Field v. Pierce

102 Mass. 253

• Court: Massachusetts Supreme Judicial Court
• Decided: September 15, 1869
• Status: Published

Opinion

Ames, J.

*

It appears from the report, that the plaintiffs have performed the labor and rendered the services which they agreed to furnish on their part, in the purchase of mining rights and other property in Nova Scotia, and have transferred them to the defendant at cost. He on his part furnished all the funds necessary to complete these preliminary purchases, and so far has fulfilled his contract. He next proceeded to draw up the articles of association necessary as the first step in the organization of a corporation under the Gen. Sts. c. 61, and the El Dorado Gold Mining Company has been duly organized under those articles. It is to be assumed that he invited and procured the subscriptions of the associates, and caused this corporate company to be so organized. The articles provide, among other things, that the capital stock of the company shall consist of one hundred thousand shares, of the par value of five dollars each; and they apportion those shares among the associates, allotting ten thousand of them to the plaintiff Field, who appears to be one of the subscribers, and who, as the report finds, was to hold in the right or for the.benefit of the other plaintiff, as well as for himself. The defendant, then, has fulfilled the second part of his contract, to the extent at least of organizing this particular corporate company, and causing one tenth part of its stock to be allotted to the plaintiffs. They complain that he has not “ given to them,” in the language and within the fair interpretation of the contract, the shares that they were entitled to receive; that he has refused, on request, to deliver the stock to them, and has insisted that they are not entitled to receive it without first paying an assessment amounting to two thousand five hundred dollars.

The report finds that, when the company voted to bay the land and mining property at the price of $500,000, the price so fixed was wholly fictitious. It is manifest that the payment of that price was equally fictitious. The checks were never intended to be presented for payment, but were returned, after passing through the hands of the treasurer, to the several parties from whom they were received. The purpose of this device undoubtedly was to have it appear by the records of the company and by the treasurer’s accounts that the nominal price of the mining property was the true price, and had been actually paid in cash. Considered as a matter between the stockholders only, it was of very little consequence what the nominal price should be, so long as it was to be paid in the easy and pleasant manner which was adopted. What particular advantage the projectors proposed to themselves by this arrangement is not stated in the report. It may be conjectured that it was supposed the stock might sell at a higher price, if the purchaser were led to believe that the company had actually invested half a million dollars in real estate and mining property. But none of the stockholders were deceived or misled by those proceedings. No deception was practised upon them, and apparently none of the original associates have any cause of complaint. These plaintiffs do not stand in the position of innocent purchasers^ who were deceived by the fictitious valuation. Even if they were not present at the meeting, they knew exactly what the property consisted of, and substantially what it had cost. All that they had any right to ask was an equal tenth part of the stock, and the question is, has the defendant in that respect fulfilled his contract ?

The defendant has made such arrangements that the plaintiff Field (in this respect representing both plaintiffs) stands recorded, in the books of the corporation, as the owner of one tenth part of the corporate stock. The other stockholders, in order to stand in the same position, have been obliged to pay something (the report does not say how much) to the defendant, that is to say, to make terms with him for the privilege of becoming participators in the enterprise. The corporation, for some real or supposed advantage, has seen fit to invest, so far as the record shows, the entire amount of its capital stock in the real estate and other property conveyed to them by the defendant. It has also seen fit to receive from the various stock holders something which it was agreed should be considered as cash, and used as cash, to the full amount cf the par value of all the shares agreed upon in the “ articles of association.” The corporation has received from the defendant, upon the ten thousand shares allotted to the plaintiffs, what it saw fit to treat and to use as cash to their full amount. The plaintiffs do not appear to have been present at the meeting at which the vote was passed. Can the corporation say to them that the record only shows the nominal arrangement, and that the real transaction vas something very different ? Why are not the plaintiffs at liberty to say that their shares are paid up in full ? It is undoubtedly true that the transaction is a very suspicious one; and there are some indications of a design to evade the law of the Commonwealth by a false and fraudulent certificate as to the amount actually paid in; but if there was such a design, there is nothing in the report to show that the plaintiffs were parties to the specific arrangement as to the price of the property, and the payment of it. On the contrary, the corporation received as cash what the defendant paid over on the plaintiffs’ shares, to the extent of one tenth part of the entire capital.

It is true that the officers of the corporation have refused to deliver to the plaintiffs the certificate provided for in the by-laws; but the certificate, though convenient as evidence of title, does not itself constitute the title. The certificate is not the stock. The corporation cannot affect their rights by refusing to deliver to them the usual written evidence of their title. Chester Glass Co. v. Dewey, 16 Mass. 94. Slaymaker v. Bank of Gettysburg, 10 Penn. State, 373. Ellis v. Essex Bridge Proprietors, 2 Pick. 243. “ Shares in a corporation are not chattels personal susceptible of possession, actual or constructive.” Arnold v. Ruggles, 1 R. I. 165. “A share in a bank, if not a chose in action, is in the nature of a chose in action.” Hutchins v. State Bank, 12 Met. 421. A share in a corporation is a right to participate in the profits, or in a final distribution of the corporate property pro rata. It would seem to follow that the defendant’s contract, to give the plaintiffs one tenth part- of all the shares, does not mean that he shall make a manual delivery of the shares, for that is impossible; or even of the certificate. It is enough if he gives them a right to the shares, and a right to demand a certificate. If the corporation in this instance wrongfully refuses to deliver the certificate, there is nothing in the case to show that the defendant is the party who should be held responsible. Their remedy for that wrong would be against the corporation, and not against him.

If the company, under the circumstances, had no authority, after the meeting at which the purchase, subsequently carried into effect, was voted for, to lay the assessment upon any shares belonging to persons who did not consent to such assessment, then the defendant appears to have fulfilled his contract. We see nothing in the articles of association, or in the proceedings of any meeting at which either of the plaintiffs was present¡ that could give to such assessment any binding force as against them, unless their express consent should be shown. What .would be the effect of the purchase of the shares by Matthew D. Field, the plaintiffs’ attorney, or of the transfer to Canterbury, are questions which it has become unnecessary to consider. The defendant, as a stockholder, may have voted for and advocated the assessment and the sale; but those acts were the acts of the corporation, and not of himself.

In this view of the case, the defendant is not entitled to recover upon his account in set-off. He has had the benefit of the money which he advanced in order to secure the purchase.

But, as the plaintiffs have failed to prove any breach of the contract, there must be Judgment for the defendant.

Wells, J., did not sit in this case.