Boulton Carbon Co. v. Mills

• Decision Date: 14 October 1889
• Parties: BOULTON CARBON CO. v. MILLS.
• Court: Iowa Supreme Court

78 Iowa 460

43 N.W. 290

BOULTON CARBON CO.

v.MILLS.

Supreme Court of Iowa.

Oct. 14, 1889.

Appeal from district court, Polk county; W. F. CONRAD, Judge.

On the 24th day of September, 1885, the plaintiff recovered a judgment against a corporation known as the “Pilcher Capital City Electric Light Company,” for $361. Execution was issued upon said judgment, and it was returned unsatisfied, because the corporation had no property upon which to make a levy. This action was brought to recover of the defendant, F. M. Mills, the amount of the judgment, interest, and costs; and the right of action is based upon the averment that said defendant was one of the promoters, officers, and stockholders of said corporation, and the owner of 25 shares of $100 each of the capital stock of said company, for which he has never paid, and that he is now indebted to said corporation on account of said stock in the sum of $2,500. The defendant denied the alleged indebtedness. There was a trial to the court without a jury, and a judgment was rendered for the plaintiff. Defendant appeals.Finkbine & McClelland, for appellant.

C. C. &. C. L. Nourse, for appellee.

ROTHROCK, J.

The corporation known as the “Pilcher Capital City Electric Light Company” was organized in September, 1883. The articles of incorporation, among other things, contained the following: “The capital stock shall be one hundred thousand dollars, divided into shares of one hundred dollars each, which may be issued as full payment for patent-rights, licenses, privileges, lands, machinery, and any and all valuable things that may be necessary for the promotion and development of the business of the corporation; and when said stock is issued it shall be fully paid up and non-assessable. All purchases of the above-mentioned items shall be made under the direction of the board of directors. The certificates of stock shall be signed by the president and secretary. The private property of the stockholders of this corporation shall not in any manner be liable for any debts or liabilities incurred by it, nor for any indebtedness or liability resulting therefrom.” The defendant was one of the original incorporators, and was elected and served as president of the company. At a meeting of the directors of the company, held three days after the articles of incorporation were filed for record, the following resolution was adopted: “That for and in the consideration of a bill of sale of the electric light machinery now in Tyrrell's Mill, wire lamps, etc., also the business patronage from October 1, 1883, of said machinery, including the good-will, rights, and city privileges, etc., belonging now and all the electric light grants and privileges for Des Moines, Iowa, only, that may hereafter belong to C. T. Bowen, R. H. Pilcher, W. R. Vaughn, F. M. Mills, P. V. Carey, W. D. Lucas, B. F. Allen, J. W. Rowen, C. W. Reed, J. C. Painter, P. H. Buston, George Harney, George Conradi, D. A. Tyrrell, and Alex. Lindsey. Said bill of sale and transfer of the above property is to be to the Pilcher Capital City Electric Light Company of Des Moines, Iowa; and the secretary of said company is hereby ordered to pay the above gentlemen, as their interests may appear in said company, the sum of one hundred thousand dollars for the same, and this resolution shall be his receipt for so doing. Bill of sale accepted, and resolution adopted, on motion of Director Painter.” The property named in the above resolution was owned by the incorporators, Bowen, Pilcher, and Vaughn, before and at the time of the incorporation. Fifty thousand dollars of the stock was issued and delivered to the incorporators, the greater part of which was in favor of Bowen, Pilcher, and Vaughn. It is probably true, as claimed by appellant, that all of the $50,000 of stock was issued in the first instance to the three parties above named. But the defendant subscribed for 15 shares of stock, and he received his certificates therefor from the company by direction of Bowen, Pilcher, and Vaughn. The other remaining $50,000 of stock was issued to a trustee for all the stockholders. The company did not receive any money, for any of the stock issued, excepting possibly for three shares. Practically all its resources consisted of the electric light plant transferred to it by Bowen, Pilcher, and Vaughn. The district court found as a fact that the property was taken by the corporation at a gross overvaluation; that said property was worth less than one-third of the par value of the stock. This finding is fully supported by the evidence. The fact is made plain by the subsequent history of the corporation. The defendant as president, and others as directors, undertook to carry on the enterprise. It did not pay running expenses, because indebted. The defendant indorsed for it, brought an action against it, had a receiver appointed, and the property sold, the proceeds of the sale being some $700. It is true that the property had very materially depreciated in value before it was sold. But there is no claim now made that it was ever at any time worth the sum of $50,000. Indeed, the defendant concedes that he paid but $500 for the $1,500 of stock issued to him, and he testified as a witness upon the trial that all of the stockholders who subscribed when he did, paid 33 per cent. of the par value for the stock. It must be conceded that all of the original stockholders knew that this property was sold to the corporation at a gross overvaluation, or, rather, that it was taken at more than three times its value. This was manifest to all of them, because it was part of the...