Whitehill v. Jacobs

• Decision Date: 07 January 1890
• Citation: 44 N.W. 630,75 Wis. 474
• Parties: WHITEHILL v. JACOBS ET AL.
• Court: Wisconsin Supreme Court

75 Wis. 474

44 N.W. 630

WHITEHILL

v.JACOBS ET AL.

Supreme Court of Wisconsin.

Jan. 7, 1890.

Appeal from circuit court, Milwaukee county; D. H. JOHNSON, Judge.

The action is in the nature of a creditor's suit, brought by the plaintiff, (who is a judgment creditor of the defendant the Jacobs Electric Company,) after execution on his judgment had been returned unsatisfied, to enforce payment of the jud ment. It was brought in behalf of the plaintiff and all other creditors of that company who should elect to become parties to it. The company is an insolvent corporation, and the plaintiff is a stockholder in it. The other stockholders, together with the company, are the defendants in the action. The complaint alleges that the defendants, Jacobs and Murphey (two of the promoters and original stockholders of the corporation) have not paid the par value of their stock. The relief demanded is that an account be taken of the assets and debts of the company; that a receiver of such assets be appointed; and that Jacobs and Murphey be held liable to pay to the receiver the full par value of their stock, for the benefit of the creditors of the company. The complaint seems to have been drawn in accordance with the views and suggestions of this court in Adler v. Manufacturing Co., 13 Wis. 57. It appeared on the trial, and the court found, that the defendant corporation was duly organized by the defendants Jacobs and Murphey, and one Lennox, for the manufacture and sale of certain electrical apparatus, invented by Jacobs, to regulate the temperature of rooms heated by furnaces, for which applications for patents had been made by Jacobs, and which patents were afterwards granted. Jacobs assigned a one-half interest in such prospective patents to Murphey and Lennox, and the three agreed to assign the patents, when issued, to the corporation. Such agreement was assigned to the corporation, but the patents have not been so assigned. Soon after the organization of the corporation, Lennox assigned his stock to Jacobs, with the consent of Murphey, and Jacobs, with like consent, assigned it to the defendant Weil. The capital stock of the corporation was fixed at $100,000, and nothing was ever paid for the stock, except the transfer to the corporation of the equitable title to such patents, by means of the assignment to it of the agreement in respect thereto between Jacobs, Murphey, and Lennox. Certificates for the whole of the stock were issued to Jacobs, Murphey, and Lennox,--one-half to Jacobs, and one-fourth to each of the others. Immediately thereafter Jacobs transferred 40 shares thereof--or $4,000, par value--to the plaintiff, who still holds the same. The demand of the plaintiff against the corporation accrued after he thus became one of the stockholders therein. The court found that such inventions and prospective patents were not valued by the defendants Jacobs, Murphey, Lennox, and Weil at more than $50,000 when the same were assigned to the corporation, or when the corporation was organized; also that all the stockholders, when they became such, had notice of all the foregoing facts. There is no charge of actual fraud in the complaint or findings against any of the stockholders. The pleadings and the findings of fact and conclusions of law are very elaborate and voluminous, but the judgment of this court goes upon grounds which render it unnecessary to state them more fully. The judgment appoints a receiver of the assets of the insolvent corporation, with the usual powers; requires the defendant Jacobs to assign to him such letters patent, and directs the receiver to sell such assets, including the patents, and to convert the same into cash. It also appoints a referee to ascertain the amount of debts owing by the corporation, and adjudges each stockholder liable up to 50 per cent. of the par value of his stock, to pay his pro rata share of the indebtedness which shall remain unpaid, after applying theretothe proceeds of such assets. Costs are awarded against “the defendant,” but no one of the defendants is named. The defendant Murphey appeals from so much of the judgment as holds him liable as a stockholder for the indebtedness of the corporation; also from the judgment for costs. The defendant Jacobs appeals from the same personal liability clause; also from the portion which requires him to assign the letters patent to the receiver. The defendant Weil appeals from the personal liability clause alone. Each has appealed separately.

D. S. Rose, Turner & Timlin, and N. S. Murphey, for appellants.

Stark & Sutherland, for respondent.

LYON, J., ( after stating the facts as above.)

The statute under which the defendant corporation was organized authorized the issue of the stock of the corporation in consideration of labor or property as well as money, but requires that such labor or property shall be estimated at its true money value, and the same must be actually received by the corporation. Rev. St. § 1753. We cannot doubt that the inventions by Jacobs of his electrical apparatus, for which he had applied for letters patent, and the prospective patents, were “property,” within the meaning of the above statute; and that his assignment of an interest therein to Murphey and Lennox, their agreement to assign the patents, when issued, to the Jacobs Electric Company, and the assignment of such agreement to that corporation, vested in the corporation the equitable title to the patents which were afterwards issued to Jacobs. Had such agreement and assignments been recorded in the patent-office before letters patent were issued, it is probable the same would have issued to the corporation as assignee. It seems clear, therefore, that the corporation is the owner of the whole beneficial interest in the patents,--Jacobs only holding the naked legal title thereto for its use and benefit,--and hence that he ought to surrender such title to the receiver for the benefit of the creditors of the corporation. We cannot see how any equities between Jacobs and the other stockholders of the corporation, or the fact that the plaintiff is one of the stockholders, can change the result.

The question discussed in each of the appeals is whether, under the circumstances of the case, the defendant stockholders are, or either of them is, liable for the indebtedness of the corporation remaining unpaid after its assets shall be exhausted. No other creditor of the corporation has elected to be made a party to the action, and it does not very clearly appear that the corporation has any creditors besides the plaintiff and certain other of its stockholders. Jacobs names two possible creditors besides himself, but does not state the amount of their demands. The court found, in effect, that all the stockholders were chargeable with notice, and had actual notice when they took their stock, that no consideration was paid therefor beyond the assignment to the corporation of the inventions and prospective patents above mentioned, except certain advances made by Murphey and Lennox for the benefit of the company. The evidence is conclusive that such advances were not made on account of stock, but as loans to the company, to be repaid. This appears in the agreement between Jacobs, Murphey, and Lennox, of the existence of which the court found the plaintiff had notice before he gave...