealment from him of the condition of the company.

The evidence in the case is quite voluminous, the record comprising more than eight hundred pages. The evidence consists mainly of records and documents, reports, etc., and considerable oral testimony. There is little dispute about the facts. The difference between the parties turns mainly upon theinterpretation of the facts and the legal effect of the proceedings of the company. The plaintiff had been in litigation with the company in various other suits, more or less of the records of which appear in the record here. Two suits were brought by him in the United States District Court; one in 1915, and one in 1913. Also a suit was brought in the name of the company against Maynard, the plaintiff here, and others, seeking to dissolve the corporation, and the circuit court adjudged the dissolution. That case was appealed to this court and appears reported in 283 Mo. 646, where the judgment of the circuit court was reversed. A considerable part of the record in that case was introduced in this case. Among other things, the plaintiff claims that certain family groups of stockholders were seeking to obtain control of the stock with a view to consolidating with the St. Joseph Lead Company, a corporation which operated and owned mines in the neighborhood of those owned by the Doe Run Company. It appears that much of the trouble causing the various suits referred to was the result of an attempt of the stockholders in the St. Joseph Company to absorb the Doe Run Company. A large part, if not a majority, of the stock of the Doe Run Company was held by stockholders of the St. Joseph Company; plaintiff himself held some stock in the latter company. The dissolution suit was reversed for the reason that, while it was in form a proceeding to dissolve the corporation, the real purpose was to perfect a consolidation with the St. Joseph Company. All this is stressed at some length by the appellant in an attempt to show an unfair advantage attempted to be taken of him by the majority stockholders.

From what appears in this record, this alleged attitude of the majority stockholders does not affect the question presented for determination here. We are not concerned with the purposes of the majority stockholders; we are concerned only with what they did and the effect of what they did. In so far as the record shows, the desire to consolidate the two companies had nothing to do with the increase of capital stock.

The particular facts claimed by the appellant to remove the bar of limitations, laches, waiver, etc., will be noticed more particularly in considering the defenses of those grounds.

The case was tried in the Circuit Court of St. Francois County, and June 15, 1922, a judgment was rendered for the defendant. The defendant in due form and in due time appealed.

I. Plaintiff's theory is that the increase of capital stock in 1906 belonged to the stockholders in proportion to their holdings; did not belong to the corporation; that his right to his proportion of such stock vested by virtue of the action taken by the stockholders when the increase was voted.

The theory of the defendant is that the stockholders voting at the meeting for the increase, and the board of directors, had authority to determine the disposition of the increased capital stock; that a stockholder could not claim a proportionate share of such increase without some definite act of the board of directors declaring a stock dividend.

In this connection the argument largely turns upon what is meant by treasury stock, and how a corporation acquires treasury stock.

Treasury stock is stock belonging to the corporation and subject to sale by it. According to the plaintiff, treasury stock, of which the corporation has a right to dispose, is stock that is unissued or may be issued for the purpose of sale, to increase the capital of the company; that it cannot include stock increase paid for out of the surplus assets. The plaintiff cites in support of his position the case of Knapp v. Publishers,127 Mo. 53, where the doctrine contended for by the plaintiff is approved by this court. In that case, however, the principle is quoted from the report of the referee. The increased stock was distinctly credited to the parties who claimed it at the time the increase was made. The court interpreted the record to show that at the time there was no attempted disposition of the stock in dispute so as to affect the claim. In that respect the case differs from the situation here.

The facts conceded by the appellant show that he has not been injured in the slightest degree by the proceedings complained of. He plants his case upon this proposition: a stockholder is entitled to preserve his pro rata interest in the corporation, and that pro rata interest cannot be changed by any act, or manipulation of the assets, by the majority stockholders or directors. That right of the plaintiff has been preserved; he has not lost in any degree his pro rata interest in the corporation. At the time of the increase he had 652 shares of stock; that was his proportion of 40,000 shares. When the company increased the stock to 100,000 shares, retaining the whole of the increase as treasury stock, his pro rata interest in the corporation and its assets was neither increased nor diminished. That stock was corporate property just as the assets it represented was corporate property. When the board of directors declared a dividend of fifty per cent of the outstanding stock plaintiff took his pro rata part, 326 shares, of that distribution; he still retained the same pro rata interest in the corporation. Then, when the board of directors offered for sale the 5906 shares, the plaintiff, like other stockholders, was permitted to purchase and pay for his proportion of those shares. He did buy and pay for them and thus still retained in the corporation the same proportionate interest that he had before, but the assets of the corporation were increased by the amount paid on that stock so sold, so that each share of his stock proportionately was worth just as much as it was before. The plaintiff asserts that three thousand shares of that stock were sold at par to others than stockholders. Evidently that was because the stockholders didn't want it, which was no concern of his, because he got his proportion, and persons buying that increase paid money which became assets of the corporation, and his relative interest was neither increased nor diminished by reason of that sale. The sale of the 5906 shares left him where he was before, so far as the value of each share was concerned. After that sale there remained 34,217 shares unissued as treasury stock; whether that should remain in that shape or be distributed in dividends made no difference in the value of plaintiff's holdings. The stock which he held was worth just as much as all of his stock would have been if that stock had been declared a dividend and he had got his proportion.

The only way he could have been injured would have been by the sale of the treasury stock for less than its actual value without allowing him to get his proportionate share of it. For instance, if the property was worth ten million dollars before the increase and the par value of the stock was only four million dollars, then each share of his stock was worth $250. If all the 60,000 shares had been sold at $250 each, that would have added fifteen million dollars to the capital of the company. The assets would have been $25,000,000, represented by one hundred thousand shares of stock, so that each share would have been worth just as much as each share was before. The only way in which a sale could injure plaintiff was to sell shares for less than their actual value and deprive him at the same time of his right to buy that portion which prorated with the amount of stock he held.

At the time of the increase he had 652 shares, and later acquired 326 in dividend, making 978 shares. Now he claims in addition 978 and 489, a total of 1467 shares which he demands that the company issue to him. If that be added to his 978 he would have 2445 shares out of the hundred thousand shares. His stock in the 40,000 shares before the increase was 652. He demands stock which would give him 2445, nearly four times as much as he had before, whereas the total increase made only two and a half times as much as the total capitalization before. What he demands would not merely maintain for him his pro rata interest in the corporation, but would increase it by more than his previous holding, in par value more than $75,000, in addition to his previous pro rata share, and in actual value much more than that.

On his own theory, to maintain his pro rata interest he was entitled to one and a half times additional stock. He got fifty per cent, 326 shares, as a stock dividend. At most then he would be entitled to one hundred per cent more, 652 shares. He now wants not only one hundred and fifty per cent of his previous holding without giving credit for that 326 shares, but he demands one hundred and fifty per cent of the 326 shares, not only a double but a thrice repeated draft on the increase.

If we understand him he justifies this demand by his theory of donation. He claims that the stockholders, representing more than two-thirds of the stock, who voted a resolution placing the increase in the treasury, thereby donated to the company their proportions of the increase, about 40,500 shares, and that would not affect the stockholders owning less than one-third who were not present and did not participate in the proceeding. The effect of the argument is that plaintiff, who was not present, not only had his pro rata portion of the increase of 60,000 shares, but in addition had a right to a second call upon that increase by taking also a pro rata share from that part as donated, and a third call upon the increase by taking a part which prorates with his share of the part donated. He understands, of course, that the donors gave the stock to the company for working capital and had no intention of donating it to him. This illustrates the peculiar sense of equity with which the plaintiff comes into court.

We present this long explanation in order that the points considered following may be clearer. It is unnecessary, for the decision of this case, to go into the authorities so as to settle that question — whether the increase of stock from surplus assets of the company belongs ipso facto to the stockholders without a declaration of a stock dividend. My individual judgment is plaintiff's contention is wrong.

II. On plaintiff's theory, so far as the 978 shares demanded are concerned, his cause of action accrued the moment the directors, May 10, 1906, resolved to retain the increased stock in the treasury, and his alleged cause of action, so far as the 489 shares are concerned, accrued when he got his dividend of 326 shares in June of the same year, 1906. He claimsLimitations. that his cause of action did not accrue at that time because it is not necessary to have certificate stock issued to attest the ownership of the stock. Permitting the certificates to remain unissued would not affect his right to it, nor put upon him the necessity of demanding or suing for his certificates. Conceding that principle to be correct, as a general rule, it would not apply in this case, because the stockholders of the company and the directors of the company, by the action taken May 10, 1906, asserted a right to the stock hostile to his claim by making it treasury stock as shown in the minutes set out above. It was that hostile act which he claims wronged him and furnished him a cause of action. No demand was necessary; so far as his rights were concerned he could sue then, and the statute began to run from that moment. That is true unless, as he claims, he was deceived by the acts and conduct of the board of directors and the officers of the company so that he was unaware of his rights.

The defendant relies upon that provision of Section 1317 to the effect that, in any action for relief upon the ground of fraud, a cause of action will not be deemed to accrue until the discovery of the fraud. That cannot apply here, because the cause of action here is not one where relief is asked upon the ground ofFraud. fraud. This is a straight suit for equitable relief to which the plaintiff claims he is entitled, arising out of the legitimate transactions of the company. That clause of the statute applies only to a case where the action is based on fraud. [25 Cyc. p. 1182.] If the plaintiff had sued immediately after that action of May, 1906, there would have been no mention of fraud. His cause of action would have been exactly the same as it is now. The alleged fraud consists in concealment of what was done. To prevent the running of the statute the plaintiff must rely upon a different principle.

Section 1334, Revised Statutes 1919, suspends the running of the statute where by some improper conduct the defendant has prevented the commencement of the action. It might be claimed by the plaintiff that the conduct of the defendants, concealing the true state of affairs from him, prevented hisConcealment. commencing the action. Or he might rely upon the equitable doctrine that the statute would not run while fraudulent concealment by defendant of the fact that the plaintiff has a cause of action prevents plaintiff from ascertaining his rights. Whether the statute, Section 1334, or the equitable principle applies, it puts the matter in a different position from what it would be if the statute did not begin to run until the discovery of the fraud. If the action is founded upon fraud, as provided in the last clause of Section 1317, the plaintiff must discover the fraud (within ten years) before the statute begins to run, and it does not matter whether the party who has defrauded him does anything to prevent his discovery or not. On the other hand, if the cause of action is not founded upon fraud as the basis of the case, the ignorance of his rights would not prevent the statute from running. The statute would not be tolled in such case unless some act of the party against whom he has his cause of action has prevented his discovering the facts.

The mere ignorance of the party complaining, or of the silence of the party complained of, would not amount to actionable concealment. [Johnson v. United Rys. Co., 243 Mo. l.c. 298, and cases cited; Shelby County v. Bragg, 135 Mo. l.c. 298.] The court in the Bragg case construed the section of the statute relating to the improper conduct which prevents the commencement of the action, and says (l.c. 298):

"The question is not whether the county, or its agent, the county court, was merely ignorant of the facts constituting the cause of action. Such ignorance will not suspend the operation of the statute unless it can be properly attributed to the fraudulent concealment of the facts by the defendant.

"It cannot be said that the evidence of facts constituting plaintiff's cause of action was concealed or suppressed. The evidence all existed upon the official books and records of the office open to the examination of the courts."

See also State ex rel. v. Yates, 231 Mo. 289. The Bragg case is a leading case cited and quoted in a number of later cases.

In this case, in order to prevent the statute from running, it is necessary for the plaintiff to show that his rights were not only unknown to him but were purposely concealed from him by the officers of the company. He seems to proceed upon that theory. He mentions a number of things which he claims tended to mislead him and prevent his knowing the facts. Among them he says the notice of the stockholders' meeting of April 24th failed to state that the proposed increase was fully paid out of the assets of the company. He also claims that neither he nor his predecessor in title got that notice, so it is immaterial what the notice contained so far as he is concerned.

Other concealments are mentioned. No entry was made on the company's books of treasury stock until September, 1908.

No certificates were ever issued for the stock claimed as treasury stock.

The records of the company fail to carry the donated treasury stock as an asset separate and distinct from the physical property of the company.

These and other omissions from the books, as well as misleading entries on the books, could have deceived the plaintiff only if he examined them; if he examined the books they informed him exactly of the facts which he claims were concealed. The minutes set out above were before him.

He says the certificates evidencing the fifty-per-cent dividend made no mention of the retention of the balance as treasury stock. Such a thing is no part of a certificate of stock.

He complains of a letter of the president of the company which notified him of his right to purchase his proportion of the 5906 shares of stock, being ten per cent of the outstanding stock, but did not apprise him of the 60,000 shares increase, because it showed only something over 59,000 shares outstanding altogether. It may be said of this letter, however, that it did show that instead of there being 40,000 shares of stock outstanding there were more than 59,000 shares issued. This should have notified the plaintiff that there had been an increase of stock, and naturally he should have inquired the amount of the increase and what was done with the rest of it.

Again, prior to 1912, no reports relating to the financial condition of the company were sent out to the stockholders. That would not affect the question of the Statute of Limitations, because this suit was brought in November, 1920. The statement sent out in 1912 will be noticed below.

These and similar acts, as claimed by the plaintiff, proved a concealment from him of his cause of action and conduct which prevented him from bringing suit earlier.

It becomes important to consider what notice the appellant had of the situation, actual, implied and constructive.

There was certain constructive notice. The statement of increase of capital stock was duly certified by the Secretary of State, was filed for record in the office of the Recorder of Deeds of St. Francois County May 8, 1906, and filed with the Secretary of State May 9, 1906. The files in theConstructive office of the Secretary of State and in theNotice. Recorder's office showed that the capital stock had been increased from four million to ten million dollars, divided into 100,000 shares of the par value of one hundred dollars each, full paid. This was constructive notice to the appellant that the increase was paid out of the company's surplus assets. In case of fraudulent concealment, such as claimed here, the doctrine of constructive notice applies in this State. [Hudson v. Cahoon, 193 Mo. l.c. 560; Board of Commissioners v. Renshaw, 99 Pac. (Okla.) 638, l.c. 640, note; Thompson v. Lyons, 281 Mo. l.c. 449.] This constructive notice is conclusive upon the plaintiff as to just what was done with the increase of the capital stock and the particular rights which he claims here, unless circumstances to be next noticed would prevent the effect of that constructive notice.

III. It is argued that the officers and directors were trustees for the stockholders, a fiduciary relation which made the constructive notice ineffective; that plaintiff had a right to rely upon what was told him by such officers andDeception. directors, and it was not incumbent upon him to search the record for what was done. If, in fact, he did rely upon the officers and directors for information and they deceived him, the point would be well taken. An examination of all the alleged facts, which the plaintiff claims misled him, fails to show any intentional deception of the plaintiff as to the facts in the case. In the first place there was no motive for misrepresenting the facts; the officers of the corporation were not apprised that the plaintiff expected to sue; there was no attempt anywhere to get from him anything to which they thought he was entitled; he was treated like all other stockholders, including those whose acts he complained of; there were no differences or difficulties between the plaintiff and the company until long afterwards. It is impossible to discover in any of the information or alleged misinformation which the officers and directors sent to the plaintiff, anything which showed an intention to deceive him, or which misrepresented any specific fact. It is only by the construction which the plaintiff has seen fit to put upon the facts that any misrepresentation occurred.

If, as claimed by his counsel, he trusted the board of directors, he had a right to rely upon them. As a matter of fact, however, he didn't trust them. He appeared at a stockholders' meeting in May, 1915, and filed a protest there against some proceeding. He filed his suit May 10, 1915, in the Federal Court to set aside an action of the stockholders at the meeting May 7, 1915. About that time he went to the office of the Secretary of State and after producing his certificate of stock examined the files there. He said he examined the reports made from time to time by the officers of the company. If he didn't examine the statement of increase of capital stock on file in that office his neglect to do so, when he wanted full information, is impossible to understand in a man as suspicious as he was.

The statement of increase in the capital stock in the Secretary of State's office and in the office of the Recorder of Deeds of St. Francois County, showed the increase from four million dollars to ten million dollars, all paid up in lawful money of the United States. He cannot take refuge in his reliance upon the officers and directors of the company for his information as to that particular fact, for he didn't rely upon them. His entire statement and demeanor shows that he did not trust them. He testified that from the time he came to Missouri in May, 1915, he spent all his time in his lawsuits against this company. He had nothing else on his thoughts. He employed some of the most famous attorneys of the country in his various lawsuits, including the celebrated Samuel Untermeyer of New York, as well as some of the most eminent lawyers in Missouri, to investigate the affairs of the company and to assert his rights in court, in connection with the company. Not later than May, 1915, he ceased to rely upon anything told him by the officers, and from that moment he had constructive notice of what was on file in the office of the Secretary of State and in the Recorder's office.

In 1915 he had actual notice of the proceedings of the stockholders and directors when the stock was increased, because the books were examined by his accountant and probably were examined by his attorneys. Those are the very proceedings of which he complains.

IV. Other facts put him upon his inquiry. He complains of the statements filed with the Secretary of State. He was dissatisfied with what he found there and by it was put upon his inquiry. Not only that, he did inquire further. He had his expert accountant, Mr. Wagner, examine the books of theActual company. Wagner testified that he examined the booksKnowledge. of the company in 1915, and at the time he must have examined and read the minutes of the proceedings of the directors and stockholders of 1906 when the stock was increased, showing exactly the facts of which plaintiff complains. The book showed the treasury stock and showed all about the condition of the stock. He knew then as much as anybody connected with the company. That information was the information of the plaintiff; what he knew of course the plaintiff knew. The exact date at which Wagner examined the books of the company in 1915 is not stated by him, but since the plaintiff went to the Secretary of State's office in May, and soon after put Wagner to examining books, it could not have been very late in the year. This suit was filed November 9, 1920.

The plaintiff's predecessor in title was his wife. (Her stock is mentioned above as his stock). From his evidence it appears that he knew all about her business, and knew that she did not receive notice of the stockholders' meeting in April, 1906.

She acquired 652 shares of stock at different dates before her marriage. The certificates for those shares bore different dates, and showed the several increases of capital stock of the company. Two of them at least were for stock dividends. Two of those certificates, one for 124 shares issued May 8, 1905, and one for 279 shares issued January 9, 1906, showed the capital stock of the company to be $4,000,000 in 40,000 shares. She received her stock dividend June 1, 1906, for 326 shares and it showed the capital stock of the company to be $10,000,000 with 100,000 shares.

After her death in 1907, the plaintiff, who acquired her stock under her will, had her several certificates canceled and caused one certificate in lieu of them to be issued to him for 978 shares. That certificate showed a capital of $10,000,000 with 100,000 shares. Here then was actual notice to him that between January 9th and June 1, 1906, the capital stock was increased by 60,000 shares, representing $6,000,000.

He claims he did not know the increase was paid out of the surplus assets of the company. The certificate issued to his wife June 1, 1906, for 326 shares of dividend stock, showed him that stock must have been paid for out of the surplus assets of the company, else there would have been no stock dividends. How could he fail to follow that suggestion and know that the increase was paid out of the surplus assets? He says in his testimony that he thought at the time he testified that the stock dividend so declared was from the donation from the majority stockholders. He does not say when he arrived at that idea, but whenever he acquired that information he must have known that the majority had voted the 60,000 increase out of the surplus assets of the company. The theory of the donation is based on that fact, and if, when his wife got the stock dividend he thought that was its source, he must have known of the exact action taken April 24, 1906. He got the same information when he bought 122 shares of stock in July, 1909. He knew then that stock was being sold at par and that he was getting his pro rata share. His testimony shows he knew also that he could get more than his pro rata share because some of the stockholders did not take what was coming to them. That was ample notice to him, not only as to the amount of capital stock for which the company was incorporated by its increase but also the amount which was outstanding, because he knew what his pro rata part of the 40,000 shares, or $4,000,000 was, and he knew that he didn't have that proportion out of the 60,000 shares. A man of his aggressiveness, as indicated by his litigation, and his business acumen, with that fact staring him in the face would not have rested without inquiry as to some of his rights. He must have known by this information that over 34,000 shares of stock were not issued, or else if issued he didn't have his proportion.

He said he was misled by certain statements issued by the company of which the following, October 31, 1912, is a sample:

"ASSETS.

"Property and Plant ....................... $14,295,490.50 Investments .............................. 27,000.00 Treasury Stock ........................... 3,400.00 Advances ................................. 27,512.18 Working and Trading Assets ............... 124,214.04 Store and Rent Accounts .................. 7,709.06 Current Assets ........................... 543,989.99 Deferred Charges to Income ............... 141,443.83 ______________ "Total ............................... $15,170,759.60

"LIABILITIES.

"Capital Stock ............................ $ 6,578,300.00 First Mortgage Sinking Fund, 6% Gold Bond ............................. 1,997,000.00 Notes Payable ............................ 1,804,900.00 Current Liabilities ...................... 99,138.55 Reserves ................................. 147,351.78 Profit and Loss Surplus .................. 4,544,069.27 _______________ "Total ................................ $15,170,759.60"

This statement shows that the net assets of the company above par value of the stock was $4,544,069.27. He knew from his certificate of stock that the capitalization was ten million dollars. He knew that something over $6,500,000 stock was issued and outstanding. What, then, did he suppose the balance of the authorized stock, over four million dollars, represented if not the surplus assets of the company? There was the evidence right on the face of the report to show that the authorized capital was fully represented in the assets of the company. He got 326 shares as a stock dividend, and had every reason to know it came from the same source as the unissued stock.

He claims he was misled by the mention in that report of 34 shares (only) of treasury stock. That very item, if he supposed it was unissued stock, should have led him to inquire what was the status of 34,217 shares which the surplus assets showed were paid in full.

Many other circumstances were brought to the plaintiff's knowledge which must have put him upon his inquiry and charged him with notice of his alleged rights more than five years before the filing of this suit. But it is unnecessary to consider others than those mentioned. These circumstances are sufficient to show that he had knowledge of facts which made it incumbent upon him to inquire further and learn the exact facts. He always hadaccess to the books. The fact that in May, 1915, he was suspicious and trusted no information from the directors, made it incumbent upon him to read the minutes of the company; his expert and probably his attorneys did read them. Whether they did or not he is charged with notice of what they contained. His action is barred by the five-year Statute of Limitations.

The judgment is affirmed. All concur.