160 Wallace vs Eclipse Pocahontas Coal Co.

AUTHOR: DAYOS
93 S.E. 293 (1919) NOTES:
TOPIC: Pre-incorporation subscription
PONENTE:
FACTS:
 The promoters (Perkins and Griffith) of Eclipse Pocahontas coal co. entered into a contract of lease with Wallace,
owner of the land.
 The company was organized for the purpose of taking over and operating a tract of about 600 acres of Coal in
McDowell County.
 The contract stipulates that in consideration that the plaintiff would transfer, assign or cause said lease to be assigned
or transfer first to Griffith, transferee, for himself and associates, and by him to the corporation when formed, the
promoters would advance and supply necessary money to pay the purchase price for said lease (2500 dollars), and
when the coal plant becomes operational, Wallace would receive 1/5 interest in the property fully paid up, represented
by stocks equivalent tone-fifth.
 It was alleged that Wallace only received 5 shares of the (allegedly) 25 shares he was entitled to get. Thus, the
defendant corporation refuses to comply with its contractual corporation.
 BOD and SH Stover denied the authority of the promoters, thus, it does not bind the company for lack of notice of the
plaintiff’s rights.
 Perkins, Weller, Griffith and O’Keeffe were ordered to pay $4,300 – value of the 43 shares of stock of which Wallace
has been deprived. (1/5 of the shares issued less 5 shares delivered to him and 2 shares Wallace contributed to other
stockholder)
 Wallace appealed contending that he was erroneously limited to money decrees against defendants for sums
aggregating the par value of 43 shares of the 250 shares issued, instead of a decree against the corporation.

ISSUE(S): W/n plaintiff Wallace is entitled to other reliefs against the corporation.

HELD: YES

RATIO:
 Defendant corporation cannot claim ignorance in the case at bar. Not only did the corporation have notice of the
plaintiff’s right through its corporators and agents, but all the stockholders of the corporation participating in the
first meeting, including Stover had notice of the plaintiff’s interest. Hence, the defendant corporation is liable
jointly and severally along with its promoters either by issuance of shares of stocks or money decree.
 To determine plaintiff’s rights it becomes necessary to specify the plaintiff’s relationship to the corporation under
his contract.
 Wallace’s status in relation to the corporation was a subscriber to the capital stock of a corporation. His
contract was to sell and convey the land to the corporation in exchange of shares of stock in the corporation.
Being entitled to this amount of stock when the land becomes fully equipped for mining and coal
production, he is entitled to such and he can compel the issuance of stock certificates having been paid his
subscription to the capital stock.

CASE LAW/ DOCTRINE:

DISSENTING/CONCURRING OPINION(S):