Damron v. Denny

Gilbert, J. 1. The first headnote need not be elaborated. 2. Damron, in his answer, denies all allegations of bad faith, and avers that he holds bona fide and for value and that his transferors have no interest in the stock or the proceeds thereof. In the agreed statement of facts it is admitted that the answer of Damron is true and correct; and also it is specifically admitted that all of said stock was purchased by Damron for a valuable consideration and that all of it was of the original issue and fully paid for, except certain designated certificates representing 800 shares which were a part of the increased capitalization of the company. These agreements as to the bona fides of Damron negative the allegations in the petition of intervenors as to his notice and bad faith. It must have been the intention of the parties to agree that Damron purchased the stock in good faith for a valuable consideration, without actual knowledge of any claims by the corporation against Porter et al., on their unpaid subscription contracts. It is also a necessary conclusion that the certificates of stock transferred to Damron and which he now holds contained nothing in themselves to put him on notice of said debts, nor anything requiring him to make inquiry concerning it. It is argued by defendants in error that shares of stock in a corporation constitute a trust fund for the payment of debts. No principle is better established by the adjudications of this court than that unpaid stock subscriptions constitute such.a trust fund. This suit does not purport to proceed in the interest of creditors, nor is it sought to obtain a money judgment at all. Its sole purpose is, by cancellation of the stock, or otherwise, to prevent the holder thereof from sharing in the assets of the corporation after the debts have been paid, along with holders of other stock which has been fully paid up. Whatever may have been the real equities between the corporation, or between holders of stock fully paid for and these subscribers who are alleged to have been guilty of fraudulent conduct, a bona fide holder for value cannot be made to suffer; and the defendant in this case was such a holder by the [286] admission of all the parties to the suit. Bank of Culloden v. Bank of Forsyth, 120 Ga. 575 (48 S. E. 226, 102 Am. St. R. 115). This case differs from that of Fouché v. Merchants National Bank, 110 Ga. 827 (36 S. E. 256). It was held there that the court erred in granting a nonsuit, because -the evidence was such as to require a submission to the jury of the issue as to good faith and notice. As stated above, these issues are foreclosed in the instant case by the admission of the parties. Compare Holbrook v. New Jersey Zinc Co., 57 N. Y. 616; Central Savings Bank v. Smith, 43 Colo. 90 (95 Pac. 307). The judgment of the court canceling the stock in question was erroneous. Judgment reversed. All the Justices concur.