43 Kan. 352 | Kan. | 1890
The opinion of the court was delivered by
On October 5, 1885, Francis Tiernan recovered a judgment in the district court of Bourbon county against the St. Louis, Fort Scott & Wichita Railroad Company for $20,100.50, and the railroad company desiring to have the case reviewed in the supreme court, gave a supersedeas undertaking, with A. W. Walburn and C. F. Drake as sure
Another point is that the action is not brought by the real party in interest. The Tiernan judgment was assigned to Chenault in writing, as follows :
“This Instrument Witnesseth: That for value received I hereby assign to Waller Chenault the benefit of the judgment obtained by me in the case of Francis Tiernan v. The St. Louis, Fort Scott & Wichita Railroad Company, obtained in the district court of Bourbon county, Kansas, in October, 1885. The said judgment is for about $19,000; and the entire judgment is assigned, subject, however, to a reservation of the unpaid attorneys’ fees of E. M. Hulett and J. D. McCleverty, yet unpaid in said case.
This September 24, 1887. Francis Tiernan.”
An entry of the assignment was also appended to the judgment on the journals of the district court in which the judgment had been given. The consideration for the assignment was a large indebtedness of Tiernan to Chenault’s Bank, or
It is next contended that “if the plaintiffs in error are liable in this action on the supersedeas bond, they are entitled to have so much of their claim against Tiernan, on account of the illegal issue of stock, as equals the amount due on the bond set off against the same.” This involves one of the questions that was considered and disposed of in the case of St. L. Ft. S. & W. Rld. Co. v. Tiernan, 37 Kas. 606. The principal facts are fully stated in that case, and it is needless to repeat them at length here. It appears that Tiernan and his associates, who had purchased the franchises and road-bed of the Fort Scott, Humboldt & Western Railroad Company, organized the St. Louis, Fort Scott & Wichita Railroad Company, in 1880, with an authorized capital of $7,000,000. After the organization was perfected, the new company pur-' chased the property and franchises of the old for $200,000 in cash or bonds, and $3,600,000 of the capital stock of the new company. The stock was issued and delivered in accordance with the terms of the sale among the owners of the old road, but only a part of the cash payment was made. The purchase of the property of the old company was ratified and approved on the 6th of March, 1881, at a meeting of the stockholders of the new company, all of the stock voting in favor of the ratification. Subsequently the company proceeded with the construction of the railroad, but in 1882, Tiernan, who was president of the company, in behalf of himself and his associates entered into negotiations with
We have only mentioned some of the leading facts in the case, for the reason that a more detailed statement has been given and commented on in Railroad Company v. Tiernan, 37 Kas. 606; and the conclusions there reached control to a great extent the disposition of the present case. It is true, as claimed, that the value of the property given by Tiernan and his associates for the stock, was far below its par value; but
“It does not appear in this case that there was any deception or fraud practiced by the parties. The property was open to inspection, and the approximate cost of constructing it was easily obtainable. Its value to the company for the purpose desired was not difficult to ascertain. I find no evidence of any representations as to its value or cost, or purchase-price, made by the parties selling; but there is record evidence that the board of directors several months after the sale, and with full knowledge of the transaction, formally approved and ratified it; and not only that, but subsequently, at a meeting of all the stockholders, the transaction was again ratified. Now who was defrauded or decéived?” (MS. opinion.)
In both of the cases last mentioned the good faith of this transaction was inquired into and sustained. Although the amount of stock issued for the purchase of the property was large, it had only a nominal value, and it was delivered and treated by all parties as fully paid. The fact that the property was over-valued will not, in the absence of fraud, create a liability against the stockholders. There is no testimony showing false statements by Tiernan or his associates, or any concealment of facts or suppression of the truth by them. Every officer, stockholder and party who had any interest in the company was acquainted with the nature of the transaction and the terms of sale. The records of the corporation disclose all the facts pertaining to the sale, and even the parties who subsequently purchased stock and the mortgage bonds upon which the judgment sought to be set off was rendered, were not deceived or defrauded with respect to the contracts
Phelan v. Hazard, 5 Dill. 45, was an action brought by a creditor against a share holder, after the corporation had become insolvent and had been dissolved. Property had been given to the corporation in payment of shares of stock which it was claimed were not fully paid. The record of the corporation showed the whole transaction, and that the property was by agreement received as the consideration for the stock which was issued as fully paid. The proof showed that the shares were paid for exactly as they were originally agreed to be paid for, by a conveyance of property to the corporation, and it was held that the stock must be regarded as paid for and the agreement conclusive unless rescinded or impeached for fraud, and this could not be done unless the attack was directly made. Judge Dillon, who rendered the opinion, stated:
“That the contract is valid and binding upon the corporation and the original share-takers, unless it is rescinded or set*363 aside for fraud, and that, while the contract stands unimpeached, the courts, even where the rights of creditors are involved, will treat that as a payment which the parties have agreed should be a payment.”
In addition to the finding in the former case, that the transaction was made in good faith and without fraud, we have the general finding of the district court upon like facts in the present case, in favor of the defendant in error, which must be treated as another finding that the transaction was free from fraud. Judge Thompson, in a discussion regarding the payment of stock by conveyance of property, states the following conclusion :
“A corporation may take in payment of its shares any property which it may lawfully purchase. Such a transaction is not ultra vires or void, but is valid and binding upon the original share-takers or corporation, unless it is rescinded or set aside for fraud. While such a contract stands unimpeached, the courts, even where the acts of creditors are involved, will treat that as payment which the parties have agreed should be payment.” (Thompson’s Liability of Stockholders, §134, and cases cited.)
It is unnecessary to discuss the principles which would apply if the transaction had been found to be fraudulent, or what would be the rights of an innocent stockholder or creditor against a stockholder who obtained his shares fraudulently, without making payment for the same, in a case where the proper proceeding was instituted to set aside the fraudulent transaction and compel the stockholder to pay the amount due upon his shares. Nor need we enter again upon a discussion of what has already been determined in Rld. Co. v. Tiernan, supra.
We find no error in the record, and hence the judgment of the district court will be affirmed.