The following opinion was filed February 2,1900:
As will be seen from the foregoing statement of facts, the trial court did not find actual fraudulent intent on the part of the Hadfields or the Hadfield Company to defraud either existing or prospective creditors of the company in conveying the Menominee quarries to the stone company, although such intent to defraud was charged -in the complaint, but the court found in effect that the Had-field Company was hopelessly insolvent in March, 1890, when the transfer was made; that the transfer was a transfer without consideration by directors of an insolvent corporation to themselves, and was hence void as matter of law as to the plaintiff and all creditors of the Hadfield Company; and that the quarry company took the property with notice,, both actual and constructive, of the facts constituting the fraud; and hence that both of the conveyances attacked should be set aside. These are the facts, then, upon .which the judgment is to be sustained, if sustained at all, namely: that the Hadfield Company was insolvent; that.the directors conveyed corporate property to themselves without consideration ; and that the quarry company took the property charged with knowledge of the facts.
As to the first and foundation fact, upon which the whole fabric depends, namely, the insolvency of the Hadfield Company when the deed was made, the finding is that the liabilities of the company, includi/ng its capital stock, exceeded
"We find ourselves unable to subscribe to this idea. It is true that in the final winding up of the affairs of a corporation, after all creditors are paid (and not until then), the stockholders are entitled to come in and receive payment for their stock. But such rights do not interfere in the least with the claims of true corporate creditors; so that, as far as such creditors are concerned, the ability of the corporation to respond to its stockholders upon stock liability is of no moment. As to creditors the question simply is, Has the corporation ample property to pay them ? not, Has it
The court below found upon sufficient evidence that a part of the present creditors of the Hadfield Company were creditors whose claims existed on the 26th day of March, 1890; hence the question as to the validity of the transfer made on that date must be considered with reference to the rights of creditors then existing. But it is important to observe that, so far as the validity of the transfer depends on the solvency of the company, it must be considered on the basis of the values of property as then fairly estimated and considered; that is, in the light of then existing values, and not in the light of the terrible drop in values which took place after the great financial depression of 1893.
It is entirely apparent from the testimony that the Had-fields considered themselves in excellent financial condition in March, 1890. They certainly owned much property and had a good business. The testimony shows that the business had been begun by them in a small way in 1871, with a small quarry and a small capital, and that it had been rapidly developed, new quarry lands being purchased, railroad switches being laid into the quarries, and the business extended, until soon after the year 1880 it had become a business of very large proportions, making profits of from $10,000 to $15,000 a year. In the year 1890 the Hadfield Company employed 100 men in their stone quarry and business. They operated a store at Waukesha, where many of the men bought their supplies, and made a profit estimated at $2,500 per year therefrom. They had laid out large additions to the village of Waukesha, and built houses thereon, many of which they rented, and they were receiving nearly $4,000 per year from such rentals. They had also accumu
This being the situation, they organized a new corporation (the Menominee Falls Stone Company) for the operation of the Menominee quarries, and transferred those quarries to it for the expressed consideration of $35,000, and placed the-deed immediately upon record. The Hadfields claim that the-consideration named in the deed was the total amount which the property had cost them up to that time, but the court, found that the property had then cost them about $80,000,. and we accept the finding as conclusive. No money was paid to the Hadfield Company upon this purchase, but mortgages of $14,500 upon the property were assumed by the new company, and, upon the 1st of January following, the Iladfields personally were charged on the books of the Had-field Company with $20,500, being the balance of such purchase price. Now, they had a perfect right to transfer this, property to the new corporation upon credit and for an inadequate price, so far as the Hadfield Company and its stockholders were concerned, because all the stockholders of the
Eliminating the stock liability, the court’s finding was that the available property of the Hadfield Company on March 26, 1890 (excluding the Menominee quarry), was §50,000 less than its liabilities, and that it was thereby hopelessly insolvent. If this finding be correct, then existing creditors at least would probably have a right to complain of the conveyance; otherwise not. The finding was evidently based upon the investigations and conclusions of an expert accountant, who labored upon the books, vouchers, and papers and memoranda of the Hadfield Company in the hands of the assignee for more than a year consecutively, beginning in December, 1892, and at various times during succeeding years for considerable periods of time up to the time of the trial of this action, which began in February, 1897. As a result of this examination, the expert first testified that the assets of the company March 26,1890, amounted to §265,883.22, and its liabilities, excluding stock liability, were §385,022.22, leaving a deficit of about §120,000. In the estimate of assets the entire real estate of the company (excluding the Menominee quarries) was placed at $109,231.16, which amount was arrived at simply by compiling the net cost to the company of its real estate as shown on its books. Subsequently, during the trial, after the introduction of evidence as to the values of the various parcels of real estate on both sides, the plaintiff voluntarily added to the real estate item the sum of'§25,821.39, and to the personal prop
The largest single item among the items of increase of assets claimed by the defendants is in the valuation of the Waukesha stone quarries, which the defendants claim should be placed at $225,000, instead of at $65,500, as listed by the plaintiff in its corrected figures. If the defendants’ contention on this item is correct, or substantially correct, or if the quarries were worth any sum exceeding $155,000, then, even conceding the liabilities (excluding stock liability) to be as great as plaintiff claims, there was no deficiency of assets when the conveyance attacked was made. But here arises the difficulty as to the meaning of the term “ available ” assets. If by that term is meant assets which can be readily turned into money— such as open accounts, notes, bills, mortgages, and choses in action, as defined in Brigham v. Tillinghast, 13 N. Y. 216, — then the finding is entirely inadequate as a finding of insolvency, in the sense in which
As to this fact the court has not found, nor do we think that it could find under the evidence, that such a condition of affairs existed in March, 1890. The testimony is very voluminous, and the various items very numerous, and we cannot undertake to review them in detail here; but concerning the one item of the value of the Waukesha quarries the testimony may be briefly considered.
The great differences of opinion which always exist among witnesses as to the values of real estate are well understood by the profession. Perhaps no question of fact is more difficult of accurate solution. Particularly must this be the case when considering a large manufacturing or mining plant, the value of which depends so largely upon the condition of the concern which is operating it, whether the business is well established and has a flourishing trade, or whether it is new in the field and has yet to acquire its hold in the business world; in other words, upon the condition of the good will. Many other circumstances enter into the question of the reasonable value of such property which will readily suggest themselves to the mind.
. In the present case there was a large tract of real estate, amounting to more than 160 acres, containing a large and well-developed quarry of excellent building stone, owned by parties who had developed a large and exceedingly profitable business and were still operating it with apparent sue-
As we do not know at what figure the court placed the
There are other items of assets which the evidence clearly "demonstrates ought to be increased in amount above the expert’s statement, as well as items of indebtedness which ■ought to be stricken therefrom, but' it would extend this ■opinion to an unwarrantable length-were we to attempt to ■review them in detail. Suffice it to say that, in our judgment, the reasonable value of all the assets at the time of the transfer attacked is shown clearly by the evidence to have exceeded the liabilities, not by a mere beggarly margin, but in an amount running up well into the thousands, ■and that the transfer did not render the company insolvent in the sense in which that word must here be used.
There being no actual fraudulent intent, and the company being solvent, and not rendered insolvent by the transfer, there is no ground upon which the transfer can be set aside as to existing creditors, and for stronger reasons it cannot ■be set aside as to subsequent creditors. The subsequent heavy losses and consequent hopeless insolvency of the com
This conclusion effectually disposes of the plaintiff’s claim, but there is another consideration which reaches the same result and which we shall briefly state. The sale of the Menominee quarry to the present defendant was made in March, 1892, and Hermcm, Smith, and Eosendale then invested $50,000 in the purchase. No claim was then made by any one that there was any defect in the title. The defendant corporation immediately went into possession and active operation of the quarry, and continued to operate it without let or hindrance, or even claim by the plaintiff that the title would be attacked, until the commencement of this action, November 1,1894,— a period of nearly three years. During this time the evidence shows that nearly or quite $40,000 has been spent in improving the property and establishing the business. During this time, also, all the books and papers and other means of information upon whicb the plaintiff now relies were in his possession, or in the possession of his predecessor. It will not do to say that the facts could not be discovered earlier. The expert testifies that he began his examination in December, 1892. This was surely a long delay, when we consider that the plaintiff claims that Hermcm, Smith, and Eosendale should have known of the fraud in March, 1892, when they purchased. Eut waiving this point, we find that the expert spent a year making his first examination, and made his first report in December, 1893. This seems to have been a very long time, when the facts all appeared upon the books and papers; but, conceding this delay to have been necessary, still the action was delayed for another year, and in the meantime the defendant was allowed to go on investing its money and
The conclusions reached in the main case render unnecessary any consideration of the appeal from the orders refusing to Smith and Hermam, the right of intervention.
By the Court.— Judgment reversed, and action remanded with directions to render judgment for the defendant. The orders appealed from are affirmed.
The respondent moved for a rehearing in the case of Hamilton v. Menominee Falls Quarry Company.
Eor the motion there was a brief by Winkler, Flanders, Smith, Bottum & Vilas, attorneys, and Van Dyke & Van Dyke & Carter, of counsel, and a separate brief signed by Van Dyke & Van Dyke & Carter, of counsel. .
In opposition there were separate briefs by Qua/rles, Spence (& Quarles, of counsel, and Samil Rosendale, attorney.
The motion was denied April 6, 1900.