Joy v. Godchaux

Citation35 F.2d 649
Decision Date07 October 1929
Docket NumberNo. 8466.,8466.
PartiesJOY v. GODCHAUX.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

Charles M. Blackmar and Meservey, Michaels, Blackmar, Newkirk & Eager, all of Kansas City, Mo., for appellant.

Fred J. Wolfson, of Kansas City, Mo. (Swearingen, Wolfson & Lebrecht, of Kansas City, Mo., on the brief), for appellee.

Before KENYON and VAN VALKENBURGH, Circuit Judges, and MARTINEAU, District Judge.

KENYON, Circuit Judge.

Appellant is the receiver of the Tel-Tex Company, a Texas corporation. The controversy here involves two notes, one for $4,000 and one for $6,000, given by appellee to the Tel-Tex Company in payment for shares of stock in said company. The notes were made in Texas and payable there. Appellee's contention is that the notes are void under the Constitution and laws of Texas, and further that they were given without consideration. A written stipulation was entered of record in the trial court waiving a jury, and the case was tried to the court, which held that the Tel-Tex Company could not have recovered on the notes, and that the receiver had no greater claim against appellee than the company would have had. The facts are these:

Appellee was the president, director, and chief stockholder of the Tel-Tex Company. It originally had a paid-up capital of $125,000. On July 31, 1919, the stockholders, acting upon a report made to them by appellee, voted to increase the capital stock to $500,000. At this meeting there were present 787 shares of stock out of a total of 1,250, of which appellee held 537. The minutes thereof were signed by appellee as president of the company, and attested by his brother as secretary. The laws of Texas required the filing with the secretary of state of a certificate showing that the full amount of any increase of stock of a corporation had been in good faith subscribed, and that more than 50 per cent. thereof had been paid up in cash. Such certificate was signed and sworn to by members of the board of directors of the Tel-Tex Company, including appellee, and duly filed with the proper officer. The receiver also was one of the parties signing the certificate. It recited that the increase of the capital stock was $375,000, and that 50 per cent. of the sum, or $187,500 had been paid up in cash. The amount of cash paid was in fact $75,000, and a promissory note was drawn for the balance, signed by the directors of the bank. Appellee and the other directors contributed none of the $75,000 paid. The statement filed was false, and both parties to this controversy so admit. The note was reduced to $54,000 by crediting thereon at various times the proceeds of sales of capital stock. The directors prorated among themselves this balance, and gave their notes therefor, which notes include the notes in controversy here. Two directors, Raley and Morrow, were released of liability, their share being absorbed by others, of whom appellee was one. At the time the notes were signed, stock certificates were issued to the respective parties, and were deposited as collateral security therefor. The stock certificates used as security for the notes were signed by appellee as president. They were indorsed by the persons to whom the stock was issued and the notes and certificates were placed among the assets of the corporation. Whether or not these notes were entered upon the books of the company is a matter of dispute under the record. When the appellant was appointed receiver of the Tel-Tex Company by the district court of Dallas county, Tex., these notes came into his possession as assets of the company, and he brought this suit thereon. The notes signed by the other directors, as far as collectible, have been paid. While the court decided in favor of appellee, upon plaintiff's request it made the following findings of fact:

"(1) The Court finds that there are insufficient assets in the hands of M. A. Joy, as Receiver for the Tel-Tex Company to pay the creditors of said company and unless the notes sued on in this case are paid that the creditors of the Tel-Tex Company will not receive payment of their claims in full.

"(2) The Court finds that each of the notes sued on were signed by the defendant, Herbert Godchaux.

"(3) The Court finds that certificate number 429, for sixty shares of the capital stock of Tel-Tex Company of the par value of one hundred dollars each, was issued to the defendant, Herbert Godchaux, and deposited with the Tel-Tex Company as collateral security to the note of Herbert Godchaux, dated February 3rd, 1921 for $6,000.

"(4) The Court finds that certificate number 433 for forty shares of the capital stock of Tel-Tex Company, of the par value of one hundred dollars each was issued and delivered to O. A. Palmer, L. Godchaux and Herbert Godchaux and deposited with the Tel-Tex Company as collateral security for the note, dated February 3rd, 1921 for four thousand dollars signed by the aforesaid persons.

"(5) The Court finds that none of the notes sued on in plaintiff's petition have been paid."

Section 6, art. 12, of the Constitution of the State of Texas, provides: "No corporation shall issue stock or bonds except for money paid, labor done or property actually received, and all fictitious increase of stock or indebtedness shall be void."

Article 1308, c. 2, tit. 32, Revised Statutes of Texas 1925, in part is as follows: "Before the charter of a private corporation created for profit can be filed by the Secretary of State, the full amount of its authorized capital stock must be in good faith subscribed by its stockholders and fifty per cent. thereof paid in cash, or its equivalent in other property or labor done, the product of which shall be worth to the company the actual value at which it was taken or at which the property was received."

Article 1330, c. 3, tit. 32, Revised Statutes of Texas 1925, is as follows: "The board of directors, trustees or managers of a corporation may increase its authorized capital when empowered to do so by a two-thirds vote of all its stock, by complying with the provisions of Article 1348. Upon such increase of stock being made in accordance with such provisions and certified to the Secretary of State by the directors, and, if the Secretary of State is satisfied that the increase has been made in accordance with law and that the requirements of law have been complied with as to the subscription and payment of stock and in other respects, as on an original application for charter, he shall file such certificate of increase; and thereupon the same shall become a part of the capital stock of such corporation. Such certificate shall be filed and recorded in the same manner as the charter. Id; Acts 1893, p. 123; G. L. Vol. 10, p. 553."

Article 1353, c. 3, tit. 32, Revised Statutes Texas 1925, is as follows: "No corporation shall issue any stock whatever, except for money paid, labor done which is reasonably worth at least the sum at which it was taken by the corporation, or property actually received reasonably worth at least the sum at which it was taken by the company. Any corporation which violates any provision of this article shall, on proof thereof in any court of competent jurisdiction, forfeit its charter, permit or license, as the case may be, and all rights and franchises which it holds under, from, or by virtue of the laws of this state. Acts 1907, p. 309."

It is the contention of counsel for appellee that the whole transaction as to the issuance of the additional stock and the taking of the notes therefor was a subterfuge to circumvent provisions of the Constitution and laws of Texas, hereinbefore set out; that it was carried out by the directors of the company, and that none of the officers or directors ever intended to pay these notes; that they were to be credited down until completely wiped out by receipts of money from the sale of stock; that there never was any understanding that the notes should be paid except in that way; that appellee did not receive the stock certificates, but that the directors simply signed the same and placed them in a portfolio pending their sale to the public; that, even if they had received the stock certificates, the company had no right to issue the same, and no interest in the corporation passed with them; that to permit recovery would work a hardship upon one of the parties at fault in favor of the other party at fault.

Undoubtedly the transaction was contrary to the laws of Texas. If the controversy was between the corporation and appellee, it is probable a court would drop the matter, but the affairs of the corporation are in the hands of a receiver who represents, not only the stockholders, but the creditors, and the rights of creditors have now intervened and have an important bearing on the case.

The trial court found as a fact that there were insufficient assets in the hands of the receiver to pay the creditors of the company, and that, unless these notes are paid, the creditors will not receive payment of their claims in full.

Estoppel was not pleaded in reply to the answer, yet in the presentation of the case to the trial court counsel for the receiver stated, in substance, that it was the position of plaintiff in the case that a director of the company executing such notes as these was estopped to deny their validity. That question therefore arose early in the case, and was accentuated by the following request of plaintiff for a conclusion of law: "The Court declares the law to be that inasmuch as the defendant, Herbert Godchaux, who was the president, director and a principal officer of the Tel-Tex Company, participated in the stockholders' meeting at which the increase of the capital stock of the Tel-Tex Company was authorized and subsequently signed and swore to a statement filed with the State Department of the State of Texas, showing said increase of capital stock was paid up in cash, that the said defendant is estopped from asserting a plea of...

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  • Bell v. Aubel
    • United States
    • Pennsylvania Superior Court
    • February 26, 1943
    ...of stock. The Constitution of Texas, article 12, § 6, [8] is for the purposes of this case, identical with our Constitution. In Joy v. Godchaux, 35 F.2d 649, certiorari denied U.S. 723, 50 S.Ct. 239, 74 L.Ed. 1141, the Circuit Court of Appeals of the Eighth Circuit reviewed extensively the ......
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    ...holders of notes, they occupy a status brought about by reliance upon . . . the corporation conforming to the law." Joy v. Godchaux, 35 F.2d 649, 656 (8th Cir. 1929); see also F.D.I.C. v. O'Melveny & Myers, 61 F.3d 17, 19 (9th Cir. 1995) ("[A] party may itself be denied a right or defense o......
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