Court Opinion

ID: 7970180
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:54:25.678859+00
Date Added: 2024-06-11T16:34:45.156133
License: Public Domain

CANTY, J.
I concur. The agreement between the Nevins Company and Finn was not an agreement for a sale by the former to the latter of an exclusive right or license to use the patents for a consideration of $5,000. It was an agreement that the Nevins Company and Finn should be joint promoters of a corporation; that the Nevins Company should put in this exclusive right, subject to the large royalty of 25 per cent, of the list price of all the articles manufactured, and Finn should put in $5,000 in cash. This was to be the capital of the new corporation, for which $100,000 of its stock was to be issued to the Nevins Company, and $150,000 to Finn.
Leaving the treasury stock out of consideration for the present, it follows that under this contract Finn received his stock for $5,000; and it is fair to presume that the $100,000 issued to the Nevins Com-any under the same contract was issued for a consideration of no greater proportionate value. Then, if the 1,500 shares were issued to Finn for a consideration of $5,000, the 1,000 shares issued to the Nevins Company must have been issued for a consideration which did not exceed $3,333.33 in value; that is, the latter sum must have been about the value of said exclusive right, subject to said royalty. If Finn’s services as promoter can be taken into consideration at all in determining what he paid for his stock, they certainly cannot be to such an extent as to allow for such services the enormous difference between $5,000, the cash he paid, and $150,000, the face value of his stock.
Of course, the Nevins Company might have given Finn something for nothing; but there is no presumption that it has done so, certainly none that it has given him $145,000 for nothing. If any illegality existed in the transaction, all of the stock except the treasury stock is tainted with it.
The Nevins Company would not be allowed to assert that it paid full consideration for the 1,000 shares of stock which it received, *334and, if there was anything illegal in the original issue of stock, it was in the fact that Finn did not pay more for the 1,500 shares. The Nevins Company and Finn were joint promoters, and the stock of each was acquired as one transaction, and pursuant to one and the same contract. Then, unless the total consideration paid was a reasonably adequate consideration for the whole 2,500 shares, and any illegality exists, all of those shares are tainted with the illegality. Of course, the Nevins Company by the rights furnished under the patents might have furnished consideration enough for all of these 2,500 shares; but, as it must be presumed that it did not give Finn something for nothing, it follows that it must be presumed that it did not furnish any more consideration than he did.
As the treasury stock was also sold at a grossly inadequate consideration, it sufficiently appears that all of the 4,000 shares of stock were issued at such a grossly inadequate consideration that the issue of all of the stock is fraudulent as to creditors.