57 Neb. 231 | Neb. | 1898
This equitable action was brought by certain judgment creditors of the Dawson Town & Gas Company, and by plaintiffs and certain interveners was prosecuted to judgment in the district court of Douglas county agaiust certain, stockholders in said corporation. In the petition — in which there were averments of the corporate character of the Dawson Town & Gas Company,
In the light of subsequent developments it is not .difficult to approve the finding of the- district court that the real property, in consideration of which the capital stock of the company was issued, was received by the Dawson Town & Gas Company at a great overvaluation. There was testimony by parties who owned farm lands in the vicinity of the town of Dawson, Iowa, that the lands turned in to the company in payment for its stock was, as farm lands, worth only from §30 to §50 per acre. These witnesses, however, expressly limited their estimates to the value of these lands for farming purposes,
In Gilkie & Anson Co. v. Dawson Town & Gas Co., supra, it was said: “In this state there were no specific requirements or restrictions in relation to the manner of payment for the stock purchased, and no doubt the land, being such as it was within the province of the company to hold and appropriate for use in its business, could be received in payment for stock. There was no statutory requirement that payment should be in money or the money’s worth; but without such an enactment, we think there is a rule of honesty and fair dealing, which should and will be recognized by the courts, which required it. * * * It must be true that where a number of' persons have organized themselves as a body corporate and enter the business arena as such and invite and entertain dealings on the faith and credit of a fund, which, increased by gains or decreased by losses, will alone be available for the liquidation or payment of debts, they Avill be held to fairness and good faith in fulfilling the promise they made to contribute to the
In Du Pont v. Tilden, 42 Fed. Rep. 87, the syllabus thus correctly reflects the scope of the opinion of Judge Blodgett: “Where a corporation which is authorized by its charter to buy land and pay for it in full-paid stock, issues such stock in payment for land to an amount greatly in excess of the value of the land, and the stock is sold to a purchaser for value, such purchaser is not liable to the creditors of the corporation on the ground that his stock is not fully paid for, where there was no fraud in the original transaction and the corporation has taken no steps to rescind it.”
In the state of New York there was a» statute which expressly authorized the trustees of manufacturing corporations, in good faith, to purchase property necessary to their business and issue stock to the amount of the value thereof in payment therefor and, in event of such purchase in compliance with the law, exempting such trustees from personal liability. This is the condition of the law in this state without statutory provisions, as has already been shown by the quotations from the case of Gilkie & Anson Co. v. Dawson Town & Gas Co., supra.
In Douglas v. Ireland, 73 N. Y. 100, it was held that to -charge the holder of stock of a manufacturing corporation, issued upon and for the purchase of property, individually for the debts of the company it is not enough to prove that the property was purchased at an overvaluation through a mere mistake or error of judgment on the part of the trustees, and that it must be shown that the purchase was in bad faith and to evade the statute.
In Boynton v. Andrews, 63 N. Y. 93, it was held in an action to enforce the individual liability of trustees of a manufacturing corporation because of the exchange of stock for property that the question is whether the purchase ^vas in good faith or at a high valuation ’with
In Carr v. Le Fevre, 27 Pa. St. 413, it was held that where a stockholder produced receipts for the amount of the consideration for land by him conveyed to the corporation for a legitimate purchase, it formed the basis for a credit on stock of the corporation purchased, and the sufficiency of the payment was not affected by after-discovered error in the judgment of the company as to the value of the land.
In Young v. Erie Iron Co., 65 Mich. 111, Morse, J., said: “It must be considered as well settled that corporators cannot agree among themselves that property worth only $80,000 shall be treated as worth $422,000 and count at that sum as so much capital stock paid in, and then proceed to make their shares as fully paid up and non-assessable upon such false basis, as such action would be clearly a fraud upon the creditors. But it is equally well settled that such corporators are not responsible for an honest error of judgment, or a mistake in placing a valuation upon property appropriated or used as capital by a manufacturing or mining company. Nor can the fact that a jury or court finds property of the nature of this leasehold, necessarily fluctuating and speculative in value, worthless now, and of but little actual value at the time of its appropriation as capital, be controlling in deciding whether or not such appropriation was fraudulent as against the creditors of the corporation. Such finding-will be presumptive evidence of fraud; but if it is shown that those forming the company honestly believed it to be worth the amount specified in the articles, and that their mistake was one of judgment only, their action cannot be considered fraudulent either in fact or in law. The law imposes no penalty of this kind upon a stockholder or trustee of a company for a mistake or erroneous
In Phelan v. Hazard, 5 Dil. [U. S. C. C.] 45, it was held that, unless prohibited by statute, an agreement between the incorporators of a company and the directors, by which the former convey to the company property needed for the purpose of its operations and receive payment therefor in full-paid shares of the stock of the company is, in the absence of fraud, binding upon the parties and such stock is full-paid stock.
In American Tile & Iron Co. v. Hayes, 30 Atl. Rep. [Pa.] 937, the facts, and the opinion of the supreme court of Pennsylvania thereon, are thus summarized in the syllabus : “(1.) The members of a firm engaged in operating gas wells formed a- corporation under the natural gas act of 1885 with a capital stock of $500,000. They agreed with the corporation to transfer the firm’s property to it in payment of the $500,000 of stock, and also that they should retain only $175,000 of such stock and turn into the company’s treasury the remainder as a working capital. The contracts were performed in good faith. Held, that the stock was paid up, and that the subscribers were not liable to creditors for the amounts subscribed by them. (2.) The facts that the property transferred to the company afterwards proved to be worth much less than $175,000, the amount actually paid for it, and that the parties adopted a clumsy and suspicious method of effecting the transfer, did not render the subscribers liable as for unpaid stock.”
In Bickley v. Schlag, 20 Atl. Rep. [N. J.] 250, it was held by the court of error and appeals of New Jersey that when a corporation, by virtue of its charter, pays for property purchased with its capital stock, such sale cannot be set aside in the absence of fraud, on the grourid that the value of such property was not equal to the value of the stock.
In Clow v. Brown, 31 N. E. Rep. [Ind.] 361, it was held by the supreme court of Indiana that where it appears
In Kelley v. Fletcher, 28 S. W. Rep. [Tenn.] 1099, the views of thé supreme court of Tennessee are thus condensed in the syllabus: “A bill by a corporate creditor to enforce liability on the part of the stockholders for the difference between the amounts of their subscriptions and the value of the property conveyed by them to the corporation in payment of the subscriptions must allege an intentional or fraudulent overvaluation of such property.”
The necessity of averment of a fraudulent intent, in conjunction with an overvaluation of property exchanged for the capital stock of a .corporation, has been recognized and enforced in Troup v. Horbach, 53 Neb. 795, and our conviction with reference to the correctness of our views therein announced is strengthened by a reexamination of the question, rendered necessary in this case. It is true, generally, that the securing of an advantage by a stockholder to himself by reason of his relations with the corporation with which he is connected subjects his conduct to a species.of criticism from which he would be free but for his confidential relation; but, even in the face of the presumptions against a stockholder, he may show that the transaction to which he was a party was Iona fide. (Gorder v. Plattsmouth Canning Co., 36 Neb. 548.) The burden of proof is, doubtless, more strongly devolved upon a stockholder to show'- good faith with the corporation than.it would be if he were a stranger. So it is in transactions between relatives or others sustaining confidential relations in matters involving the rights of creditors, and yet it often happens that such transactions are found valid and the rights of the parties enforceable. The relation of a stockholder to a corporation is no exception to the class of cases involving confidential relations or such that a fraud might
Reversed and dismissed.