Gilkie & Anson Co. v. Dawson Town & Gas Co.

• Decision Date: 08 November 1895
• Citation: 64 N.W. 978,46 Neb. 333
• Parties: GILKIE & ANSON CO. ET AL. v. DAWSON TOWN & GAS CO. ET AL.
• Court: Nebraska Supreme Court

46 Neb. 333

64 N.W. 978

GILKIE & ANSON CO. ET AL.

v.DAWSON TOWN & GAS CO. ET AL.¹

Supreme Court of Nebraska.

Nov. 8, 1895.

Syllabus by the Court.

1. In all cases of claims against corporations and joint-stock associations, the exact amount justly due shall be first ascertained, and, after the corporate property shall have been exhausted, the individual subscribers thereof shall be individually liable to the extent of their unpaid subscriptions, and the liability for the unpaid subscriptions shall follow the stock. Const. art. 11, § 4, referring to miscellaneous corporations.

2. The capital, including unpaid subscriptions for stock, of a corporation is a trust fund for the payment of its creditors.

3. Subscriptions for stock of a corporation may be paid in money, or in property such as is within the power of a corporation to acquire and hold, or in labor for the corporation in the proper furtherance of its purposes and business.

4. Where payment of subscriptions for stock is made in property or labor, it must be of such value as to be the money's worth; if property, of the value of the amount of the par value of the stock, and if labor, it must be reasonably of the face value of the stock.

5. When property is conveyed to a corporation in payment of subscriptions for stock, it may be at a valuation agreed upon between the parties to the transaction, provided the valuation is one made in good faith, or in the fair exercise of judgment and discretion honestly directed.

6. Where the property conveyed in payment for stock is knowingly and advisedly overvalued, it is but a formal and illusory compliance with the requirements of the law and fair dealing in this regard, and is not sufficient, and the transaction may be impeached by a creditor of the corporation as a fraud, and the liability of the subscriber for stock, to the amount of the difference between the fair and true value of the property at the time it was conveyed and the fictitious value at which it was received, be enforced against such subscriber as an unpaid portion of his subscription to the stock, and appropriated, in a proper action, to the satisfaction of the debts of the corporation.

7. The books of a corporation are its private books, as to third persons, and such persons are not chargeable with notice of what is contained therein, nor with the duty of examining them, for the purpose of ascertaining the condition of the capital, in respect to whether fully paid in or not, and at what valuation, before granting credit to the corporation, to the extent that a failure to do so will bar the right in a proper action to impeach the transfer of stock to a party in consideration of the conveyance to the corporation of property, which may be shown in the books, and prove its fraudulent character.

8. The amended petition held to be sufficient in its statements of the fraudulent character of the transaction therein sought to be attacked.

Appeal from district court, Douglas county; Hopewell, Judge.

Action by the Gilkie & Anson Company and others against the Dawson Town & Gas Company, Norman A. Kuhn, and others. From a judgment for plaintiffs, defendants Kuhn and others appeal. Affirmed.

Ragan, C., dissenting.

G. W. Ambrose, for appellants.

H. W. Pennock, C. A. Fowler, and Cavanagh, Thomas & McGilton, for appellees.

HARRISON, J.

December 26, 1891, this action was instituted by the creditors of the Dawson Town & Gas Company, a corporation formed under the laws of this state, against the corporation and the appellants, stockholders therein, to recover the amount of judgments in favor of such creditors. The original party plaintiff was the Gilkie & Anson Company, the Crane Company becoming a party plaintiff by intervention. In the original petition the organization and existence as a corporation of the defendant and also the plaintiff company was averred, the object and purpose for which the defendant company was organized, its place of business, and the sale to it by plaintiff of a quantity of lumber, and that judgment was obtained for the debt thus created, execution issued, and returned “No property found.” The insolvency of the defendant company was also alleged, and it was further stated “that the authorized capital stock of said defendant corporation is $300,000, that the said defendant refuses to allow the plaintiff to examine its books, and the plaintiff cannot learn, and has no means of finding out, the exact amount of stock actually issued, or the amount of the unpaid portion of the subscriptions; but plaintiff alleges, upon information and belief, that defendants Norman A. Kuhn, Charles D. Woodworth, Arthur H. Cooley, and J. T. Hoile each own a large amount of said stock, the full par value of which has never been paid into said corporation, and that the amount remaining unpaid of the stock so owned and held by each of the said defendants is sufficient to pay the claim of the plaintiff in full. Plaintiff alleges further that the said corporation defendant was created in the month of September, 1889, and alleges, upon information and belief, that since its creation it has failed and neglected to give any annual notice, signed by its president and a majority of its board of directors, of the amount of all its existing debts in any newspaper printed in the county, or any of the counties, in which its business had been transacted, as is provided and required by the statutes of the state of Nebraska.” These allegations, except in relation to the creation of the corporation, were denied in answer filed for the defendant company and the stockholders, and it was further averred that full payment of the par value of the stock owned by the stockholders had been made. The Crane Company was allowed to intervene and become a party plaintiff. Its petition stated no new facts, but referred to and made a part of it the material allegations of plaintiff's amended petition. The plaintiff company was, on application, allowed to file an amended petition, in which it included other and further parties as stockholders and defendants, and, after pleading, substantially as in the original petition, the creation of the corporation, its purpose and powers, the indebtedness to plaintiff, the judgment, etc., the insolvency of the defendant company, and the failure to publish the annual notice required by law, further alleged: “That the authorized capital stock of said defendant corporation is $300,000; that said stock was issued to each of the defendants Cooley and Hoile to the amount and of the par value of $120,000, and that as payment therefor defendants fraudulently turned into said corporation certain real estate, at a false and fictitious valuation of $205,000, and nothing else whatever, and that said real estate was worth no more than $10,000, of all of which defendants Cooley, Kuhn, and Woodworth at the time had knowledge, and that there now remains unpaid on said stock the sum of $230,000; that defendant Cooley is now the owner of said stock issued to him, of the par value of $53,500, and that there remains unpaid thereon, and said Cooley is individually liable to the creditors of said corporation by reason thereof in the sum of, $51,270.80; that defendant Charles D. Woodworth is now the owner and holder of said stock issued to said Cooley, by assignment from him, of the par value of $35,000, and that there remains unpaid thereon, and said Woodworth is individually liable to the creditors of said corporation by reason thereof in the sum of, $33,451.66; that defendant Thomas H. Platter is now the holder and owner of said stock issued to said Cooley, by assignment from him, of the par value of $4,000, and that there remains unpaid thereon, and said Platter is individually liable to the creditors of said corporation by reason thereof in the sum of, $3,833.33; that defendant Norman A. Kuhn is now the owner and holder of said stock issued to defendant Hoile, by assignment from him, of the par value of $35,000, and that there remains unpaid thereon, and said Kuhn is individually liable to the creditors of said corporation by reason thereof in the sum of, $33,541.66; that defendant Alexander G. Charlton is now the owner and holder of said stock issued to said Hoile, by assignment from him, of the par value of $12,500, and that there is unpaid thereon, and said defendant Charlton is individually liable to the creditors of said corporation by reason thereof in the sum of, $11,979.16; that defendant J. R. Pearson is now the owner of said stock issued to said Hoile, by assignment from him, of the par value of $5,000, and that there remains unpaid thereon, and said Pearson is individually liable to the creditors of said corporation by reason thereof in the sum of, $4,785.”

The answer to the amended petition and petition of intervener put in issue all the material facts therein stated, except that of the formation of the corporation, and further pleaded as follows: “Defendants aver as true that all stock as owned by them, or either of them, was in good faith taken and paid for at the time, and they, nor either of them, are now, or at any time were, indebted to said corporation for any amount of said stock or shares thereof. The defendants, further answering, show to the court that said amended petition or the petition of intervention of the Crane Company does not either state facts sufficient to constitute a cause of action against either of said defendants.” The plaintiff filed a reply, which was a denial general as to some, and special as to others, of the allegations of the answer.

In the portion of the amended petition which we have copied herein, the following words appear, “of all of which defendants Cooley, Kuhn, and Woodworth at the time had knowledge,” which were not in the petition at the time of trial or introduction of testimony. There was a demurrer ore tenus, on the ground that the petition did not state a cause of action, and plaintiff and interve...