Court Opinion

ID: 3507317
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:17:41.179115+00
Date Added: 2024-06-11T14:16:53.610397
License: Public Domain

To me it seems that respondent's claim is not for money advanced to, or for any benefit conferred upon, the corporation but only for the balance of a debt (for which the corporation is not liable) made up of two items — (1) respondent's $7,100 claim against the original partnership, and (2) the $17,000 advanced under its contract (exhibit B, p. 9, of the record) with the other creditors "for the reorganization of the Kollitz Mercantile Company, a partnership * * * into and as a corporation under the name of Kollitz, Incorporated." Under that contract, both the original claim and the new money advanced went, not to the new corporation but to purchase the merchandise, accounts receivable, and other property of the old business for the purpose of turning the same over to Ed. H. Kollitz to enable him, as the agent of the contracting parties, "to subscribe and pay for stock" in the new corporation "to the amount of the inventoried value of said property ($36,800.00) * * * to be paid for by transfer of the property aforesaid."
The transaction was carried out accordingly, and the stock of the new corporation issued to Ed. H. Kollitz as the agent or trustee for the four contracting creditors, of whom respondent was one. (The evidence that Ed. H. Kollitz did make the subscription for 368 shares as contemplated by the contract is found at folios 120-3 *Page 169 
of the record.) True, notes were given to them in an amount equal to the balances due on their original claims — in case of the respondent, its original claim plus its $17,000 new advance. But as to the new corporation, these notes evidenced no loan or other debt due from it but only what the payees had subscribed and paid for its capital stock. In consequence, the notes as to the corporation were without consideration and void. They were in law a fraud on its real creditors, who dealt with it on the faith of its capital stock.
If the theory of the decision below is correct, Kollitz, Inc. issued its stock for nothing and when organized was nearly, if not quite, insolvent. For its entire property, inventoried at $36,800, it issued stock of that par value and simultaneously incurred debts in the same amount. That would be an impossible situation, and it is not to be supposed that the parties intended the violation of law which would be the necessary result.
I cannot concur in a decision which assumes that any such thing was intended, or that if it was we can or should give it effect. Respondent, in my judgment, can claim only as a stockholder and not as a creditor, without prejudice of course to whatever claims it might have against the other contracting parties under the agreement pursuant to which the $17,000 was advanced.