Troup v. Horbach

Citation74 N.W. 326,53 Neb. 795
Decision Date17 February 1898
Docket Number9375
PartiesELSIE D. TROUP ET AL., APPELLEES, v. PAUL W. HORBACH ET AL., APPELLANTS
CourtSupreme Court of Nebraska

APPEAL from the district court of Gage county. Heard below before LETTON, J. Reversed.

REVERSED AND REMANDED.

John D Howe, for appellants:

Purchase of stock and payment in property at more than its real value will not enable a creditor giving credit to the corporation with full knowledge of the facts to charge the stockholder with the difference between the real value of the property and the value at which it was taken. (3 Thompson Corporations sec. 2932; Bank of Fort Madison v Alden, 129 U.S. 372; Thompson v. Bemis Paper Co., 127 Mass. 595; Hospes v. Northwestern Mfg. & Car Co., 50 N.W. 1117 [Minn.]; Adamant Mfg. Co. v. Wallace, 48 P. 415 [Wash.]; First Nat. Bank v. Gustin Minerva Consolidated Mining Co., 44 N.W. 198 [Minn.]; Coit v. Gold Amalgamating Co., 119 U.S. 343; Rickerson Roller-Mill Co. v. Farrell Foundry & Machine Co., 75 F. 554.)

John A. Horbach was not a stockholder, as each party must consent--the one to become a member, and the other that he should become a member of the corporation. (Essex Turnpike Corporation v. Collins, 8 Mass. 299; Angell & Ames, Corporations sec. 527, and cases cited.)

Other references in an argument on the non-liability of appellants: Gilke v. Dawson Town & Gas Co., 46 Neb. 333; Wood v. Dummer, 3 Mason [U.S.] 308; Gorder v. Plattsmouth Canning Co., 36 Neb. 549; Jackson v. Traer, 64 Ia. 469; New Albany v. Burke, 11 Wall. [U.S.] 96; Steacy v. Little Rock & Ft. S. R. Co., 5 Dil. [U.S. C. C.] 348; Welster v. Upton, 91 U.S. 65; Upton v. Tribilcock, 91 U.S. 45; Phelan v. Hazard, 5 Dil. [U.S.] 45; Hart v. Lauman, 29 Barb. [N. Y.] 410; Moore v. Hudson River R. Co., 12 Barb. [N. Y.] 156; Porter v. Buckfield B. R. Co., 32 Me. 539; Memphis & L. R. Co. v. Dow, 120 U.S. 287; Peoria & S. R. Co. v. Thompson, 103 Ill. 187; Shaw v. Robinson, 50 Neb. 403; Morgan v. Brower, 77 Ga. 627; Flinn v. Bagley, 7 F. 785; Hatch v. Dana, 101 U.S. 205; Graham v. Railroad Co., 102 U.S. 148; Gilman v. Gross, 72 N.W. 885 [Wis.]; Coleman v. White, 14 Wis. 762; Hadley v. Russell, 40 N.H. 109; Farmers Loan & Trust Co. v. Funk, 49 Neb. 353; Adler v. Milwaukee Patent Brick Mfg. Co., 13 Wis. 57; Griffith v. Mangam, 73 N.Y. 611; Morgan v. New York & A. R. Co., 10 Paige Ch. [N. Y.] 290; Mann v. Pentz, 3 N.Y. 415; Pollard v. Bailey, 20 Wall. [U.S.] 520; Terry v. Little, 101 U.S. 216; Patterson v. Lynde, 106 U.S. 519; Niver v. Crane, 98 N.Y. 40.

Charles Offutt, also for appellants:

The contracts between the Horbachs and the transit and power company were not frauds upon the creditors of the corporation, not a single creditor was injured by either of the contracts, John A. Horbach was never a shareholder either in fact or beneficially, and appellants are not liable. (Fogg v. Blair, 139 U.S. 118; Christensen v. Eno, 106 N.Y. 97; Van Ostrand v. Reed, 1 Wend. [N. Y.] 424.)

The shares of stock issued to Paul W. Horbach were not subscribed by either of the Horbachs or by Lantry. These shares had all been previously issued by the company to the original or other shareholders, and were by the holders voluntarily surrendered to the company to enable it to execute its agreement with Horbach. Hence the shares issued to Horbach were assets of the company which it had the right to sell for what it could get, and the purchaser or owner of such shares incurred none of the liabilities of a subscriber to shares, nor any liability to pay the difference between the par value of the shares and what had been previously paid thereon. (1 Cook, Stock and Stockholders [3d ed.] sec. 29; Ramwell's Case, 50 L. J. Ch. [Eng.] 827; Otter v. Brevoort, 50 Barb. [N. Y.] 247; People v. Allany & S. R. Co., 55 Barb. [N. Y.] 371; Lake Superior Iron Co. v. Drexel, 90 N.Y. 87; Morrow v. Iron & Steel Co., 87 Tenn. 262; Handley v. Stutz, 139 U.S. 417; Clark v. Bever, 139 U.S. 96; Van Cott v. Van Brunt, 82 N.Y. 535.)

A transferee of shares is not liable for unpaid subscriptions on his shares unless he has agreed with the corporation to pay them. If he has not promised he is not liable. (Seymour v. Sturgess, 26 N.Y. 143; 1 Cook, Stock and Stockholders [3d ed.] sec. 46; Foreman v. Bigelow, 9 Fed. Cases 441; Currie's Case, 3 De Gex, J. & S. [Eng.] 367; De Ruvigne's Case, 5 L. R. Ch. D. [Eng.] 306; Anderson's Case, 7 L. R. Ch. D. [Eng.] 94; Christensen v. Eno, 106 N.Y. 97.)

Existing creditors were not injured by the contracts with the Horbachs, and other creditors had knowledge thereof. Appellees cannot, therefore, complain of these contracts. (First Nat. Bank of Deadwood v. Gustin Minerva Consolidated Mining Co., 42 Minn. 327; Hospes v. Northwestern Mfg. & Car Co., 48 Minn. 174; Handley v. Stutz, 139 U.S. 417; 1 Cook, Stock and Stockholders [2d ed.] sec. 46.)

E. R. Duffie and A. H. Babcock, also for appellants.

J. E. Cobbey and G. M. Johnston, contra:

Lantry having such notice as would put him on inquiry, the burden of showing himself an innocent purchaser rested on him. (Wishard v. Hansen, 68 N.W. 691 [Ia.]; Oswald v. Minneapolis Times Co., 68 N.W. 15 [Minn.].)

The decree was correctly entered. (Commercial Nat. Bank v. Gibson, 37 Neb. 750.)

Appellants are liable. (Gilkie v. Dawson Town & Gas Co., 46 Neb. 333; Elyton Land Co. v. Birmingham Warehouse Elevator Co., 9 So. Rep. [Ala.] 129; Wishard v. Hansen, 68 N.W. 691 [Ia.]; Globe Publishing Co. v. State Bank, 41 Neb. 175; Gogebic Investment Co. v. Iron Chief Mining Co., 47 N.W. 726 [Wis.]; Sanger v. Upton, 91 U.S. 56; Farmers Loan & Trust Co. v. Funk, 49 Neb. 353; State v. German Savings Bank, 50 Neb. 734; Boulton Carbon Co. v. Mills, 43 N.W. 290 [Ia.]; Welles v. Larrabee, 36 F. 866; Preston v. Cincinnati, C. & H. V. R. Co., 36 F. 54; Shields v. Casey, 25 Atl: Rep. [Pa.] 619; Davis v. Stevens, 17 Blatchf. [U.S.] 259; Case v. Small, 10 F. 722; National Bank v. Case, 99 U.S. 628; McKim v. Glenn, 8 A. [Md.] 130; Baines v. Babcock, 27 P. 674 [Cal.].)

A transferee of stock is liable for the balance remaining unpaid upon stock which he purchases or receives, knowing it to be unpaid, though it be issued as fully paid and non-assessable. (White v. Greene, 70 N.W. 182 [Ia.]; Henderson v. Turngren, 35 P. 495 [Utah]; Peninsular Savings Bank v. Black Flag Stove Polish Co., 63 N.W. 514 [Mich.]; Hastings Malting Co. v. Iron Range Brewing Co., 67 N.W. 652 [Minn.]; Scoville v. Thayer, 105 U.S. 225; Calumet Paper Co. v. Stotts Investment Co., 64 N.W. 782 [Ia.]; Carter v. Union Printing Co., 16 S.W. 579; Peck v. Elliott, 79 F. 10; Addison v. Pacific Coast Milling Co., 79 F. 459.)

All creditors becoming such after the corporation authorized the issue of stock may enforce the liability. (Handley v. Stutz, 139 U.S. 417; Webster v. Upton, 91 U.S. 65; Pullman v. Upton, 96 U.S. 331.)

A. C. Troup, Griggs, Rinaker & Bibb, and E. H. Hinshaw, also for appellees.

OPINION

The facts are stated by the commission.

RYAN, C.

This appeal was advanced for hearing upon an agreement of parties in compliance with rule 2. (52 Neb. ix.) The action was brought in the district court of Gage county, wherein there were judgments against the several defendants conformably with the prayer of the petition. Plaintiffs alleged that they were creditors of the Beatrice Rapid Transit & Power Company in various sums which were described in separate paragraphs and in many instances were evidenced by judgments against that company. They further alleged that under a decree of the United States circuit court for the eighth circuit, district of Nebraska, all the property of the Beatrice Rapid Transit Company had been sold and that it was without any property for the payment of its aforesaid indebtedness. The prayer of the petition was as follows: "Wherefore plaintiffs pray that each of said defendants may be held liable for the several amounts hereinbefore claimed due from them upon the stock of the Beatrice Rapid Transit & Power Company, as hereinbefore alleged, and that said defendants, and each of them, may be required to pay to these several plaintiffs the amounts of their several claims; that the court may adjudge the amount due from each may be held and decreed to be due to these several plaintiffs the full amount of their respective claims, and that under the order of this court the amounts so found due from said several defendants may be collected of them, severally, the full amount found to be due to these plaintiffs, together with the costs of this proceeding; that the said John A. Horbach and Paul W. Horbach may be held jointly and severally liable for the amount of stock issued to the said Paul W. Horbach, as hereinbefore alleged, and that the several plaintiffs may have such other further and different relief as in equity they may be entitled to, and for their costs." From this prayer it is clear that the defendants were proceeded against as being liable as holders of shares of the Beatrice Rapid Transit & Power Company capital stock on the assumption that these shares had not been paid for. Issues were joined by answers, except in the instances wherein there were defaults.

To illustrate the general theory on which it was sought to hold liable certain of the stockholders it will be sufficient to quote one sample paragraph of the petition. We shall also quote another paragraph which supplements the allegations of that already referred to. The two paragraphs above indicated are in this language:

"The defendant Beatrice Rapid Transit & Power Company issued to the defendant George R. Scott 115 shares of their capital stock of the par value of $ 11,500; that the only consideration paid by said Scott for the issuing of said stock was services rendered to the said rapid transit company, and real...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT