Finletter v. Acetylene Light, Heat & Power Co.

• Decision Date: 07 May 1906
• Docket Number: 147
• Parties: Finletter, Appellant, v. Acetylene Light, Heat and Power Company
• Court: Pennsylvania Supreme Court

64 A. 429

215 Pa. 86

Finletter, Appellant, v. Acetylene Light, Heat and Power Company

No. 147

Supreme Court of Pennsylvania

May 7, 1906

Argued January 10, 1906

Appeal, No. 147, Jan. T., 1905, by plaintiff, from decree of C.P. No. 1, Phila. Co., Sept. T., 1897, No. 733, dismissing bill in equity as to certain defendants in case of Robert W Finletter, receiver of the Acetylene Light, Heat and Power Company v. The Acetylene Light, Heat and Power Company et al. Affirmed.

Bill in equity to enforce alleged liability on stock assessments. Before BEITLER, J.

The opinion of the Supreme Court states the case.

Error assigned was decree dismissing the bill as to the appellees.

All of the assignments of error are dismissed, and the decree below is affirmed at the cost of the appellant.

Preston K. Erdman and Edwin O. Michener, for appellant. -- Where stock is issued for property as full paid stock, and there is actual fraud in the transaction, it will be deemed as stock subject to assessment at the suit of creditors: Camden v Stuart, 144 U.S. 104 (12 S.Ct. Repr. 585); Lloyd v. Preston, 146 U.S. 630 (13 S.Ct. Repr. 131); Richardson v. Green, 133 U.S. 30 (10 S.Ct. Repr. 280); Coit v. North Carolina Gold Amalgamating Co., 119 U.S. 343 (7 S.Ct. Repr. 231); Taylor v. Walker, 17 Am. & Eng. Corp. Cases (N.S.), 321.

The following cases are submitted as authority that the subscriber for stock subject to call is not relieved from his liability to creditors by a transfer of his shares, even if the transfer is approved by the company: Messersmith v. Bank, 96 Pa. 440; Lane's Appeal, 105 Pa. 49; Upton v. Tribilcock, 91 U.S. 45.

Frank P. Prichard and H. B. Gill, with them Andrew Wright Crawford, Andrew Zane, Frederick R. Reeves, and James Fitzpatrick for appellee, cited: Willock v. Dilworth, 204 Pa. 492; American Tube & Iron Co. v. Hays, 165 Pa. 489; Warren-Ehret Co. v. Franklinville Ice Mfg. Co., 198 Pa. 412.

Before MITCHELL, C.J., FELL, BROWN, MESTREZAT, POTTER, ELKIN and STEWART, JJ.

OPINION

MR. JUSTICE BROWN:

The Acetylene Light, Heat and Power Company was incorporated for the purpose of producing acetylene gas and supplying it to consumers Julius J. Suckert and Edward M. Dickerson held letters patent for their method of producing this gas at a price very much less per cubic foot than the cost of producing coal gas. Joseph A. Vincent secured from them an option to purchase a license under their patent for certain territory embracing Philadelphia and its suburbs. He paid $10,000 for this option and agreed to pay $90,000 additional for the license within a fixed time and to give a certain proportion of the stock of a company to be organized for the purpose of producing the gas, to which company he was to assign the license. He induced Charles C. Adams and Edward C. Napheys, two of the appellees, and others to organize the company of which the appellant is the receiver. Its capital stock was $1,000,000, consisting of 20,000 shares of the par value of $50.00 each. The original subscribers to the capital stock took 2,000 shares and paid for them fully in cash, their subscriptions amounting to $100,000, or ten per centum of the authorized capital. In the application for the charter it was stated that, of the remaining 18,000 shares, 13,000, of the par value of $650,000, were to be issued to Joseph A Vincent in part payment for the assignment by him to the company of the exclusive license issued to him by Suckert and Dickerson. Subsequently the capital stock of the company was increased to $2,000,000, and in the application for the increase, filed with the secretary of the commonwealth, it appeared that three-fourths of the additional 20,000 shares were to be given in payment of a license for additional territory. Of the original 13,000 shares issued to Vincent, he gave Dickerson and Suckert 5,000, and of the 15,000 issued to him under the increased capital he gave them 5,000 more. Of the 40,000 shares which the company was authorized to issue, Suckert and Dickerson, the patentees, received 10,000, Vincent 18,000 and the company had 12,000 shares in its treasury, 2,000 of which were issued to the original subscribers. Vincent divided 10,000 shares between himself, Napheys, Adams and one Devine, having borrowed from the latter a part of the $10,000 which he paid to Dickerson and Suckert for the option to purchase the licenses, and turned over through Napheys 8,000 shares to the original subscribers under an agreement which he made with them that they should receive four additional shares as a bonus for each share of stock for which they subscribed and paid.

The company became insolvent, and, upon the appointment of the appellant as its receiver, he filed this bill, in which he prays for a decree that the 8,000 shares of stock given by Vincent to Napheys, and transferred by the latter to the original subscribers, be decreed to be not full paid stock; that it was issued in fraud of the...