Shickle v. Watts

• Decision Date: 05 March 1888
• Citation: 94 Mo. 410,7 S.W. 274
• Parties: SHICKLE et al. v. WATTS et al.
• Court: Missouri Supreme Court

7 S.W. 274

94 Mo. 410

SHICKLE et al. v. WATTS et al.

Supreme Court of Missouri.

March 5, 1888.

1. CORPORATIONS — LIABILITY OF STOCKHOLDERS — UNPAID STOCK.

Defendant had a contract with a company to build its works, for a certain sum, part of which was to be paid in stock, which defendant, like other stockholders,

was to take at 50 per cent. of its par value. He had already realized for the works more than their reasonable value, though not yet the price agreed on, and the accounts between him and the company were still unsettled. Plaintiff, a judgment creditor of the company, sought to subject defendant to liability, by creditors' bill, on unpaid stock which he had taken in pursuance of his contract with the company. Held, that plaintiff was not bound by the contract between defendant and the company, as to the price for the works, and that only to the extent of their reasonable value can the defendant avail himself against the unpaid balance on the par value of the stock.

2. SAME.

Where a corporation becomes insolvent, the holder of unpaid stock cannot, as against creditors, offset his own claim against the corporation.

3. SAME.

Plaintiffs had obtained judgments in Illinois against a corporation of that state, and execution had been returned nulla bona. They proceeded against holders of unpaid stock in Missouri. Held, that the proper forum is a court of equity, and that a failure to plead remedy at law is a waiver of that objection.

4. SAME.

The holder of unpaid stock in an insolvent corporation is liable whether he was a subscriber or not, though the charter prescribes that persons wishing to become members shall subscribe.

5. SAME.

Where judgments, obtained in a foreign jurisdiction against a corporation of that jurisdiction, proved unavailing by reason of the insolvency of the corporation, it is not necessary, in a proceeding in a court of equity in Missouri, against a holder of unpaid stock, to obtain judgment of dissolution of the corporation, that fact appearing sufficiently aliunde; and the statute requiring such judgment does not apply.

6. SAME.

The liability of a stockholder on unpaid stock of an insolvent corporation remains unchanged, though the judgments against the corporation, sought to be enforced against him, were rendered after he became a stockholder.

7. JUDGMENT — INTEREST — SUIT ON FOREIGN JUDGMENT.

Rev. St. Mo. 1879, § 2725, provides that interest on any judgment of any court shall be allowed at 6 per cent., from the rendition of the judgment to payment. Held that, in a suit on a foreign judgment, such interest is properly allowed, though there is no proof of the statute in relation to interest in the state where the judgment was rendered.

Appeal from St. Louis circuit court; AMOS M. THAYER, Judge.

M. McKeag, for appellant. T. A. Post, for respondent.

SHERWOOD, J.

This is a suit in the nature of a creditors' bill. The plaintiffs, Shickle, Harrison & Co., are judgment creditors of the East St. Louis Gas-Light & Coke Company, a foreign corporation, organized under the laws of Illinois. Watts is the sole appellant here. He and the plaintiffs are residents of the state of Missouri. Watts is the owner of 1,200 shares of the capital stock of the foreign corporation mentioned. The basis of this proceeding is that Watts is the owner of said stock; that the par value of the same has not been paid in full; and the purpose of this proceeding is to compel him to pay the judgment debts due the plaintiffs, they having exhausted their remedy at law against the corporation.

The controlling question in this case is whether Watts can be treated as the holder of unpaid stock in the corporation. In 1874 he contracted with the corporation for the erection of its gas-works in East St. Louis. For his work he was to receive $83,000; $50,000 of this sum was to be paid him in the mortgage bonds of the company, secured by first lien on the "works, property, and franchises of the corporation; and the residue, $33,000, was to be paid him in cash. Concerning the cash payment, $33,000, it was stipulated that $13,000 "should be payable from the holders of the original $50,000 of stock, and the other $20,000 only from other stock thereafter to be disposed of by the corporation." And it was further stipulated "that if the corporation failed to dispose of sufficient new stock to realize from an equal assessment upon all stock enough to pay $20,000 when so due," that then the defendant should "receive in lieu of said $20,000, cash stock of the corporation at the same rate as other stockholders in full compensation for his dues." Watts built the works as agreed upon, receiving from the corporation $40,000 in its bonds, and realized from their sale $38,504.16. The contract evidently contemplated that the sum of $13,000 should be raised by an assessment upon the $50,000 of old stock, which was never raised and paid him. Nor did the company succeed in selling any part of the new stock, from the sale of which $20,000 was to be raised and paid him. It does appear, however, that at various times the corporation issued to Watts, and he received, 1,500 shares of what is termed "new stock." The par value of these shares was $25 each, and amounted in the aggregate to $37,500. He sold 300 of these shares, and now retains 1,200. No settlement, it seems, was ever made between Watts and the corporation; but that matter is still open and unadjusted between them. Concerning the reasonable cost of constructing the gas-works, such as the contract contemplated, there was a good deal of testimony introduced. The estimates of the cost of similar works varied from $35,000 to $45,000; but, looking at all the testimony, $50,000 would seem to be a reasonable charge, inclusive of a fair allowance for the profit of the contractor. Relative to the terms upon which the 1,500 shares were issued, and received by Watts, the contract provided that the stock should be issued to him "at the same rate it was issued to other stockholders." He makes no claim that the stock was issued to him in satisfaction of his demand, and the account between himself and the company still remains open and unadjusted. The other stockholders obtained their certificates of stock upon payment of $12.50 per share, and, as before stated, he was to receive his shares at the same rate that they did. It results from this that inasmuch as between Watts and the company he obtained his stock at $12.50, giving the company credit only at that sum per share, which, for the 1,500 shares, would amount to a credit of $18,750, paid to him with stock, taking this as the proper basis of computation, this would leave him still liable to the creditors of the corporation to the amount of $15,000, on the 1,200 shares which he still retains. This must be so, if it be true that notwithstanding any understanding or agreement between the defendant and other shareholders and the corporation, that they were not to be assessed any further on their shares, is of no avail as against corporate creditors. And this seems to have been the nature of the agreement between the corporation and its various shareholders, i. e., that they were to receive their shares on payment of 50 per cent. of their par value, and so the court below has found. And that court has also found that the contract price for the gas-works built was some 70 per cent. beyond a fair and reasonable price, and that the sum already paid on account of those works, including bonds and stock, amounts to $57,254, or about $7,254 more than the reasonable value of such works.

Upon the premise so well established, that the capital stock of a corporation is a trust fund for the benefit of its creditors, the very reasonable deduction has been made by the courts that where an agreement is entered into between a contractor and a corporation, whereby the former is to perform work for, or furnish material to, the latter, and to take unpaid stock in part or in full payment, that such contractor, whether for labor or material, can only charge therefor the reasonable market value for such labor or material thus given in exchange, and that all agreements by the corporation to pay more than such reasonable compensation will be disregarded and held for naught by the courts, when the rights of creditors intervene. And this is the case even though no fraud be proven. Thomp. Liab. Stockh. §§ 127, 201; Boynton v. Hatch, 47 N. Y. 225; Talmadge v. Iron Co., 4 Barb. 382; Van Cott v. Van Brunt, 2 Abb. N. C. 283; Osgood v. King, 42 Iowa, 483; Chouteau v. Dean, 7 Mo. App. 214; Kehlor v. Lademann, 11 Mo. App. 550; Carr v. Le Fevre, 27 Pa. St. 413. And the same rule holds in this class of cases in regard to partial payments for stock in labor or material, as holds when payments pro tanto are made upon shares of stock in cash. In regard to which latter payments, it is abundantly settled by authority that they will avail as against creditors only to the extent, and only in...