of said hospital on the 16th day of January, 1897. The claim for $482.45 was duly audited and allowed by the board of directors of said hospital on the 16th day of April, 1897. It is shown by the petition that the state board of examiners have failed, neglected, and refused, and still fail, neglect, and refuse, to audit and allow the said claims, or either of them. An alternative writ of mandate was issued commanding said board of state examiners to proceed and audit and allow said claims, or to show cause why it had not done so. Said board appeared, and demurred to said petition on the following grounds: (1) That the petition did not state facts sufficient to constitute a cause of action against the defendants; (2) that the court had no jurisdiction of the subject-matter of said action. Before a hearing

was had on the demurrer an amendment to the petition was filed, showing, among other things, that said claim had been duly and regularly presented to said board of state examiners, and that there had been held numerous regular sessions of said board since the reception and presentation of said claims to them, and at each and all of said meetings said board of examiners had failed, neglected, and refused, and still fails, neglects, and refuses, to audit or allow said claims; that one C. Bunting, now deceased, was formerly treasurer of the state of Idaho, and was during his lifetime a stockholder in said corporation of C. Bunting & Co., and it is claimed by said board that Bunting was short in his accounts as such treasurer, and that plaintiff is informed and believes, and therefore avers the fact to be, that said alleged deficiency or shortage in the accounts of said treasurer is the cause or reason for the refusal of said board to audit and allow said claims; that the petitioner has repeatedly made application to said board for information in regard to the allowance of said claims, and has been unable to get any information whatever on the subject. After the amendment of said petition an amended alternative writ issued, and the defendant board appeared and demurred to the amended petition, and as grounds therefor reiterates the same grounds as are set forth in the demurrer above referred to. The auditor of the state, J. H. Anderson, was made a party, but, as the proceeding was dismissed as to him, we do not refer to him as a party to this appeal. The amended alternative writ commands said board to proceed and audit and allow said claims, or to show cause why they had not done so. The record shows that no return whatever was made to said amended alternative writ, and that, pursuant to notice duly given to counsel for defendants, the proceeding came regularly on for hearing on the 18th day of August, 1897, E. E. Chalmers, Esq., appearing for the plaintiff and no counsel for defendants. The defendants failed to answer or appear at the hearing. Thereupon judgment and order for a peremptory writ of mandate were made and entered, whereby said board of examiners was commanded, at

its next regular meeting thereafter, to proceed and audit and allow said claims. Thereupon this appeal was taken from said order.

As the defendant board made no return to said writ, and stood on the demurrer, they thereby admitted all of the material allegations of the petition to be true. Henry v. Taylor, 57 Iowa, 72, 10 N. W. 308; Merrill, Mand. § 40. As to return, see Amperse v. City of Kalamazoo, 59 Mich. 83, 26 N. W. 222, 409.

The facts necessary to an intelligent understanding of this case, and as are shown by the petition, are substantially as follows: The Idaho Insane Asylum, located at Blackfoot, is under the management and control of a board of directors, consisting of three persons. See section 750, tit. 5, c. 1, Pol. Code. Section 752 of said chapter prescribed the powers and duties of said board. Subdivision 9 of said last-mentioned section is as follows: "To examine and audit the expenditures for salary of employés and all other expenses incident to the conduct of the asylum, and care and maintenance of its inmates, and if ap proved by them to certify the same to the state auditor." Section 753 of said chapter provides that all itemized bills of purchases, and other expenditures made, when examined by the board of directors, and found cor rect, must be certified by the president of the board, then to be transmitted to the state auditor, to be audited and allowed by him. Section 754 authorizes the board of directors to contract for all supplies required for said asylum. It prescribes the manner of advertising for contracts to furnish such supplies, and provides that such contracts must be awarded to the lowest bidder. Section 6, art. 10, of the constitution of Idaho, provides as follows: "There shall be appointed by the governor three directors of the asylum for the insane, who shall be confirmed by the senate. They shall have the control, .direction and management of the said asylum, under such regulations as the legislature shall provide and hold their office for a period of two years. The directors shall have the appointment of the medical superintendent, who shall appoint assistants with the approval of the directors." Prior to the adoption of the constitution the legislature had enacted the laws prescribing the duties and powers of said board of directors in its management of said asylum, which laws were continued in force after the adop tion of the constitution, so far as their provisions were not in conflict with the constitution.

1

It will thus be seen that a board of directors for said asylum is provided for by the constitution, and is given such powers as shall be prescribed by law. Said board is a constitutional board; that is, it is provided for by the constitution. The state board of examiners is also provided for by Const. § 18, art. 4. Said section provides that the governor, secretary of state, and the attorney general shall constitute a board of examiners, with power to examine

all claims against the state, except salaries or compensation of officers fixed by law, and perform such other duties as may be prescribed by law; and that no claim against the state, except salaries and compensation of officers fixed by law, shall be passed upon by the legislature without first having been acted upon by said board. In aid of said section of the constitution the legislature passed an act entitled "An act relating to the board of examiners." Laws 1891 (1st Sess.) p. 45. Said act prescribes when regular sessions of said board shall be held, and the duties of said board. Sections 2 and 3 are as follows:

"Sec. 2. Regular sessions of the board shall be held on the first and third Tuesdays of every month, and special sessions at any time, if all the members are present.

"Sec. 3. It shall be the duty of the board to examine all claims against the state, except salaries and compensation of officers fixed by law, and except fixed appropriations for principal and interest of the public bonded debt, and except claims against the state already presented to the board and favorably reported by it to the legislature for passage. The board may approve or disapprove any claim or demand against the state, or any item thereof, or may recommend a less amount in payment of the whole, or any item thereof, and a decision of a majority of the members shall stand as the decision of the board."

Said act modifies to some extent the law prescribing the duties of the board of directors of the insane asylum (which law was enacted prior to the adoption of our constitution) in this, to wit: The claims audited and allowed by the insane asylum board must be sent to the state board of examiners for audit and allowance, instead of to the state auditor, which was done in this case. It is contended by the attorney general that said board is given absolute discretion over all claims against the state. They may audit or refuse to audit, allow or disallow, all claims against the state at their good pleasure, and, in case of disallowance, the claimant's only remedy is an application to some future legislature; and, in support of that view, he states the general rule that mandamus will not issue to control the discretionary power of a board. He attempts to surround said board .with a halo of discretion that never was intended. Said board must pass upon said claims. It has no discretion in that matter. It is given a sound, legal, reasonable discretion in the allowance of claims. It is not a discretion that can be exercised in a capricious, arbitrary, oppressive, or wanton manner. The law requires said board to hold two regular sessions each month. Many regular sessions have been held since said claims were presented to said board. The board has not only refused to act, but has refused to give to the petitioner any information in regard to said claims. They have seen fit to rest their case upon a demurrer, and upon the broad ground that the discreon given them is absolute, above and beyond the criticism or correction of any tribunal.

In

**

Amperse v. City of Kalamazoo, 59 Mich. 78, 26 N. W. 222, 409, the court says: "The respondents in this case have seen fit to rest their cause upon the broad ground that their action is above and beyond criticism of any other tribunal. Their answer assumes that they are sole arbiters of the relator's rights. * Whether they have any good reason for their action, for some cause, they refuse to inform us. In such case we can only assume that they acted arbitrarily and without reason." Common courtesy required said board to inform petitioner why they refused to audit and allow said claims; also the responsibility of meeting the matter set forth in the petition frankly, and stating the true reasons for refusing to allow said claim, rested with them. They have seen fit to refuse to do so, and have rested their case upon the broad ground of absolute discretion.

My associates hold that the writ must issue to compel said board to act, but that this court has no jurisdiction to direct how they shall act. I concede the general rule to be that a writ of mandate will not issue to direct a board how to act, but there are well-defined exceptions to the general rule, and this case comes within the exception. The admitted facts in this case clearly show that the refusal to allow said claims was on account of the misapprehension of the law, and in that case it is stated, in section 38 of Merrill.on Mandamus, that the "officer could not be considered to have exercised his discretion in the matter." They misapprehended the law, in this: the board conIcluded that they had the authority to set off these claims against a claim which the state, it is alleged, has against a former treasurer. This the law would not permit them to do. In the case at bar it is alleged in the petition, and admitted by the demurrer, that the reason of the refusal of said board to allow said claims is that C. Bunting, former treasurer of the state, was short in his accounts with the state, and the intention of said board was to offset said claims against said shortage. Said board has no power or authority to make said offset. That fact clearly shows that said board misapprehends the law, and, according to the rule laid down by the authority last cited, the writ should issue. As to set-off, see Danley v. Whiteley, 14 Ark. 687.

To illustrate: Supposing the board has said, by way of return to the writ, that the claims are just and proper, but, "as we have discretion to allow or disallow them, we shall exercise that discretion, and refuse to allow them"; would it be contended for a moment that the writ should not issue to compel them to do what they admit to be their duty, simply because they have discretion? I think not. Thus, in this case, by the demurrer, it is admitted that the claims are just and should be allowed, but that an offset is intended, which under the law the board has no power to make. The board admits that a legal contract was made by the board of directors of the insane asylum for the purchase of supplies for that in

stitution; that the state has accepted, received, and used the supplies purchased under said contract; that said asylum board had audited and allowed said claims. No question is raised as to the fairness and legality of the said contract and the whole transaction. Money has been appropriated by law to pay for such supplies. The law enjoins payment. The absolute discretion invoked in favor of the board is repudiation, pure and simple. It is not sufficient to say that the petitioner has a remedy by resorting to some future legislature. That is not the plain, speedy, and adequate remedy, in the ordinary course of law, referred to in section 4978, Rev. St. It is more a political remedy than a plain, speedy, and adequate remedy, in the ordinary course of law. High, Extr. Rem. §§ 17, 20, 104; People v. Mayor, etc., of New York, 10 Wend. 395. It was not intended that the payment for supplies furnished the insane asylum, under legal contract made by the asylum board, and for the payment of which an appropriation had been made by law, should, by the arbitrary action of said board, be relegated to the uncertain action of future legislatures. Such arbitrary discretion would place the state at great disadvantage in making contracts, and would prevent business men from entering into contracts with the state, unless they knew that the board would allow their claims. The constitution and law confers on said board a sound legal discretion in passing upon claims. Its plain duty, under the law, is to audit and allow all legal claims against the state, not to reject them. The discration given them has been exercised, and, under the exercise of that discretion, they admit the claims are legal and just, but an offset is intended. That being admitted, their duty thereafter is only ministerial. They must allow them. What is the plain duty of said board, after they have admitted that a claim is legal and just? Is it to arbitrarily disallow it? I think not. Discretion, carried to that extent, is characterized by the court of appeals of Colorado, in Board of Com'rs of Grand Co. v. People, 46 Pac. 109, as "another name for the gaunt specter of repudiation." At section 48 of Merrill on Mandamus it is stated that "when, however, in a mandamus proceeding, the respondent admits the existence of the facts, concerning the determination of which alone was any judgment or discrimination authorized on his part, his duty becomes ministerial, and the writ of mandamus will issue to compel its performance." State v. Murphy (Nev.) 6 Pac. 840; Wood v. Strother, 76 Cal. 545, 18 Pac. 766; State v. Board of Com'rs of Lander Co. (Nev.) 35 Pac. 300. Apply that rule to this

claim. That fact is alleged in the petition, admitted by the demurrer, and the attorney general urges as a detense for the board that it has absolute discretion in said matter. That

is the only defense in this case,-"absolute discretion." The honor of the state is at stake. It has made a solemn contract, under and by the terms of which it has taken possession of private property, and put it to a public use, and has made an appropriation with which to pay said claims. Under that state of facts (which are all admitted by the demurrer and a refusal to make any return to said writ), is the board given absolute discretion to refuse to allow said claim? Every principle of honesty and justice would say, "No." Said board and the state are bound by the same rules of common honesty and justice which bind individuals. See Danolds v. State, 89 N. Y. 36. The discretion given must be governed by honesty, not by humor or prejudice. Merrill, Mand. § 62. Under the facts of this case, said board admits the justness and legality of said claims, and there remains only the ministerial duty of their allowance of said claims, which must result from the conclusion reached by them, and a peremptory writ should issue to compel them to do so.

(5 Idaho, 612) OSBORN v. RAVENSCRAFT et al. Dec. 13, 1897.) (Supreme Court of Idaho.

CLAIMS AGAINST COUNTY. Where a county was engaged in litigation, and the necessity for the present payment of a small amount of costs arose, and a member of the board of commissioners for the county advanced the required sum, the allowance of the sum so advanced by the board will not be reversed on appeal.

(Syllabus by the Court.)

Appeal from district court, Blaine county; C. O. Stockslager, Judge.

Appeal by J. W. Ravenscraft and another from the judgment affirming the action of the board of commissioners of Blaine county Afin allowing the claim of I. T. Osborn. firmed.

A. F. Montandon, for appellants. Lyttleton Price, for respondent.

HUSTON, J. This is an appeal from the action of the district court of Blaine county in affirming the action of the board of commissioners of said county in allowing a claim of I. T. Osborn, chairman of said board, for moneys laid out and expended by said Osborn as a member of said board in behalf of said county. It is not claimed nor pretended that the full amount set forth in the bill of the claimant was not paid out and expended by said commissioner for the benefit of said county. It is not pretended that the money was not paid for legitimate and legal charges against the county, being for the payment of costs incurred in suits in which the county was a party, and which were then pending, nor that the claimant

realized, directly or indirectly, any pecuniary benefit from the payments so made by him. A necessity arises, as appears by the record in this case, involving the payment of a small sum of money in behalf of the county, and to protect its important interests. The chairman of the board of commissioners for the county is present, is advised of the necessity, and he advances the money. The patriotic, unselfish, self-constituted guardians of the public weal of the county say, not that the claim was not a legal and legitimate one, but that certain technical requirements of the statute were omitted, an attempt to comply with which would not only have defeated the purpose sought, but would have involved an expense far beyond the amount claimed and allowed. While we would not countenance any deviation from the duty imposed by law upon the board of commissioners or any other officials, still, recognizing the fact that in the mutation of human affairs an occasion may arise when adherence to the strict letter of a law may crucify its intent and spirit, we do not hesitate, as in this case, to inquire into the real facts of the case, and, so inquiring, we find that the respondent acted honestly and patriotically in what he did; that, while the technical requirements of the law were not strictly complied with, the nonobservance thereof wrought no injury to the county; on the contrary, the county was benefited thereby; and we further find that this appeal is frivolous, and actuated by motives which we cannot commend. The judgment of the district court is affirmed, with costs.

SULLIVAN, C. J., and QUARLES, J., con

1. Directors of a Kansas corporation have no authority to change the number or par value of the shares of its capital stock as set forth in its charter.

2. The only provision in respect to any change in the capital stock of a corporation after it is organized is found in paragraph 1171, Gen. St. 1889, which empowers the stockholders to vote an increase of the amount of its authorized capital, and said paragraph requires a formal certificate of such increase to be made by the directors, and to be filed and recorded in the same manner as the charter.

3. Where the directors of a corporation, who had voted to increase the par value of its stock from one dollar each, as the charter provided, to five dollars each, thereafter, and, without any other authority than such vote, issued shares purporting to be of the par value of five dollars each, held, that such shares were void.

4. Where persons who had taken such invalid shares of stock, and afterwards returned the same, and received from the corporation the money they had paid for it, under a parol agree

ment, made at the dates of the transactions, that such shares were to be held as collateral security for such loans, were sued by the receiver of such corporation, after its insolvency, to recover the money so repaid, and it appeared that certain debts which were contracted by the corporation while such stock was outstanding remained unpaid, held, that such parties were not liable, as stockholders of said corporation, to the creditors represented by the receiver, and that it was error to render judgments against them in favor of the receiver for the amounts returned to them as aforesaid. (Syllabus by the Court.)

Error from district court, Franklin county; A. W. Benson, Judge.

Action by F. G. Hills, receiver, etc., against John Tschumi and others. From a judgment for plaintiff, defendants bring erReversed.

ror.

C. A. Smart, for plaintiffs in error. John W. Deford, for defendant in error.

MILTON, J. F. G. Hills, the defendant in error, brought this action against the plaintiff in error in the district court of Franklin county to recover various sums which he alleged said parties had illegally drawn from the capital stock of the Wellsville Farmers' & Laborers' Exchange, an insolvent corporation, for which said Hills had been appointed receiver by said court. The answer of defendants set up that they had loaned money to the corporation, and received shares of stock from it as evidence of the indebtedness thus created, and that defendants and the officers of the corporation had so intended and understood in respect to these transactions. The answer also contained general denials. The trial court made extended findings of fact, the principal features of which are as follows: (1) The exchange was incorporated on May 12, 1890, to conduct a general merchandise and exchange business at Wellsville, in Franklin county, its authorized capital stock being $50,000, divided into 50,000 shares of $1 each. It opened a general merchandise business at Wellsville about the time of its incorporation, and conducted such business until the 29th day of October, 1894, when. having become insolvent, a receiver for its property and effects was duly appointed. (2) On or before the 28th day of February, 1891, by a vote of the directors, the shares of capital stock were increased to $5 each, and thereafter all stock subscribed for and issued was in shares stated to be of that value. The charter, however, was not amended. (3) The by-laws permitted stockholders to withdraw the money paid for their stock upon surrender of the certificates, after the giving of the prescribed notice in writing of the intention to withdraw. The defendant E. F. Turner, a single woman, engaged in the millinery and dressmaking business at Wellsville, learned from her father that the corporation wanted to use her money, and would pay her 10 per cent. interest. She went to the secretary of

the concern, and was informed by him that the transaction would be safe; that she could have 10 per cent. interest, and could draw her money out on 30 days' notice; and thereupon she gave him $110, and received a certificate of stock for 22 shares, signing a receipt therefor on the "stub." Both Miss Turner and the secretary regarded the transaction as a loan. On September 9, 1892, having given 30 days' notice, she withdrew $110 with 10 per cent. interest. The secretary entered the transaction on the books of the corporation as stock regularly issued. During the time the corporation had Miss Turner's money, it contracted debts amounting to $2,700, and it issued 66 shares of stock to subscribers other than defendants below. The receiver has paid only 40 per cent. of the indebtedness from the proceeds of merchandise sold and from collections on notes and accounts. Miss Turner did not read the certificate, although she could have done SO. She took no part in any corporate meetings. When her stock was surrendered, it was marked "Canceled," and she always considered the transaction as an investment of her money at interest. (4) The facts regarding the issue of stock to Tschumi, Hey, and Anderegg are substantially the same as those concerning Miss Turner. These three men are foreigners, and can neither read nor write the English language, except to write their names. They can understand and intelligently take part in an ordinary conversation in English. All of them can read and write the German language, and the secretary of the corporation was a German. They did not ask to have their certificates read to them. Tschumi and Hey were stockholders before the transactions in question occurred, and attended the corporation meetings, and voted therein. They knew the certificates in question were of the same form and appearance as those they already held as certificates of stock. The corporation books showed that all of the stock issued to defendants was regularly issued and outstanding, the same as other stock, until the entry of cancellation of the various certificates. The secretary regarded the transactions as loans, and the stock so issued as being collateral security. If the money SO withdrawn by defendants and others similarly situated should be refunded, and all the remaining assets collected, the amount would still be insufficient to pay the debts of the corporation. The court made certain conclusions of law in which he held that the evidence of parol conditions contemporaneous with the subscriptions and inconsistent with the terms thereof was incompetent, and that, as between the defendants and those who gave credit to the corporation on the faith of these subscriptions, the loss ought to fall on the defendants. Judgment was rendered against each of the defendants as follows: Turner, $110; Tschumi, $400; Anderegg, $180; and Hey, $240.

The findings of the court show that the directors of the exchange, in February, 1891, increased the par value of the shares of stock from one dollar each, as stated in the charter, to five dollars, and that the charter was not amended. This was done prior to the transactions through which plaintiffs in error were held by the trial court to have become liable to the creditors of the corporation. Counsel for plaintiffs in error argues that, if they are liable at all, such liability cannot exceed the par value of the shares of stock actually issued to each of them as such value is fixed in the charter. Paragraph 1161, Gen. St. 1889, provides what must be set forth in the charter of a corporation, the sixth item being: "The amount of its capital stock, if any, and the number of its shares into which it is divided." Paragraph 1167, relating to the powers of the corporation, provides, among other matters: "Every corporation shall have power: *** Sixth: To make by-laws not inconsistent with existing laws for the management of its property, the regulation of its affairs, and for the transfer of its stock." Paragraph 1171 authorizes a corporation to increase its capital stock in one of two ways, "by a vote of the stockholders in conformity with the by-laws thereof," and requires that a certificate of such increase shall be filed and recorded in the same manner as the charter. Paragraph 1176 is as follows: "The directors or trustees may adopt by-laws for the government of the corporation; but such by-laws may be altered, changed, or amended by a vote of the stockholders, at an election to be ordered for that purpose, by the directors or trustees, on the written application of a majority of the stockholders or members." It is evident that the last paragraph authorizes the first directors of a newly-chartered corporation to complete its organization by the adoption of bylaws; and it is equally evident that, after such by-laws are once adopted by the direc tors, their powers in that regard are ended, and those of the stockholders become substituted therefor. While specific authority to increase the capital stock of a corporation is granted by paragraph 1171 to the stockholders, there is no provision in the law which modifies the requirement of paragraph 1161 that the amount of capital stock, and the number of shares into which it is divided, shall be set forth in the charter. In respect to any par ticular corporation, this provision is binding upon its members, directors, and creditors. The presumption that creditors have dealt with the corporation on the faith that its subscribed capital is held by bona fide stockholders, and that such capital stock is a trust fund to which creditors may resort, can only be indulged in with respect to such capital stock as the charter of the corporation authorizes to be issued. If the stock be wholly different from that described in the charter the rights of creditors cannot operate so to transform it that it will appear legal and valid when viewed by a court. Its invalidity is in