L. M. Rumsey Mfg. Co. v. Kaime

• Decision Date: 31 March 1903
• Citation: 73 S.W. 470,173 Mo. 551
• Parties: L. M. RUMSEY MFG. CO. et al. v. KAIME.
• Court: Missouri Supreme Court

73 S.W. 470

173 Mo. 551

L. M. RUMSEY MFG. CO. et al. v. KAIME.

Supreme Court of Missouri, Division No. 2.

March 31, 1903.

EQUITY — APPEAL — REVIEW OF EVIDENCE— CORPORATIONS — PAYMENT OF STOCK IN MERCHANDISE — OVERVALUATION — LIABILITY OF STOCKHOLDERS.

1. In equity, where oral evidence is taken below, the Supreme Court, in reviewing its sufficiency to sustain findings, will defer somewhat to the judgment of the chancellor.

2. Where merchandise is transferred to a newly organized corporation in payment of stock, it must be put in at its fair market value; and any overvaluation is pro tanto a fraud on creditors, though no intent to defraud existed.

Appeal from Circuit Court, St. Louis County; R. Hirzel, Judge.

Suit by the L. M. Rumsey Manufacturing Company and others against David F. Kaime and others. From a decree for plaintiffs, defendant Kaime appeals. Affirmed.

Clinton Rowell and Jos. H. Zumbalen, for appellant. Albert N. Edwards and W. Palmer Clarkson, for respondents.

BURGESS, J.

This is a suit in equity by the L. M. Rumsey Manufacturing Company, a corporation, and other judgment creditors of the Detrick Supply Company, against David F. Kaime and others, as stockholders of said supply company. The bill was dismissed as to all the defendant stockholders except Kaime. The suit was instituted for the benefit of plaintiffs and all other creditors of the Detrick Supply Company who wished to join therein and to become parties plaintiffs therein.

The petition alleges that the Ripley-Detrick Supply Company was duly incorporated on January 10, 1894; that on April 8, 1895, the name of the Ripley-Detrick Supply Company was legally changed to the Detrick Supply Company, and that on the 25th of February, 1896, the Detrick Supply Company became wholly insolvent, and made a voluntary assignment to Albert Webb for the benefit of its creditors, in pursuance of the statute in such case made and provided; that the Ripley-Detrick Supply Company, afterwards called the Detrick Supply Company, was incorporated with an authorized capital stock of $75,000, divided into 750 shares, of the face or par value of $100 each, and that said shares in the Detrick Supply Company were subscribed as follows: David F. Kaime, 505 shares; Geo. F. Detrick, 254 shares; Wm. H. Barere, 9 shares; Lyman B. Ripley, 2 shares; that Geo. F. Detrick subscribed such shares, and received the same as trustee for others, and not for himself; that the shares were issued as fully paid and nonassessable, when in fact $46 2/3 were and remain unpaid on each share; that prior to and on the 25th day of February, 1896, the defendant Kaime acquired and became the holder and owner of all the shares of stock not previously subscribed; that the creditors of said concern have proved up claims in the sum of $55,832.17 before the assignee, and had the same duly allowed by the assignee; that the said assignee has declared and paid a dividend of 20 per cent. on said claims, and that 80 per cent. is wholly unpaid; that the assigned estate is wholly insolvent, and no further dividends can or will be declared by the assignee; that there is now due by the stockholders the sum of $46 2/3 on each share of stock, which constitutes a trust fund in favor of the creditors, and especially the plaintiffs herein. The bill then sets forth the allowance of each plaintiff herein separately, and prays that an account may be taken between the company and its stockholders, and the amount actually paid in by the stockholders may be ascertained and fixed by the court, and that the action of the company in issuing said shares of stock as fully paid and nonassessable may be declared fraudulent and void as to these creditors to the extent of which the same remains unpaid, etc. Defendant Kaime's answer is, first, a general denial; second, an averment that the plaintiffs contracted the alleged debts with the Detrick Supply Company with full knowledge of all the facts relating to the formation of said corporation and the payment of stock subscribed for the corporation; third, a statement that there was another action pending between the same parties and for the same cause of action in the city of St. Louis—all of which was not proven.

That defendant Kaime owned 525 shares of stock in the Detrick Supply Company is not denied. Therefore his liability, if any, must be reckoned from that standpoint. Nor is there any dispute in regard to the incorporation of the Ripley-Detrick Supply Company as alleged, its absorption by the Detrick Supply Company, and the final insolvency of that company. Nor is there any question but that the capital stock was placed at $75,000, and that the total amount paid in was $40,000 in cash, with which a certain stock of goods was bought and placed in the corporation at an alleged sufficient profit to enable it to issue fully paid up stock for $75,000; and this transaction, plaintiffs allege, was fraudulent. The vital question, therefore, is as to the actual, fair market value of the stock of merchandise purchased by the original stockholders of the Ripley-Detrick Supply Company from Messrs. Kaime, Ripley, and Detrick.

The court found and observed as follows: "The firm of Bronson & Ripley failed during the financial panic in July, 1893, and their affairs were put into the hands of Mr. W. B. Homer as receiver. He caused their whole stock of goods to be...