The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1896-12-13
WALLACE is BEATEN
In His Suit over Electric Heater
Stock

In His Suit over Electric Heater
Stock.
Judge Otis filed decision for the defend
lace, Jr., against the Carpenter Electric
Heating corporation to recover a judgment
for $4,000 and dismissed the suit.
The case grew out of the merging of the
first named defendant corporation into the
American Electric Heating corporation by a
purchase Of majority Of its capit-1 stock.
1t was claimed that certain stock transferred
at the time of the Incorporation of the Car
penter Electric Heating Manufacturing COM
pany as full paid capital stock, as matter
of fact had not been paid for and the Amcri-
can Electric Heating corp esltion was made
defendant in that 1t was alleged to hold stock
upon which the subscription had not been
paid. The claim was based upon the agree
ment whereby the Carpenter Electric Heat
ing Manufacturing company was organized,
it being alleged that George II. Finn, one
of the promoters, received a certain amount
of stock as a consideration for patents which
were of little or ne value, being subsequently
declared invalid. Finn also paid the company
S., 600 for carrying its business in consid-
Grafton of which he received 1,500 shares Of
full paid capital stock and caused coo shares
to be issued to the company from which he
acquired the patent rights which he had con-
tributed to the new organization. The remain
ing 1900 shares were held as treasury stock
and when the Carpenter Electric Heating
Manufactur ng company was duly organized
IN May, 1881, as per agreement, the treasury
stock was sold for $25, 900. Subsequently the
AHlGT1cdH Electric H04LnR corporation Dur
chased 3,946 shares Of the capital stock of
the newly organized company all of the orig
inal stock with the exception Of "a shares,
when Wallace began suit on the ground tina.
the purchase of stock by Finn in consider.
ton Of the patent rights had been without
due Consideration, and seeking that the re,
order that he might collect his judgment
against the Carpenter company.
L., memorandqm Judge Otis says:
Wis Section Sli5 OF the General Statutes
dc fc ole 7
the opinion that 1t operates to allow a manu-
featuring corporation to issue it's stock as
full paid and dispose of the same for less
than par, and on such terms as its board of
directors may deem advisable, this section,
without the proviso, is the same as section
163 of chapter 81, General Statutes of 1866
The proviso has since been added by amend
ments from time to time made, and unless
1t has the effect of taking this class of cor
poratlons out of the operation of the statute
as originally enacted it is impossible to give
1t any force and we are to assume that there
was some purpose in adding the proviso.
The fact that afterwards, section 2743 Gen.
eral Statutes, 1894, was enzcted. gives legis-
lative construction to this proviso the same
as have given it; for, otherwise, a substan-
tfal portion of this section 2743 would seem
to be quite unnecessary.
That the classes of corporations entitled to
the privileges of this proviso have been from
time to time by successive amendments ex-
tended, shows that it was not considered
meaningless, and as believe the construc-
nun nave duOptOu is IN accordance with the
general understanding of the bar
1t follows that the Carpenter company could
dispose Of its stock in the manner found
without making purchasers thereof liable for
any further assessments.
Further than this as the stock was issued
and disposed of as full paid and raised from
hand to hand as such, it seems to me a per-
son taking it without notice that it was SO
in fact, would be protected; and there e no
allegation or evidence that the parties from
whom defendant acquired such stock were not
such good faith purchasers and thereby fully
protected.
If they were the defendant would be like
wise protected without regard to such know
ledge as it might be charged with.