Court Opinion

ID: 4724062
Source: CourtListenerOpinion
Date Created: 2021-08-12 02:48:15.262032+00
Date Added: 2024-06-11T08:07:45.411141
License: Public Domain

Dunbar, J.
(dissenting). — I dissent. My understanding-of the disposition of this case when it was before this court at its January term in 1897 was that this mortgage was held void as to the creditors who then appeared and to all others who stood in the same position as the creditors appealing. This is not exactly the language of the opinion, but it was my understanding of the opinion, and I think can be fairly gathered from the language used. These creditors in class “ B ” presented their claims under *510the orders of the court after the case was remanded and upon application for a writ of prohibition this court decided that the court below was proceeding in an orderly manner to settle the claims, and it seems'to me did settle them in accordance with the equities existing. But conceding that the prior judgment of this court only affected the standing of this mortgage in its relation to the five appealing creditors, I am of the same opinion now in relation to the merits of the controversy as I was when the case was here before. The appellants rely upon the decision of this court in Kroenert v. Johnston, ante, p. 96 (52 Pac. 605). I did not subscribe to the doctrine announced in that decision and never can as long as the laws in relation to the government of corporations exist as they do now. But this case, it seems to me, goes even beyond Kroenert v. Johnston, supra. It has been established by this court in common with most of the other courts of the Union that stock in corporations could be paid for in money or money’s worth. Even this was a modification •of the law and a concession in the interest of the corporation; but it was a harmless concession, for the term “ money’s worth ” is well understood and not susceptible of two constructions. It means, of course, property worth the money, and not worth one-half or one-tenth of the money. Under this rule the real relations of the corporation with the creditors are not changed; for the corporation still has in its possession for the benefit of the credr itors the full value announced. But it has never been a recognized rule in any court that I know of that corporations in their dealing with private individuals would be protected in a fraudulent estimate of their capital stock. T am aware that it is hard to realize the values that were honestly placed upon property of all kinds during the inflated period commonly called “boom times,” and that it *511makes a wonderful difference whether we are looking through the small or large end of the telescope, but the action of the corporation in this respect convinces me that it was the intention of the corporation to place a value upon its property which it knew did not in reality exist, for the purpose of obtaining credit and of selling its bonds. The majority says:
“ It has been urged that the fact that some two million dollars of the stock was turned back into the corporation to be disposed of to assist in raising funds for the prosecution of the enterprise and was sold with the bonds for considerably less than its par value, goes to show that the projectors knew that the estimate was extravagant and fraudulent, but we do not think this in anywise tends to establish fraud as against these creditors.”
The opinion further states that
“The fact of an exaggerated value might have an important bearing under certain conditions; for instance, if the bondholders were here complaining that they had been deceived by an excessive valuation placed upon the property and had been led thereby into buying the bonds on the belief that they were amply secured, then the question would be brought directly in issue, for there was an intention to float the bonds of the company and many of them were disposed of to various parties, not all of them stockholders. But it is sufficient to say that no bondholder is complaining of any fraud.”
I cannot understand under what theory of law or ethics the fraud would be any more vicious or violent, if by reason of this exaggerated value bonds were sold to innocent purchasers, than it would be, if by reason of an exaggerated value, credit was obtained and goods secured which could only be obtained and secured by reason of the fraudulent holding out of the value of the property of the corporation. All the laws compelling these valuations and prescribing the actions of corporations in cases of this kind are for *512the purpose of giving notice to the public and of protecting parties who deal with the corporations. It seems to me that these laws might as well be swept from the statute books, if-it is to be coolly held that no fraud as against creditors can be predicated upon the action of a corporation in estimating and holding the value of its property at ten or twenty or a hundred times its actual value. Relying upon the expressed valuation of the property of the corporation one might readily loan a hundred thousand dollars to a corporation that, according to its showing and its representations solemnly made, had property worth five million dollars when he would not be willing to credit it for more than one-tenth that amount if its property was known to be of the value of $100,000. There is no hardship imposed upon a corporation by compelling it to deal honestly, openly and above board with the public. In this instance, I think it is clear that the dealing has been exactly of the opposite character, that these creditors were deceived, that in effect a conspiracy has been entered into for the purpose of depriving them of their proportionate share of the proceeds of the estate of this corporation. In my judgment the findings of the lower court were right and should he sustained.