72 Mo. 424 | Mo. | 1880
The Superintendent of the Insurance Department, on the 24th day of March, 1871, instituted a suit in the circuit court of Jackson county against the Kansas City Eire & Marine Insurance Company, the purpose of which was, among others, to enjoin it from carry-ing on its business as an insurance company, and to wind up its affairs. On the 9th day of August, 1871, a decree was rendered in said cause enjoining and restraining said company from conducting business, and with a view to winding up its affairs. L. C. Slavens was appointed receiver, and was directed to take possession of all the assets and property of every nature and description, including moneys, and all books, records and papers belonging to said company. On the 10th day of May, 1872, said Slavens tendered his resignation as receiver to said court, which was accepted, and on said day said court, by its order and decree, and in furtherance of its purpose of winding up the affairs of said company, appointed Turner A. Gill, the plaintiff in the present suit, receiver, and devolved upon him the performance of all.duties required of the former receiver, Slavens.
By the further order of said court made in June, 1873, the said receiver, Gill, was required and directed to join in an action, prosecuted in his own name all parties liable in any way for and on account of subscriptions to the capital stock of said insurance company, now unpaid, and for balances unpaid on stock or subscriptions therefor. In obedience to this order, plaintiff Gill, as such receiver, instituted the present suit in his own name against all the defendants as stockholders of said company for the purpose of recovering forty per cent of the par value of each share of the capital stock; of said company. The trial of the cause resulted in a judgment for the plaintiff, from which the defendants prosecute their appeal to this court. The principal
By virtue of this section, when the Superintendent of the Insurance Department files his petition, the court or judge may, upon inspection of the petition, before answer filed or any hearing had upon the merits, appoint a receiver to take charge of the property of the delinquent company; and if no other power than this had been conferred upon the court, the position taken by appellants that the receiver •could not prosecute a suit in his own name, for the recovery of a debt due the company, would be maintainable. But the section goes further and authorizes the court on a final hearing to make such orders and decrees as may be needful “ in winding up the affairs of such company.” It is difficult to conceive how the court could perform the duty enjoined upon it of winding up the affairs of the company, if rWfcóuld not employ agencies to enforce the collection of the debts owing to said company. The settlement or winding up the affairs of a delinquent corporation can only be accomplished by the application of its assets to the payment of its debts, and the distribution to the stockholders of what may remain after the debts are paid. Ordinarily, before the assets, when they consist in property and debts due the company, can be thus applied, it is necessary to convert the property into cash and to collect the debts, and until this is done, its affairs cannot be settled, and the duty enjoined upon the court of winding up its affairs would remain unperformed.
The duty of settling up the affairs of the company being thus devolved upon the court, no reason is perceived why it might not (without any statutory provision) resort to such methods as would enable it to perform the duty. But we think that section 32, supra, sets this question at rest by expressly authorizing the court to make all orders and decrees needful for winding up its affairs. The statute invests the court in which the proceeding is pending, with the power to determine the necessity of the orders and de
A solution of this question can only be reached by reference to the facts found by the referee to whom the case was referred. It appears from his report that the capital stock of the company was $400,000, of which $255,250’ had been subscribed, and on which only ten per cent had been paid, and the remainder secured by the stock notes of the respective shareholders; that after the resolution of February 17th, 1871, the stockholders, among whom the defendants are embraced, surrendered to the company certificates of stoik amounting to $167,200, after paying five per cent thereon, and received therefor from the company their stock notes, given to secure the payment of stock respectively subscribed for by them to the amount of $150,400, The only stock remaining, after this surrender, amounted to $88,000, on which there was owing not to exceed $81,000r only $41,760 of which the referee finds was collectable. At the time the resolution was adopted, according to the report of the finance committee of said company, the company had lost $48,250, and the liabilities of the company other than the capital stock amounted to $32,121.27, including a reinsurance fund estimated at $10,000, which estimate the referee finds to be $5,621.37 less than it ought-to have been. In the report of this committee no account-was taken of $350,000 of outstanding policies and liabilities. The referee further finds that on' the 7th day of February, 1871, the Superintendent of the Insurance Department entered, through an expert, upon an examination of the condition of said company, who, on the 14th day of February, three days before the passage of the resolution under which defendants claim exemption, reported to the-Superintendent that the condition of the company was-such as to render its further proceeding in business hazardous to the public and those holding its policies. The referee finds further, that at the time of the passage and adoption of said resolution the affairs of said company
In the light of the above facts we cannot see how the action of the board of directors in the passage of the resolution of February, 1871, can be upheld. Casting out of view liabilities which might come against the company in consequence of the $350,000 of outstanding policies, and taking the estimate of its liabilities to be $32,121.27, as reported by the finance committee, if all the stockholders had complied with the terms of the resolution by paying ’five per cent of their stock notes and surrendering their .stock, and receiving in return therefor their stock notes, constituting all the assets of the company except $2,000 .and the five per cent thus paid in on $255,250, amounting to $12,762.50, the spectacle would be presented of a company with liabilities amounting to $32,121.27, with no one responsible for the payment of the balance of $17,358.77, which would be remaining after the application of the $12,762.50 and $2,000 of the assets to the payment of such liabilities. A resolution which embraces within its scope ■such a result can neither be maintained on principle nor authority. It is no answer to this to say that but two-
The case of Upton v. Tribilcock, 91 U. S. 45, is equally emphatic in condemnation of the right of .directors to limit the liability of stockholders as to unpaid stock, and pronounces such a transaction void. Justice Hunt, speaking for the court, uses the following language : “ The capital stock of a moneyed corpox-ation is a fund for the payment of its debts. It is a trust fund, of which the directors are trustees. It is a trust to be managed for the benefit of its shareholders during its life, and for the benefit of its creditors in the event of its dissolution. This duty is a sacred one, and cannot be disregarded. Its violation will not be undertaken by auy just-minded man, and will not be permitted by the courts. The idea that the capital of a corporation is a football to be thrown into the market fox-purposes of speculation, that its value may be elevated ox-depressed to advaxxce the interests of its managers, is a modern and wicked invention. Equally unsouxxd is the-opinion that the obligation of a subscriber to pay his subscription may be released or surrendered to him by the-trustees of the company. This has often been attempted, but never successfully. The capital paid in and promised to be paid in is a fund which the trustees cannot squander or give away. They are bound to call in wl^pt is unpaid and carefully husband it when received.” Section 201,. Thompson on Stockholders, is an authority to the effect that the American courts have steadily annulled all arrangements between corporations and their stockholders whereby the latter wex-e sought to be released from their liability to creditoi-s. The same author, in the following section, refers to the case of Dorr v. Stockdale, 19 Iowa 269, to which 'counsel of defendants have cited us as sustaining the resolution of the 17th February, 1871, as the only Amex-ican
The other questions presented by the counsel we have not considered, not deeming them material to a proper disposition of tbe case. Judgment affirmed,