Harrison v. Union Pacific Ry. Co.

McCrary, C. J. The intention of the Arkansas Valley Railway Company was to sell the stock to Harrison for less than its par value; i. e., to give him $15,000 in stock, 20 bonds of the company, guarantied by the Kansas Pacific Company, and the Clay county bonds, all for $15,000 in cash. There is nothing in the statutes of Colorado, where the corporation was created, to forbid the sale of stock at less than par, nor was Harrison forbidden to purchase the stock by reason of the fact that he was already a stockholder and director in the Kansas Pacific Railway Company. The transaction was therefore valid as between the corporation and Harrison, whatever the right of the creditors of the corporation as against Harrison may be. Scovill v. Thayer, 4 Morr. Trans. 179; S. C. 11 Fed. Rep. 198, note. [524] ■ Such being the case, it cannot be said that Harrison obtained the bonds without consideration. He bought all the securities above mentioned for $15,000 in cash, and although the face value of the securities purchased is much more than $15,000, it does not follow that they were intrinsically worth more than that sum; and, in fact, the cross-bill alleges, and the demurrer admits that they were not intrinsically, nor in the market, worth the sum paid for them. It is, at all events, clear that the owner of such paper is at liberty to sell it at any price he pleases, unless prohibited by statute. The Kansas Pacific Company is bound by its guaranty of said 20 bonds. The pecuniary interest which that company had in the Arkansas Valley Company, and in the construction of the road from Kit Carson to Pueblo, was a sufficient consideration for the guaranty. It follows that Harrison may recover upon the bonds unless the railway company has shown some sufficient defense in equity. It is said, and it is true, that if the Union Pacific Railway Company is compelled to pay the sum due on these 20 bonds it will have the right to recover from the stockholders of the Arkansas Valley Company, including Harrison, to the extent of their unpaid stock in that corporation. But in this case there can be no decree for contribution, because the necessary parties are not before us, and the pleadings are not framed with a view to such a decree. If the Union Pacific Company is liable for the sum claimed by Harrison, it must make payment and then proceed against the stockholders, including Harrison, for contribution. . Our conclusion is that no sufficient defense, either at law or in equity, to the bonds in question has been shown, and that as against the Arkansas Valley Company, the maker, and the Kansas Pacific Company, the guarantor, of said bond, the plaintiff, Harrison, has a good cause of action. The remaining questions are, what is the extent of liability of the Union Pacific Company, and what measure of relief is Harrison entitled to against it ? The parties are now in a court of equity; and, if their rights can be determined by a decree in the present case, that is sufficient for our present purpose. It may be that there is a right of action against the consolidated company; but if so, we think it is not exclusive. ' If a creditor of the original corporation sees fit to proceed in equity to subject the property of that corporation in the hands of the consolidated company, he has a clear right to do so. By the articles of consolidation it is expressly provided that “nothing herein shall prevent any valid debt, obligation, or liability of [525] either constituent company from being enforced against the property of the proper constituent company, which, by force of these articles, becomes the property of the consolidated company.” The cross-bill alleges and the demurrer admits that the consolidated company has received from the Kansas Pacific Company all its property, amounting to more than $10,000,000, and that the original corporation has practically ceased to be, and is merged in the consolidated company, having now no officers upon whom service can be made, and no property out of which an execution can be satisfied. We are of the opinion that, under such circumstances, the consolidated corporation is liable in equity for the debts of the original corporation; at least, to the extent of the value of the property received from it. If the new corporation admits (as it does by its demurrer in this case) that it has received to its own use the property of the original corporation to an amount largely in excess of the sum claimed, no inquiry is necessary, and relief may be had in the form of a decree for the sum due. If this be denied, (as it may be by an answer,) the court will hear the proof, and in that case it would become the duty of the Union Pacific Eailway Company to answer the interrogatories embodied in the cross-bill. The demurrer to the cross-bill is overruled, and if the Union Pacific Company stands upon the demurrer, there will be a decree for the sum due upon the bonds, without prejudice to the rights of the said company to proceed against the stockholders of the Arkansas Yalley Eailway Company, including Harrison, to compel .contribution. We do not determine the question whether a creditor of the Kansas Pacific Company may maintain an action at law against the Union Pacific Company to recover his debt. The correct determination of that question depends somewhat upon the construction of certain statutes, state and federal, some of which are not before us, and the decision is not necessary in the present case. Treat, D. J., concurring.