to seek it, and that the plaintiff might maintain | shares issued upon the consideration of Ralthis action as representing the corporation only. ston's conveyance and the deposit of messenConsidering, however, the purpose of the bank act, we deem this a very narrow and false view ger stock were a reissue from the shares surof the scope of the receivership provided by it. rendered by Waterbury and his associates; The proceeding under which the receiver is ap- but such memoranda are evidently made at a pointed, is not a proceeding by the corporation, later date than the issue of the stock, contain but against it. It is not for the corporation, but interlineations and erasures, are written with exclusively for the public, as billholders, and for those having funds in its hands as depositors; different ink from that used on other parts and it is only when they are in danger of being of the stub; and, considering the fact that defrauded, or the bank has become insolvent, Ralston a short time subsequently became that commissioners or the court can act. Rev. St. c. 126, § 47. The duty of the receiver, as president of the bank, he either made the marked out by the statute, regards the creditors, memoranda himself or caused them to be and not the corporation, which is to be wound made by the then superserviceable MacGibup. The forty-ninth section provides for the bon with the intent to escape liability as a payment of the debts of the corporation out of its assets, giving a preference to billholders; subscriber. Even granting that it was surand it is only after the creditors are satisfied rendered to the bank by Waterbury because and the expenses of the trust paid, that the not paid for, because the consideration failed, stockholders are to receive anything. It is true, that by the fiftieth section, the receiver is cloth or for any reason, and that after it had been ed with all the powers and rights of the corpora- so surrendered, the bank in form reissued it tion in respect to the collection of debts, con- to Ralston, this fact would not render him ferred upon it by charter or otherwise; but this, so far from being designed to limit his any the less a subscriber. The bank had no powers, was designed to clothe him with special right to purchase its own stock. If it did so, powers and authorities. His principal office, un- it diminished its capital by just so much as der the law, as we have seen, is to care for and the shares purchased represented, unless the represent the interest of creditors; and in all stock so surrendered or purchased is to be such cases, the receiver or assignee, call him by whatever name you will, may take advantage treated, as in equity it should, as having gone of any fraud in derogation of the rights of credi- back into the general mass of original stock tors, to which the insolvent debtor was a party. and thereby become subject to subscription. A deed which is void as against creditors, is This view is sustained by the following auvoid also as against those who, by law, represent creditors. Doe d. Grimsby v. Ball, 11 M. & W. thorities: State ex rel. v. Smith et al., 48 Vt. 531, 533. If this principle were not applied to 266; Pabst v. Goodrich, 133 Wis. 43, 113 N. the receivers of insolvent banks, the receivership W. 398, 14 Ann. Cas. S24; Porter v. Plymwould, in a great number of cases, be of very outh Gold Mining Company, 29 Mont. 347, little use." 74 Pac. 938, 101 Am. St. Rep. 569; Bank v. Wickersham, 99 Cal. 655, 34 Pac. 444; Wells & Co. v. Thompson Mfg. Co. and Foley, 54 Mo. App. 41; Commonwealth v. Boston & Albany R. Co., 142 Mass. 146, 155, 7 N. E. 716; Belknap, Receiver, v. Adams and Rice, 49 La. Ann. 1350, 22 South. 382. So that while the testimony indicates that there was original stock on hand to satisfy the exigency of Ralston's purchase, yet upon his own theory he

[3-5] We will now consider the facts relating to defendant Ralston's relations with the company in order to determine whether he is to be treated as a subscriber for stock held by the company or a purchaser of stock previously subscribed and paid for and repurchased by it. It appears from the testimony that previous to Ralston's dealings with the bank one G. W. Waterbury and others had subscribed for 850 shares of stock in the corporation, and had pretended to pay for it in as-is still liable as a subscriber for any amount sets of the Bank of America, representing them to be of the value of $85,000, although they were in fact probably worthless. Waterbury subsequently attempted to surrender his shares, which were taken up by the bank and canceled. This proceeding was wholly outside of the law and in defiance of section 4569, L. O. L., which forbids a bank to become the purchaser of its own stock, except under circumstances which are not shown to have existed at the time the stock in question was surrendered. It follows that the transaction was void, and the bank never legally became the owner of the Waterbury stock, and therefore had no legal right to reissue it. When Ralston contracted to purchase stock, he did not apply for the Waterbury stock or any particular stock. He merely contracted to purchase 245 shares of stock, and to pay therefor by conveying to the company real property worth $22,200, and 23 shares of city messenger stock to cover the balance of the purchase price. The memoranda upon stubs of the stock certificate book show that the

he has failed to pay. Some question is raised on account of the fact that the certificates for 35 of the shares included in the transaction were issued in the name of L. R. Ralston and 10 shares in the name of J. M. Long, but the fact remains that they were issued upon the faith of defendant's agreement to pay for them by conveying the real estate and transferring the messenger stock, and he cannot escape liability by causing them to be issued upon the books of the company to other persons. We are of the opinion that defendant Ralston must be treated as a subscriber for the 245 shares embraced in the transac tion above detailed. McAllister v. American Hospital Association, 62 Or. 530, 125 Pac. 286; Jackson v. Traer et al., 64 Iowa, 469, 480, 20 N. W. 764, 52 Am. Rep. 449. This conclusion being reached, we will next consider the evidence as to payment.

[6] It may be premised that the law and public policy alike demand that a stock subscription shall be paid for in money or something just as good as money. The evidence

[12] Passing now to the second cause of action it will be noticed that it is not brought to recover upon a subscription to capital stock, but substantially in damages for the unlawful conversion of shares of stock. is alleged, in substance, that defendant, as president, unlawfully and without the consent of the board of directors caused to be issued to himself 101 shares of stock and has refused to pay for the same, and judgment "Any person, firm, or corporation doing a is asked for $10,100, the par value of the banking business in this state may purchase, shares so unlawfully appropriated. The facts hold, and convey real estate for the following purposes and no others: 1. Such real estate as appear to be that for some reason, probably shall be necessary in which to transact the busi- to enable the bank to sell the shares at less ness of any such bank, including with its bank- than par value or to cover up the fact that ing offices, other premises in the same building to rent as a source of income, but which shall it was holding or purchasing its own stock in not exceed in cost to such bank fifty per cent. violation of law, a block of stock consisting

of 182 shares of the par value of $18,200, and taken. The undertaking by Connell to hold 1 being part of the stock surrendered by Wa- defendant harmless in any proceeding which terbury and his associates, was held in the might thereafter be had against him on acname of Ralston and MacGibbon as trustees count of his transactions with the bank is for the bank; Ralston holding one half the a personal matter between defendant and shares, and MacGibbon the other half. With Connell. So far as the bank undertook to be what seems to be a characteristic disposition surety on such undertaking, the transaction to appropriate anything lying around loose, is wholly void and unauthorized as to credRalston caused the 91 shares held by him as itors of the bank, as already intimated. As trustee to be issued to himself personally, to its effect between defendant and Connell, and appears to have disposed of part of them it is unnecessary to express an opinion. Neifor his own benefit or to have kept them. ther was it necessary to make all stockholdHe paid the bank nothing for them, and ers of the bank parties. The superintendent when he was finally requested to withdraw of banks, in our opinion, has authority to he brought in what he had disposed of, and bring any suit that the bank or any creditor turned over to Connell apparently as an in- or stockholder could have brought. The bank dividual, but in fact as trustee for the bank, itself, if it could have been freed from the these shares, together with the 245 shares he corrupt or incompetent officials who mishad subscribed for in the first instance. An- managed its affairs, could have repudiated other certificate for 10 shares was issued to their unauthorized acts and compelled him to Mr. Ralston to enable him to borrow $1,000 pay for the stock, and previous to the superfor the bank. The money was borrowed and intendent's taking possession any stockholder afterward repaid, and upon the final closing in the event of the refusal of the officers of up of Ralston's business with the bank this the bank to act, could have brought such stock was turned over to Connell. At the suit. The stock in contemplation of law same time that the stock was turned over was purchased upon an agreement to pay for Ralston was permitted to take out certain it immediately in property equivalent to it notes due the bank of the face value of $8,- in par value. The shares were delivered, but 500, and was paid $1,500 in cash. Connell the defendant fraudulently failed to convey gave his personal note for $10,000 to cover such property, and tendered a conveyance, this, and afterward paid the note. Now as which was practically worthless as an asset. Ralston is not sued as a subscriber for this Thereupon a cause of suit arose to compe! 101 shares of stock, but merely for the con- him to pay in money this demand, which was version of it, and it appears that it was rean asset of the bank that its officials, one of turned and accepted by the officers of the whom was the defendant, fraudulently failed bank, and that the bank has lost nothing by to enforce. The bank now having fallen into the transaction, receiving, in fact, $8,500 of honest hands, a suit is brought to uncover Connell's money in exchange for notes of the unauthorized acts by which defendant's doubtful value, it would seem inequitable to fraud was concealed, and to compel him to compel Ralston to pay for the stock for do equity in the premises by paying the which he is not sued as a subscriber and money for the stock for which he has subwhich he has returned. scribed. His contract to pay for stock is individual, and not dependent upon whether or not other persons have failed to pay in full for stock. Nor is the plea that the plaintiff is suing another party for a subscription for the same stock available here. If such a fact were shown it might be considered as evidence in the nature of an admission by plaintiff that such other party, and not the defendant, was the person liable; but as heretofore intimated we are of the opinion that the evidence tends to show that plaintiff bought original unissued stock, and that the stubs in the stock certificate record have been fraudulently "doctored" in the interest of the defendant.

[13] The contention that plaintiff's remedy is by an action at law is untenable. The fact that the books of the bank showed upon their face a regular purchase and issue of stock and a payment credit of $22,200 in real estate transferred and of $2,300 in stock of the messenger company, when in fact such real estate and stock were worthless and such a credit a fraud upon the bank, its creditors, and stockholders, and the further fact that the defendant Ralston had obtained a release from all liability signed by the officers of the bank and apparently regular, when in truth the release was unauthorized, illegal, and therefore fraudulent, rendered the interposition of a court of equity imperatively necessary in order that these and other fraudulent devices of Ralston and his associates should be uncovered. To have submitted the mass of evidence and exhibits which have consumed a week of our time in their examination to a jury whose time for deliberation is necessarily limited would have been a farce.

The history of this bank from the beginning is a record of deception, fraud, and mismanagement. Publishing to the world by its articles that it had a capital stock of $150,000, an examination of the testimony shows that such capital was represented by $85,000 of the assets of an insolvent "tincup" bank of small value, something which is termed "Mt. Hood" stock, presumably a paper rail[14-17] The plea in abatement was not well road and of less value, a little office furni

JAKIN, J., took no part in the considera- the recorder's office, or the abstract books or tion of this case.

TYNG v. CONSTANT-LORAINE INV. CO. before or after paying the $1,000. It did not

ment to convey 55 feet by warranty deed to the taxes for 1907. The receipt or writing entitle him to a directed verdict. further recited that:

[Ed. Note. For other cases, see Vendor and Purchaser, Cent. Dig. §§ 1008-1017; Dec. Dig. 341.]

9. EVIDENCE 244-DECLARATIONS OF AGENT -ADMISSIBILITY.

of the Republic and accepted by them under "This deposit is made with the National Bank authority of the following telegram from R. A. Rowan: Los Angeles, California, Sept. 6-7, 1907. Thomas E. Rowan, Salt Lake, Utah: Will accept one thousand for thirty days option for property west side State street. Price fifty thousand subject to twenty thousand mortgage. Balance thirty thousand to be paid in cash on or before thirty days from date. Taxes to be proOne thousand to be deposited to my credit immediately with National Bank of Re: public, they to notify me by wire. R. A. Rowan.''

In an action to recover a payment on a contract for the purchase of land on the ground that defendant did not have title to all of the land agreed to be conveyed, defendant contended that the contract was made by its president personally and not by it. Plaintiff was permit-rated. ted to testify that after a former trial resulting in defendant's favor, he had an interview with defendant's president, in which he offered to discuss the case "man to man" and "settle this between ourselves," that defendant's president declined to discuss the case, saying that "the jury says it is mine, and I guess it is mine,' and offered to flip a penny to see who would that nothing was said as to whether his suit lay against defendant or the president. Held, that this was not admissible to contradict defendant's claim that if any one was liable it was its president and not it, or to show its reason for withholding the money, as the president by virtue of his office had no authority to make admissions against defendant as to past events.

take the amount involved. He also testified

[Ed. Note.-For other cases, see Evidence, Cent. Dig. §§ 916-936; Dec. Dig. 244.]

Appeal from District Court, Salt Lake County; F. C. Loofbourow, Judge.

Action by Charles Tyng against the Constant-Loraine Investment Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

See, also, 37 Utah, 304, 108 Pac. 1109. Howat, Macmillan & Nebeker, of Salt Lake City, for appellant. Pierce, Critchlow & Barrette, of Salt Lake City, for respondent.

It then is alleged that the Equity Investment Company, in paying the money and taking the receipt, acted for the plaintiff and that he understood and believed that the defendant was the owner and in possession of 55x165 feet, and that it legally could convey that much ground by warranty deed, and that the Equity Investment Company, immediately upon paying the money, made over and assigned the bank's receipt or writing to the plaintiff. It further is alleged that on the 9th of October, 1907, and within the option period, the plaintiff tendered the sum of $29,000 and demanded a warranty deed, but that the defendant tendered a warranty deed for only 532x165 feet and a quitclaim for 12x165 feet. This the plaintiff declined to accept and averred that the defendant was the owner and in possession of only 5321⁄2x165 feet, and that it, at no time, was the owner or in possession of the 12x165 feet, which, as is averred, was possessed and held adversely by another, by reason of which the defendant, at no time, could grant or convey any interest therein, but of which the plaintiff had no knowledge until after the payment of the $1,000. It further is alleged that the deed tendered by the defendant "was not in conformity with the terms of said option or offer or agreement to sell" as evidenced by the bank's receipt and writing; that upon the defendant's failure to give a warranty deed for the whole of the 55 feet, the plaintiff demanded a return of the $1,000 theretofore paid, which was refused. Hence the plaintiff prayed judgment for $1,000 and interest.

STRAUP, C. J. The substance of the complaint is, that the defendant, a resident corporation of California doing a real estate business, was, subject to a $20,000 mortgage, "the record owner, as appeared from the plat books and other records in the office of the county recorder of Salt Lake county, Utah," of particularly described real property, a lot 55x165 feet, on the west side of State street, in the city of Salt Lake; that the defendant, on the 9th of September, 1907, gave the Equity Investment Company, a Utah corporation doing a real estate business in Salt Lake City, an option to purchase the property subject to the mortgage, for $30,000, $1,000 cash, and $29,000 on or before 30 days thereafter, and that in pursuance thereof, the Equity Investment Company, for the credit of the defendant, deposited with the National Bank of the Republic at Salt Lake City, $1,000, and took the bank's receipt therefor, which, so far as material, acknowledged payment of the $1,000 "on account of the pur- As shown by the records in the recorder's chase price" of the property described in the office of Salt Lake County, one Colgate, in complaint, a lot 55x165 feet, and recited the 1903, by warranty deed, conveyed the lot, further payment of $29,000, to be made with- 55x165 feet, to one Halloran. In June, 1905, in 30 days thereafter, when the property was Halloran, by warranty deed, conveyed 53% to be deeded by warranty deed, free from x165 feet, and by quitclaim 12x165 feet, to all incumbrances, except the mortgage, and R. A. Rowan of Los Angeles. In December,

The case was tried to a jury who rendered a verdict in plaintiff's favor in accordance with the prayer of the complaint. The defendant appeals and urges that the court erred in refusing to direct a verdict, to charge the jury as requested, in misdirecting the jury, and in permitting answers to be made to certain questions propounded to the plaintiff as a witness.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes