130 Mich. 111 | Mich. | 1902
Lead Opinion
( after stating the facts).
In Perkins v. Grobben, 116 Mich. 172 (74 N. W. 469, 39 L. R. A. 815, 72 Am. St. Rep. 512), the contract provided that the title should not pass until full payment, and that all payments made on the notes which were given for the purchase price should be deemed “to be payments for the use, wear, and tear of the property up to the retaking thereof.” There is no substantial difference between the above provision of that contract and the one in this providing that the monthly rental value of the property was $750, if such provision be conclusive as ■an implied contract to pay that amount as rental if the vendor should retake the property. In that case money had been paid, while in this case none had been paid. But that difference cannot change the rule of law. The notes were given in consideration of the property contracted to be sold. When the property was retaken under the contract, there was no longer any consideration for the notes. The only remedy open to the vendor in such case is to sue for the rental value, or bring a suit for damages for nonperformance of the contract. He cannot bring suit to recover the purchase price, or any part thereof. A defense upon this ground would, therefore, have been fatal to the plaintiff’s right of action, based upon the theory upon which the judgment was rendered. The judgment is, of course, valid as against the defendant Elevator Company, and is not open to a collateral attack by it. The judgment could only be set aside by that company upon a direct proceeding for that purpose.
It is claimed that the Wormer Company retook this property by agreement. Whether Mr. Moore, the president of the company, had any authority to make such an arrangement, we need not consider. All Mr. Moore said to the agent of the Wormer Company was to advise him that he had better take back his property, and dispose of it. This did not make a new contract. It was advice simply to the company to take advantage of the contract it had made.
Is the judgment conclusive against a' stockholder ? While it is the general rule that judgments against corporations are conclusive upon the stockholders, an exception is equally well established in cases where judgments are rendered through fraud or collusion, or without jurisdiction. 3 Thomp. Corp. §§ 3392, 3400; 2 Mor. Priv. Corp. § 865; 1 Cook, Corp. § 209; Bohn v. Brown, 33 Mich. 257, 263. In Bohn v. Brown this court said:
“ If the proceedings against the corporation should appear to be tainted by fraud or collusion between the-claimant and the corporation, the judgment would not be good as inducement, or as an adjudication to fix the liability of the stockholder through it, or to fix the amount, and the suit against the stockholder would fail inevitably.”
This exception is approved in the following cases: Irons v. Bank, 36 Fed. 843; Schrader v. Bank, 133 U. S. 67 (10 Sup. Ct. 238); Slee v. Bloom, 20 Johns. 669; Warrington v. Ball, 33 C. C. A. 609, 90 Fed. 464; Saylor v. Banking Co., 38 Or. 204 (62 Pac. 652); Ward v. Joslin, 44 C. C. A. 456, 105 Fed. 224.
‘ ‘ To bind one by a judgment to which he is not a party, as provided for by the statute, is barely tolerable. To bind him by such a judgment obtained by fraudulent collusion would be intolerable.”
In Saylor v. Banking Co. the judgment against the corporation was based upon a promissory note executed by the president and secretary of the corporation to the president, and plaintiff sought to enforce payment of the .judgment by assessments against the stockholders for unpaid subscriptions. It was held that they could attack the validity of the judgment upon the ground that the execution of the note had not been authorized by the directors. See, also, Mandeville v. Reynolds, 68 N. Y. 528, and Conway v. Duncan, 28 Ohio St. 102, in which judgments were held not conclusive.
We think the principle approved in these decisions is sound, and that when a stockholder can show, even aliunde the record, that the judgment is wholly void, he may do so as a defense to his liability as a stockholder.
The duty of the corporators in putting in property as paid-up capital stock is fully stated in Moore v. Universal Elevator Co., and needs no further discussion by us. The original incorporators exercised no judgment whatever upon the value of the assets transferred to the corporation by Schoonmaker Bros. & Co. as worth $63,250, and for which stock was issued to that amount as fully paid. No one asked, and no one volunteered an opinion, as to their value. Moore, Stanton, and Brotherton, the only original incorporators of any financial responsibility, testified that they did not ask or consider the value of the assets. They considered themselves as mere dummies to sign the articles of incorporation, make the solemn assertion and certification that stock of the value of $63,250-had been actually paid in, and that they each had subscribed for a certain number of shares. They believed that they could immediately transfer their stock to the Schoonmaker Bros, without incurring any liability whatever. They testified that an attorney, who was present, so advised them. This attorney was not produced as a witness. Frank E. Schoonma'ker was not a witness. James N. Schoonmaker testified that he did not know the value of these patent devices. This case, therefore, affords no room for the application of the rule of Young v. Iron Co., 65 Mich. 111 (31 N. W. 814), that “corporators are not responsible for an honest error of judgment, or a mistake, in placing a valuation upon property appropriated or used as capital,” and as approved in Graves v. Brooks, 117 Mich. 424 (75 N. W. 932). In cases where the incorporators passed no judgment upon the value of the assets
We found in Moore v. Universal Elevator Co. that the property conveyed was not worth the amount stated in the articles.of association, and that as to the Schoonmakers and Hultgren it was a fraud in fact, and that as to the other parties it was a fraud in law, if not in fact. The assets put in to form a corporation with $63,350 of capital stock fully paid in are as follows: Elevator patents, $37,000; business of the Otto Gas-Engine Company, $10,000; factory and property, $15,500; business incidental with mechanical engineering, $10,750.
Schoonmaker Bros. & Co. were agents for the Otto Gas-Engine Company. That agency was revocable at any time. Schoonmaker Bros. & Co. could not transfer it to the Elevator Company without the assent of the Gas-Engine Company. There is no evidence of any such arrangement with that company, or any agreement .that the Gas-Engine Company would accept the Elevator Company as its agent. It may be inferred from the. record that the Gas-Engine Company raised no objection to the' Elevator Company’s acting as its agent during the time the latter carried on business. It appears from the depositions of the officers of the Otto Gas-Engine Company that the commissions paid- Schoonmaker Bros. & Co. were as follows: 1893-4, $337.90; 1895, $1,043.34; 1896, $1,399.91; 1897, $1,160.73. Out of this, however, were to come Schoonmaker Bros. & Co.’s expenses, and it is not shown how much these were. At the same time Schoonmaker Bros. & Co. were selling elevators for Morse, Williams & Co., of Philadelphia, and had the exclusive agency for the Variety Machine Company, a manufacturer of hand elevators. Is a revocable commission agency, yielding from
“Business incidental with mechanical engineering, $10,-750.” No tangible property whatever, except perhaps $150 worth of tools used by Schoonmaker Bros. & Co., was included in this asset, and I find no evidence that these tools became the property of the corporation. Schoonmaker Bros. & Co. employed from three to five men in connection with their business as agents for the three companies, viz., the Gas-Engine Company, the Variety Machine Company, and Morse, Williams & Co., for -whom they sold elevators.. Naturally, Morse, Williams & Co. would not employ the Elevator Company to act as their agent when it was engaged in a rival business. James N. Schoonmaker testified that this item “was for our business as experts; our ability to carry on the business ; our skill. It didn’t represent any tangible property. There was no contract made by which we-were to work for the company.” Mr. Schoonmaker was unable to tell whether there was any profit in the agency, and, when asked upon what he based or computed the agency to be worth $10,000, replied, “As to the possibility there was in the business we were doing.” What is the cash value of a possibility, and that a possibility which Schoonmaker Bros. & Co. had not contracted to continue for the benefit of the corporation?
Within four months after the making and filing of these articles of association, the directors of the Elevator Company made and filed a statement of their assets and liabil
There was no factory in existence at the time the company was organized, but it had bonus subscriptions, amounting to something like $8,000, and a bonus subscription of an acre and a half of ground on which to place the factory. There was no other property at that time, except those bonuses.
The one-third interest in the patents, which was turned in at $27,000, consisted of a one-third interest in five devices used in making elevators. There were other devices used by other companies designed to accomplish the same purposes. Mr. Hultgren, the patentee, and Mr. Ellithorpe, who was interested with him, estimated these devices as worth much more than the interest conveyed by Mr. Hultgren to the Elevator Company through the Schoonmakers. An attorney, an expert in patents and their value, testified that these devices were of little value. As against these ■opinions, what are the facts ? Mr.' Hultgren sold one shop right to a company in Springfield for $200. This gave
I think the decree should be modified in accordance with this opinion, and the case remanded, with directions to the receiver to sell the interest in the patent devices, if a purchaser can be found, and to apply the proceeds thereof in payment of the judgment in favor of the Wormer Company, and to proceed under the order and direction of the court below to assess the original incorporators to pay other debts, should any be proven; but my brethren think the decree should be sustained, with costs, and it is so ordered.
Concurrence Opinion
I do not think the disposition of the case requires the discussion under head 3 of the opinion, and express no opinion in relation to the question there discussed. I concur in the disposition of the case made by Justice Grant.