Mallinckrodt Chemical Works v. Belleville Glass Co.

Beeves, P. J. Independent of the question whether the preference gained by the Belleville Savings Bank, Stookey, Kloes and Lorenzen, can be upheld in equity, there is an allegation in the bill which, we are led to believe, was overlooked by the Circuit Court in passing upon the demurrer to the bill filed by the bank and Stookey. Ifc is this: The complainant further represents that said alleged sale of said personal property by said sale bill was not, in fact, a sale of said property for the price stated in said sale bill nor for any other fixed or definite price, nor was it a sale at all or for any price; but there was then and there an understanding and agreement between said Belleville Glass Company and said Belleville Savings Bank, Madison T. Stookey, John Kloes and Margaretlia Lorenzen, that said transaction should not be a sale in fact at all, but that said Belleville Savings Bank and said Madison T. Stookey, John Kloes and Margaretha Lorenzen, should collect said outstanding accounts, and sell said personal property so turned over and alleged to be sold to them, either for cash or'on credit, as to them might seem most advantageous, and out of the proceeds, after deducting the expenses, pay first their own claims against said Belleville Glass Company, and if there should then be any surplus remaining, to return the same to the Belleville Glass Company, or to hold the same subject to the order of the Glass company. The demurrer admitted this allegation to be true, and taking it as -true, no citation of authority is needed to show that, by reason of the last clause in the allegation, the transaction was fraudulent in law as to the other creditors of the Glass company, and could not, as against such creditors, stand. Selz v. Evans, 6 Ill. App. 466, and cases there cited. The demurrer of the bank and Stookey should have been overruled. Whether this transfer, had it been absolute, would have been invalid as giving a preference, we do not deem it necessary now to determine. The second error assigned by plaintiff in error is that the Circuit Court refused to hold the solvent stockholders responsible for the unpaid stock subscriptions remaining due from insolvent stockholders. The 25th section of the act relating to corporations is relied on to support the proposition involved in this assignment of error. As we construe this section, it only renders stockholders delinquent in payment for stock liable to the full amount unpaid on their stock, when this becomes necessary because of the insolvency of other stockholders who are also delinquent in payment for their stock. It must be conceded that a stockholder in a corporation organized under the act of 1872, who has paid in full for his stock, is not liable to a creditor of the corporation. Why should there be any greater liability on a stockholder who has not paid in full for his stuck, than the amount due and unpaid on his stock? Is it to be said that the Legislature intended to impose the heavy penalty upon a stockholder who has not paid in full for his stock, of making him liable for the full amount unpaid upon the shares of all other insolvent stockholders who may be in arrears? We think not. While the language used in the 25th section may be so construed, we' do not think it a reasonable construction. If the Legislature intended to create such a penalty as is above indicated, we think it should have used language that plainly expressed such a purpose. Penalties of this character should not be created by construction but only by clear and explicit enactment. As the Circuit Court held upon- this point as fully for complainant as in our judgment was warranted, this assignment of error is not sustained. There remain the cross-errors assigned by Wolfort and Truesdale. It is not disputed that Wolfort and Trues-dale paid the par value for the stock held by them, but it is claimed that Eberle, to whom five shares of Wolfort’s stock and ten shares of Truesdale’s stock were originally issued, did not pay for it in cash, and that the contracts which he turned over to the company on account of which the stock was issued were not worth the par value of the stock, and consequently the stock was never fully paid for to the company, and in such case the assignee of the stock is liable to creditors of the company for the amount unpaid. The stock was issued by the company to Eberle as paid up stock under a resolution of the board of directors passed April 22, 1882, which (reciting the proposition of Eberle to assign to the company for §5,000 his contract with Harding, Kloes and others, by which they agreed to convey to him or his assigns five acres of coal land in West Belleville, free from all incumbrances, and to pay him or his assigns §2,000 in consideration of his building the glass works on said lands and to accept stock of the company at par in payment) accepted the offer of Eberle and directed the president and secretary to conxplete the purchase and issue the stock. Subsequently, at a meeting of the directors held July 22, 1882, it was ordered that fifty-four shares instead of fifty be issued to Eberle, as paid up stock, in consideration of the assignment of the contract above referred to. The books of the company showed the stock paid up. It does not appear that either Wolfort or Truesdale knew of the transaction by which this stock was issued, when they bought. Wolfort bought his five shares of McAdam, who had received the shares from Eberle, by transfer on the books of the company. Truesdale bought of Foster, in whose name the ten shares stood when Truesdale purchased them. Even if we concede that the consideration which the glass company received from Eberle for the fifty-four shares of stock was not equal in value to the par value of the stock, yet unless the transaction is impeached for fraud, it is binding both upon the company and its creditors. To charge a holder of stock with individual liability it is not enough to prove that the stock was paid for in property,'and that an over-valuation was placed by the parties upon the property through a mistake or error of judgment, but it must be shown that the purchase of the property at the price agreed upon was in bad faith and fraudulent. Peck v. Coalfield Coal Co., 11 Ill. App. 88, and cases there cited. The amended bill does not charge that this stock was issued to Eberle in bad faith, but only avers that the consideration for which the stock was issued did not exceed in value $2,100_ Except in the matter of the increase of the amount of stock issued to Eberle in consideration of the assignment of the contract referred to, from fifty to fifty-four shares, we find nothing in the proof that tends to impeach the good faith of the transaction. The decree as to Wolfort and Truesdale is, upon the cross-error assigned by them, reversed and remanded. Decree reversed and remanded.