Hodde v. Hahn
| Decision Date | 25 June 1920 |
| Citation | 222 S.W. 799,283 Mo. 320 |
| Parties | CYRUS E. HODDE, Receiver, v. PETER HAHN, JAMES H. ROACH and VICTOR DIESING, Appellants |
| Court | Missouri Supreme Court |
Appeal from St. Louis City Circuit Court. -- Hon. Thos. C. Hennings Judge.
Affirmed.
O. F Karbe and S. C. Rogers for appellants.
(1) Estoppel applies under the facts and circumstances here. Plaintiff is but the creditors and they waived their rights elected to forego pursuing the rights they waived and are now estopped to hold these defendants. It would be a double burden on them. 2 Cook on Corporations, sec. 548, p. 1616; Brooks v. Brooks, 174 Pa. St. 519; Daugherty v. Poundstone, 120 Mo.App. 310; Bigelow on Estoppel (6 Ed.), p. 732; 1 Cook on Corporations, p. 583, sec. 216; Willis v. Black, 117 Cal. 161; 10 Cyc. 665; 14 Corpus Juris, secs. 1544, 1621, 1633, 1644, and notes; Morawetz on Private Corps. (2 Ed.) sec. 871; Lawrence v. Greenup, 97 F. 906; Berry v. Rood, 168 Mo. 335; McMahon v. Transit Co., 85 N.J.Eq. 544; McClaren v. Franciscus, 43 Mo. 466; Hobbs v. Henley, 186 S.W. 981; State ex rel. Hayes v. Ellison, 191 S.W. 51; Bowman v. Anderson, 268 Mo. 28; Kelsay v. Bank, 166 Mo. 171. (2) The stock was fairly and properly paid up in the first instance. Beebe v. Hatfield, 67 Mo.App. 615. (3) Goodwill is property. Milling Co. v. Hanebrink, 247 Mo. 221; Pope-Turnbo v. Bedford, 147 Mo.App. 698; Fox v. Glynn, 191 Mass. 344; Bloom v. Ins. Agency, 91 Ark. 373; Mfg. Co. v. Hall, 61 N.Y. 230; Heneger v. Sundseth, 106 Minn. 133. The value of goodwill can be ascertained by its dividend producing capacity. Bank v. Home Lbr. Co., 118 Mo. 462; 14 C. J. 960, sec. 1487; Greer v. Lafayette Co. Bk., 128 Mo. 575. (4) Good faith is all that is necessary in setting a valuation upon property in such cases. 10 Cyc. 476, 477, 478 and notes; 2 Cook on Corps., sec. 423, p. 1213; Coleman v. Hagey, 252 Mo. 102. (5) The court should not have permitted plaintiff to prevail under the allegations of his petition and the evidence offered by him as to appellant Diesing, as he was not a stockholder subsequent to 1912; he had disposed of his stock prior to the insolvency of the corporation in March, 1914, and the transfer to the trustee. Sec. 9, art. 12, Mo. Constitution; Banta v. Hubbell, 167 Mo.App. 43; McClaren v. Franciscus, 43 Mo. 452; Miller v. Ins. Co., 50 Mo. 55; 1 Cook on Corp., p. 747, sec. 259; Secs. 3004-3006, R. S. 1909; Berry v. Rood. 168 Mo. 333. (6) The court based its judgment on the value of the assets at the time the receiver took charge. Under the circumstances in this case this was not proper. The value of the property turned into the corporation by these appellants individually at the time of the organization of the corporation in 1909 is the proper basis for estimating the liability and this enhanced by additional property acquired by it is the proper basis of recovery for unpaid stock subscription. (7) The liability is several and not joint. Perry v. Turner, 55 Mo. 418.
Grant & Grant for respondent.
(1) The stock of a corporation must be paid for in money or money's worth. If paid for in property then such property must be the fair equivalent of the par value of the stock. It is the duty of the stockholders and not the duty of the creditors to see that it possesses such value. Van Cleve v. Berkey, 143 Mo. 136; Berry v. Rood, 168 Mo. 316; Meyer v. Mining & Milling Co., 192 Mo. 188; Houston v. Edgar, 207 Mo. 301; Bank v. Rockefeller, 195 Mo. 15; Hequembourg v. Edward, 155 Mo. 520; Steam Co. v. Scott, 157 Mo. 525; Sawyer Bkg. Co. v. Independent Co., 168 Mo. 643; Shields v. Hobart, 172 Mo. 510; Rumsey v. Kain, 173 Mo. 560; Rogers v. Mining Co., 185 Mo.App. 672; Sec. 1312, R. S. 1909. (2) Good will may be considered a species of property for certain purposes. It may be sold; its willful destruction may be the basis of an action for damages; it may be taxed under appropriate statutes, but in states which hold that capital stock is a trust fund for creditors, it has never been held that it may take the place of "lawful money of the United States." It has no market value so that it can be readily disposed of to pay creditors. Good will has been defined by this court. Milling Co. v. Hanebrink, 247 Mo. 221. Assets, worth $ 7,000, of two dying corporations whose capital stock had been almost entirely depleted by losses in business cannot, by the fiction of an imaginary good will, be made by the stockholder to pay up capital stock of a new corporation with par value of $ 50,000. If the stockholders of a corporation dissolve it, organize a new corporation with the same stockholders and transfer all its assets to the new corporaton, the status of the parties is not changed, and the law will disregard the form, consider the substance of the transaction and treat the new corporation as a continuation of the old. Thompson v. Abbott, 61 Mo. 176; Winkelman v. Levee District, 171 Mo.App. 53; Many v. National Surety, 103 Mo.App. 721; Coffey v. Bank, 46 Mo. 140; Lighting Co. v. Hobart, 98 Mo.App. 235; Barrie v. United Rys., 138 Mo.App. 649. A corporation cannot capitalize its good will by paying up an increase of capital stock by an alleged good will. Coleman v. Booth, 268 Mo. 64. (3) The facts upon which an estoppel might be based are wholly lacking. The principles underlying estoppel are well settled. They have been stated in various ways. Henson v. Merc. Co., 48 Mo.App. 214; Acton v. Dooley, 74 Mo. 63; Hart v. Giles, 67 Mo. 175; Hequembourg v. Edwards, 155 Mo. 514; Spurlock v. Sproule, 72 Mo. 503; Osborn v. Court of Honor, 152 Mo.App. 652; De Lashmutt v. Teetor, 261 Mo. 412.
This is an action against appellants, and others not appealing, for alleged unpaid stock subscriptions. In January, 1909, the George Henseler Oil Company, a $ 10,000 corporation, was doing business in oils and kindred commodities in the City of St. Louis. None of these appellants were stockholders in this company. It enjoyed a lucrative business. The Mercantile Supply Company was a $ 50,000 corporation having $ 30,000 of its capital stock paid up. All of these appellants were stockholders therein. A suggestion of merger or consolidation of the two companies was made, agreed to and consummated in January and February, 1909. The Mercantile transferred all its assets and good will to the consolidated corporation, the Henseler Mercantile Oil & Supply Company, for stock issued to the several shareholders thereof to the extent of $ 25,000. The merged or consolidated company did business with varying success until in 1914. Some time in 1912 appellant Diesing, while the corporation was solvent, disposed of his stock. Appellant Hahn disposed of all his stock to his wife, who was a defendant below, saving four shares. In March, 1914, the directors realized the company was in financial straits and attempted to settle with their creditors. As a result there was a meeting of the creditors held on the 26th day of March, 1914, when there was presented to them an expert accountant's statement of the condition of the company. It was proposed to do anything the creditors might direct. The creditors finally appointed a committee of three to determine the course to be pursued. It decided to transfer the assets and property of the company to a trustee. In the meantime the creditors had charge of the affairs of the company. They prepared a deed, named their trustee, the transfer was made to him and he took charge without bond or the taking of an inventory or appraisement of the assets and attempted to operate the business. The first two months he made a profit of $ 3,145. Thereafter the creditors enlarged the business, created various liabilities and assets began to depreciate and decrease and the liabilities increase until in October or November, 1914, when the trustee advised discontinuance, but the creditors were obdurate and a substitute trustee was appointed at the request of the Union Petroleum Company, one of the largest creditors. The new trustee attempted to operate the business until in March, 1915. The result was disastrous financially and the Union Petroleum Company applied for the appointment of a receiver, and the present plaintiff was appointed as such. According to the books of the company in March, 1914, the assets exceeded the liabilities, that is, the assets were in excess of $ 37,000 and the liabilities less than $ 34,000. During the operation of the trusteeship under the direction of the creditors the entire assets were dissipated, lost or squandered and the liabilities increased, with the result that when the receiver sold the assets on hand there was not enough to pay the liabilities incurred during the trust.
Thereafter the receiver brought this suit against the then and former stockholders for balances due on their unpaid stock.
The petition alleges the appointment of a receiver, sets forth the facts upon which the liabilities of the defendants were based, to-wit, the amounts due and unpaid by each upon their respective shares of stock, the assets on hand, the debts the order authorizing the receiver to institute this action, the allowance of claims amounting to $ 27,037.94 and that there remained but $ 1,300 in the receiver's hands with which to pay the same, that the defendants were liable as subscribers for their unpaid stock, the incorporation of the Henseler Mercantile Oil & Supply Company, that the two former corporations had been so operated that their capital stock was impaired and that on the 30th day of January, 1909, there was but $ 7,253.72 as assets on hand in payment of the capital stock of the Henseler Mercantile Oil & Supply Company, that said articles represented $ 50,000 of the stock was paid up and all of it subscribed, that there were no assets of the value of $ 50,000...
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