158 Ind. 226 | Ind. | 1902
The appellee commenced this suit as the receiver of an insolvent domestic corporation. The purpose of the action was to recover upon unpaid stock subscriptions. Certain of the appellants filed their respective pleas in abatement, alleging, in substance, that all of the defendants except one lived in counties of this State other than Madison, and that the corporation had its home office in another county. The court below sustained demurrers addressed to each of these pleas. This was proper. Herron v. Vance, 17 Ind. 595 ; Gainey v. Gilson, 149 Ind. 58.
Subsequently the appellants addressed a demurrer to the complaint, but their demurrer was overruled, and they reserved an exception. Error is assigned upon this ruling. The complaint alleges the character of said corporation,
Our conclusion, however, is that under the language of the stock subscription contract it is fairly inferable that the contract of April 25, 1893, did relate to- a matter other than the times and proportions of the stock payments. The express promise of the stockholders to pay for their stock was conditional upon payment being made in accordance with the contract with Heller. To quote the sentence, treating the words, “as assessments are made and payments called for by the board of directors of said company”, elliptically, will illustrate our thought. The sentence would then read: “We further agree to pay for the shares of stock in accordance with a contract made and signed April 10, 1893, between Jesse O. Heller and the incorporators of said company.” We attach importance to the fact that the contract states that the limitation of liabiliy is to be found in a con
The appellants filed seven paragraphs of answer. The first was a general denial. The other answers are all long, and it would unduly extend this opinion to attempt to give even a synopsis of each of them. They may, however, if some minor differences are disregarded, be classified, and we deem it proper to make at least a general statement of their character when so classified. The second, third, fourth, and fifth paragraphs plead, in substance, that the Jesse O. Heller referred to in said stock subscription contract was also a subscriber to said stock; that the agreement
In the absence of a special limitation in the articles of incorporation, the rule is that the original holders of stock are liable (irrespective of any express promise to pay) for the unpaid instalments of their respective stock holdings in so far as necessary to work out the equities of general creditors, and any secret agreement with the corporation or its agent by which they attempt to limit their liability on such account will be treated as void as against such creditors or those who represent them. 1 Taylor on Priv. Corp., §701; Cook on Stock and Stockholders, §71; Upton v. Tribilcock, 91 U. S. 45, 23 L. Ed. 203; Tuckerman v. Brown, 33 N. Y. 297, 88 Am. Dec. 386; Jewell v. Rock River Paper Co., 101 Ill. 57; Goodwin v. McGehee, 15 Ala. 232; Farnsworth v. Robbins, 36 Minn. 369, 31 N. W. 349; Thompson v. Reno Savings Bank, supra, at page 173.
While there is no privity of contract between such holders of unpaid stock and the corporation’s general creditors, yet the latter, either by compelling the directors to make calls, or, if it is no longer a going concern, by the aid of the corporation’s representatives, may compel delinquent stockholders to pay in the par value of their stock for the use and benefit of the creditors.
The statements, however, that we have made apply to general creditors, and do not apply to a creditor who has by contract waived his right to collect from a stockholder a debt that the corporation fails to pay. 1 Cook on Stock and Stockholders, §216; 2 Morawetz on Priv. Corps., 871; Bush v. Robinson, 95 Ky. 492, 26 S. W. 178; Basshor v. Forbes, 36 Md. 154; Brown v. Eastern Slate Co., 134 Mass. 590; Whitwell v. Warner, 20 Vt. 425; Robinson v. Bidwell, 22 Cal. 379; Kenton, etc., Co. v. McAlpin, 5 Fed. 737; Separate opinion of Champlin, J., in Young v. Erie
Counsel for appellee argues in defense of the ruling overthrowing the paragraphs that plead the written contract of April 10, 1893, that as that contract did not provide the amount at which the corporation should be capitalized, or the amount of stock which each of the subscribers would take, the agreement of Heller cannot be construed as an agreement to exempt them from stock liability. If this proposition were granted, it would be difficult to point out what other substantial liability the signers of the contract were guarding against. This agreement must be construed, however, in connection with the stock subscription contract of April 25, 1893, and when so construed it is plain that such signers were guarding against the indirect liability that the creation of an indebtedness of $9,000 would impose upon them.
Appellee’s counsel further insist that the stock subscription contract, and the execution of the purchase-money
The orderly development of the legal propositions involved in this case has thus far required that we should consider the rights of the appellants to set up the equities of their alleged agreements as against Heller. Having determined that, if the averments of the answers are true, Heller would be without right, as against them, if he were still the holder of the indebtedness, it remains to consider the rights of his assignee. Each of the paragraphs of answer that we have been considering allege that the purchase-money notes were not made payable at any bank in this State. We regard this as an immaterial circumstance. The question herein involved is not a question as to the rights of the corporation, for confessedly it had no defense. While it is true that, under the statute, a note not payable at bank is subject to the defenses of the maker to the full extent provided by statute (§7517 Burns 1901, §5503 Horner 1901), yet this suit is not based on the notes, but is. based on the equity that exists in favor of a creditor who has presumptively purchased the paper of the corporation on the strength of the obligation of the shareholders to pay the amount of the par value of the stock they purchased into the corporate treasury. Notice of the equities of the appellants is a matter of defense. 3 Thomp. on Law of Corp., §3636. If the equities of the appellants and the assignee of Heller are equal, the claim of the latter will be upheld. If Heller’s assignee acquired the legal title to the notes, by purchase and indorsement, before he acquired any notice, actual or constructive, of the equity that existed as
At common law choses in action were not assignable. Subsequently the law permitted the assignee to sue in the name of the assignor. The provision of the code authorizing the assignee to sue in his own name has only-changed the form of the action, but not the effect of the assignment.Such instruments, when not governed by the law merchant, are still subject to all of the equities of the maker. 1 Parsons on Contracts, 230; Murray v. Lylburn, 2 John. Ch. 441, and, for an exhaustive discussion of the whole subject, see note to Bassett v. Nosworthy, as reported in 2 White & Tudor’s Leading Cases in Equity (4 Am. ed. from 4 London ed.), 1. The assignee in such a case is charged with notice of such defenses as the maker may have, because, as the assignee is conclusively presumed to know the law, the instrument on its face is notice to him of the existence of such' possible defenses. Stock liability obligations are to be widely differentiated from the class of obligations we have last mentioned, because all persons have a right to assume, without inquiry, where there is no notice, actual or constructive, to the contrary, that the stockholders have done, or will do, that which the law requires of them (Clow v. Brown, 150 Ind. 185) ; and it is therefore against equity to allow a defense of a secret agreement limiting liability unless the stockholders can at least show such notice to the purchaser as was calculated to put him, as a reasonably prudent man, on inquiry.
Judgment reversed, with instructions to the court below to carry appellee’s demurrer to the answers back to the complaint, and to sustain said demurrer to the complaint, and for further proceedings not inconsistent with this opinion.