WALLACE VS ECLIPSE POCAHONTAS COAL CO.

93 S.E. 293 (1919)

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 another 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.