Standard Lithographing Co. v. Twin City Motor Speedway Co.

• Decision Date: 23 January 1920
• Docket Number: No. 21448.,21448.
• Citation: 176 N.W. 347,145 Minn. 5
• Parties: STANDARD LITHOGRAPHING CO. v. TWIN CITY MOTOR SPEEDWAY CO. et al. (PAUST et al., Interveners).
• Court: Minnesota Supreme Court

145 Minn. 5

176 N.W. 347

STANDARD LITHOGRAPHING CO.

v.TWIN CITY MOTOR SPEEDWAY CO. et al. (PAUST et al., Interveners).

No. 21448.

Supreme Court of Minnesota.

Jan. 23, 1920.

Appeal from District Court, Ramsey County; Frederick N. Dickson, Judge.

Sequestration proceeding by the Standard Lithographing Company against the Twin City Motor Speedway Company, with intervention by Paust and Cooke, Philip W. Herzog, receiver of defendant, and Frank H. Wheeler and others. Judgment for Paust and Cooke, a new trial was denied, and the receiver and Frank H. Wheeler appeal. Reversed.

Hallam and Holt, JJ., dissenting.

Syllabus by the Court

The holders of the Speedway Company stock, all of the stock having been issued, surrendered their stock and it was canceled. It was contemplated that the stock would be reissued to the parties in interest as their interests should be determined to be; and it was further contemplated that it might be necessary to use some of the stock in caring for the corporate indebtedness. Certain stock was issued to the claimants in payment of their claim against the corporation and they gave a release. They claim that the stock was an overissue and not a payment and the trial court so found. It is held, upon the facts stated in the opinion, that the stock was not an overissue; that it was valid stock; that the doctrine that a surrender such as was made was invalid as to creditors has no bearing upon the controversy as to an overissue; and that the acceptance of the stock by the claimants was a payment of their claim.

On the former appeal there was a reversal. The trial court found that there was an overissue; but it held that the claimants were estopped to assert it. The claimants appealed. The point of the reversal was the holding on the question of estoppel. The opinion stated that it did not conclusively appear that there was not an overissue and it directed a new trial upon all the issues. The present appellants were respondents upon the former appeal. It is held that the doctrine of the law of the case does not preclude them from attacking the sufficiency of the evidence to sustain the finding of an overissue. Milton D. Purdy, of Minneapolis, for Wheeler & Dutton.

Bishop H. Schriber, of St. Paul, for appellant receiver.

John C. Benson, of Minneapolis, and Orr, Stark & Kidder, of St. Paul, for respondents.

DIBELL, J.

This is a sequestration proceeding against the Twin City Motor Speedway Company, a Minnesota corporation. The controversy now before the court is upon the claim of Paust and Cooke for $9,994.05 on an account stated. It was here before and is reported in 140 Minn. 240, 167 N. W. 796. So far as is possible we avoid a repetition of the facts.

In January, 1916, Paust and Cooke received $10,000 in stock of the company and $5,000 of its bonds and gave a release. It is not questioned that they accepted the stock and bonds in settlement of all their claims, including the account stated. Their contention is that the stock was an overissue and void; that it was applied in payment of the account stated; and that the bonds were given in payment of services rendered subsequent to the stating of the account. The court found that the parties stated an account as claimed; that the $10,000 in stock was given in payment of the account stated and the $5,000 of bonds in payment of subsequent services; that the stock was an overissue and therefore not a valid payment; and it directed judgment for the amount of the account stated. The receiver of the company and Frank H. Wheeler, a stockholder, appeal from the order denying their motion for a new trial.

The question of the validity of the stock in consideration of which Paust and Cooke released their claim is the fundamental one. The conclusion which we have reached upon it makes it unnecessary to determine the question whether there was an account stated such as is claimed; and we pass the question with the suggestion that it would be difficult to sustain the finding that an account was stated. We have then these two questions:

(1) Was the stock issued to Paust, and Cooke an overissue or was it valid stock and by consequence the transfer of it an effectual discharge of their claim on an account stated?

(2) Is the opinion on the former appeal the law of the case so that the appellants are concluded upon the question of the overissue?

The two questions we consider in the order of their statement.

[1] 1. The Speedway Company was incorporated in the early part of 1915. On September 4, 1915, it held its first races on its tracks at Ft. Snelling. They were disastrously unsuccessful. Those interested then began giving serious thought to the payment of the large indebtedness of the company. It was conceived that an issue of bonds secured by a trust deed might afford a feasible method of liquidating the company's debts; and those interested set about getting the creditors to accept bonds for their claims. Paust and Cooke rendered services in that behalf.

The capital stock of the company was $1,000,000 and it was issued about the time of the incorporation. It does not seem that it represented money actually paid into the treasury, nor the value of property transferred to the company, nor definite services rendered, though it may be assumed that some 50 shares were issued upon a definite consideration. Some of the stockholders had procured options which went to the company. Some had advanced or loaned money. It was intended that all the authorized capital stock should be distributed leaving none in the treasury. The distribution, if not tentative, and there is much to indicate that it was only tentative, was upon a basis which does not appear.

On December 16, 1915, apparently in view of the contemplated settlement of the company's debts, it was voted at a meeting of the stockholders that all of the stock be surrendered and canceled. All except the 50 shares and perhaps a few others were surrendered and canceled and the certificates were returned and attached to the studs in the stock book. A certificate of one share was then issued to each member surrendering his stock, some seven in all. No more stock was issued until February 9, 1916.

Negotiations for the settlement of the company's debts through a bond issue proceeded satisfactorily. On January 14, 1916, at a meeting of the creditors and stockholders, an agreement was made whereby the greater portion of the creditors agreed to accept bonds, and the issuance of bonds in the amount of $350,000 secured by a trust deed was authorized, and afterwards the deed was executed and the bonds were issued. At this meeting Paust and Cooke agreed to take $10,000 in stock and $5,000 of bonds in payment of their account stated and their subsequent services in inducing creditors to take bonds in lieu of cash. On February 9, 1916, $10,000 in stock was delivered to Paust and Cooke and they accepted it along with their bonds and their claims against the company were satisfied. Paust soon after was...