The Indiana State sentinel. [volume] (Indianapolis) 1868-1895, 1874-01-13

A declSlOn from the nlg1eSG duInOf1Ly, lDe
Supreme Court of the United States, puts
an end to whipping the devil roundsthe
stump by the stockholders in a corporation.
The case in point was upon an &C.
ton with the Lumberman's Insurance Com
pany. of Chicago, which went into insol-
vency after the great fire. and was placed in
the hands OF T. c. Hoag, as assignee. Mr..
C. b. Sawyer, the appellant, was stock
holder and claimed to have paid up his
S., 900 subscription of stock, when in fact he
had paid only fifteen per cent of it. The
fiction was achieved.in this way. He gave
his check to the company for the $1,000 and
then turned round and loaned of the COM
pany $3.50, for which their check was
given. No evidence Is shown from bank
or otherwise that either of the checks was
ever. cashed, as they were not, of course.
Now, when the company goes into insol-
vency and the creditors come in tor distri-
button of the assets, which consist in
part of unpaid stock, Mr.. Sawyer's
little arrangement comes exactly in play.
He owes the company for money loaned, his
his note at seven per cent. interest having
been given for the 81 go chsck, bat not for
stock. He claims his stock as an Offset to
his note. Such is u simple and plain state
ment of the facts. To tricksters it looks like
a very neat way to escape responsibility in
case of disaster to the corporation which
often, and as it would seem in this case, is
not unexpected nor unprovided for. In this
situation Mr.. Sawyer expects to reap the adj
vantages, if any accrue, of holding stock,
but not to expose himself to liability az a
stakeholder if, through bad management,
dishonesty or calamity, misfortune comes.
1t is representa- tive case, one of ten thou
sand, and of great concern to the public
Mr. Sawyer's game, aided by the company
of which he is part, does not win. The
court of last resort confirms the uniform
holdings of two courts below, that the ruse
does not relieve him from liability TO cred
itors of the company for stock which was in
realty not paid. As between himself
and the company the court hold that the ar
rangement might stand. The company could
not call on him for the payment of his stock
nor refuse dividends, if any, on the whole
amount. But the point decided is that the
assignee Is not the representative of the
company alone, as claimed, but the repre-
sentative of both the company and it's credit
ors. As such he can not recognize the fraud,
for such it really is, between the company
and one of it's stockholders. The Supreme
Court say with great pertinency:
Though it be doctrine of modern date,
we think it now well established that the
capital stock Off corporation, especially its
unpaid subscriptions, is trust and for the
benefit of the general creditors of the corpor-
alton. And when we consider the rapid de-
velopment of corporations as Instrumental
ties OF the commercial and business world
in the last few years, with the corresponding
necessity of adapting legal principles to the
new and varying exigencies ofthis business,
it is no solid objection to such principle that
it is modern, for the occasion for it could
not sooner have arisen.
That is the important aspect of the case.
The prevalence of corporate bodies requires
that all these lodges and tricks by which
parties acquire the benefits of the business
without actually and truly paying their
money as stockholders, the fictitious capital
schemes need all to be smoked out. This
point Is well settled now, and the decision
will have wide application and wholesome
effect on the business OF the country.
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