Kentucky Mut. Inv. Co.'s Assignee v. Schaefer

• Decision Date: 25 March 1905
• Citation: 120 Ky. 227,85 S.W. 1098
• Parties: KENTUCKY MUT. INV. CO.'S ASSIGNEE et al. v. SCHAEFER et al.
• Court: Kentucky Court of Appeals

85 S.W. 1098

120 Ky. 227

KENTUCKY MUT. INV. CO.'S ASSIGNEE et al. v. SCHAEFER et al.

Court of Appeals of Kentucky.

March 25, 1905

Appeal from Circuit Court, Jefferson County, Chancery Division.

"To be officially reported."

Action by the assignee of the Kentucky Mutual Investment Company and others against F. W. Schaefer and others. From a judgment for defendants, plaintiffs appeal. Affirmed.

Thum &amp Clark and R. L. Greene, for appellants.

Dodd &amp Dodd and O'Neal & O'Neal, for appellees.

HOBSON C.J.

Charles G. Schaefer bought shares of stock of the par value of $6,000 in a West Virginia corporation called the Union Finance &amp Investment Company, whose chief place of business was in the city of Louisville, and its officers resided there. The Kentucky Mutual Investment Company was organized under the laws of the state of Kentucky about January 2, 1900. H. W Richardson was its president, and Purnell Johnson and one Bennett were among its officers and stockholders. These three bought the controlling number of shares of stock in the Union Finance & Investment Company, and elected themselves president, vice president, and treasurer of the company, assuming charge of its affairs; they having at the same time control of the affairs of the Kentucky Mutual Investment Company. This was in December, 1900. Some time in February, 1901, they made an exchange with Schaefer and those whom he represented, giving them an equal amount of stock at par value in the Kentucky Mutual Investment Company for their stock in the Union Finance & Investment Company, and also exchanged with them certificates of deposit called "bonds," giving them Kentucky Mutual certificates for the Union Finance certificates which they held, and upon which they had paid a considerable sum. A few months after this the Kentucky Mutual Investment Company made an assignment for the benefit of its creditors, and this action was brought by the assignee against Schaefer and those whom he represented, to hold them liable for $6,000 upon an alleged subscription to the capital stock of that company, under section 547, Ky. St. 1903.

The defendants cannot escape liability on the idea that they did not subscribe for stock in the Kentucky Mutual Investment Company. The signing of a subscription is not necessary. They accepted the certificates of stock, and their liability is not affected by the fact that it was understood that they took the new stock in lieu of their old, and that the new was paid for by their surrender of the old. If this would defeat the statute, it would be rendered largely nugatory. They must be held liable for the difference between the amount they actually paid and the amount of stock they received, at par value. The fact that they did not pay any money, but paid in something else, is immaterial.

It is charged by the defendants and shown that they were induced to make the exchange by false and fraudulent representations made to...