Schwarz v. Bowler Manufacturing Co., 177 Ill. App. 294 (1913)

Feb. 11, 1913 · Illinois Appellate Court · Gen. No. 18,010

177 Ill. App. 294

John Schwarz, Appellant, v. Bowler Manufacturing Company et al., Appellees.

Gen. No. 18,010.

Corporations—money paid for stock not trust fund. Money received by a corporation from stock subscriptions constitutes a trust fund for all its creditors, and where it is insolvent, no preference can be given by impressing a trust on a fund paid by a purchaser, whether his subscription was induced by fraud or not.

Appeal from the Superior Court of Cook county; the Hon. William Fenimobe Cooper, Judge presiding. Heard in the Branch Appellate Court at the December term, 1911.

Affirmed.

Opinion filed February 11, 1913.

McEwen, Weissenbach, Shrimski & Meloan, for appellant.

Caswell & Healy, for appellees,

Mr. Justice Barnes

delivered the opinion of the court.

This is an appeal from a decree sustaining a demurrer to the bill of complaint and dismissing the same for want of equity. The bill seeks the rescission of a contract for the purchase of stock of said manufacturing company on the ground that complainant was fraudulently induced by defendants to enter into it, the return of the money paid therefor, an accounting, and to have certain deposits of said company with the defendant bank consisting, as is alleged, of part of the money paid for said stock, declared a trust fund.

The grounds relied upon for the aid of a court of equity are two,—an alleged claim for accounting, and right to declare a trust. As to the former, the hill fails to show a complicated account and to state a case for an accounting. As to the latter, we do not think that the mere fact that money from the sale of stock induced hy fraud has entered into the corporation’s banking account or a certificate of deposit issued to it, furnishes ground for' impressing a trust upon either of them for the benefit of the subscriber or purchaser of such stock. Money received from stock subscriptions constitutes a trust fund for all creditors of the corporation, and as the bill alleges that the corporation is insolvent, no preference can be given to complainant as a creditor over its other creditors whether the subscription was induced by fraud or not. Turner v. Grangers’ Life & Health Ins. Co., 65 Ga. 649. The obvious aim of the bil.1 is to tie up such account and certificate so complainant can realize upon them in the event of sustaining his case; but on facts as stated in the bill he may manifestly recover a judgment in law, and we do not think the bill sets forth equitable grounds for reaching the funds in question. The decree will be affirmed.

Affirmed.