Court Opinion

ID: 3881083
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:12:33.919087+00
Date Added: 2024-06-11T13:36:00.841258
License: Public Domain

Upon a consideration of the petition for a rehearing in this case, the Court is satisfied that error has been committed by it in assuming that the 400 shares held by Mortimer and the 200 held by Gilliam were issued to them by the D.F. McKeithan Lumber Company, upon subscriptions made by them to the stock in that company. In order therefore to correct that error and its consequences, it is ordered: *Page 337 
1. That the following statements in the opinion be stricken out:
"J. Mortimer, Jr., for his 400 shares paid $15,000 in cash and gave his note to the bondholders (from whom the corporation purchased the property) for $25,000, with his stock as collateral. R.L. Gilliam, for his 200 shares, paid $2,000 in cash and gave his note to the bondholders for $15,000 with his stock as collateral."
And that the following statements be inserted in lieu thereof:
"The 400 shares owned by James Mortimer, Jr., represented a substitution for 400 shares of the Williams  McKeithan Lumber Company, which he had purchased from Barr, Bonsal, and McKeithan, paying them therefor $15,000 cash and giving his note to them for $25,000 with the 400 shares as collateral. The 200 shares owned by R.L. Gilliam represented a substitution for 200 shares of the same company which he had purchased from the same parties, paying them therefor $2,000 cash and giving his note to them for $15,000 with the 200 shares as collateral."
2. That the following statements in the opinion be stricken out:
"It is worthy of notice that in the original distribution of the stock of the old corporation, Mortimer subscribed for $40,000 of stock. He paid $15,000 cash and gave his note to the bondholders, for $25,000, with the stock as collateral. By the agreement of June, 1915, he obtained a cancellation of his note with return of his pledged stock, and 75 of the 350 shares held by the bondholders. He has therefore, for $15,000, received 475 shares of the old corporation."
"Gilliam subscribed for $20,000 of stock. He paid $2,000 cash, and gave his note for $15,000, to the bondholders, with the stock as collateral. By the agreement of June, 1915, he obtained a cancellation of his note, with return of his pledged stock, and 275 of the 350 shares, held by the bondholders. *Page 338 
He has therefore, for $2,000, received 475 shares of the old corporation."
"Mortimer is claiming 1,025 shares additional in the new corporation under the May agreement, without any pretense of having furnished any other consideration than what is contained in that agreement. Gilliam appears to be content with what he has."
3. That the following statements in the opinion be stricken out:
"There are two very peculiar circumstances connected with this transaction: (1) At the organization of the old company in 1911, Mortimer subscribed for 400 shares of stock. He paid in $15,000 cash (we assume, of course, to the company), and gave his note to the bondholders, for $25,000, with the stock as collateral. This obligation for the unpaid portion of his subscription was an asset to the company, not of the bondholders, and why it should have been given to them, and not to the company, is not understood. It may explain the complacency with which the bondholders, under the June agreement, were willing to cancel the note, in which they really had no interest, and surrender to Mortimer the collateral stock. By this arrangement the company not only received nothing upon the $25,000 note, which belonged to it, but incurred a capital stock liability to Mortimer for the surrendered stock, $25,000. Before Mortimer can be held entitled to this block of stock, he should be required to account for the note given by him for the unpaid subscription. The interest of Gilliam in the $20,000 of similar stock is subject to the same observations."
4. That the following statements in the opinion be stricken out:
"Provided that Mortimer account to the corporation for the $25,000 due by him upon his original subscription; that in the event of his failure to do so within 60 days from the filing of the remittitur, his holdings in the original corporation be reduced to 225 shares, representing the 150 shares, *Page 339 
all that he paid for, and 75 shares received by him from the bondholders, and that his holdings in the new corporation be 225 shares plus 50 per cent thereof, 112.5 shares, total 337.5 shares; but as no objection has been raised to the issue of 475 shares in the new corporation, let it stand at that."
5. That the following statements in the opinion be stricken out:
"If Mortimer is entitled to one-half of the 3,000 shares of the new corporation, under the May agreement, by the same token Gilliam is also entitled to the same proportion. Mark the result so far as Gilliam is concerned: He has admittedly paid in upon his stock subscription only $2,000, and has not paid a dollar upon the debts referred to in the May agreement; he would become the owner of stock to the amount of $150,000, 75 times what he has paid in. And yet Mortimer complains that Kieswetter has received 2,046 shares in the new corporation for which he has not paid a dollar. He forgets that the stock issued to Kieswetter represents the Poston stock for which the coal company paid in cash $102,500."
6. The other matters referred to in the petition have been duly considered. The Court adheres to the opinion relating to them.
7. That the petition be dismissed except as herein indicated, and that the stay of the remittitur be revoked.
MR. JUSTICE FRASER: I did not concur in the majority opinion, but consent to any change desired by the majority in their opinion. I concur. *Page 340