Woodward v. Sonnesyn
| Decision Date | 03 April 1925 |
| Docket Number | No. 24090.,24090. |
| Citation | 162 Minn. 397,203 N.W. 221 |
| Court | Minnesota Supreme Court |
| Parties | WOODWARD v. SONNESYN et al. |
Appeal from District Court, Hennepin County; W. W. Bardwell, Judge.
Action by Dudley K. Woodward, Jr., as receiver of the Northern Oil & Gas Company, against E. C. Sonnesyn and others. Judgment for plaintiff. From an order denying defendants' motion for amended findings or for new trial, defendants appeal; and, from an order denying plaintiff's motion for amended findings or for new trial of certain issues, plaintiff appeals. Both orders affirmed.
H. E. Fryberger and Olof L. Bruce, both of Minneapolis, for appellants.
George S. Grimes, of Minneapolis, for respondent.
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 & 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 & 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 10 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 cancellation 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 cancellation; that certain specified claims against the corporation have been filed and allowed by the Texas court: that other claims exist the time for filing which has not expired; that the 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 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 National Bank v. Gustin, etc., Co., 42 Minn. 327, 44 N. W. 198, 6 L. R. A. 676, 18 Am. St. Rep. 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 convenience the excess of the par value above the price for which stock is issued will be referred to as bonus stock to distinguish it from the unpaid part of the subscription or purchase price.
The Texas Constitution provides:
"No corporation shall issue stock or bonds except for money paid, labor done or property actually received." Article 12, § 6.
The Texas statute provides:
"The stockholders of all private corporations created for profit with an authorized capital stock under the provisions of this chapter, shall be required, in good faith, to subscribe the full amount of its authorized capital stock, and to pay fifty per cent. thereof before said corporation shall be chartered." Article 1125, Vernon's Sayles' Ann. Civ. Texas Statutes 1914.
We understand the Texas courts to hold that the capital stock of a corporation, including any unpaid part of the par value thereof, is a trust fund for the payment of its liabilities; that the capital stock cannot be lawfully issued for less than its par value in money or its equivalent; that the corporation while a going concern may collect unpaid subscriptions, but is estopped from collecting the bonus part of stock which it has assumed to issue as fully paid up; that when a corporation goes into the hands of a receiver, it is his duty to collect unpaid subscriptions and also the bonus part of stock issued for less than par or for property taken at an overvaluation, if needed to pay liabilities; and that in a suit by a creditor or by a receiver for the benefit of creditors, stockholders will not be heard to assert any contract or arrangement with the corporation purporting to relieve them from liability for any part of the par value of stock issued to them, unless it appears that the creditors gave the credit before the issuance of the stock or had full knowledge of all the facts at the time they gave the credit. Mathis v. Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1015; Herf & Frerichs Chem. Co. v. Brewster, 54 Tex. Civ. App. 217, 117 S. W. 880; Thompson v. First State Bank (Tex. Civ. App.) 189 S. W. 116; Mason v. First Nat. Bank (Tex. Civ. App.) 156 S. W. 366; Nenny v. Waddill, 6 Tex. Civ. App. 244, 25 S. W. 308; Cole v. Adams, 19 Tex. Civ. App. 507, 49 S. W. 1052; Washer v. Smyer, 109 Tex. 398, 211 S. W. 985, 4 A. L. R. 1320; O'Bear-Nester Glass Co. v. Antiexplo Co., 101 Tex. 431, 108 S. W. 967, 109 S. W. 931, 16 L. R. A. (N. S.) 520, 130 Am. St. Rep. 865; Showalter v. Laredo Imp. Co., 83 Tex. 162, 18 S. W. 491.
While the trust fund doctrine has not been adopted to this state, stockholders who have received bonus stock are held liable for the debts of the corporation to substantially the same extent as under the laws of Texas. First National Bank v. Gustin, etc., Co., 42 Minn. 327, 44 N. W. 198, 6 L. R. A. 676, 18 Am. St. Rep. 510; Hospes v. Northwestern M. & C. Co., 48 Minn. 174, 50 N. W. 1117, 15 L. R. A. 470, 31 Am. St. Rep. 637; Hastings Malting Co. v. Iron Range Brewing Co., 65 Minn. 28, 67 N. W. 652; Downer v. Union Land Co., 113 Minn. 410, 129 N. W. 777; Randall Printing Co. v. Sanitas M. W. Co., 120 Minn. 268, 139 N. W. 606, 43 L. R. A. (N. S.) 706; Mackall v. Pocock, 136 Minn. 8, 161 N. W. 228, L. R. A. 1917C, 390; State Bank v. Kenney B. I. Co., 143 Minn. 236, 173 N. W. 560.
Defendants invoke the rule, applied in Texas as well as in this state, that creditors who gave credit knowing the facts concerning the...
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