Atlanta & Walworth B. & C. Asso. v. Smith, 141 Wis. 377. the natural and probable effect of the conditions, of which he must be held to have had at least constructive knowledge, he must be held to have intended, and the corporation to have intended as well. If this goes further than the general rule as to transactions in fraud of present and future creditors it seems that the doctrine is a just one and a necessary limitation upon the right of a corporation and its stockholders to deplete its assets by exchanging the latter for its corporate stock, in order to prevent such right being exercised in a manner highly prejudicial to the public. A transaction, as in this case, where, by treaty, the corporation is at once changed from a solvent to an insolvent concern, to the manifest advantage of a stockholder over existing creditors, the parties concerned contemplating that it may and probably will incur other indebtedness, while having the semblance of solvency as before, should be regarded, as to all creditors prejudiced thereby, characterized by bad faith and so as not having the essential necessary to uphold it under the decisions of this court to which we have referred. In other words, a purchase by a corporation of its own stock, known by the parties to the transaction, or which ought to be known by them, to render it insolvent, is not a purchase in good faith as to existing creditors and not such as to future creditors if the parties to the transaction contemplate that the corporation will continue to do business and incur indebtedness, as before, on the faith of its previously supposed solvency continuing. In such a case the stockholder surrendering his stock is to be regarded as having acted fraudulently, at least constructively, as to existing creditors and subsequent creditors as well, and held, as to the latter, estopped by his conduct from denying his continuance as a stockholder so far as such denial to effect would prejudice such creditors trusting the corporation upon the appearance of solvency, and such continuance is necessary to liability to the corporation for the benefit of creditors or to statutory liability to them. Atlanta & Walworth B. & C. Asso. v. Smith, 141 Wis. 377. We are not unmindful that the rule, in general, as to avoidance of a transfer of property in fraud of future creditors applies only in case of actual intent to defraud them. Sommermeyer v. Schwartz, 89 Wis. 66, 71, 61 N. W. 311; Case v. Phelps, 39 N. Y. 164. That rule as stated is out of harmony with some adjudications, but is supported by the great weight of authority under statutes similar to our sec. 2320, Stats. (1898), as indicated by the text in 1 Moore on Fraudulent Conveyances at page 191 and authorities cited in note 23, and Bump on Fraudulent Conveyances (4th ed.) § 292, and cases cited. It is too restrictive, as generally stated, to apply to the situation we have here, and should, it is thought, be extended to include it, upon the theory that the duty of a stockholder not to deplete for his advantage corporate assets below the subscribed capital and become a party to a continuance of solvent appearance supplies the need for actual intent to defraud, where the natural and probable effect is to prejudice persons subsequently dealing with the corporation as solvent; condemning the transaction for want of that good faith necessary to sustain a purchase by a corporation of its stock,—while at the same time, so far as necessary to fully protect the rights of creditors, the doctrine of estoppel applies to prevent the stockholder from claiming, to effect, that his relations as such holder were terminated by such transaction. Counsel for appellant contend that, since this action is grounded on the statutory liability of stockholders to creditors of a corporation whose credits accrue in the course of its business transactions in violation of sec. 1773, Stats. (1898), limiting such liability as to obligations thus incurred to the signers of the articles "and the subscriber or subscribers for stock transacting such business or authorizing the same, or having knowledge thereof, consenting to the incurring of the" liability "as well as the stockholders then existing," that there was no liability of Smith here, except upon the first cause of action, because his transfer of stock must be held to have terVOL. 141-25 Atlanta & Walworth B. & C. Asso. v. Smith, 141 Wis. 377. minated his relations to the corporation as a stockholder, till such transfer shall have been set aside by some judicial determination. That is wrong for several reasons: First, respondent was entitled to the benefit of the law of estoppel to bar the claim of severance of such relations; second, the transaction was void at law, under the circumstances, by force of sec. 2320, Stats. (1898); third, where a transaction is voidable as to creditors and they do not need the use of equity jurisdiction to remove a cloud on title or for an accounting or some other relief within the peculiar field of such jurisdiction, they may treat it as a nullity and proceed at law as if such transaction had never occurred. Of the latter the following are illustrations: Bates v. Simmons, 62 Wis. 69, 22 N. W. 335; First Nat. Bank v. Knowles, 67 Wis. 373, 28 N. W. 225; Leslie v. Keepers, 68 Wis. 123, 31 N. W. 486. In the last case cited an accord and satisfaction, in form, pleaded as matter of defense to an action on the original claim, was met by proof, under objection, that the settlement was obtained by fraud. It was contended on appeal that the settlement could only be avoided in equity. The decision of the court was otherwise. Counsel for appellant misapprehend the nature of this action, in making the assertion that it is to set aside the purchase of the stock as fraudulent, and misapprehend the law in supposing that such an action is necessary in order to charge Smith with statutory liability. The action is against him upon the theory that, as to plaintiff, the stock was never transferred, just as in Leslie v. Keepers, supra, the action was commenced upon the theory that no accord and satisfaction had oc curred except one effectually avoidable at plaintiff's election. and that the commencement of the action was a sufficient election, the circumstances of the transaction not requiring any restoration as a condition of recovery. What has been said sufficiently, it is thought, deals with all objections advanced to the judgment and all reasons given by Atlanta & Walworth B. & C. Asso. v. Smith, 141 Wis. 377. counsel for its affirmance to indicate that, although the major ground for the judgment stated in the circuit court's decision and urged upon our attention in support thereof cannot be approved, it is right and must be affirmed. By the Court.-So ordered. TIMLIN, J. (concurring). In addition to the ground for affirmance consisting of constructive fraud upon future creditors in the transaction by which it is claimed Smith ceased to be a stockholder prior to the incurring of the debt in question, I desire to rest my concurrence also upon another ground going to lack of power in the embryo corporation to purchase in its own shares and so release from that status the persons who had theretofore become shareholders. The corporation. never had fifty per centum of its capital stock subscribed, consequently there could be no first meeting, no directors, and no officers; but the signers of the articles of incorporation were by law intrusted with the direction of the affairs of the corporation. Sec. 1773, Stats. (1898), as amended by ch. 507, Laws of 1905. The signers of the articles did not, for the corporation, buy in Smith's shares. Who else at this stage had authority to represent the corporation for this purpose Walters v. Porter, 3 Ga. App. 73, 59 S. E. 452. If the corporation was not represented in the transaction, how could the transfer have any effect whatever? Is the corporation, even through the signers of its articles, at this stage of its existence, empowered to dispose of its assets to a shareholder in purchase of his shares? I think not. The following sections of the statute may be of interest in connection with these queries: Secs. 1774, 1775, 1776, 1767, 1751. A motion for a rehearing was denied February 1, 1910. McGowan v. Paul, 141 Wis. 388. MCGOWAN, Appellant, vs. PAUL and others, Respondents. October 8, 1909-February 1, 1910. Towns: Powers: Sidewalks and street lighting: Contracts: Tax levy: Restraining unauthorized expenditure: Taxpayer's action. 1. A town has no power to raise money by general taxation to build sidewalks and light public streets in an unincorporated village within its boundaries. 2. One taxpayer may maintain an action in behalf of all taxpayers even though, by reason of an estoppel, he has for himself alone no equitable ground of complaint. 3. The expenditure of moneys raised by a tax levy upon property generally in a town for the unauthorized purpose of building sidewalks and lighting streets, pursuant to contracts theretofore made, in an unincorporated village within the town, will be restrained in an action brought by one taxpayer in behalf of all, even though all except the plaintiff have indicated their consent to the levy by voluntarily paying the tax pending the suit. The doctrine of equitable estoppel is inapplicable to such a case because the town had no power whatever to make the contracts or levy the tax complained of. Babcock v. Fond du Lac, 58 Wis. 230, distinguished. MARSHALL, J., doubts. APPEAL from a judgment of the circuit court for Rock county: GEORGE GRIMM, Circuit Judge. Reversed. Taxpayer's action to restrain the officers of a town, in which is located an unincorporated village, from carrying out a sidewalk and a street-lighting contract. These facts were established, as stated in the trial court's decision, in addition to such as appertain to the capacity of plaintiff to maintain the suit and of defendants to be parties: The town of Milton, in Rock county, contains the unincorporated village of Milton Junction. Such village is a railroad center, and the condition of things is such as to render sidewalks, as contemplated by the sidewalk contract, and street lights, as contemplated by the contract on that subject, reasonably necessary for the safety of pedestrians using the public ways. April 5, 1904, at the annual town meeting, a reso |