U.S. Supreme Court
Fogg v. Blair, 139 U.S. 118 (1891)
Fogg v. Blair
Argued January 6, 1891
Decided March 2, 1891
139 U.S. 118
APPEAL FROM THE CIRCUIT COURT OF THE UNITED
STATES FOR THE EASTERN DISTRICT OF MISSOURI
It is the settled doctrine of this Court, as well as of the Supreme Court of Missouri, that unpaid subscriptions to the stock of a corporation constitute a trust fund for the benefit of creditors, which may not be given away or disposed of by it, without consideration or fraudulently, to the prejudice of creditors.
While it is competent for a railroad corporation in Missouri, exercising good faith, to use its bonds and stock in payment for the construction of its road, it could not rightfully, at least as against creditors or stockholders, issue its stock to contractors as full paid without getting some fair or reasonable equivalent for it. What is such equivalent depends primarily upon the actual value of the stock at the time it was contracted to be issued, and upon the compensation which, under all the circumstances, the contractors were equitably entitled to receive for the particular work undertaken or done by them. The corporation could not, by its directors, sell or dispose of its assets to the prejudice of creditors and stockholders under such circumstances, on such terms, and at such prices as indicated, upon the face of the transaction, that they were being squandered recklessly or fraudulently in disregard of the trust committed to them.