106 F. 253 | U.S. Circuit Court for the Southern District of Iowa | 1900
Simply to advise counsel, all of whom may be absent when the decision of the case is announced in open court, l briefly present my views in writing'.
There is pending in this court a.n action (No. 3,615, law) wherein Welker Given. respondent herein, is plaintiff, and the Tunes-Eepub-lican Printing Company, one of complainants herein, is defendant. The petition in the law action is in five counts. The first two counts declare upon two promissory notes, of date November and December, 1895, of the printing company, payable to Welker (liven, aggregating $8,000. The third and fourth counts are based upon the allegations of money loaned by (liven to the company in the same amounts and at the same dates as the alleged notes. These
The printing company is, and for many years has been, engaged in the business of publishing a daily and weekly newspaper of general circulation at Marshalltown, Iowa, and part of the time a semiweekly paper, and doing job printing and binding. It is a corporation, composed of 260 shares of capital stock, of $100, par value, each, or $26,000 in the aggregate. Prior to 1893 McFarland owned all the capital stock. In the year 1893 McFarland, sold all the capital stock to Given for $16,000, part of which Given paid for in cash. The balance was evidenced by a note payable to SlcFarland, signed by Given as principal and another party as surety, and was still further secured by the corporation stock as collateral security; Given retaining the right to vote the stock. Given owned all the stock, subject to the rights of McFarland as security for said note, until May, 1896. In May, 1896, Given sold all to McFarland. (1) Did he only sell all the capital stock to McFarland? (2) Did he sell the concern or plant to McFarland, placing McFarland in his position? (3) Immediately prior to the sale, whatever the sale was, was Given a creditor of the corporation, as well as a stockholder, in the sum of $8,000, on account of money loaned by him, and $375 balance of salary? (4) If a creditor, was the $8,000 evidenced by two notes? (5) If he were a creditor at the time of the sale to McFarland, is he now estopped from asserting his claims? Accordingly as these questions are answered, should the decree be. TJie evidence is voluminous. Part of it is material, some of it not much so, and part of it but incidental. It is not practical to point' it all out in this memorandum. It was all read in my hearing, and parts of it again and again, and much of it I have again read. I believe it all to be in my mind.
It is not very material, as a question by itself, whether Given holds or did hold notes of the company for $8,000, because, if the company owes him that sum, and he is entitled to a judgment therefor, it is of no concern whether he have judgment on the notes or for the naked loan, excepting the difference of 2 per cent, in the rate of interest. But the question of notes or no notes has a substantial bearing upon the other questions. If two notes aggregating $8,000 were given to Given by the company, such notes were signed by affixing the corporation name, “by W. Given, President.” I do not believe the notes were given, and I find that in fact they were not given. Given himself at times in his evidence is not certain about it. If he signed them, it was when other notes for other
Did Given loan the company §8,000? That he advanced this sum is conceded. But why and on what account did he advance it? New machinery and fixtures and type, etc., were badly needed. Money was required. But one of two ways was open to raise the money: (1) Borrow it; (2) make good the impaired capital stock, because the stock was impaired. Given, but three years prior, bought the concern for §16,000, and yet it was capitalized at $26,000. Then the question is, was the money borrowed, or was the impaired stock made good? Given owned all the stock, and, aside from creditors, was the only interested person. If he retained full ownership of the stock, it was of no concern to him whether he loaned the money, or put it in the business and thereby made good the impaired stock. If he loaned i he money, he would thereby, of course, become a creditor to that amount, and his capital stock would thereby be worth just that much' less. Upon the dissolution or winding-uj) of the affairs of the corporation, Given would have exactly the same amount of money, whether the money was borrowed or used to make good the impaired stock. Therefore Given had no concern in the matter, and at no time prior to the consummation of the sale in May, 189(5, to McFarland, could he have cared, if the corporation remained solvent, whether he made good his stock or loaned the money. And that the corporation was at all times solvent, apart from the capital stock, is a conceded fact, and was so shown by Given, McFarland, and all persons in charge of any department of its business. And, as Given had no concern in the question whether he loaned the money or made good the stock, he likewise was indifferent. McFarland all this time was taking part in managing the company’s business. But he was also a creditor. He still held the note of Given Cor the purchase price. Four thousand dollars remained due
But much evidence was taken and elaborate arguments made upon the questions of whether the sale in May, 1896, was of the stock, or whether McFarland stepped in the shoes of Given in all respects, and whether Given is estopped from asserting that he is a creditor. As to what Given sold to McFarland, the evidence shows that the stock was indorsed by Given, and the proper indorsements made on the stubs of the certificate book. In form, it wás a sale of stock. Given since 1893 had owned all of the stock. McFarland now became the owner of all of it. Stockholders’ meetings had not recently been held, and for a great many years had transacted nothing but formal business. The same is true as to the board of directors. Given owned and managed and operated the business, not as the head of a corporation, but as an individual. So'had McFarland before him. The written proposition by Given to McFarland relates to the printing company as a property. It was this proposition that was accepted. Nothing was said about the stock, or its value per share; and no one knows now its value, or what it was at the time