Hinckley v. Pfister

• Decision Date: 27 September 1892
• Citation: 53 N.W. 21,83 Wis. 64
• Parties: HINCKLEY ET AL. v. PFISTER ET AL.
• Court: Wisconsin Supreme Court

83 Wis. 64

53 N.W. 21

HINCKLEY ET AL.

v.PFISTER ET AL.

Supreme Court of Wisconsin.

Sept. 27, 1892.

Appeal from superior court, Milwaukee county; R. N. AUSTIN, Judge.

Action by Francis E. Hinckley, impleaded with the Milwaukee Electric Railway Company, against Charles F. Pfister and others. Judgment for defendants. Plaintiffs appeal. Affirmed.

The other facts fully appear in the following statement by PINNEY, J.:

The appellant Hinckley commenced an action against the Milwaukee Electric Railway Company, Richard Burke, August H. Vogel, Charles F. Pfister, John A. Hinsey, H. H. Field, Oscar D. Aeppli, G. W. Hinckley, and A. M. Hinckley, stating, in substance, the incorporation of the Milwaukee Electric Railway Company, December 17, 1889, for the purpose of operating a street railway in Milwaukee and adjoining towns, using electric or other motive power, and empowered to acquire the property and franchises of the Milwaukee Cable Railway Company; that the first-named company organized March 10, 1890, with a capital stock of $500,000, being 5,000 shares of $100 each; that the latter company transferred to the electric railway company all its property, rights, and franchises, and the entire capital stock of the electric railway company was issued to the plaintiff Hinckley and the defendants Hinsey, Aeppli, Field, and G. W. and A. M. Hinckley; that none of them paid anything of value for such stock except the plaintiff, but what he paid for his stock is not stated; that the only person having any actual interest in the electric railway company defendant, or in the cable railway company, is the plaintiff, but precisely what interest he had is not stated; that the plaintiff and defendant Hinsey were the promoters of the corporationdefendant, and the other defendants named, to whom stock was issued, were brought in and given certificates of stock merely for the purpose of completing and forming a corporate organization, except the defendant Manschott, who claimed some stock under the defendant Hinsey; that the stock of the electric company was, at the date aforesaid, issued to the plaintiff and Hinsey, and such persons as they selected, in the proportion of three fifths to plaintiff or his order, and two fifths to Hinsey or his order, but the same was issued to him gratuitously, without any good or valuable consideration, and contrary to law, but for a part of the stock of said plaintiff in the electric railway company he paid no money or value, but what part thereof is not stated; that for the greater portion the plaintiff did pay moneys, property, and services, but what amount is not alleged. On the same day a mortgage or deed of trust was executed by the plaintiff as president, and the defendant Aeppli as secretary, of the electric railway company, in its name, to the defendant the Northern Trust Company, as trustee, the same being an Illinois corporation, to secure an issue of a series of 500 coupon bonds of the sum of $1,000 each, to mature April 1, 1910, bearing interest at the rate of 6 per cent. per annum, payable semiannually. This was the first mortgage on the property of the company, and was recorded. It contained a provision that the bonds therein described should not be valid until certified by the trustee, who, it is alleged, accepted his trust, and certified and delivered to the electric railway company 250 of said bonds of $1,000 each, and that it issued said bonds to the defendant Pfister as collateral security of a loan of $125,000 made by him to said company on its note, and for no other purpose, which contained a power of sale authorizing Pfister, in case of default in the payment of the note, to sell the bonds at private sale; that the electric railway company had no means sufficient for the payment of its debts, and Pfister was thereby enabled to take advantage of it, and sell $100,000 of said bonds to the defendant Vogel for $50,000, retaining $150,000 of said bonds and the note of the electric railway company for $125,000, on which he claims there is still due to him the sum of $70,000; that at the time Pfister made said loan the plaintiff and defendant Hinsey pledged to him to secure its payment certain stock of the company, namely, Hinsey pledging 1,001 shares, and the plaintiff 1,501 shares; that Pfister knew that the plaintiff was a mere surety, through his stock, on the note, and it was expressly agreed in a separate writing “that no sale of plaintiff's pledged stock should take place until after the property of the electric railway company, namely, its said bonds, were exhausted on said power of sale.” It is alleged that “all money expended in creating or constructing or purchasing said street railway company, and all the corporate assets of the said street railway company, and also all of the assets of the Milwaukee Cable Railway Company, aforesaid, except such as was acquired from the proceeds of the said $125,000 loan, and such as said defendant street railway company is still indebted for, have been furnished by the plaintiff,” and no other of the stockholders of said company paid or furnished any portion thereof; and that said plaintiff furnished said money and paid the same under an agreement with said street railway company that he should be and remain a creditor of the defendant street railway company to the amount of the money and property so advanced by him, and that the same should be repaid to him from the proceeds of the sale of said corporate bonds, or that, in lieu thereof, he should have such bonds for the same at not less than 75 cents on the dollar; and that by virtue of such advances and said agreement the plaintiff is a creditor of said corporation to an amount exceeding $100,000, for money actually advanced, materials and supplies furnished, and labor performed, for said corporation, for which, by said agreement, he was to be paid as aforesaid. That certain officers of the defendant company, without plaintiff's consent, after the pledge of said $250,000 of bonds to Pfister, ordered the trustee in the mortgage to issue and certify no more bonds, so that the plaintiff is unable to procure any bonds in payment of his advances, and the defendant is unable to pay its existing debts. That plaintiff is a director and the president of the company, and the defendants G. W. Hinckley, A. M. Hinckley, H. H. Field, Oscar D. Aeppli, John H. Manschott, John A. Hinsey, Charles F. Pfister, Richard Burke, and August H. Vogel have or hold in their name stock of said defendant company, sold by said Pfister to Vogel under said power of sale for the sum of $5,000, but in disregard of Pfister's agreement not to sell the same until the bonds of the defendant so issued were all sold. That the sale of said stock and bonds to Vogel was formal or colorable, and no consideration was paid therefor, but they were bid in by him, as trustee, for Pfister, in pursuance of an arrangement or combination between the defendants Pfister, Vogel, Burke, and Hinsey, which is charged to have been collusive, and entered into for the purpose of creating fictitious liens against the corporation by virtue of the bonds, and obtaining control of its stock, so as to control corporate actions with reference to said bonds, and to enable Pfister to occupy the position of creditor for a large amount under the said bonds, and at the same time control corporate action with reference thereto. That, after bidding in the stock, Vogel transferred “part of the same” back to Pfister, and “part to the defendant Burke,” and that Pfister and Burke claimed the right to vote such corporate stock at the corporate meetings, and the plaintiff also claims the right to vote the same stock, and to be the owner thereof, and to be the owner of his proportion of that held by the defendant Vogel; and that Pfister, Vogel, Hinsey, and Burke threaten and intend to vote out the plaintiff from all trusteeship or office in the corporation, the defendant Pfister being enabled to control a majority of the stock of the corporation, and at the same time to hold against it the bonds so alleged to be legally acquired, and the note, on which he claims there is still due $70,000. There is no allegation to show what part of the stock is so held in the name of Pfister or Burke or Vogel, nor whether, when the same was pledged, any transfer or evidence of the pledgee's right was entered on the stock register, nor whether the transfer to the said several defendants of the stock claimed to be held by them respectively has been entered thereon. That the defendants Field, Aeppli, and Hinsey are a majority of the present board of directors, and the interest of Field is merely nominal, and Aeppli is the clerk or secretary of Hinsey, and all said persons are controlled by the defendant Hinsey. That Vogel, Burke, and Pfister are not purchasers of said stock for value, but took the same with knowledge and notice of the defects in such stock and in the title thereto, and right of Pfister to sell it; and that he took the bonds purchased by him with full knowledge of their invalidity and illegality. That the property of the electric railway company has been sold for taxes of two years last past, and tax certificates thereon have been issued to the defendant Pfister, and a large number of suits at law have been commenced and are pending against the company, and judgments are liable to be rendered against it. That the property of the defendant is liable to attachment by its creditors, and Pfister is interested in rival and competing lines of street railway in Milwaukee. That Pfister, Burke, Vogel, and Hinsey claim the right to vote on the stock so acquired by them at the corporate meetings, and to gain control of the corporation, and are combining to carry out such intention by virtue of their holding such certificates, for which no money has been paid “except such certificates as are in their hands and belong to the plaintiff, and not to Vogel and...