165 Pa. 489 | Pa. | 1895
Opinion by
This bill was filed by creditors of the Bad.en Gas Company, a corporation organized under the act of 1885, known as the Natural Gas Act. The relief prayed for, and obtained under the decree appealed from, is an adjudication that the defendants are liable to the receiver for the amount of the capital stock of the Baden Gas Company subscribed for by each of them, and that they pay the same over in money for the benefit of the plaintiffs and other creditors of the corporation which is admitted to be insolvent. The defendants admit the fact that they were subscribers to the capital stock of the Baden Gas Company, but insist that their subscriptions were paid in full, in property transferred by them to the corporation, immediately after its organization. The liability of the defendants depends therefore upon their allegation of actual payment; and this can be intelligently determined only upon a careful consideration of the facts and circumstances attending the organization of the gas company, and their legal value.
The fourth finding of fact made by the learned master, adopted by the learned judge of the court below, and conceded on all hands to be correct, informs us that the defendants and others who composed the Baden Gas Company had been previousfy associated in business under the firm name of the Allegheny Oil Company. The master then proceeds in this finding to tell us that “ The Baden Gas Company was organized to take the place of the said Allegheny Oil Company, and the said subscribers, soon after their incorporation, proceeded to sell and transfer the gas property and interests of the said Allegheny Oil Company and 1300,000 of their subscribed stock to the said Baden Gas Company for a price equal to the corporate stock of the latter company, to wit, 1500,000.”
In the fifth finding of fact we are informed that the gas property and interests so transferred consisted of between four and five thousand acres of gas leases including two large producing gas wells, certain rights of way, ordinances for th'e introduction of gas into the boroughs of Freedom, Baden, Sewickley, Osborne, Glenfield, West Bellevue and Bellevue, and contracts for the supply of gas, and certain patents relating to the business of transporting gas. All this property belonged to the Allegheny Oil Company and was transferred by that-
The seventh finding assures us that the $325,000 of capital stock set apart to provide a working capital was actually turned into the treasury of the corporation and used in the manner contemplated. Shares amounting at par to $55,000 were sold for cash at eighty cents on the dollar and the proceeds used in the business of the corporation. The balance of the stock was used in the extension of its lines to Allegheny City; and at the date of the filing of this bill not one share out of the entire amount remained in the treasury undisposed of. But in the execution of the sale from the oil company to the Baden Gas Company and in the payment of the subscriptions to the capital, a clumsy device was resorted to. A half million of dollars was apparently raised on a note signed by the members of the oil company and placed to the credit of the treasurer of the corporation in the Fifth National Bank as payment for the stock. It was checked back to the treasurer of the oil company as payment for the property bought by the corporation from the oil company. The property was then conveyed, the stock issued and disposed of as already stated, and the note taken out of bank. Not a dollar in actual money was used in the
Let us turn then from the method of organization to the facts showing the situation of the parties, their general plan for the development of their property, the necessity for obtaining corporate powers, and the provision made for a working capital with which to enter upon the proposed corporate enterprise. The corporators had been partners. As such they had been engaged in procuring leases and drilling wells in search for oil. In this search they had not been successful; but two of the wells drilled by them proved to be valuable gas wells. This, taken in connection with other developments in the same general region, was well calculated to induce the belief that they were the possessors of a large and valuable gas territory that should be promptly developed 'and utilized or its value would steadily decline by reason of drainage from the operations of others. Thejr could not utilize their gas without transporting it to a market. They could not transport it to advantage except as a natural gas company possessing the powers conferred by the act of 1885. This determined them to organize a corporation under the provisions of that act for the production and transportation of natural gas, and to transfer their gas wells and leases, covering over four thousand acres, to the corporation. When this had been decided on, the first question to present itself was how shall the partnership convey its property to the corporation so as to secure to its members the same relative interest in the stock of the corporation they now have in the partnership property ? The next question was how shall we secure the necessary working capital to enable the corporation to go forward with the work of produc
Now let it be conceded that this was neither the safest nor most business-like way of securing a working capital. Let it be conceded further that the use of the note in the Fifth National Bank and the ceremony of first crediting and then debiting the treasurer with a half million of dollars without the handling of a dollar in money, was an unfortunate device liable to be misunderstood and calculated to excite suspicion. The question remains, nevertheless, for our consideration, was it the method actually adopted for the accomplishment of the ends in view? There is no suggestion by'the master that it was fraudulently intended or that it was not faithfully carried out. On the contrary he finds in the twelfth finding of fact that the “ Baden Gas Company never made any calls upon its subscribers for airy payment upon their stock, but treated the bank credit transaction set forth as payment in full upon the said stock.” It is evident therefore that, whether wise or unwise, the scheme we have outlined was that which these parties actually adopted and upon which they acted in good faith.
In the seventh finding of fact we learn also that the whole amount of the $325,000 contributed in stock as a working capital was sold or used in the extension of the pipe lines of the corporation and the prosecution of its business in producing and transporting natural gas. The learned master however lost sight of his own findings of fact, for in his first finding of law he says: “ I cannot however see anything but an idle performance in the use of these notes, credits and. checks, or in any temporary shuffling of money, had that been done; ” and
In what respect then have the defendants failed in the performance of their undertaking to the Baden Gas Company ? The shares of stock nominally issued to them, but to be returned into the treasury of the company for sale for its benefit, have been so returned by them and have been actually disposed of by the company in the prosecution of its enterprises and the extension of its pipe lines. The shares of stock which they were to retain as the price of the gas wells, leases, patents, rights of way, and other propertjr of the Allegheny Oil Company were paid for in full in accordance with the written agreement entered into by the parties and delivered to the defendants as paid-up stock. The gas company has no claim on the defendants therefore resting in contract, and there cannot be found in the bill or the findings any averment of fraud in fixing
The learned judge felt the stress of the situation and found relief in the proposition “ that the facts in evidence, connected with the fact that within a few months it was demonstrated that the property was of very small value, threw on the defendants the burden of showing clearly that the sale from themselves to themselves was in good faith on a reasonable belief of the value of the property.” But what has the fact that, after some months spent in development of their territory, the corporation found itself disappointed in its productiveness and a heavy loser in consequence, to do with the good faith of their purchase, or the reasonableness of the price ? These are to be judged of by the facts before them when the arrangement was made. The character of the gas wells already opened, the extent of the territory covered by the leases, its relation to other developments, its nearness to an adequate' market, and the probable duration of the sugply within reach, were the considerations that would affect the judgment of buyers and sellers and of the business public as to its value. The subsequent disappointment must therefore be left out of the case and the transaction examined in the light in which it was seen when the agreement was entered into. When this is done, and the absence of any suggestion or finding of fraud is remembered, it is not easy to see what there is in the case to shift the
The decree is reversed so far as it requires payment of the stock subscriptions or any part thereof. It is allowed to stand as to costs.
And now, October 26,1894, this appeal came on to be heard and was argued by counsel, whereupon, on consideration thereof, it is ordered, adjudged and decreed that the decree be reversed except in so far as it relates to the payment of costs, and that the bill be dismissed.