183 Ky. 330 | Ky. Ct. App. | 1919
Affirming as to Charles W. Stoecker, Jacob Schreick, Martin Kaelin, Xavier Schuler, Lonis Doerhoefer and Frank W. Kaiser, denying the appeal of, and affirming as to, Lorenz Jochim, C. A. Miller, Max J. Sebolt, Edward M. Lang, J. E. Rnby and George Ehell, and reversing as to Lonis Stoke.
These appeals grow out of the same facts, are prosecuted on the same record and will be considered in one opinion.
The suits were brought by appellees, creditors of the Globe Casket Company, to recover of the appellants, except Frank W. Kaiser, the par value of common stock of that company, alleged to have been received as a bonus in connection with the purchase of the company’s preferred stock. Appellants, Stoecker, Schreick, Kaelin, Schuler, Doerhoefer and Stoke were held liable, and individual judgments were rendered ag-ainst them for amounts exceeding $500.00; The judgments rendered against Jochim, Miller, Sebolt, Lang, Ruby and Ehell were for less than $500.00, and each of them prays for an appeal. The appeal by Frank W. Kaiser is from an order of the court, refusing to permit him to file an intervening petition, asserting title to the liability of the appellants.
The facts are as follows: The Globe Casket Company is a Kentucky corporation, and was incorporated on May 11, 1911. It continued, in business until July 21, 1914, when an involuntary petition in bankruptcy was filed against it. On August 6, 1914, it was adjudged a bankrupt. Its assets were insufficient to pay preferred claims, and the unsecured creditors received nothing.
Steps looking to the incorporation of the company were begun in April, 1911, by three promoters, R. H. Hundley, J. A. Schuéssler and S. Oppenheimer. The promoters and their' attorney entered into a preliminary agreement, providing for the organization of the corporation with a. capital stock of $100,000.00, $50,000.00 of which was to be preferred stock and $50,000.00 common stock. The par value of each kind of stock was $25.00. It was further provided by the agreement that Hundley would undertake to sell the preferred stock and pay all necessary expenses, and in consideration of his services and to reimburse him for his expenses, the company
“Capital $100,000
No.............Globe Casket Company
Incorporated
Preston and Burnett Avenue
...............................................................191.........
“I hereby subscribe for .................. shares of eight per' cent preferred stock of the Globe Casket Company, of Louisville, Kentucky; for which I agree to pay thirty-five ($35.00) dollars per share, fully paid and non-assessable.
*334 “Solicitor....................................................Signature..........................................
“Make all settlements payable to Globe Casket Co. Address ...............................................................”
‘ ‘ Capital $100,000
Par Value $25 per share
No,
Globe Casket Company. Amount $.
Incorporated
Preston and Burnett Avenue
.191.
Received of........................................................................................................................... ......................................!...........................................'................................................ Dollars In full payment of.................. shares 8 per cent preferred capital stock of Globe Casket Co. (You are also to receive one share of common stock with each two shares of preferred.) Make all settlements payable to Globe Casket Company.
.............................................................................................Solicitor.”
In describing the method employed in making sales, Hundley testified as follows: “6.- What did you state to purchasers when you were selling the stock, if anything? A. If I would go to see a man to sell him some stock, I would tell him I was, of course, representing the Globe Casket Company, which I was, and the par value of the stock was $25.00 per share, but we sold it at $35.00 a share, but in addition to the preferred stock we would give him one share of common stock with each two shares of preferred. In some cases where some of the prospective buyers would bring up' about the common, about whether it was fully paid, I would say, ‘It is fully paid and non-assessable, according to my contract. ’ 10. Why did you say it was paid up and non-assessable, the common stock? A. Because the contract provided that way. 11. How did you pay for it, in what way? A. I was to get that for the services, the common stock, and the money made out of it, I wanted to make some money, of course, in selling this stock I made $20.00 on every two shares of preferred I sold, $10.00 a share commissions, you see. 12. But in order to induce them to do that, as I understand, you told them you would give them one share of common .stock for each two shares of preferred? A. That is right, yes. Q. Was there any application or subscription by any purchaser of any other sort of stock except preferred stock? A. No. Q, Did any
Oppenheimer’s testimony is as follows: “57. What was the method as to the issuance of common stock, where preferred had been sold? A. At the time the company was organized, at the direction of the president of the company, the whole common stock, consisting of $50,000.00, was issued to E. H. Hundley, in accordance with the contract entered into between him and the company and in addition passed by the board of directors. Thereafter, whenever preferred stock was sold, I made a mémorandum on the back of this certificate of stock which stood in the name of E. H. Hundley, showing the number of the certificate for common stock and the number of shares which were issued as a bonus to the purchaser of the preferred stock. 58. Was this $50,000.00 worth of common stock transferred to Hundley at the organization of your company as compensation to him for selling the preferred stock? A. Only to the extent of $25,000.00. The other $25,000.00 was done for the purpose of evading the law, and to make it plain, at that time none of us had the least conception that there ever could be a possibility that the company should become bankrupt, because we all thought that there was plenty of room for a new company, and we did not dream that there would be any trouble about the common stock. 59. When you took
Upon the same question Otto testified as follows: “49. Taking these individuals you sold to, tell the court the basis on which they purchased this preferred stock? A. In the manner that it was presented to them? 50. Yes, sir. A. We went to see them and we told them that the company was capitalized for. $100,000.00, $50,000.00
Only two of the appellants, Stoecker and Stoke, testified in their own behalf. Stoke says that he paid $35.00 a share for the preferred stock, and for every two shares of preferred stock he received one share of common stock for nothing. Stoecker says that Hundley and Otto came to his office and told him they had a good thing, and that it was the Globe Casket Company; that they had common stock which had voting power, but the preferred stock did not; that the preferred would pay eight per cent, and that for every share of preferred he bought at $35.00 they would give him one-half share of common. They further told him that the common stock was Hundley’s, and that it was full paid and non-assessable. Shortly thereafter he bought 34 shares of preferred and 17 shares of common, at $30.00 a share. At that time he made no inquiries of the company if the common stock had been paid for. Hundley gave him a receipt for the stock and subsequently he received the stock, either through mail or through Mr. Otto. *
Section 193 of our Constitution and section 568, Kentucky Statutes, provide that no corporation shall issue stock or bonds except for an equivalent in money paid or labor done, or property actually received and applied to the purposes for which such, corporation was created, and neither labor nor property shall be received in payment of stbck'or bonds at a greater value than the market price at the time said labor was done or property delivered; and all fictitious increases of stock shall be void. Section 547, Kentucky Statutes, provides that the stockholders of each corporation shall be liable to creditors for the full amount of the unpaid part of stock subscribed for by them. For appellants, however, it is suggested that they were 5 on,a fíele purchasers and are not, therefore, liable. The facts, however, do not bring the case within the rule announced in Hess v. Trumbo, 84 S. W. 1153. The contract, as ratified by the board of directors, provided that Hundley should transfer to each purchaser of the preferred stock one share of common stock for each two shares of preferred. In other words, the purpose of
But it is insisted that the chancellor erred in not giving appellants credit for the premium which they paid on the preferred stock.
The argument is as follows: The par value of the pre-. ferred stock was only $25.00. They paid a premium of $10.00 per share. The premium was in effect a payment on the common stock. That being true, it follows that each subscriber' for two shares of preferred actually paid 80% of the par value of each share of common stock received therewith. The difficulty with this contention is that it does not square with the facts. The uncontradicted evidence shows that appellants subscribed for the preferred stock at the price of $35.00 per share, and that the common stock was given to them. It follows that the additional $10.00 was paid solely as a premium on each share of preferred, and was in no sense a payment on the common stock. Under these circumstances, their indebtedness for the common stock, which was given to them as a bonus, cannot be credited by the premium which they paid on the preferred stock.
On the appeal of Louis Stoke the following facts appear: Stoke purchased several shares of preferred stock
Appellant,Frank W. Kaiser,insists that the chancellor erred in refusing to permit him to file an intervening petition, asserting title to the amounts, recovered by appellees. The basis of his claim is that he was a remote purchaser from the purchaser at the trustee’s sale of the assets of the Globe Casket Company, and that as such purchaser he succeeded to the right of action vested in the trustee, and was entitled to the amounts recovered from the delinquent stockholders. The argument is that unpaid stock subscriptions are assets that pass to the trustee in bankruptcy, and may be sold by him as any other assets of the estate. Louis Stoke, through whom Kaiser claims by subsequent deeds and bills of sale, was the original purchaser at the trustee’s sale. Under the deed and bill of sale executed by the trustee, Stoke acquired title to certain real estate therein described, “together with all the personal property, open accounts, notes and all assets belonging to the said Globe Casket Company, and now in the hands of the party of the first part, as aforesaid trustee. ’ ’ It will thus be seen that the personal property, transferred by the instrument in question, was limited to such as then belonged to the Globe Casket Company, and was then in the hands of the trustee. The common “stock was permitted to be issued by the company’s agents upon the representation that it was fully paid and non-assessablé. Under these circumstances, the company was estopped to recover the unpaid stock subscriptions. That being true, the liability of appellants was in no sense an asset of the Globe- Casket Company, nor was it ever in the hands of the trustee. Hence, it is unnecessary to decide whether the trustee’s right of action could have been sold, but sufficient to say that it was not sold, and did. not pass to the purchaser ill the trustee’s sale.
It follows that the chancellor did not err in rejecting the intervening petition.
On the appeals of Charles W. Stoecker, Jacob Schreick, Martin Kaelin, Xavier Schuler, Louis Doerhoefer and Frank W. Kaiser,'the judgments are affirmed.