127 Minn. 346 | Minn. | 1914
This is an action to enforce against defendant constitutional liability as a stockholder of a bankrupt local corporation. Plaintiff prevailed. Defendant appealed from an order refusing amendments of the findings and a new trial.
The complaint was sustained on demurrer in 116 Minn. 285, 133 N. W. 801, 38 L.R.A.(N.S.) 648, Ann. Cas. 1913A, 719, where it was held, among other things, that the discharge of a corporation under the Federal Bankruptcy Act does not discharge or extinguish the constitutional liability of its stockholders for the payment of its debts.
Plaintiff claimed that on April 19, 1905, defendant subscribed for and became the owner .of 50 shares of the capital stock of the Winslow Furniture & Carpet Co., the bankrupt corporation, of the par value of $5,000, issued in his name, an entry whereof was then made upon the stock books of the company, and that such ownership
Little dispute exists as to the facts. In April, 1905, the Winslow Co., which had theretofore been a retail furniture dealer in St. Paul, contemplated opening a branch in Minneapolis, and with that end in view conferred, through Mr. Winslow, its president, with Messrs. Salisbury & Satterlee, president and vice president of a company then engaged, under that name, in wholesaling furniture in the latter city, regarding the purchase by it of shares of the former’s capital stock. What occurred, the agreement entered into, and how interest was paid on the advances subsequently made, will best be understood by stating the testimony of the last-named officers as witnesses for defendant. Mr. Satterlee, after testifying that Mr. Winslow advised him of the contemplated establishment of the branch, continued:
“And that he wanted to know if he couldn’t interest us in taking some financial interest in the business; that he had had some kind of proposition from other people and wanted us to take stock. We told him we wouldn’t take stock, couldn’t take it and wouldn’t. We conversed along that line for some time and then we suggested, I suggested, or Mr. Winslow, in our conversation, it came to this arrangement, that we would let them have approximately $2,500 worth of goods and $2,500 in cash and take stock in the Winslow & Huff Furniture Co. as security, collateral security, this stock to be issued to Mr. Barney. It was first suggested by Mr. Winslow*349 to issue it to a man in our employ, but we didn’t want to have anything to do with it for the reason that with the other trade in the city here it isn’t advisable or desirable to have them feel that you are backing competition coming into the city. So we suggested Mr. Barney. He didn’t know Mr. Barney, never had heard of him, and said if it was satisfactory to us it would be to him. So we made the deal on that basis.”
Mr. Salisbury testified:
“Through Mr. Satterlee I learned Mr. Winslow desired to open a branch in Minneapolis and with Mr. Satterlee had several conferences with Mr. Winslow. It was his desire, as I recollect it, that we should take a certain amount of stock, $5,000 was the ultimate sum that we arrived at as necessary for us to participate in his patronage, to receive his patronage for our line of goods. I was not in favor, nor was Mr. Satterlee at our conferences, of taking stock in the Winslow Furniture & Carpet Co. or in the Winslow & Huff Furniture Co., as it was at that time. And I presume there was suggestions made along several lines; as I remember it we were trying to reach a point where we could agree upon the conditions under which we could give them $5,000, a loan of $5,000 in credit, partly goods and partly cash. And it was my understanding that when the deal was finally consummated that Mr. Winslow was to issue $5,000 worth of stock to Fred E. Barney which he was to hold to secure us for the payment of the credit-which we gave him; that he was to pay us 8 per cent interest, not on the $5,000, but on the cash as soon as it was invested or turned over, and upon the monthly balances of goods. The interest was paid for at least two years if not more. And the time of payment was not definitely settled or promised or understood, except that the success of the business from Mr. Winslow’s standpoint would undoubtedly allow him to take up the credit or the loan within two or three years.”
After the making of this arrangement defendant, at the request of the Salisbury Co., consented to take the stock in his name, and, likewise, on April 19, 1905, attended a stockholders’ meeting of the Winslow Co., at which a resolution was passed to issue the shares to him, which was done, nothing being said about their be
Certificate
No. 8
For SO shares
Issued to
Fred E. Barney.
Dated April 19, 1905.
From Whom Transferred.
Dated...................■.....190........
No. Original No. Original No. of Shares
Certificate . Shares Transferred
Deceived Certificate No..............
For .............................................. Shares
this.............. day of ....................190........
The within certificate, No. 8, is one of a series, aggregating $25,-000 of preferred stock, and is entitled to the following preference, viz.: To be paid an annual cumulative dividend, on the date of the regular annual meeting of the corporation, of eight per cent, and in case of the winding up of said corporation, said preferred stock shall be paid in full before any common stock shall receive a dividend. The right to redeem the same at any time after five years is reserved.
“Winslow & Duff Furniture & Carpet Company.
“By Irving M. Winslow, Pres.
“By Alfred Mortenson, Sec.”
This was substantially in accord with the resolution authorizing its issuance. Later defendant executed a proxy and the shares were voted thereunder at the annual meeting of the company held in February, 1906. The company’s articles of incorporation provided
In this jurisdiction, in harmony with the great weight of authority, one to whom corporate stock has been transferred as collateral security, but who appears upon the books of the corporation as its general owner, is liable as a stockholder for corporate debts. Marshall Field & Co. v. Evans, Johnson, Sloane & Co. 106 Minn. 85, 118 N. W. 55, 19 L.R.A.(N.S.) 249; note 121 Am. St. 197. But the rule is otherwise when the holder’s true relation to the stock appears of record (Marshall Field & Co. v. Evans, Johnson, Sloane & Co. supra), or where absence of such disclosure is not due to his failure to exercise reasonable care. Hunt v. Seeger, 91 Minn. 264, 98 N. W. 91. Subsequently to the issue of the stock here in question, the rule stated in the Field case was, to some extent, incorporated in our statutes. See E. L. 1905, § 2863.
At the outset it is to be remembered that we are not dealing with a case where any claim is made that defendant either requested or suggested any notation as to the stock being issued as collateral; and, further, that the root of the rule of estoppel in such cases is protection of creditors, and although stock be issued by a corpora
We sustain tie findings and iold tie court justified in refusing to find eitier negligence or fraud on tie part of the Winslow Co., and tiat defendant’s negligence justified tie conclusion of estoppel.
Order affirmed.
On December 11, 1914, tie following opinion was filed:
Attention ias been called to an omission to make a specific ruling in the opinion on defendant’s contention tiat plaintiff really represents simple creditors with tie same standing only as such creditors iave under tie National Bankruptcy Act (Act July 1, 1898, c. 541, 30 St. 544), and, under tie agreement found by tie trial court, could not claim tie benefit of tie estoppel herein declared, except in some such- capacity as that of bona fide purchasers or lien or judgment creditors; tiat under tiat act the creditors here cannot avail themselves of an estoppel which tie corporation could not claim. Wherefore, it was urged, plaintiff was precluded from tie benefit of an estoppel.
Tie point has been considered, and is overruled.