Court Opinion

ID: 3434438
Source: CourtListenerOpinion
Date Created: 2016-07-05 20:03:24.629379+00
Date Added: 2024-06-11T12:35:25.582259
License: Public Domain

As to the propositions passed upon by the majority in this case, except as herein indicated, I desire to be understood as expressing no opinion. I adhere to all I said in the dissent to the opinion in Kosman v. Thompson, 204 Iowa 1254. In my opinion, the court in this case should have refused to permit the receiver to proceed against alleged stockholders of the Associated Packing Company. As I view it, they ceased to be such after the State, in an action in equity, obtained decree rescinding and canceling the charter issued to it, upon the ground of fraud in its procurement. By this decree, subscriptions for stock became waste paper, — not because the corporation was insolvent, but because, by act of the sovereign, its right to do business as such was taken away. The alleged corporation could not thereafter issue or deliver certificates of stock to anyone. The consideration for the contract was totally wiped out. The trust fund doctrine is strictly of judicial origin, and is strictly of equitable cognizance. There is no equitable basis upon which to support the decree in this case. Subscribers for stock obtained nothing, for the reason, as stated, that, by the act of the sovereign, which granted the company the right to do business as a corporation, the right to issue certificates of stock was taken away. The subscribers were as innocent of the fraud practiced upon the state as were the creditors of the corporation. Nothing could be more inequitable than for the court to permit the receiver to proceed against subscribers for stock and compel them to pay an assessment for the benefit of creditors. There is no equity in the proposition that subscriptions for stock, under such circumstances, constitute assets of the corporation, to be administered as a trust fund for the benefit of creditors. The application of the trust fund doctrine to the facts of this case is, in my opinion, grossly inequitable and wholly unjust. The situation is different from what it would be if the corporation had ever had a de jure or a de facto existence, and had become *Page 773 
insolvent, and in this way its stock was rendered worthless. The subscriptions for stock were rendered worthless in this case because of the cancellation and rescission in equity by the state of its contract with the original promoters of the fraudulent scheme. As bearing upon these propositions, see 8 Fletcher's Cyclopedia Corporations, Section 5027 et seq.; Luedecke v. DesMoines Cabinet Co., 140 Iowa 223; Hollins v. Brierfield Coal Iron Co., 150 U.S. 371 (37 L. Ed. 1113); Wood v. Dummer, 3 Mason's Rep. (U.S.) 308 (opinion by Judge Story).
I would reverse.