Easton Nat. Bank v. American Brick and Tile Co.

69 Eq.

if any, are entitled to relief against the original subscribers? The claims presented are as follows: Henry A. Potter, $6,210.13; E. P. Wilbur Trust Company, $16,515.58; Lehigh Valley National Bank, $1,002.31; Easton National Bank, $18,185.75; Henry Short, $2,000; estate of Henry Green, $22,947.88; estate of Henry Green, $30,100; Frederick Green, $6,655.

As to the claims of the Easton National Bank and Henry Short no substantial defence was interposed, as the claim of the Lehigh Valley National Bank was not proven, and is not now in position to be passed upon, I will hold it for future consideration. The claim for $30,100, on behalf of the estate of Henry Green, was withdrawn before argument, leaving the claims of Henry A. Potter, Frederick Green, the E. P. Wilbur Trust Company and the remaining claim of the estate of Henry Green to be dealt with. Henry Green, on behalf of whose estate a large claim is made, Elisha P. Wilbur, president at the time the stock was issued of the E. P. Wilbur Trust Company, and Henry Potter, were directors of the defendant corporation, and Frederick Green was its secretary and treasurer at the time the stock found to be unpaid was issued, and each, at the time they became creditors, knew the exact condition of the company, and that the stock they now seek to impress with their claims was not issued for property at its value. Their right to hold subscribers for unpaid balances on account of stock issued depends entirely upon the fact that it was issued fraudulently as to creditors. If it was so issued it was by the act of the directors and within the knowledge of the treasurer, and they each extended credit with notice that the stock was not full paid, and that the company had entered into a contract with its stockholders that no further payments would be required. The E. P. Wilbur Trust Company is chargeable with knowledge of all facts possessed by its president, E. P. Wilbur, one of the offending directors. He had notice of the conditions under which the stock was issued, which it was not against his interest to communicate to the trust company, and the presumption is that he did.

It is not every creditor who can call upon a stockholder to

pay an unpaid subscription in satisfaction of his debt, or insti tute an inquiry as to the value or amount of the consideration given for stock. It is only those creditors who can fairly allege that they have relied, or whom the law presumes to have relied, upon the amount of the capital stock. The doctrine that the capital stock is a trust fund for creditors, which the company may not dissipate, cannot be invoked, when the creditor has knowledge of the arrangement under which the stock was issued as full paid. First National Bank of Deadwood v. Gustin Mining Co., 42 Minn. 327; Cook Stock. § 39; Hospes v. Car Company, 48 Minn. 174.

It therefore follows that these last-named claimants are not in a position to call upon the delinquent subscribers to contribute towards the payment of their claims. I will advise a decree setting aside the contract under which the stock was issued to the original subscribers as full paid, and they will be required to pay to the receiver such proportionate amounts of their unpaid subscriptions as may be sufficient to satisfy the claims of the Easton National Bank and Henry Short, and also the expenses of the receiver's administration, together with the cost of this proceeding. As these amounts are readily ascertainable an order of reference will not be required.

SARAH C. STOUT et al.

υ.

ARCHIBALD T. APGAR et al.

[Decided March 2d, 1905.]

Where a husband conveyed lands in trust for the benefit of his wife and children, creditors of the wife cannot subject such lands to the payment of her debts.

69 Eq.

On bill for relief.

Stout v. Apgar.

Messrs. Clark & Case, for the complainants.

Mr. H. Burdett Herr, for the defendants.

BERGEN, V. C.

In 1892 Sylvester A. Hall conveyed certain lands in Somerset county to one Martin Wyckoff, in trust,

"to hold, rent, sell, convey and mortgage any and all of said lots, if he shall think best to do so, for the purpose of raising money for the maintenance and support of said Ella Hall and her children, for their clothing and education, and, if deemed best, to buy and provide a house for them."

The beneficiaries were the wife and children of the grantor, who lived apart from his family and made no provision for their support or maintenance other than the trust above mentioned. The wife incurred obligations, in supporting and maintaining herself and family, for which the complainants recov ered judgments against her, and now file their bill of complaint as judgment creditors of the wife, making parties defendant the trustee, wife and infant children, praying that their judgments may be declared to be a lien on the trust property, and that the lands be sold free and clear of the interests of the defendants, and the judgment debts satisfied out of the proceeds of such sale.

A demurrer was interposed by the trustee, stating as a cause that the trust, as disclosed in the bill of complaint, did not proceed from Ella C. Hall, the judgment debtor. It is quite clear that the objection raised by this demurrer is well taken, and that the pleading presenting it should be sustained. The aid which the complainants seek is the subjecting of this trust property to the lien of their judgments at law against one in whose favor, in part, the trust was established. The statute under which relief is sought by its terms excludes appropriation by creditors of trust property when the trust has been cre

3 Robbins.

Sterling v. German-American Insurance Co.

ated by or the fund has proceeded from some person other than the debtor himself, and our court of last resort has held that this statute defines the jurisdiction of the court over trust funds in their application to the payment of debts. Hardenburgh v. Blair, 30 N. J. Eq. (3 Stew.) 645, 665.

In the case under consideration the trust property proceeded from a person other than the debtor, and thus falls within the prohibition of the statute. The trust was created to provide a fund for the support not only of the wife but of the children, and it was purposely put beyond the reach of the creditors of the wife. If these complainants dealt with the wife, and extended credit to her on the strength of the trust, they did so. with full knowledge of the conditions, and are chargeable with notice that the trust proceeded from another and could not be reached to satisfy their claim without abrogating the exception in the statute.

I will advise a decree sustaining the demurrer, with costs.

MARY J. STERLING, executrix,

2.

GERMAN-AMERICAN INSURANCE COMPANY.

[Decided March 4th, 1905.]

In a suit to set aside an award by appraisers, to whom the question of damage by fire was submitted, where a witness for complainant estimated the cost of new buildings at $2,890, while the appraisers fixed it at $2,750, the difference was not sufficiently radical to show that plaintiff was injured by the award, or to justify the court in setting it aside because the complainant was not notified that the appraisers intended to meet and estimate the damages.

On bill. On final hearing.

Sterling v. German-American Insurance Co.

69 Eq.

Mr. Linton Satterthwait, for the complainant.

Mr. James Buchanan, for the defendant.

BERGEN, V. C.

The complainant, having suffered a loss by fire, submitted the question of damage resulting therefrom to appraisers, according to one of the conditions of the policy of indemnity issued by the defendant to her. The appraisers awarded to the complainant $1,800 as compensation for her loss, and this amount was arrived at by ascertaining the costs of reproducing new buildings and foundations similar to those injured, and deducting therefrom the value of the foundations, which were not destroyed or appreciably injured, and also an allowance for depreciation resulting from age. The principal building destroyed was a barn, the first story of which was built of stone. The upper story was a frame building, and naturally depreciated in value during the fifty years since its erection, notwithstanding usual and necessary repairs. A witness produced by the complainant, being a carpenter from the neighborhood, estimated the cost of new buildings at $2,890, while the appraisers fixed it at $2,750, a difference in estimates not sufficiently radical to warrant the assumption that the appraisers were actuated by any improper motives. The stone wall was standing and its condition subject to the view of the appraisers, who are not charged with being either incompetent or dishonest, and the allowance made by them for the stone wall, constituting the first story, together with that for depreciation, cannot be said to be so excessive as to justify the inference that the appraisers acted upon an erroneous principle or made any such mistake as to call for a review of their judgment. I have considered this branch of the case only upon the theory suggested by counsel when the evidence was offered, viz., that in order to have the benefit of the allegation that the complainant had no notice of the meeting of the appraisers, which is the potent factor upon which the complainant relies, it was necessary to show that she had been injured by the award, or that such a doubt as to the accuracy of