it "under lock and key, in an elk-skin purse," until the fall of 1873, when the defendant purchased this property with two thousand and twenty-five dollars of this money, and took the conveyances therefor to his wife. In the light of the established circumstances of the case, the story is a very improbable one, and the contradictions. and absurdities with which Jeremiah Elliott has filled his testimony, in the attempt to support it, make it utterly unworthy of belief. When the plaintiff paid him with a check on New York, he gave the same to the National bank of this city for collection, but apparently he was in such urgent need of money that he could not wait from the first to the eighteenth of the month, when the collection was telegraphed, but got six hundred dollars on interest from the bank on the security of the check, and yet he testifies that at that very time his wife had two thousand three hundred dollars in gold lying idle, and he had nine hundred and fifty dollars of his own in bonds. In the language of the court in Catts v. Phelan, supra, this transaction seems to have been, on the part of Jeremiah Elliott, "a deeply concocted, deliberate, gross, and most wicked fraud." There must be a decree that the plaintiff recover of the defendant, Jeremiah, the sum of seven thousand nine hundred and thirty-one dollars and ninetyseven cents, with legal interest from October 1, 1873, together with costs, and that the property mentioned in the bill be held by the parties claiming it in trust for the plaintiff, and that the same be sold to satisfy this decree. IN RE SOUTH MOUNTAIN CONSOLIDATED MINING DISTRICT COURT, DISTRICT OF CALIFORNIA, 1. STOCKHOLDERS OF MINING CORPORATION-LIABILITY-ASSESSMENTS.---The stockholders of mining corporations organized under the laws of California, as the bankrupt corporation in this case was organized, incur no liability ex contractu, either express or implied, to pay in, either for the 1881.] Opinion of the Court-Hoffman, J. prosecution of the enterprise or the payment of the debts of the company, the nominal par value of their shares. 2. PERSONAL LIABILITY FOR ASSESSMENTS.-Unless stockholders of a corporation have subscribed for stock, or are the successors of subscribers, assessments levied on their stock can be enforced only by the sale of their shares. 3. SECTION 349 OF THE CALIFORNIA CODE OF CIVIL PROCEDURE does not create any personal liability for assessments, unless, from the terms of the stockholders' subscription, such liability was incurred. 4. THE REMEDY OF CREDITORS against the stockholder personally is limited and defined by section 322 of the code. Before HOFFMAN, District Judge. James A. Waymire, attorney for creditors. A. L. Rhodes, J. B. Crockett, and W. H. H. Hart, of counsel. McAllister & Bergin, attorneys for William Willis. HOFFMAN, J. At the request of counsel, I indicate the grounds for the denial of the application heretofore made, to order an assessment to be levied on the shareholders of the above corporation. The assessment is asked for with the object of collecting the same by suits in personam against delinquent shareholders. The question whether they are personally liable must, therefore, first be determined. I do not question the power of the court to compel contribution of unpaid subscriptions to the capital stock of an insolvent corporation for the purpose of paying its debts. (Upton v. Tribilcock, 91 U. S. 48; Sanger v. Upton, Id. 60; Chubb v. Upton, 95 Id. 665; Pullman v. Upton, 96 Id. 328; Turnbull v. Payson, 95 Id. 420; Bank v. Case, 99 Id. 528; Hatch v. Dana, 100 Id.) Nor do I deny that a promise to pay for shares of stock will be implied from the fact of subscribing for them. (14 Wend. 20; 12 Conn. 499; 2 Metc. (Ky.) 314; 13 Ill. 514; Id. 504.) And the acceptance and holding of a certificate of stock will have the same effect. (91 U. S. 48; Id. 60.) Nor is it necessary to create a liability as stockholder that a certificate shall have been issued. (37 Me. 76; 19 Pick. 564; 32 Md. 393; 22 N. Y. 551; 16 Mass. 94.) Opinion of the Court-Hoffman, J. [January, Payment of assessments will estop an unregistered transferee of shares from denying his liability as a shareholder. Serving as director or voting at stockholders' meetings will have the same effect. (60 Me. 468; 36 Miss. 17; 31 Pa. St. 489; 38 Id. 81; 6 Man. & G. 81.) The acceptance of an assignment of a certificate in blank will fix the liability as stockholder. (3 Biss. 524.) If a subscription be obtained by fraud, it must be promptly repudiated. (91 U. S. 45; 95 Id. 667.) Nor will ignorance of the law relieve the stockholder. (91 U. S. 45.) Nor can the corporation release the stockholder from his liability so far as creditors are concerned; nor can it accept any other mode of payment than money, unless full value be given. (91 U. S. 60; 21 Wend. 296; 16 N. Y. 459.) The fact that the company may forfeit and sell the shares of a delinquent stockholder does not impair the rights of a creditor against him. (Ang. & Ames on Corp., secs. 549, 550; Thompson on Liab. of Stockh., sec. 193, and cases. cited.) All these positions which the counsel for petitioners have maintained in their able and elaborate brief, I concede. These principles apply to all cases where an obligation has been created or incurred on the part of the stockholder, to pay to the corporation a certain sum, being the par value of the capital stock subscribed for or transferred to him. The liability thus created grows out of contract, express or implied, and the creditors of the corporation may avail themselves of it, as of any other chose in action or equitable assets of the corporation, on well-settled and familiar principles. But the question in this case is: Does the acceptance of stock in a mining corporation, as they are usually formed in this state, create any obligation, either by contract or under the law, to pay to the corporation or to its creditors the nominal par value of the stock so accepted? The mode in which mining companies are formed in this state is familiar to us all. The owners of the property, or persons expecting to become such, by complying with a few 1881.] Opinion of the Court-Hoffman, J. simple formalities, form themselves, with such others as they may take into the association, into a corporation, to which the property is conveyed. The amount of the capital stock, which is required to be stated in the certificate of incorporation, is usually fixed at a purely arbitrary sum, and divided into as many shares as convenience or caprice may dictate. It neither bears nor is intended nor supposed by the public to bear the slighest relation to the real value of the property-a value nearly always conjectural, and very often imaginary. It has recently become the practice to divide the capital stock into one hundred thousand shares of the value of one hundred dollars each, making ten millions of dollars in all, a sum which, it is apparent, can have no reference to any estimate of the real or intrinsic value of what is usually a mere hole in the ground, supposed to afford favorable indications. A striking proof of this is afforded in the present case. Among the first acts of the corporation was to place (in. effect) five thousand shares of their stock on the market at the price of one dollar per share. The organization having been effected and the property conveyed to the company, the stock is issued to the former owners, to the amount which may have been previously agreed upon. The remainder is reserved for working capital, or disposed of in the market for such prices as the value and prospects of the enterprise may justify. The purchaser is, of course, careful to know into how many shares the stock is divided, but he is wholly regardless of the nominal and purely arbitrary par value attributed to the shares. No subscription paper, memorandum of association, deed of settlement, or other document creating either expressly or impliedly any ex contractu obligation to take and pay for, at their nominal par value, any shares of stock, is signed by any of the shareholders. This general account of the mode of organizing mining companies in this state describes with sufficient accuracy what was done in the case at bar. The requirements of the statutes of this state, with regard to mining corporations, were strictly complied with. I am unable to perceive how Opinion of the Court-Hoffman, J. [January, any ex contractu obligation on the part of the shareholders to take and pay for their stock was created. It may be confidently affirmed, that in no case of this description has such an obligation or liability been intended to be created. It has on all hands been supposed that the resources of such corporations were to be derived from the sale of reserved stock, or by levying assessments, with the power of selling delinquent stock. Creditors are protected by the personal liability of each shareholder for his pro rata share of the indebtedness of the corporation. It was urged on the part of the stockholders, that the shares held by them are to be treated as fully paid-up stock. I do not concur in this suggestion. It might have some plausibility in cases where all the stock has been distributed among the owners of the mine in proportion to their respective interests. But where stock has been reserved, and subsequently sold at perhaps one hundredth part of its nominal par value, it can in no sense be called or treated as fully paid-up stock. But even in the case of shares distributed among the mine owners, the view suggested seems to me inadmissible. It is a pure fiction. The mine owners do not, in fact, agree to take the stock and pay for it at its nominal par value— payment to be made by conveying the mining ground at a valuation extravagantly in excess of its real value. If they bad really contracted any obligation to take and pay for the stock, they could not acquit themselves of it by such a device. (Sanger v. Upton, 91 U. S. 60; 21 Wend. 296; 16 N. Y. 459; 14 Johns. 228; 9 Id. 217.) To call the stock fully paid up is to admit the obligation to take and pay for it, and to suppose that obligation to have been fulfilled in a mode the law will not permit. In .. my view, no such obligation ex contractu was at any time created. If the liability to pay the nominal par value of the stock for the benefit of creditors exists, it must arise from the positive provisions of the statutes, and not from the contracts of the parties. This question I will now proceed to examine. |