
    No. 182
    DeVAUGHN, Trustee v. SHIELDS CUTTER CO.
    No. 20187.
    Supreme Court
    On motion to certify.
    Dock. Nov. 24, 1926,
    4 Abs. 805.
    313. CORPORATIONS — Can a corporation whose capital stock is impaired, purchase and retire its preferred stock, thereby leaving its creditors unpaid, by virtue of Sec. 3669 GC?
    First Publication of this Case
    Attorneys — Thompson, Hiñe & Flory for DeVaughn; Mooney, Loeser & Keough, and White, Cannon & Spieth for Company; all of Cleveland.
   The Cleveland Milling Machine Co. became financially involved and the representatives representing the three groups of stockholders, in a meeting, decided on a segregation agreement whereby one Shields who- was the president of the old company was to assume some of the liabilities of the other interests; and that the company was to be known as the Shields Cutter Co. Through this agreement, stock of the other interests was retired, etc. and ah action is brought by creditors prior to the segregation to recover money due them as such.

DeVaughn contends in the Supreme Court:—

1. That a corporation whose capital is impaired, cannot purchase and retire its preferred stock, thereby leaving its creditors unpaid, by virtue of 8669 GC.

2. That a corporation whose capital is impaired cannot purchase its common stock, thereby leaving its creditors unpaid.

3. Whether or not the trust fund doctrine, as . applied to corporations, shall continue to be applied in this State.

4. Whether capital assets of a corporation whose capital is impaired may be distributed to stockholders before paying creditors.  