In re Remington Automobile & Motor Co.

• Decision Date: 26 March 1907
• Docket Number: 202.
• Citation: 153 F. 345
• Parties: In re REMINGTON AUTOMOBILE & MOTOR CO. et al.
• Court: U.S. Court of Appeals — Second Circuit

153 F. 345

In re REMINGTON AUTOMOBILE & MOTOR CO. et al.

No. 202.

United States Court of Appeals, Second Circuit.

March 26, 1907

L. M Southworth and George E. Dennison, for appellant.

F. G Fincke, C. H. Searl, W. G. Miller, and Fuller & Miller, for appellees.

Before WALLACE, LACOMBE, and COXE, Circuit Judges.

LACOMBE Circuit Judge.

The case is an intricate and complicated one, because of the issues of stock made from time to time to different individuals under different circumstances. The district judge has fully and carefully stated the facts necessary to be considered, and has set forth the relevant documents in full. It would be a waste of time to restate them here, except so far as may be necessary to an understanding of the different conclusions hereinafter expressed.

The Right to Make Assessment.

The Remington, etc., Company is a New Jersey corporation, and subject to the following statutory provisions (chapter 185 p. 277, Laws N.J. 1896) 'Sec. 21. Stockholders liable until subscriptions are fully paid.--Where the whole capital of a corporation shall not have been paid in, and the capital paid shall be insufficient to satisfy its debts and obligations, each stockholder shall be bound to pay on each share held by him the sum necessary to complete the amount of such share, as fixed by the charter of the corporation, or such proportion of that sum as shall be required to satisfy such debts and obligations.'

'Sec. 48. Nothing but money shall be considered as payment of any part of the capital stock of any corporation organized under this act, except as hereinafter provided in case of the purchase of property, and no loan of money shall be made to a stockholder or officer thereof; and if any such loan be made the officers who make it, or assent thereto, shall be jointly and severally liable, to the extent of such loan and interest, for all the debts of the corporation until the repayment of the sum so loaned.

'Sec. 49. Any corporation formed under this act may purchase mines, manufactories or other property necessary for its business, or the stock in any company or companies owning mining, manufacturing or producing materials, or other property necessary for its business, and issue stock to the amount of the value thereof in payment therefor, and the stock so issued shall be full paid stock and not liable for any further call, neither shall the holder thereof be liable to any further payment under any of the provisions of this act; and in the absence of actual fraud in the transaction the judgment of the directors as to the value of the property purchased shall be conclusive; and in all statements and reports of the corporation to be published or filed this stock shall not be stated or reported as being issued for cash paid to the corporation, but shall be reported in this respect according to the fact.'

Had the corporation not become bankrupt, it could have laid an assessment upon such of its stockholders as were liable for further calls to make up full payment, and the right to make an assessment and call passed by the bankruptcy to the trustee. The Supreme Court, in Scovill v. Thayer, 105 U.S. 143, 26 L.Ed. 968, holds that the proper practice in such cases is for the trustee to file petition in the bankruptcy court for an order directing him to make an assessment and call upon the unpaid stock of the corporation for the purpose of paying its debts. In order to determine whether such an order should be made, it is necessary for the court to examine into and decide certain questions of fact, e.g., whether at the time of the issue of any particular share the full value was or was not paid in, whether any subsequent payments were made on account of it, whether the corporation was indebted in excess of assets, and what is the amount of its indebtedness. We are unanimously of the opinion that the practice followed in this case was correct, and that the decision of the District Court as to any question the decision of which was necessary to the making of the order will be res adjudicata in any subsequent proceeding between the trustee and any stockholder who received notice of the proceeding. Thus, in a plenary action against a stockholder to enforce assessment, he cannot be heard to question the findings made in this proceeding as to the amount paid for the stock, as to the indebtedness of the corporation, or as to the amount of the assessment; but he may present and make proof of any individual defense which he may have to such action. In this connection it may be noted that the phraseology of the order is such that it might be contended that execution for the respective amounts might be issued against the individuals named. This should be corrected.

The writer is further of the opinion that, inasmuch as the stockholder is to be concluded as to the amount of corporation indebtedness by the finding in the bankruptcy court, he is entitled to have that amount proved by the best evidence, if he appears and asks for it. In the case at bar the indebtedness was proved merely by presentation of the proofs of claim. To this counsel for...