254 F. 39 | 6th Cir. | 1918
(after stating the facts as above).
“Tlie recognition in tlie Iowa statute of tlie right of creditors of corporations to look to unpaid installments of stock subscriptions to obtain satisfaction of their demands did not confer a new right, but is a recognition of a right existing before the statute in virtue of the relations between a corporation and its creditors and stockholders.”
Comparison of the Ohio with the Missouri statute, quoted in Fogg v. Blair, supra, 139 U. S. at page 125, 11 Sup. Ct. 476, 35 L. Ed. 104, shows at least as strong a case of statutory liability in Missouri as in Ohio, yet the Missouri statute does not prevent the full application of Handley v. Stutz in that jurisdiction. Ingraham v. Commercial Co. (C. C. A. 8) 177 Fed. 341, 343, 101 C. C. A. 317. Hence we must conclude that the Ohio statute furnishes no effective distinction.
The Ohio decisions are said to begin with and rest upon Henry v. Vermillion Co., 17 Ohio, 187. This contains nothing now pertinent, save the rather casual statement that since the charter' required stock subscriptions to be paid in cash, an agreement by one subscriber to pay in something other than cash would be invalid as a fraud upon the other stockholders. Noble v. Callender, 20 Ohio St. 199, 208, is to the same effect. When subscribing, the stockholder took a collateral agreement providing that the subscription was to be paid in land. Without any discussion, it was held that this could not be enforced to the prejudice of creditors or costockholders. In Rouse v. Bank, 46 Ohio St. 493, 22 N. E. 293, 5 L. R. A. 378, 15 Am. St. Rep. 644, the court first had occasion to discuss the general principle, upon \yhich depend all the points now involved, that the capital stock of a corporation, upon insolvency, becomes a trust fund for the benefit of creditors ; but the extent and character of the liability for — or as if for — • unpaid subscriptions were in no> way involved. Gates v. Tippecanoe Co., 57 Ohio St. 60, 48 N. E. 285, 63 Am. St. Rep. 705, is the first decision brought to our attention or which we have found in which payment, as upon a subscription, has been enforced against one who received stock purporting to be fully paid. It had to do' with a transaction by which, a corporation was launched and continued in business
We find nothing else to support the claim that the Ohio rule is inconsistent with Handley v. Stutz; on the contrary, there are two decisions tending to support the opposite conclusion. In Peter v. Union Co., 56 Ohio St. 181, 46 N. E. 894, there had been capital stock issued at a discount after the corporation had been in business for some time and when it needed additional capital. Upon insolvency, a suit was’ brought to compel a holder of this discount stock to pay the difference between this purchase price and par. After an exhaustive and fully reported argument of counsel, in which Handley v. Stutz was cited, it was held that the liability did not exist. It is true that the court relied upon, as more or less controlling, the fact that the complaint was made by another stockholder rather than by a creditor, and it is true that this distinction has later been noted by the same court (Trust Co. v. Ford, supra, 75 Ohio St. at page 338, 79 N. E. 474, 8 L. R. A. [N. S.] 263); but, with all deference, we cannot see that this is a distinction in principle. The court expressly holds, in this Peter Case, 56 Ohio St. 197, 46 N. E. 894, that if these unpaid subscriptions are assets of the corporation, the other stockholders are entitled to have them paid in and turned over to the creditors before the statutory double liability of the other stockholders is enforced; and, as it was held in the Gates Case, at almost the same time, that these unpaid subscriptions are corporate assets, the decision in the Peter Case necessarily leads to the conclusion that, under the facts of that case, there was no liability, even for the direct benefit of creditors. The latest reference to the general subject by the Ohio Supreme Court is in Niles v. Olszak, 87 Ohio St. 229, 234, 100 N. E. 820, Ann. Cas. 1913E, 1020. The specific question involved was one of set-off, but the court discussed the controlling principles, and cited, with apparent approval, Clark v. Bever, supra, to the effect that where an additional stock issue was accepted at 20 cents on the dollar, when that was more than it was worth on the market, there was no’ liability for the remainder as upon a subscription. It clearly did not occur to the court that the Ohio rule was inconsistent with Clark v. Bever. When we remember that the Gates Case and the trustee’s claims here are founded on the trust fund theory, and that the United States Supreme Court has consistently maintained and applied that theory, but has decided that it does not reach facts like those now assumed which, upon the present record must be considered to show a case like the Peter and not like the Gates Case, and, when we make; this review of the Ohio decisions, we cannot escape concluding that;
Rickerson Co. v. Farrell Co., decided by this court in 75 Fed. 554, 23 C. C. A. 302, is not pertinent to the issue we have been discussing. In that case the stock issued to Fox was in connection with what was practically the launching of the business (“to begin the business for which it had been organized” [75 Fed. 558, 23 C. C. A. 306]), and the opinion distinctly shows that the case was classified under that part of the opinion in Handley v. Stutz which declares a liability as against original subscribers and differentiated from that part of the opinion which refers to a later issue of stock at its market value. Kiskadden v. Steinle, supra, likewise involved only a case of original organization and its accompanying stock issue. Altenberg v. Grant (C. C. A. 6) 85 Fed. 345, 29 C. C. A. 185, was not only of the same class on its facts, but depended on a statute which, as construed, forbade any sale at less than par.
The record suggests numerous questions that will arise, if further efforts are made to enforce a liability, upon the theory that these bonds and stocks were sold for less than their known and fair value. Upon that theory, is the right of action in the trustee, as for the recovery of a corporate asset, or in the creditors who are injured, as for a fraud? Is the actual value of the stock sold, or the good faith exercised in fixing a price, the controlling criterion? Whatever the rule as to ordinary commercial creditors, is there á presumption that one who buys a mortgage bond does so upon the faith of a supposed liability to pay the capital stock, if it has not been paid; and, if there is such presumption, is it merely prima facie, or is it so violent as to be conclusive? Are the customary and natural investigations made by or for one about to buy mortgage bonds in large amount likely to disclose the truth as to its capital stock, so as to raise any presumption of knowledge or of ignorance on that subject? Upon this theory, is the rule of set-off the same as upon the theory of a subscription? Upon the subject of es-toppel as against a creditor who knew that the capital stock was issued as fully paid, is one who buys a mortgage bond in any better position than his vendor? Whatever the rule as to the second purchasers of subscribed stock or the original takers of additional stock later sold at a discount, are those who later purchase the latter class of stock,
The order appealed from is reversed, and the case remanded for further proceedings in accordance herewith.
The sarnie rule has either been expressly adopted, or referred to with apparent approval, quite generally by federal and state courts, where there was no controlling statute. Grant v. East & West Co. (C. C. A. 5, Ala.) 54 Fed. 569, 575, 4 C. C. A. 511; Toledo Co. v. Continental Co. (C. C. A. 6, Ohio) 95 Fed. 497, 515, 36 C. C. A. 155; Ingraham v. Commercial Co. (C. C. A. 8, Mo.) 177 Fed. 341, 343, 101 C. C. A. 317; Granite Co. v. Titus (C. C. A. 5, S. C.) 226 Fed. 557, 570, 141 C. C. A. 313; Clark v. Johnson (C. C. A. 8, Ark.) 245 Fed. 442, 447, 157 C. C. A. 408; Stein v. Howard, 65 Cal. 616, 4 Pac. 662; Dummer v. Smedley, 110 Mich. 466, 476, 68 N. W. 260, 38 L. R. A. 490; Hospes v. Northwestern Co., 48 Minn. 174, 197, 50 N. W. 1117, 15 L. R. A. 470, 31 Am. St. Rep. 637; Woolfolk v. January, 131 Mo. 620, 634, 33 S. W. 432; Van Cott v. Van Brunt, 82 N. Y. 535; Speer v. Bordeleau, 20 Colo. App. 413, 421, 79 Pac. 332; McDowell v. Lindsay, 213 Pa. 591, 595, 63 Atl. 130; and see note in 8 L. R. A. (N. S.) 263, 265.
The proof is that the bonds, “as marketed,” were worth what they brought, but they were “marketed” with the stock accompanying them; and this-amounts to saying that they together were worth the price received.