Hequembourg v. Edwards

• Decision Date: 09 May 1899
• Parties: HEQUEMBOURG v. EDWARDS et al.
• Court: Missouri Supreme Court

50 S.W. 908

HEQUEMBOURG v. EDWARDS et al.

Supreme Court of Missouri, Division No. 2.

May 9, 1899.

CORPORATIONS — AMOUNT OF CAPITAL — LIABILITY OF FIRST BOARD OF DIRECTORS — CONVERSION.

1. In an action by an assignee of an insolvent corporation against incorporators, who constituted the first board of directors, to recover the difference between the amount of capital actually paid into the treasury and the amount stated in the articles to have been paid to the first board of directors, as required by Rev. St. 1889, § 2768, which provides that the articles shall set forth that one-half of the par value of the stock has been paid up in lawful money and is in the custody of the first board of directors, defendants are estopped from proving that a less amount than declared in the articles was paid, and that it was agreed they should do business on that amount.

2. An action by an assignee of a corporation against incorporators who constituted the first board of directors, to recover the difference between the amount of capital actually paid into the treasury and the amount stated in the articles as having been paid to the first board of directors, as required by Rev. St. 1889, § 2768, is not an action for conversion.

3. Persons who organize a corporation and do business as directors without the amount of capital required by Rev. St. 1889, § 2768, to be paid in, become personally liable to creditors of the corporation for the difference between the amount actually paid in and the amount which should have been paid in.

Appeal from St. Louis circuit court; Thomas A. Russell, Judge.

Action by William A. Hequembourg, assignee of the Builders' Iron Works, against Henry F. Edwards and others. From a judgment in favor of defendants, plaintiff appeals. Reversed.

Jos. T. Tatum, for appellant. Theodore Rassieur, for respondents.

SHERWOOD, J.

Action by Hequembourg, as assignee of the Builders' Iron Works, incorporated under the provisions of section 2768, Rev. St. 1889. The section just mentioned has a provision that the articles of incorporation shall set forth "the amount of the capital stock of the corporation, the number of shares into which it is divided, and the par value thereof, that the same has been bona fide subscribed, and one-half thereof actually paid up in lawful money of the United States, and is in the custody of the persons named as the first board of directors." The three defendants, Henry F. Edwards, Alex. Kilpatrick, and Frank Hunleth, were the only incorporators, as well as the first board of directors and the stockholders, of the concern. Incorporation was effected, and in January, 1893, certificate thereof granted to defendants. The capital stock was $20,000. By the statement in the articles, the defendants acknowledged they had $10,000 of the capital paid up and in their possession. Edwards subscribed for $10,000, and the other defendants for $5,000 each. The corporation began business in February, 1893; Hunleth being secretary and treasurer, and keeping the cash book. Edwards paid into the treasury $1,500, being unable to raise the $5,000 which he agreed to contribute as his one-half of the cash due by him to the corporation. The other defendants contributed $1,500, making a total of $3,000 paid into the treasury; and they agreed to start the business with the $3,000, which was deposited in bank, and invested in tools and machinery. No more than this $3,000 was ever contributed to the funds of the corporation, nor accounted for by the defendants. At the end of the year the condition of the corporation was: Tools, fixtures, and material valued at $4,000; amounts due the company, irrespective of shareholders, about $6,800; liabilities, $8,300; total net valuation of assets, about $2,500; making a loss, or using up the capital, of about $500. After paying dividends about exhausting the assets, leaving a deficiency of nearly $7,000, the...