Court Opinion

ID: 8009215
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:56:19.935913+00
Date Added: 2024-06-11T16:36:00.312467
License: Public Domain

_ Sherwood, J.
This is a suit in the nature of a ■creditor’s bill. The plaintiffs, Shickle, Harrison & Company, are judgment creditors of the East St. Louis Gas Light & Coke Company, a foreign corporation organized under the laws of Illinois. Watts is the sole appellant here. He and the plaintiffs are residents of the state of Missouri. Watts is the owner of twelve hundred shares of the capital stock of the foreign corporation mentioned. The basis of this proceeding is, that Watts is the owner of said stock; that the par value of the same has not been paid-in full, and the purpose of this proceeding.is, to compel him to pay the judgment debt due the plaintiffs, they having exhausted their remedy at law against the corporation.
The controlling question in this case is, whether Watts can be treated as the holder of unpaid stock in *415the corporation. In 1874 he contracted with the corporation for the erection of its gasworks in East St. Lonis. For his work he was to receive eighty-three thousand dollars. Fifty thousand dollars of this sum was to be paid him in the mortgage bonds of the company, secured by first lien on the “works, property, and franchises of the corporation,” and the residue, thirty-three thousand dollars, was to be paid in cash. Concerning the cash payment, thirty-three thousand dollars, it was stipulated that thirteen thousand dollars “should be payable from the holders of the original fifty thousand dollars of stock, and the other twenty thousand dollars only from the other stock thereafter to be disposed of by the corporation.” And it was further stipulated, “that if the corporation failed to dispose of sufficient new stock to realize, from an equal assessment upon all stock, enough to pay twenty thousand dollars when so due,” that then the defendant should “receive in lieu of said twenty thousand dollars, cash stock of the corpóration at the same rate as other stockholders in full compensation for his dues.”
Watts built the works as agreed upon, receiving from the corporation forty thousand dollars in its bonds and realized from their sale $38,504.16. The contract evidently contemplated that the sum of thirteen thousand dollars should be raised by an assessment upon the fifty thousand dollars of old stock, but it was never raised and paid him. Nor did the company succeed in selling any part of the new stock, from the sale of which twenty thousand dollars was to be raised and paid him. It does appear, however, that at various times the corporation issued to Watts, and he received fifteen hundred shares of what is termed new stock. The par valúe of these shares was twenty-five dollars each and amounted in the aggregate to thirty-seven thousand five hundred dollars.. He sold three hundred of these shares and now retains twelve hundred. No settlement, it seems, was *416ever made between Watts and the corporation; but that matter is still open- and unadjusted between, them.
Concerning the reasonable cost of constructing the gasworks, such as the contract contemplated, there was a good deal of' testimony introduced. The estimates of the cost of similar works varied from thirty-five thousand dollars to forty-five thousand dollars. But looking at all the testimony, fifty thousand dollars would seem to-be a reasonable charge, inclusive of a fair allowance for the profit of the contractor. Relative to the terms upon which the fifteen hundred shares were issued and received by Watts, the contract provided that the stock should be issued to him “at the same rate it was issued to other stockholders.” He makes no claim that the stock was-issued to him in satisfaction of his demand, and the account between himself and the company still remains-open and unadjusted. The other stockholders obtained their certificates of stock upon payment of $12.50 per share, and, as before stated, he was to receive his shares-at the same rate that they did.
It results from this that, inasmuch as between Watts and the company he obtained his stock at $12.50, giving the company credit only at that sum per share, which for-the fifteen hundred shares would amount to a credit of $18,750 paid to him with stock — taking this as the-proper basis of computation, this would leave him still liable to the creditors of the corporation to the amount of fifteen thousand dollars on the twelve hundred shares which he still retains. This must be so if it be true that, notwithstanding any understanding or agreement between the defendant and other shareholders and the corporation, that they were not to be assessed any further on their shares, is of no avail as against corporate creditors. And this seems to have been the nature of the-agreement between the corporation and its various shareholders ; i. e., that they were to receive their shares ora payment of fifty per cent, of their par value, and so the-*417court below has found. And that court has also found that the contract price for the'gasworks built was some seventy per cent, beyond a fair and reasonable price, and that the sum already paid on account of those works, including bonds and stock, amounts to $57,254, or about $7,254 more than the reasonable value of such works.
I. IJpon the premise so well established, that the capital stock of a corporation is a trust fund for the benefit of its creditors, the very reasonable deduction has been made by the courts that, where an agreement is entered into between a contractor and a corporation, whereby the former is to perform work for, or furnish material to, the latter, and to take unpaid stock in part or in full payment, that such contractor, whether for labor or material, can only charge therefor the reasonable market value for such labor or material thus given in exchange ; and that all agreements by the corporation to pay more than such reasonable compensation will be disregarded and held for naught by the courts when the rights of creditors intervene. And this is the case, even though no fraud b e proven. Thompson Liab. Stock., secs. 127, 201; Boynton v. Hatch, 47 N. Y. 225; Talmadge v. Iron Co., 4 Barb. 382; Van Cott v. Van Brunt, 2 Abb. N. C. 283; Osgood v. King, 42 Iowa, 478; Chouteau v. Dean, 7 Mo. App. 214; Kehlor v. Lademan, 11 Mo. App. 550; Carr v. LeFevre, 27 Pa. St. 413.
And the same rule holds in this class of cases in regard to partial payments for stock in labor or material, as holds when payments pro tanto are made upon shares of stock in cash. In regard to which latter payments it is abundantly settled by authority that they will not avail as again st creditors only to the extent and only in proportion as such payments approximate the par value of the stock taken. Upton v. Tribilcock, 91 U. S. 45, and cases cited ; Thompson Liab. Stockholders, sec. 201, and cases cited; Gill v. Balis, 72 Mo. 424.
*418II. Pursuing the same line of thought respecting the capital stock of a corporation being’ a trust fund, it has been ruled that where stock held by a stockholder which has not been fully paid, that such a debt is deemed in equity part of the capital stock for all the creditors, and through which the corporation is a “going concern,” it may call the unpaid balance in, and though the stockholder during that period of prosperity may set off against the company any demand he may hold against it, yet when the company becomes insolvent, the rule .changes, and then the creditor stockholder cannot appropriate his unpaid balance in exclusive satisfaction of, his own claim, for this would be to give him an undue preference altogether inconsistent with the idea of a trust fund for the benefit of all the creditors, and for that reason to be shared by all of them pari passu. Thompson Liab. Stock., sec. 386, and cas. cit.
Prom this premise, it must needs follow that Watts cannot offset against his stock liability, amounting to some fifteen thousand dollars, what appears to be due him on his contract with the corporation. This would be true according to the authorities, even if his contract had been made on a fair and reasonable basis, and a ,'fortiori, must this be so, when the contract actually made far exceeded any such reasonable sums.
III. Relative to the forum in which plaintiffs seek to obtain relief: They had pursued their remedy at law in Illinois, recovered judgments, issued executions which were returned nulla bona, and the whole assets had been placed in the hands of a receiver. It is not seen how plaintiffs could have proceeded in any other forum than in a court of equity in order to succeed in this state against stockholders resident here. Por this reason the unpaid balances in the hands of Watts must be regarded as equitable assets recoverable alone in a court possessed of chancery jurisdiction. Moreover, Watts *419in the circuit court, did not plead a remedy at law, and his answer denying any knowledge or information sufficient to form a belief whether plaintiffs had a remedy at law is not tantamount to an affirmative allegation tha.t such remedy existed. The rule is that when a party proceeded against in a court of chancery fails to plead a remedy at law, he cannot raise the point at a later stage of the case. Blair v. Railroad, 89 Mo. 383.
IY. The gist of this proceeding and of plaintiffs’ right to the relief they seek consists in this: That Watts is owner and holder of unpaid stock in the insolvent corporation. This causes a liability to attach to him as a stockholder, and it is quite immaterial whether he is in fact a subscriber or not. The taking of certificates of stock implies a promise to pay. Webster v. Upton, 91 U. S. 65; VanCott v. VanBruntt, 2 Abb. N. C. 283; Chouteau v. Dean, 7 Mo. App. 215. And stockholders may become such by direct purchase from the company or what is equivalent thereto, by exchanging labor or property for stock. Thompson Liab. Stock., sec. 305, and cases cited. And even if the charter of the corporation, as in this instance, prescribes that persons wishing to become members shall subscribe for shares upon the stock books, this by no means prevents a person from becoming a shareholder by purchasing-shares and receiving a certificate for the same. Morawetz Corp. (2 Ed.) sec. 69. No sound distinction can be taken between a purchaser of,- and a subscriber for, stock, and the authorities generally take none.
Y. The judgments in the case at bar were entitled to full faith and credit in this state (R. 'S., 1879, sec. 2735), and had the same force and dignity, pro Jiao vice, as if domestic judgments. Ereem. Judg., sec. 575. The object of getting the judgments and issuing the executions thereon, was to demonstrate that, so far as concerned proceedings against the corporatibn, the *420plaintiffs were remediless. The judgments, etc., introduced established this fact as conclusively as though they were domestic judgments. It has been ruled in this state that, though our statute required judgment of dissolution before proceedings could be had against a stockholder, yet that, where dissolution sufficiently-appeared .aliunde, obtaining a judgment dissolving the-corporation was not necessary. State Savings Institution v. Kellogg, 52 Mo. 583. So in this case a court, and especially a court of equity, which regards substance- and not form, would not require the plaintiffs, having-recovered judgments in the foreign jurisdiction, which, proving unavailable by reason of the insolvency of the foreign corporation, should be required again to go-through the same barren and meaningless ceremony in this state, merely because service could be had here on an officer of the insolvent corporation.
YI. The circuit judge at first did not allow interest, on the judgments on which this proceeding is based, on the ground that the statute of Illinois allowing six per cent, interest was not offered in evidence at the-hearing, but subsequently he allowed interest, -and the question is, was his ruling in this particular correct ? Our statute makes provision that: “Interest shall be-allowed on all money due upon any judgment or order of any court from the day of rendering the same until satisfaction be made by payment,” etc. R. S. 1879, sec. 2725. The same section makes provision that the ordinary rate of interest of judgments shall be six per cent. It seems to me this language is broad enough to cover not only the judgments of our own domestic tribunals, but to include within its purview, as it certainly does-within its letter, “any judgment * * * of any court.”
Why should not this be- the- case ? Certainly our legislature cannot be ignorant of the fact that suits-upon judgments of our sister states are daily brought im *421cur courts, and it may have been contemplated by the legislative mind to make a uniform rule as to the rate of interest such judgments should bear from the time of their rendition in a sister state until they become merged into judgments rendered in our own-tribunals. If such was the intention of the legislation in question, it certainly conforms to those constitutional and legislative provisions which place judgments of our sister states “on the same footing as domestic judgments.” In Massachusetts the rule has long been established, unaided by statutory legislation, that, in suits on judgments .of sister states, interest, by way of damages, shall be allowed on such judgments when sued on in courts of that state. Baninger v. King, 5 Gray, 9. In the case just cited six per cent, interest was allowed, but the .plaintiff claimed seven per cent., that being the rate allowed on the judgment in New York. He was told, however, by the court that the six per cent, was damages, not interest, and that the rule of damages is that of the court where action is brought. To the same effect see Hopkins v. Shepard, 129 Mass. 600, where suit was brought on a judgment rendered in Maine, and though no evidence was offered in the lower court concerning the law of Maine as to interest on judgments, that court rendered judgment for the amount of the main judgment, and six per cent, interest thereon, and this judgment was affirmed.
In an earlier case in that state (Williams v. Am. Bank, 4 Met., 317), where speaking' of the subject of interest, Shaw, C. J., said: “Interest is allowed not only on strict legal grounds, where there is a contract for the payment of interest, or by way of legal damages where there is a tortious detention of a debt, but upon considerations of equity and natural justice, when a party is entitled to the payment of money, which, owing to various causes, he cannot obtain. The subject of interest was put upon rational and intelligible grounds *422in the case of Robinson v. Bland, 2 Bur. 1085. It was put upon the ground that interest should be allowed on a loan of money after the time fixed for payment, because it was equitable, and in order to assimilate the practice of courts of law to those of equity. And, in the same case, it was held that, in assumpsit, the interest should not stop at the commencement of the action, but be brought down to the time of the assessment of the damages. The true principle there recognized is,'that in justice the interest should be carried down to the time of the payment of the debt, but as that cannot be done it should be brought down to the latest period at which the court can act upon the subject. The same case recognizes the principle that, where interest is recoverable, except in special cases where it is payable by contract before the principal is due, interest is incident to the debt, constitutes part of it and passes with it; otherwise, upon no principle could the plaintiff recover in an action money not due when the action was brought.”
The rule which prevails in Massachusetts, as already quoted, is also the rule in New Hampshire. Mahurin v. Bickford, 6 N. H. 567. In 3 Com. Big. 321, citing 1 Rol. 575, 1, 10, it is said: “Indetinue the plaintiff may recover agáinst the garnishee more damages than were alleged in the declaration, because he recovers for delay after his declaration.” These authorities and the reasons they give support the conclusion reached by the lower court in the matter of interest.
VII. There is but one more point remaining to be noticed : Watts became a stockholder and owner in 1874. Plaintiffs ’ judgments were obtained in 1880 and 1881, and because this is so it is contended that they should not have prevailed in the lower court. There is no merit in this contention if it be true that unpaid stock is a trust fund for the benefit of the creditors of the corporation. If it be a trust fund, then its character remains *423unchanged and awaiting demands which may arise against it, precisely as if it had been paid into the corporate coffers instead of remaining in the hands of the person who still remains a debtor to the corporation, to the extent of his unpaid balance.
The judgment is affirmed.
All concur, except Ray, J., absent.