Woodward Jr. v. Sonnesyn
| Decision Date | 03 April 1925 |
| Docket Number | 24,090 |
| Parties | DUDLEY K. WOODWARD JR. v. E. C. SONNESYN AND OTHERS |
| Court | Minnesota Supreme Court |
Action in the district court for Hennepin county. The case was tried before Bardwell, J., who ordered judgment in favor of the receiver. Defendants appealed from an order denying their motion for a new trial. Plaintiff appealed from an order denying his motion for a new trial. Affirmed on both appeals.
Rights of Texas receiver who sues here subordinate to those of Minnesota creditors.
1. A receiver appointed by a Texas court to wind up the affairs of a dissolved Texas corporation is permitted to sue in the courts of this state as a matter of comity. His rights however, are subordinate to those of local creditors.
Rights and duties of stockholders fixed by laws where company is incorporated.
2. The rights and obligations of stockholders in a corporation are determined by the laws of the jurisdiction creating the corporation.
Texas law as to issue of stock.
3. The laws of Texas forbid the issuance of stock for less than its par value in money or its equivalent, and require all stock to be subscribed and one-half thereof to be paid in before the charter is issued.
Purchaser of stock liable to subsequent creditors for par value of stock; otherwise as to company.
4. Under the laws of Texas a purchaser cannot relieve himself from liability to subsequent creditors for the full par value of his stock by any contract with the corporation, but the corporation is estopped from collecting more than he contracted to pay.
When subsequent creditors may recover on bonus stock.
5. Subsequent creditors are presumed to be entitled to recover on bonus stock, but the presumption may be overcome by showing that they knew the facts.
Receiver representative of creditors.
6. The receiver represents creditors and may enforce their rights.
Allowance of claims and fees by Texas court not questioned in Minnesota action.
7. The validity of claims and fees allowed by the Texas court cannot be questioned in this action.
Duty of court in winding-up proceeding.
8. It is the province of the court winding up a corporation to determine the respective rights and obligations of all parties, and to collect available funds and distribute them to the parties entitled thereto.
When holders of bonus stock may defeat recovery by receiver.
9. Holders of bonus stock cannot defeat recovery thereon by a receiver, unless it appears that there are no claims for which they are liable.
False representations of seller of stock no defense against receiver.
10. False representations inducing the purchase of stock are not available as a defense against the receiver of an insolvent corporation.
Finding sustained.
11.The finding that defendants were subscribers for the stock is sustained by the evidence.
Holders of bonus stock which is canceled not liable to subsequent creditors.
12. Holders of bonus stock which was surrendered and canceled are not liable to subsequent creditors.
Trustees of unsold stock not personally liable.
13. Holders as trustees for the corporation of unsold stock are not personally liable thereon.
* Headnote 1. See Corporations, 14 C.J. p. 1339, § 4046 (1926 Anno).
Headnote 2. See Corporations, 14 C.J. p. 991, § 1536.
Headnote 3. See Corporations, 14 C.J. p. 154, § 155; p. 156 § 156; p. 443, § 605.
Headnote 4. See Corporations, 14 C.J. p. 450, § 610; p. 952, § 1480.
Headnote 5. See Corporations, 14 C.J. p. 1126, § 1773 (1926 Anno).
Headnote 6. See Corporations, 14a C.J. pp. 990, 991, § 3232.
Headnote 7. See Judgment, 34 C.J. p. 1135, § 1611.
Headnote 8. See Corporations, 14a C.J. p. 1088, § 3679.
Headnote 9. See Corporations, 14a C.J. p. 1188, § 3874.
Headnote 10. See Corporations, 14a C.J. p. 1190, § 3875 (1926 Anno).
Grimes & Maxwell, for plaintiff.
H. E. Fryberger and Olof L. Bruce, for defendants.
The receiver appointed in proceedings, brought by the state of Texas in the courts of that state, to dissolve and wind up the affairs of the Northern Oil and Gas Company, a corporation of that state, brought this action in the courts of this state to recover the unpaid portion of the par value of the capital stock issued by the corporation to the defendants, residents of this state.
The court found, in substance, that the Northern Oil and Gas Company was organized as a corporation under the laws of the state of Texas, on May 8, 1917, with a capital stock of $200,000 divided into shares of the par value of $100 each; that the laws of Texas forbade the issuance of such stock for less than its par value, and required all thereof to be subscribed for, and one-half the amount thereof to be paid in, at or before the issuance of its charter; that the organizers of the company represented, and its charter set forth, that all its capital stock had been subscribed and paid in at the time the company was organized; that in fact only a small portion of its capital stock had been subscribed for or paid in at that time; that in January, 1921, the attorney general of the state of Texas brought an action in the proper court of that state to forfeit the charter of the company for failure to comply with the laws of Texas and for fraud in organizing the company; that in that action the charter of the company was duly forfeited and annulled, and the corporation dissolved; that in January, 1921, the plaintiff, Dudley K. Woodward Jr., was duly appointed receiver of the corporation and of all its property and assets with authority to collect all claims due to the corporation, whether for stock subscriptions, for unpaid stock, or otherwise, and to prosecute any and all suits necessary for that purpose; that Woodward duly qualified as such receiver and ever since has been and still is acting as such; that on May 22, 1917, the corporation issued to each of the defendants except Thomas and Elise Tonneson 60 shares of its capital stock for which each of such defendants except Theodore Tennyson paid the sum of $2,000 and no more; that Tennyson paid $1,000 for the 60 shares issued to him and no more; that 50 shares were issued to Thomas Tonneson and ten shares to Elise Tonneson for which they paid $2,000 and no more; that all of the stock issued and paid for as above stated was a part of the original issue of the stock of the corporation; that in October, 1917, each of the defendants surrendered to the corporation for cancelation one-third of the stock issued to him as above set forth; that under the constitution and laws of the state of Texas the defendants are indebted and liable to the corporation and its creditors for the unpaid part of the par value of the stock issued to them, as above set forth, and not returned for cancelation; that certain specified claims against the corporation have been filed and allowed by the Texas court; that the other claims exist, the time for filing which has not expired; that only assets of the corporation are the claims against the stockholders thereof for unpaid subscriptions upon the capital stock; and that the Texas court had duly authorized the receiver to bring and prosecute the present suit.
As conclusions of law the court found that the receiver was entitled to judgment against each of the defendants for the unpaid amount of the par value of the capital stock issued to him and not surrendered, and directed that judgment be entered accordingly.
Defendants made a motion for amended findings or for a new trial. Plaintiff also made a motion for amended findings or for a new trial of certain issues. Both motions were denied and both parties appealed. We will first consider the questions raised on defendants' appeal.
DEFENDANTS' APPEAL.
Defendants contend that the receiver appointed by the Texas court cannot maintain this action in the courts of this state; that he can bring suit only in the courts of Texas. It is true that a receiver cannot bring suit in the courts of another state as a matter of right unless vested with title to the property or assets which he seeks to recover. Herf & Frerichs Chem. Co. v. Brewster, 54 Tex. Civ. App. 217, 117 S.W. 880, apparently holds that in Texas the receiver of an insolvent corporation is vested with title to its property. In the present case the corporation was dissolved at the instance of the state of Texas and is insolvent, and plaintiff as receiver is charged with the duty of winding up its affairs. The title to its property may have vested in him under the Texas law; but we have no occasion to decide that question, for this state permits a foreign receiver to sue in its courts as a matter of comity, taking care to protect the rights of its own citizens by holding that the rights of a foreign receiver are subordinate to those of local creditors. Comstock v. Frederickson, 51 Minn. 350, 53 N.W. 713; Stevens v. Tilden, 122 Minn. 250, 142 N.W. 315; Goldman v. Christy, 155 Minn. 91, 192 N.W. 360. Most of the state courts permit such suits. 23 R.C.L. 141-144; and numerous authorities cited in note found in 5 Ann. Cas. 570, and Ann. Cas. 1913D, 1296. The Federal decisions cited by defendants do not control the state courts in this respect.
The corporation having been created and organized under and pursuant to the laws of Texas, the rights and obligations of its stockholders are fixed and determined by the laws of that state. First Nat. Bank v. Gustin M.C.M. Co. 42 Minn. 327, 44 N.W. 198, 6 L.R.A. 676, 18 Am. St. 510; Axford v. Western Syndicate Inv. Co. 141 Minn. 412, 168 N.W. 97, 170 N.W. 587; 7 R.C.L. 354.
The stock in question was issued as fully paid up and nonassessable, and defendants contend that they are not liable for the unpaid part of its par value. For...
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