Webber v. LeIghton

• Decision Date: 30 March 1880
• Parties: JOHN W. WEBBER ET AL., Respondents, v. GEORGE E. LEIGHTON ET AL., Appellants.
• Court: Missouri Court of Appeals

8 Mo.App. 502

JOHN W. WEBBER ET AL., Respondents,

v.GEORGE E. LEIGHTON ET AL., Appellants.

St. Louis Court of Appeals, Missouri.

Mar. 30, 1880.

In a proceeding, under the statute, against a holder of unpaid shares by a creditor of the corporation, the shareholder may offset a matured indebtedness of the corporation to him.

APPEAL from the St. Louis Circuit Court.

Reversed and remanded.

GLOVER & SHEPLEY, for the appellants, cited: Schaeffer v. Phœnix Brewery Co., 4 Mo. App. 120; Noell v. Gaines, 68 Mo. 649; Pond v. Smith, 4 Conn. 295; Railroad Co. v. Rhodes, 8 Ala. 206; McClellan v. Kinnaird, 9 Gratt. 352; Marshall v. Cooper, 43 N. Y. 46; Lindsay v. Paige, 2 Paige, 581.

J. H. WIETING, with whom are I. C. TERRY, and BROADHEAD, SLAYBACK & HAEUSSLER, for the respondents: As against a creditor moving for execution against a stockholder, the latter cannot set off a debt of the corporation. The debts are not mutual, or in the same right.--Thomp. on Stock., sects. 381-387; Story's Eq. Jur. (11th ed.) 1436 a, 1437 b. But, in any event, the principal of the bonds, not being due until the year 1886, cannot be set off. The stockholder, being sued for a debt now due from him to the corporation, in trust for creditors, cannot offset something that the corporation has promised to pay him seven years hence.-- Bradley v. Angell, 3 N. Y. 475; Scogin v. Hudspeth, 3 Mo. 123. The provision of the third-mortgage deed (not inserted in the bonds at all) that the bonds shall become due, in certain contingencies, before their date of maturity, was intended merely to facilitate distribution of the proceeds by the trustees in case of foreclosure and sale of the mortgaged property, and does not make the bonds due for other purposes.-- Morgan v. Martien, 32 Mo. 438; Mason v. Barnard, 36 Mo. 384; Hurck v. Erskine, 45 Mo. 484; Whelan v. Riley, 61 Mo. 565.

BAKEWELL, J., delivered the opinion of the court.

The case was submitted with Keystone Bridge Company v. Barstow, ante, p. 494. The statement in that case need not be repeated here; the principles involved in both cases are the same up to a certain point, and are investigated in Skrainka v. Allen, 7 Mo. App. 433, to which we refer.

The additional question in this case arises on this state of facts: Bridge, in his lifetime, purchased of the corporation twenty-five of its bonds, each for $1,000, with annual interest at seven per cent, with interest coupons. The bonds were dated March 1, 1874, and, by their terms, matured in March, 1886. The bonds vested in the trustees of Bridge before judgment against the company. The interest after March was unpaid, and due at semi-annual periods. Bridge had paid $15,000 for the bonds. These bonds were secured by a third mortgage, which secured a series of bonds amounting to $3,000,000. The mortgage provided that the bonds, though not due on their face, should mature at once if certain conditions were broken. It was admitted that these conditions had been broken, by non-payment of interest and default as to the two prior mortgages, and that, under the former mortgages, a decree of foreclosure and sale had been obtained on December 20, 1878, the property in each mortgage being the same. The trial court in this case deducted from the amount found to be unpaid on the shares of Bridge the coupons due at the date of the motion for execution against defendants as shareholders of the corporation, but refused to credit the unpaid stock with the principal of the bonds.

The only question presented for our determination is, whether the trial court committed error in refusing to allow the trustees of Bridge, who stand before the court precisely as Bridge would do if alive, to set off, as against the amount due by them for unpaid stock, the principal sum represented by the bonds of the corporation held by defendants, and which appellants claim are not due. As to this, appellants contend that the bonds are not due, but that if they were due they would constitute no defence to this motion. And appellants do not admit that the action of the trial court in allowing defendants credit for the matured interest was correct.

So far as the interest due is concerned, we see nothing erroneous in the action of the trial court. Stockholders who owe the company for their subscription may nevertheless obtain judgment against the corporation for any balance due them, and, as judgment creditors of the corporation, may proceed under the statute against other stockholders, as we held in Schaeffer v. Phœnix Brewery Company, 4 Mo. App. 116. They can, therefore, offset an indebtedness of the corporation to them against a claim for unpaid stock at the suit of a judgment creditor of the corporation. A stockholder, with us, is in no worse position than another creditor. Where, as in England, there are winding-up acts, in the nature of bankruptcy acts, framed on the principle of an equitable distribution of the assets pro rata amongst creditors, the amount due by a stockholder for the stock could not be reached by a shareholder of unpaid stock, being a creditor, in such a way as to give him a preference over other creditors. He would be compelled first to pay for his stock, and then to come in with other creditors. The liability for stock unpaid, whether created by statute under a double-liability clause or not, is a trust fund for the benefit of creditors, and for all creditors, undoubtedly; and they look to it, and perhaps rely upon it, in giving credit to the company. Nevertheless, the company, whilst viable, if it is attempted to call it in, could be met by any claim for offset on the part of a stockholder. The question would be, how much, if anything, on striking a balance, does the stockholder really owe for his stock? And we think that, under our statute, it is meant that the stockholder should be liable to a judgment creditor, not for the difference between the amount actually paid on account of stock and the par value of the stock, but for the amount which, after deducting the amount due by the company to the stockholder, would be found to be unpaid. Though a creditor who is a stockholder cannot, in general, recover the full amount of his debt by an action at law against another stockholder, but must proceed in equity for contribution, yet we have held that a judgment creditor, though a stockholder holding unpaid stock, is not therefore precluded from proceeding against another stockholder, under the Corporation Act, for the satisfaction of his execution. In New York it has been held...