107 Mich. 447 | Mich. | 1895
Grant, J.
The bill sets up the articles of association of the Princess Dressing-Case Company in full; alleges that said corporation began to do business; the amended articles by which its name was changed to the Michigan Cabinet Company, and its capital was increased to $100,000, and its shares to 10,000; the annual report; that said corporation did business until September, 1893, and created a large indebtedness; that at that time it gave a trust mortgage, and ceased to do business; that, at the time it gave said mortgage, all of its capital stock was not subscribed for, and had not all been paid in in money, but some had been paid for in nearly worthless patent rights, and not to exceed one-third of the capital stock had been subscribed for in any manner; that the annual report was not true; that, at the time said mortgage was given, said Michigan Cabinet Company was indebted to the complainant in the sum of $570; that on December 19, 1893, the complainant obtained a judgment against the said Michigan Cabinet Company in the circuit court for $570.33 and costs, for which sum it had execution, but that said execution was returned nulla bona; that the said Michigan Cabinet Company owas not legally organized to do. business; that the said stockholders became individually liable thereby for its indebtedness; that, by means of the premises, defendants became indebted to the complainant for the indebtedness of said Michigan Cabinet Company up to $100,000, or such part thereof as shall be required to pay said complainant;
1. This case is before us on bill, demurrer, and answer. The original articles of association were executed in December, 1889, and were duly fiied in the offices of the secretary of state and county clerk of Kent county. The corporation immediately entered upon its business, and carried it on until September, 1893. Meanwhile, in October, 1892, it amended its articles by increasing its capital stock to 1100,000, which amendment was also duly filed in the proper offices. It was recognized by the public authorities as a duly-organized corporation; did business and made and filed its annual reports as such. The complainant dealt with it and brought suit as such. The complainant cannot now attack its legal existence, and hold the stockholders liable as partners. Swartwout v. Railroad Co., 24 Mich. 389; Merchants’, etc., Bank v. Stone, 38 Mich. 779. Many authorities are cited in these two cases. See, also, Pochelu, v. Kemper, 14 La. Ann. 308; Cresswell v. Oberly, 17 Ill. App. 281.
2. It is alleged in the bill that “a large amount of what was subscribed for was not paid for in any manner, and some of the said subscriptions for stock had been paid for in patent rights, which were nearly worthless, and some paid for in goods at fictitious prices.” There is no allegation to connect the defendant Bulkley with any of these supposed fraudulent transactions. The complain
3. The defendant corporation was organized under Act No. 232, Pub. Acts 1885, as amended by act No. 170, Pub. Acts 1889. The act does not provide that the entire capital stock shall be subscribed as a condition precedent to its organization and the right to carry on business. It provides that 10 per cent, of it shall be paid in, and this requirement was fulfilled when that amount was paid in by the actual subscribers. Mrs. Bulkley was not a director, and is not shown to have had anything to do with the management of the business, or with the alleged fraudulent annual report made by the three directors in February, 1893. There is no allegation that she knew that the entire capital stock was not to be subscribed, or that there was any understanding or agreement that they should enter upon and carry on the business without the subscription of the entire stock. This is not a. contest between the corporation and the stockholder to enforce a subscription or assessment, as was the case in International Fair, etc., Ass’n v. Walker, 88 Mich. 62.
In Haslett v. Wotherspoon, 1 Strob. Eq. 209, the stockholders were held liable because they had represented that the entire capital stock of $60,000 was subscribed and paid in, whereas, in fact, only about half that sum had been paid in. This case was commented on in South Carolina Manfg. Co. v. Bank of South Carolina, 6 Rich. Eq. 227. It was there held that stockholders incur no personal liability except as prescribed by the terms 'of the charter. Speaking of the power of the corporation to
In Burns v. Beck, 83 Ga. 471, two parties undertook to form a corporation. All the stock had not been subscribed for, or the minimum amount paid in. They held the corporation out as duly organized, and then made a fraudulent assignment of the corporate property. The court say: “Taking the allegations of the bill as true, they were connected with the corporation through fraud at both ends of its career, and throughout the whole intervening space.” The parties held liable were the sole organizers of the pretended corporation, and perpetrators of the fraud.
In Hawes v. Petroleum Co., 111 Mass. 200, no stock had been issued, and only one of the members had agreed to take a certain number of shares. It was held that they were the joint owners of the entire capital stock, and, by the express terms of the Massachusetts statute, were jointly and severally liable for the corporation debts.
'The above are the principal cases cited by the complainant in support of the liability of Mrs. Bulkley. They are not in point. The sole question presented to us now is, can a stockholder, whose ordinary contract is to pay the par value of his share, and who has paid it, be held liable to creditors of the corporation for its unissued stock, without any allegation or showing that he either subscribed for or purchased his stock with knowledge or in furtherance of a fraudulent scheme to organize and carry on an illegal corporation? We find no authority, and we see no reason, to support such a proposition. It seems to us contrary to the principles of justice and
It follows that the decree must be affirmed, with costs.