Irvine v. Chicago, Wilmington & Vermillion Coal Co.

BAKER, Circuit Judge (after stating the facts as above). Between the action of a corporation, with powers limited to dealing in coal and to owning and using only such property as is necessary in that business, in accepting property in the form of existing stock in a railroad corporation as a means of realizing something upon a desperate debt' by selling the stock, and its action in being one of the organizers of a railroad corporation, in subscribing for stock which is yet to be brought into existence, and in paying par value on its subscription (for so must the subscription be paid) in money or property taken from the assets of its coal business, there is a markedl difference. First National Bank v. Converse, 200 U. S. 425, 26 Sup. Ct. 306, 50 L. Ed. 537; Converse v. Gardner Governor Co., 174 Fed. 30, 98 C. C. A. 16; Converse v. Emerson & Co., 242 Ill. 619, 90 N. E. 269. Particularly is the difference emphasized if, in the one case, the corporation accepts existing stock as property, to the holding of which no further liability can attach, and, in the other, not only embarks a part of its capital in a hazard of new fortune which its charter does not authorize, but also risks a further part of its capital in a liability which, to the extent thereof, is like a partnership undertaking with its fellow subscribers to the new enterprise. To the latter class the instant case belongs. Defendant had no claim of debt against the new railway company. Its claim was against Pickard, receiver of another company, for past-due rentals, evidenced by receiver’s certificates; and, further, defendant had the legal title [955] and immediate right of possession of its 268 coal cars. Instead oi collecting the receiver’s certificates, which were payable ahead oí all bond and other liens and all stock interests, and taking possession of its cars for use or sale, defendant subscribed for stock in a new railway company, payable at par in money or money’s worth, paid its subscription in cars and receiver’s certificates, and further undertook with its fellow organizers to provide, if necessary, additional capital in money to a like amount. This we believe to have been ultra vires. In this aspect of the case it is unnecessary to consider how far one corporation may go in taking stock in another corporation by way of compounding a debt. The judgment is affirmed.