Gillin v. Sawyer

• Decision Date: 22 July 1899
• Parties: GILLIN et al. v. SAWYER.
• Court: Maine Supreme Court

44 A. 677

93 Me. 151

GILLIN et al.

v. SAWYER.

Supreme Judicial Court of Maine.

July 22, 1899.

(Official.)

Action by Patrick H. Gillin and another, assignees in insolvency of the Bangor Pulp & Paper Company, against Charles H. Sawyer. Verdict for plaintiffs, and defendant moves for a new trial. Granted.

This was an action on the case, brought by the assignees in insolvency of the Bangor Pulp & Paper Company to recover the value of 50 shares of stock of the insolvent company, which they allege the defendant either agreed to take or did take soon after the organization of the corporation, and for which he has never paid.

The Bangor Pulp & Paper Company was organized under the laws of the state of Maine, January 14, 1892, with a capital stock of $150,000, the par value of each share being $100; which capital stock was afterwards increased to $300,000. October 1st following its organization the company leased the plant of the Orono Pulp & Paper Company, located at Orono, which it operated until April, 1896. June 4, 1896, upon a petition filed by its creditors, the company was declared insolvent, and on the 25th day of June the plaintiffs were duly appointed assignees of the insolvent corporation.

The circumstances under which the stock in question was issued appear as follows: December 7, 1891, the Orono Pulp & Paper Company entered into an agreement with H. S. Rice and B. P. Hosford, in which they agreed, upon completion of a paper mill to be thereafter completed and ready for operation, to execute a lease of all its property and rights, including a pulp mill then in successful operation at Orono, to said Rice and Hosford, or to a corporation to be formed by them, for a term of 25 years at a rental thereon stipulated, and on January 14, 1892. the Bangor Pulp & Paper Company was incorporated.

March 1, 1892, Robert W. Sawyer was elected treasurer, and on the 1st of August, 1892. Messrs. Hosford and Rice assigned to the Bangor Pulp & Paper Company their contract with the Orono Pulp & Paper Company for a lease of their plant, etc., and on the same day the directors of the Bangor Pulp & Paper Company voted that the assignment of the said contract be accepted, subject to all the obligations therein contained, and that the clerk be directed to notify the Orono Pulp & Paper Company of said assignment, and that "the lease referred to in said contract is to be issued to this corporation."

At the same time, the Bangor Pulp & Paper Company, the plaintiff corporation, voted: "That whereas, H. S. Rice et als. [others being Hosford] have this day assigned to this company the contract above referred to, this company issue to H. S. Rice et als. 600 shares of the capital stock in payment therefor; said stock to be Issued as follows: 50 shares to H. S. Rice or order, and 550 shares to B. F. Hosford or order."

No stock was issued to Hosford, who, without the knowledge of the defendant, as he claimed, directed R. W. Sawyer, in writing, as follows: "Of the 550 shares of stock voted to-day to be issued to my order, please make out as follows: 50 shares, Charles H. Sawyer." The paper also contained directions how the remaining shares should be made out. The shares were made out in accordance with the memorandum, and a certificate was made, unbeknown to the defendant, as he claimed.

The defendant testified that this certificate was never delivered to him, was never accepted by him, and that he never knew that such certificate had been made out until the following spring, in April, 1803. It remained undetached from the stub in the stock book as late as September 15, 1893, a period of nearly 14 months.

The defendant also testified that he first learned of the existence of the certificate in April, 1893, and that he told the treasurer, R. W. Sawyer, that he would not take it; and on the 29th day of May following he notified Mr. Whitman, the new treasurer, that he would not accept the stock; and he also notified Hosford, July 14th following, that he would not take it. The list of stockholders of the company, made and returned by its treasurer December 7, 1892, to the secretary of state, as required by law, does not contain the name of the defendant as a stockholder.

The plaintiffs introduced evidence showing that the defendant was present at a meeting of the board of directors of the Bangor Pulp & Paper Company held In Boston, April 21,

1892, at which meeting he was unanimously elected a director; and was present at a meeting August 1, 1892, when it was voted to issue to H. S. Rice and others 600 shares of the capital stock of the company; also to issue 50 shares of this 600 to H. S. Rice, or order, and 550 shares to B. F. Hosford, or order. The record of the company shows that the defendant was present, and voted for the issuing of the stock. The plaintiffs further proved by the testimony of one Corbett, of Boston, that he purchased of the defendant the 50 shares in question for $1,500, in July, 1893. The defendant, on the other hand, offered evidence to prove that the treasurer, R. W. Sawyer, who resigned May 9, 1893, had a claim against the company for $2,000 for money lent; that the defendant was in Boston in July, 1893, in negotiation with Hosford, trying to get his brother's money. Hosford said there was a certificate of 50 shares of stock standing in his name, and asked him why he did not take it. The defendant told him, as he told Whitman, that he did not consider it belonged to him; that he would not have it, and would not have anything to do with it. Hosford said it was of value,— was worth to the company $2,500,—and defendant told him he had better sell it, and send the money down to Bangor, and pay some bills the company owed down there. Hosford said it was in defendant's name, and they could not sell it; and upon his solicitation Hosford brought out the stock book, and asked defendant to indorse It, which defendant did, and turned it Into the company, where, as he says, he supposed it belonged. He left the certificate, in that condition, with Hosford, and it remained in possession of the company, and was attached to the stub as late as September 15, 1893. The defendant also proved that the funds with which to pay off the indebtedness of the company to the treasurer, R. W. Sawyer, were obtained by him at this time of Corbett and another stockholder, through the intervention of Hosford.

For the purpose of showing the indebtedness of the insolvent corporation during the time of the defendant's alleged ownership of the stock, the plaintiffs proved that the Agawam National Bank of Springfield, Mass., was a creditor of the insolvent corporation during the years 1892 and 1893; and further put in evidence a judgment recovered in the supreme judicial court, Penobscot county, by Bertha L. Whitmore, administratrix of the estate of Austin J. Whitmore, against the insolvent corporation, rendered June 1, 1896, for $1,852 damages. The damages thus recovered were a verdict against the insolvent company for the injuries received by Austin J. Whitmore, October 11, 1892, while employed in the mill of the insolvent company, by the explosion of a digester in its mill; and he afterwards died from the effects of the injury. This execution was returned in no part satisfied. See Whitmore v. Paper Co., 91 Me. 297, 39 Atl. 1032.

Plaintiffs also offered the proof of debt filed by Bertha L. Whitmore in the insolvent court, based upon the foregoing judgment. This evidence was objected to, and admitted subject to the defendant's exception.

"Mr. Gillin: In order to protect our rights, we wish to show that the amount of indebtedness proved against this company in the court below exceeded the amount of assets which have been returned.

"Mr. Appleton: We object. We admit that the assets are not sufficient to discharge the liabilities."

The jury returned a verdict for the plaintiffs of $5,000.

Argued before EMERY, HASKELL, WHITEHOUSE, WISWELL, STROUT, and SAVAGE, JJ.

P. H. Gillin, Charles J. Dunn, and E. C. Ryder, for plaintiffs.

F. H. Appleton and H. R. Chaplin, for defendant.

EMERY, J. The Bangor Pulp & Paper Company was a corporation under the laws of Maine, and doing business in this state. Certain of its creditors, believing it to be insolvent, asked the proper court of insolvency to so adjudicate, and to cause its assets to be administered under the direction of that court. The corporation, upon that petition, and regular proceedings under it, was, on the 4th day of June, 1896, adjudged to be an insolvent debtor, and on the same day the usual warrant was issued for the sequestration of its assets. On the 25th day of the same June the plaintiffs were appointed and qualified as assignees of the corporation under the insolvency proceedings. They received the usual instrument of assignment of the debtor's estate, and entered upon the duty of administering it. On the 18th of June, 1897, they brought this action at law against the defendant to recover the par value ($100) of 50 shares of the capital stock of the corporation, alleged to have been taken by the defendant, and not paid for.

The plaintiffs claim to recover independent of any statute creating a liability of the stockholder for debts of the corporation, upon the ground that the defendant stockholder was a debtor to the corporation for the unpaid stock, and that this debt was an asset of the corporation, which they could recover as a debt due the corporation, like any other debt due it.

It appears, however, from the uncontradicted evidence, that, if the defendant did take the 50 shares of stock as alleged, it was under an agreement with the corporation that the shares were fully paid for by the assignment of a lease of a business plant to the corporation by the defendant and his associates. The lease was assigned to the corporation, and the board of directors voted to accept such assignment in full payment for these 50 and other shares. There is no evidence of any intent to...