possession of said stock of goods and fixtures, which inventoried $3,695, and sold the same to its codefendant, Adolph Fricke, at 90 cents on the dollar of invoice value, aggregating $3,325, which was the reasonable market value thereof, and which sum said Rotan Grocery Company received in cash and now has on hand. That on the 6th of January next thereafter, appelle was duly appointed administratrix of said estate by the county court of McLennan county, and qualified as such, and subsequently, after demand on appellants for and refusal on their part to deliver said property, brought this suit against them to recover possession thereof, alleging that said property was necessary for the purposes of administration, and that said probate court had ordered her to demand possession thereof, and, in the event of refusal to bring suit therefor. That her homestead was incumbered. That there was not on hand at the time of the death of her husband all the property exempt by law to families of deceased persons. That it will be necessary to make an allowance out of the estate of the deceased in lieu of such exempt articles, and that it will be necessary for the probate court to set aside an allowance for the support and maintenance of said surviving wife and minor children. The Rotan Grocery Company, after special exception and general denial, sought to defeat recovery by reason of said conveyance of said property to it by Mrs. Pate; and Fricke, after adopting the answer of the Rotan Grocery Company, further pleaded that in the purIchase of said stock of goods, wares, and merchandise by him from that company he had consulted with Mrs. Pate, had conferred with her about the rental value of the store in which the goods were situated, and she concurred in and agreed to such sale to him, and before his purchase agreed to rent him the storehouse in which the goods were situated, and thereafter did so, and that by reason thereof she was estopped from alleging a conversion of said stock of goods by him; that in the event he should be held liable for such conversion, then he prayed judgment over against his codefendant, the Rotan Grocery Company in like amount. Appellee filed a general demurrer, which was overruled, and a number of special exceptions to defendants' answers, all based upon the theory that the conveyance made by her to the Rotan Grocery Company on October 22, 1912, for the benefit of the creditors of her deceased husband, was rendered void by her appointment and qualification as administratrix of said estate, and that in any event she was entitled to possession of said property for administration under the orders of the probate court of McLennan county, which exceptions were sustained. A jury being waived, judgment was rendered in favor of appellee against the Rotan Grocery Company and Adolph Fricke in the sum of $3,325, with interest thereon from February 10, 1913, at 6 per cent. It was further adjudged that the defendant Fricke have and recover of and from his codefendant the Rotan Grocery Company judgment for said sum of $3,325, from which judgment both the Rotan Grocery Company and Fricke have appealed to this court. It was shown that there had been duly presented to the administratrix, allowed, approved, and established by the probate court, as claims against the estate of the deceased, the following: First-class claims, amounting to $531, third-class claims, $1,250, which was a vendor's lien note on 100 acres of land belonging to the estate, and $2,700, which was a vendor's lien on the homestead, the reasonable value of said homestead in excess of said indebtedness being $1,800, also fourthclass claims, amounting to $600. It was further shown that no allowance had been fixed by the probate court for expenses of administration. None of said approved claims had been paid. The surviving widow was shown to have property in her own right, and was not entitled to an allowance for a year's support, but that the minor children had no property in their own right, and there were several items of exempt property allowed to families of deceased persons not found on hand in kind among the property of the estate. By the first assignment it is insisted that the court erred in its judgment because under the laws of this state the survivor of the community can transfer or sell community property to pay community debts, and the probate court cannot acquire jurisdiction over or right to administer such property so sold and conveyed by thereafter granting administration on the community estate of such decedent. And by the second assignment it is insisted that said judgment is erroneous because the granting of letters of administration did not set aside the voluntary conveyance by Mrs. Pate of a part of the community estate to the Rotan Grocery Company for the purpose of paying community debts prior to the application for such administration, and the granting of such administration did not entitle the said Mrs. Pate, as administratrix, or the probate court, to the possession of said property against the defendant Fricke, a purchaser thereof for full value before the granting of such letters. The facts showed a necessity for the administration, and the court appointed appellee as administratrix, which fact, we think, authorized her to demand and take possession of the property of said estate. By article 3235 of the Revised Statutes of 1911, it is provided, among other things, that upon issuance of letters testamentary or of administration upon any estate, the executor or administrator shall have the right to the possession of the estate as it existed at the death of the testator or intestate, with certain exceptions; and it shall be the duty of such executor or administrator to recover to delegate this power to a trustee, as here possession of and hold such estate in trust attempted. Her right, we think, in this reto be disposed of in accordance with law. spect is personal, and the law will not perSee, also, Latham v. Dawson, 40 Tex. Civ. mit her to thus surrender to another her App. 219, 89 S. W. 315; Blinn v. McDonald, privileges, duties, and responsibilities. 92 Tex. 604, 46 S. W. 787, 48 S. W. 571, 50 S. W. 931; Laas v. Seidel, 28 Tex. Civ. App. 140, 66 S. W. 871; Fisk v. Norvel, 9 Tex. 13, 58 Am. Dec. 128; Mitchell v. De Witt, 20 Tex. 294. In Latham v. Dawson, supra, where the survivor of the community had sold certain community property to pay community debts, and she was afterwards appointed administratrix of the estate and brought suit for such property, her right to do so was sustained, and a plea setting up such sale as a defense was stricken out upon demurrer, the court saying: But it is insisted on the part of appellants that appellee in the instant case is estopped from asserting this right by reason of said conveyance, because the survivor of the community estate has the right to sell community "The right of the survivor to sell community property for the purpose of paying communi- property for the purpose of paying community ty debts (citing Carter v. Conner, 60 Tex. 59; rights of other parties interested in said comdebts cannot be exercised in disregard of the Dever v. Selz, 39 Tex. Civ. App. 558, 87 S. W. munity estate. While such a conveyance would 891; Dashiell v. Moody, 44 Tex. Civ. App. 87, pass the title as against the adult heirs of the 97 S. W. 843; Brown v. Elmendorf, 87 Tex. deceased husband, it could not affect the right 57, 26 S. W. 1043; Corzine v. Williams, 85 of creditors of the estate to subject the property to the payment of their claims, nor the Tex. 499, 22 S. W. 399; Wenar v. Stenzel, right of the minor children of the deceased to 48 Tex. 484, 489; Johnson v. Harrison, 48 subject it to their claim for allowance. It Tex. 257; Orr v. O'Brien, 55 Tex. 149). would be contrary to the express provision of our probate laws to hold otherwise, and thus While this is true, yet the conveyance relied permit the survivor, if she saw fit, to approupon was not a sale of such property by Mrs. priate all of the property of the estate to the Pate, but, on the contrary, was an assignment payment of one creditor, and leave nothing for to the Rotan Grocery Company for the bene-titled to have the property of the estate subthe satisfaction of others who were equally enfit of creditors, expressly authorizing said jected to the payment of their claims" (citing company to convert the property therein con- many cases in support thereof). veyed (which constituted the bulk of said We think the above case is authority for estate) into cash for the pro rata benefit of holding that, even if there had been a comall creditors, share and share alike, without plete sale on the part of Mrs. Pate for the any preference whatever. To uphold this purpose of paying community debts, which conveyance would be to set at naught the pro- is not the case, yet such sale would be nullibate laws of this state, which vest in the pro-fied by the appointment of an administratrix, bate court the right to pass upon, not only who would eo instanti become entitled to the amount, but the validity, of all claims possession of such property for the purposes against the estate, and to classify same in ac- of administration. cordance therewith. See articles R. S. 1911. Besides this our law gives to certain creditors of an estate preferences and determines the priority of such preferences. See Articles 3458, 3459, 3460, etc., R. S. 1911. And, in addition thereto, authorizes the court to make allowances and grant exemptions to the family of the deceased, all of which are preferred claims, and must be paid in their due order, as required by article 3460, supra. The conveyance under consideration expressly disregards the rights of such creditors and the heirs to allowances and exemptions, for which reason alone we think it might be held inoperative. As well said by counsel for appellee in their brief: "To allow the surviving wife, immediately on the death of the intestate, to make a final and conclusive disposition of all or any of the assets of the estate for the payment of community debts, and thereby place such assets beyond the reach of the administrator, would lead to complications and collusion, and would probably result in defrauding creditors and minor children of their statutory rights." Notwithstanding appellee had the power, under the doctrine of the cases above alluded to, to sell community property and apply the proceeds to the payment of community debts of the estate, yet this did not authorize her As held in the case of Blinn v. McDonald, supra, the purchaser must be charged with notice of the fact that such administratrix may, within the statutory period, be appointed, and of her powers and duties, and hence could not, during such period, become a bona fide purchaser, or acquire any rights which would prevent the execution of such trust. In the case of Matula v. Freytag, 101 Tex. 357, 107 S. W. 536, there was a contention as to whether the property was sold by the surviving widow before or after the grant of administration, and our Supreme Court, through Mr. Justice Williams, held that while the sale was after such grant, yet expressly stated that it was not to be understood that the fact that the sale was after administration had any determinative effect. Granting, for argument's sake that there had been a complete sale by Mrs. Pate to appellant company, still we think that the granting of the administration by the probate court had the effect to vitiate the same, and entitled the administratrix to the possession of said property. Nor did such conveyance estop her, as administratrix, from instituting this suit, because it was made in her individual capacity, while the suit is by her in her representative capacity as adminis-posed of T. H. Kessler, tratrix. Troutschold, A. J. Droke, and R. G. Ard, owned and oper Believing that the court below did not errated a planing mill, in the judgment rendered, the same is in all things affirmed. 1. CORPORATIONS (§§ 244 544)-RIGHTS OF CREDITORS-TRUST FUND THEORY. The capital stock of a corporation is a trust fund for the benefit of creditors, who may enforce the payment therefor in full, as against subscribers for such stock and transferees with knowledge of nonpayment. [Ed. Note.-For other cases, see Corporations, Cent. Dig. §§ 960-977, 2162-2169; Dec. Dig. 88 244, 544*] 2. CORPORATIONS (§ 232*) — STOCKHOLDERS LIABILITY OF. Where half of the capital stock of a corporation was paid in upon organization in accordance with the law at the time of organization, and the corporation later became in need of funds to carry on its business, the sale of treasury stock at the fair market price, though for less than par, in accordance with Rev. St. 1895, art. 661, authorizing the sale of such stock, would not render the purchaser liable for any sum in addition to the price paid. [Ed. Note. For other cases, see Corporations, Cent. Dig. $$ 879, 880, 883, 884, 987; Dec. Dig. § 232.*] 3. CORPORATIONS (§ 249*)-STOCKHOLDERS TRUST FUND THEORY. Where the principal stockholder and manager of a corporation advanced money to the corporation with knowledge of the stockholders and other directors, he may, upon being held liable for an unpaid amount on his stock, set off his claim against that of the corporation's creditors; the money advanced having become part of the corporate assets. [Ed. Note. For other cases, see Corporations, Cent. Dig. §§ 1002-1010, 1012, 2273; Dec. Dig. § 249.*] 4. CORPORATIONS (§ 232*)-STOCKHOLDERS LIABILITY OF. Where, upon organization of a corporation, half of its capital was paid in and stock is sued therefor, and thereafter stockholders became indebted to the corporation, which took over their shares, a subsequent purchaser of such shares, who bought for a sum less than par, is not liable to the creditors of the corporation, under the trust fund theory. [Ed. Note. For other cases, see Corporations, Cent. Dig. $$ 879, 880, 883, 884, 987; Dec. Dig. 232.*] Appeal from District Court, McLennan County; Tom L. McCullough, Judge. Action by Edgar E. Witt, trustee, against E. Nelson and another. From a judgment for defendants, plaintiff appeals. Affirmed. Davis & Cocke, of Waco, for appellant. Sleeper, Boynton & Kendall and Gallagher & Stratton, all of Waco, for appellees. Findings of Fact. (2) It was agreed by the members of the firm and Oscar Myre, an employé of the firm, that they would incorporate, and that Myre would buy Troutschold's interest. (3) On August 25, 1902, a charter was obtained in the name of T. H. Kessler & Co., with an authorized capital of $30,000. (4) On September 2, 1902, a proposition was submitted to the directors of the corporation by T. H. Kessler for the partnership, to sell to the corporation all of the property of the firm for $15,000, which proposition was accepted by the corporation. (5) On September 2, 1902, the partnership T. H. Kessler & Co. conveyed to the corporation T. H. Kessler & Co. all of its assets for the recited consideration of $30,000. (6) On the same day the corporation issued to the members of the firm of T. H. Kessler & Co., including Myre, who agreed to take Troutschold's interest, 150 shares of stock of the par value of $100 each in proportion to their interest in said firm, as follows: T. H. Kessler, 51 shares; Oscar Myre, 48 shares; A. J. Droke, 36 shares; R. G. Ard, 15 shares. (7) After issuing the 150 shares, as above stated, there remained unissued 150 shares of the par value of $100 each. (8) On October 9, 1902, by order of the directors, 40 shares of the capital stock were sold to J. M. Nelson for $2,000, and a certificate for that number of shares was issued to him. (9) T. H. Kessler remained a director of the corporation until January, 1903, at which time he died, and his wife, Mrs. T. H. Kessler, became the owner of his shares and was elected a director. (10) On January 26, 1903, a resolution was entered upon the minutes allowing Mrs. Kessler to draw $10 per week to be charged to her account, and, when net earnings had been declared, her part of same to be credited on her account, and, if her account was then found to be overdrawn, she to pay the balance or same to be charged against her stock at her option. (11) On October 5, 1905, a motion was passed to sell A. L. Elliott $5,000 of "treasury stock" at 75 cents on the dollar per share. Mrs. L. E. Elliott, wife of A. L. Elliott, paid for $2,000 of this stock at 75 cents on the dollar. A. L. Elliott gave his note for 30 shares, with his stock as collateral. He paid interest on his note to July 21, 1908, but none of the principal. On July 21, 1908, by order of the directors, Elliott returned the 30 shares of stock, and his note was surrendered to him. (12) On July 16, 1906, the certificate for 40 shares issued to J. M. Nelson was by him transferred on the back thereof to E. Nelson, and the same was delivered to E. Nelson. (13) On May 29, 1907, Mrs. Kessler was JENKINS, J. (1) In 1902 and prior thereto, T. H. Kessler & Co., a copartnership comFor other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes † Application for writ of error pending in Supreme Court. indebted to the corporation in the sum of $3,164.73, which, by order of the directors, she was permitted to and did pay by surrendering her certificate for the 51 shares issued to T. H. Kessler, and receiving a certificate for 19 shares. (14) On May 29, 1907, by order of the board, $5,000 of stock was sold to J. S. Harrington at 75 cents on the dollar. (15) On May 29, 1907, it was ordered by the directors that $1,000 of stock be sold to E. Nelson at 75 cents on the dollar, but this stock was never issued. to operate its business and to pay debts incurred in such operation, and was unable to continue its business without such money, and had no means of obtaining such money, except by the sale of its stock, or by mortgaging its property. Each of said sales was made for the full market price of such stock, and for the highest price that could be obtained for such stock, and no stock was at any time sold in excess of the then needs of the corporation to enable it to carry on its business. Each of said sales was beneficial to the corporation, its stockholders, and to (16) On May 29, 1907, E. Nelson was elect-its then creditors. All of the money obtained ed a member of the board of directors, vice J. M. Nelson, who had sold his 40 shares of stock to E. Nelson. (17) On May 29, 1907, two additional shares were sold to Oscar Myre, at 75 cents on the dollar. (18) Prior to March 24, 1908, A. J. Droke had died, and his widow had become the owner of his stock. On that date, Mrs. Droke having become indebted to the corporation in the sum of $500, and Mrs. Kessler having become indebted to the corporation in the further sum of $900, by order of the directors they paid these debts by Mrs. Droke's surrendering the certificate for 36 shares issued to A. J. Droke, and a new certificate for 31 shares was issued to her, and by Mrs. Kessler's surrendering her certificate for 19 shares, and a new certificate for ten shares was issued to her. (19) On July 21, 1908, the corporation, through its board of directors, sold to J. S. Harrison, E. Nelson, and J. L. Enright each $1,000 of stock at 75 cents on the dollar. (20) The minutes of the corporation show that at a meeting held June 3, 1911, there were present, representing stock in said corporation, as follows: Oscar Myre, 50 shares; E. Nelson, 50 shares; Mrs. A. L. Elliott, 20 shares; R. G. Ard, 15 shares; Mrs. Droke, 21 shares; and J. S. Harrison, 80 sharestotal 236 shares. Mrs. Droke's shares had been further reduced from 31 to 21 shares by her surrendering 10 shares in payment of a debt she owed to the corporation. At this meeting the ten shares owned by Mrs. Kessler were surrendered and canceled in payment of a debt for $1,000, due by her to the corporation. (21) On January 10, 1911, J. L. Enright sold his certificate for 10 shares to J. S. Harrison. (22) July 9, 1911, J. S. Harrison, for the consideration of $5,000, sold to E. Nelson his certificate for 50 shares of stock, dated May 29, 1907; his certificate for 10 shares of stock dated July 22, 1908, purchased by him from J. L. Enright, and 10 additional shares. (23) At each of the times of the respective sales of stock of the corporation, after the issuance of the first 150 shares of stock to the members of the firm of T. H. Kessler & Co., the corporation was a going concern and was perhaps solvent; but it needed money from such sales was used in the prosecution of the business of the corporation, and for no other purpose, and none of the money realized from such sales of stock was used for additional investments by the corporation. (24) None of the certificates purchased by E. Nelson were ever transferred to him on the books of the corporation by surrendering the said certificates and obtaining new certificates in lieu thereof, but the said purchases were known to the corporation, and he was elected a member of its board of directors, and on June 19, 1911, he was elected president and general manager of the corporation, and continued as such until the corporation went into bankruptcy October 15, 1912. (25) The salary of E. Nelson, as president and general manager of the corporation, was never fixed by the board of directors, but he caused to be credited to himself, on the books of the corporation, for such services, the sum of $200 per month from July 1, 1911, to June 1, 1912, and from June 1, 1912, to October 15, 1912, the sum of $150 per month, aggregating for such salary $2,875, and his services were reasonably worth that amount. He received during said time in cash and merchandise, and caused to be charged against himself on the books, $2,972.88. He was not otherwise paid anything for such services. (26) From and after the 1st day of January, 1912, said corporation was heavily involved, and its creditors were insistent and pressing, and there was constant demand for money for the purpose of liquidating indebtedness, and for the purpose of paying for material ordered by said company for the purpose of carrying on its work, which said material was required to be paid for in cash, and for the purpose of paying the laborers for carrying on the work of said corporation, which was required to be paid for in cash weekly, and the corporation, from time to time, being without sufficient money to meet said obligations, the said E. Nelson voluntarily paid into and for said corporation for said purposes the sum of $3,857.49 in cash. (27) Said payments made by said E. Nelson in said sum as aforesaid, into and for said corporation, were made by him without any contract for the repayment of the same, and were made by him on his own responsibility and in recognition of the needs of full as against the subscribers for such stock, and against their transferees with knowledge that such stock has not been fully paid for. Mathis v. Pridham, 1 Tex. Civ. App. 58, 20 S. W. 1023; Nenney v. Waddill, 6 Tex. Civ. App. 244, 25 S. W. 308; Sawyer v. Hoag, 84 U. S. (17 Wall.) 610, 21 L. Ed. 731; Sanger v. Upton, 91 U. S. 56, 23 L. Ed. 221; Scovill v. Thayer, 105 U. S. 143, 26 L. Ed. 968; Chubb v. Upton, 95 U. S. 665, 24 L. Ed. 523; Hawley v. Upton, 102 U. S. 314, 26 L. Ed. 179; Upton v. Tribilcock, 91 said corporation, and at the time of the pay- | is a trust fund for the benefit of creditors, and ment of the same and all the same, except creditors may enforce the payment thereof in the sum of $252.92 paid the Owens Lumber Company on the 15th day of October, 1912, said corporation was a going concern, actively engaged in operation and the carrying out of the purposes for which it was chartered and organized, and said Nelson at the time believed the same to be solvent, and made said payments and advancements to said corporation in good faith, believing that the same would enable said corporation to tide over temporary embarrassments, and continue indefinitely a solvent and going concern. (28) That said sum of $252.92 paid to said | U. S. 45, 23 L. Ed. 203; Webster v. Upton, Owens Lumber Company on said 15th of October, 1912, was made by him because he had long prior thereto personally obligated himself to pay the same, or to see the same paid, and at the time he so obligated himself he did so in good faith, believing said corporation was solvent. (29) On or about the 17th day of October, 1912, the corporation of T. H. Kessler & Co. went into voluntary bankruptcy, and the proceeds of the sale of its properties has proved insufficient to discharge its indebtedness, and there remains undischarged approximately $10,000 of indebtedness owed by said corporation. (30) The referee in bankruptcy, by order duly made, directed the trustee to bring these suits for the several amounts claimed herein. 91 U. S. 65, 23 L. Ed. 384; Land Co. v. Raymond, 158 N. Y. 576, 53 N. E. 507, 47 L. R. A. 246. Nothing said in this opinion is intended to impinge upon this doctrine when applied to a proper state of facts. It has been said that this doctrine was invented by Mr. Justice Storey, and is slowly becoming obsolete. 10 Cyc. 461. It is not obsolete in Texas, and will not become obsolete anywhere until honesty shall become obsolete. It may be true in these days of frenzied finance and watered stock that professional dealers base their estimates as to the value of stocks upon the assets and liabilities of the corporations, when they find out what they are, but the investing public is daily robbed through the medium of watered stock, which is the life blood of gambling on exchanges. The Constitutions of many of the states, including our own, have provisions that are designed to prevent the issuance of watered stock, and this is effectually ac (31) The defendant E. Nelson proved up a claim in the bankruptcy proceedings against the estate of T. H. Kessler & Co., bankrupt, for the sum of $3,672.65, based on such mon-complished by our present corporation laws. eys so advanced by him to and for said corporation. Such proof was made upon the advice of counsel, in view of the situation as it then existed, and was not in contemplation at the time such advancements were made, and nothing whatever has been paid on said claim, and nothing will or can be paid thereon, unless a recovery be had in these causes, and such payment would have to be made out of such recovery. But, at the time the corporation in the instant case was chartered, our statute only required that 50 per cent. of the capital stock be subscribed, and that 10 per cent. be paid up. R. S. 1895, art. 654. This amount was subscribed and fully paid up, whether the property conveyed to the corporation was worth $30,000, as found by the trial court, or $15,000, as contended by appellant. In considering the cases wherein it has Appellant, as trustee for the bankrupt cor- been held that unpaid subscriptions to capital poration of T. H. Kessler & Co., brought two stock is a trust fund for the benefit of credisuits to recover an alleged balance due for tors, it must be kept in mind that there is a stock in said corporation, one against J. M. distinction between stock subscribed for the Nelson et al. and one against J. S. Harrison purpose of organizing the corporation and et al. The suits were consolidated. Upon stock sold by an organized corporation for trial before the court without a jury, judg- the purpose of enabling it to pay its debts or ment was rendered for the defendants. The to carry on its business. In the former case above findings of fact are substantially those it is held upon equitable grounds that the found by the trial court. The appellant subscription is a contract to pay the full par prosecutes his appeal on 62 assignments of value of the stock, if it becomes necessary to In view of the disposition that we do so in order to protect creditors; in the latmake of the case, we do not deem it necessary ter case the purchase is a contract to pay to discuss seriatum all of the matters pre-only the price agreed upon, if the same be the sented in the findings of fact and in appellant's assignments of error. error. Opinion. [1, 2] It is well settled, as a general proposition, that the capital stock of a corporation fair market price of the stock purchased. Handley v. Stuz, 139 U. S. 417, 11 Sup. Ct. 530, 35 L. Ed. 227; Clark v. Bever, 139 U. S. 96, 11 Sup. Ct. 468, 35 L. Ed. 88; Fogg v. Blair, 139 U. S. 118, 11 Sup. Ct. 476, 35 L. Ed. 104; Christenson v. Eno, 106 N. Y. 97, 12 N. |