60 Md. 93 | Md. | 1883
delivered the opinion of the Court.
This was an action brought by 4he plaintiff as trustee against the defendants to recover of them a certain per cent, of the unpaid subscription to the capital stock of the National Express and Transportation Company, a corporation chartered and organized under the law of the State of Virginia. The corporation was organized in 1866, under a charter granted by the Legislature of Virginia in 1865, subject to the general laws of that State, relating to corporations or joint stock companies. And among the provisions of such general laws upon the subject, there is one which declares that upon every subscription for shares in any joint stock company there shall be paid upon each share two dollars at the time of subscribing, and the residue thereof as required by the president and directors / and if any money which any stockholder has to pay upon his shares be not paid as required by the president and directors, the same, with interest thereon, may be recovered by warrant or action, according to amount, &c.
The authorized capital stock of the company was 85.000. 000, (with the privilege of increasing it to 810.000. 000,) divided into shares of 8100 each, on which two dollars per share were payable at the time of subscription, and the balance as called for by the president and directors. Of this capital stock 40,044 shares -were subscribed, and the defendants, as it is alleged, became sub
In December, 1871, a creditors' bill was filed in the Chancery Court of the City of Richmond, in the State of Virginia, where the corporation was located and had its principal office, against the corporation, and certain of its officers, and against the trustees named in the deed of assignment ; and to which bill an amendment and supplement were filed in August, 1879, praying that the trustees named in the deed of- assignment he removed, and'others appointed in their place ; that an assessment on the un-. paid capital stock be made ; that the debts of the corporation be ascertained and paid; and for general relief. Upon this bill and amendment such proceedings were had as resulted in a decree of the Court, whereby the original trustees in the deed were, upon their own request, dis
The case is presented on demurrers to pleading exclusively. The parties by their counsel have agreed that the Court shall refer to the record of the Chancery Court of the City of Richmond, in the case of Gflenn’s administrator and others against the ^National Express and Transportation Company and others, (the creditors’ suit already referred to,) as if the same had been fully set out in the declaration, and that the printed copy of such record of said cause may be used in this Court, without being copied into the record in this cause. The object of this is, as we understand it, to place before the Court all the facts relevant to the case as fully as they could have been alleged in the declaration; and any facts disclosed by that record which may be material to the questions raised on the pleadings, are to be regarded as set out in the declaration. It is only in that way that we can regard such an agreement in deciding questions on demurrer.
The declaration, as amended, contains but a single count, in which are alleged briefly the facts supposed to be sufficient to constitute a right of action against the defendants. The latter pleaded by way of defence eleven pleas, and all of them, except the first and fourth, have been demurred to by the plaintiff. The Court below gave judgment on the demurrers for the defendants, and the appeal is taken from that judgment. The issues of fact were not tried, and are therefore not before us.
The demurrers mount up to and challenge the sufficiency • of the declaration, as well as the pleas to which they were
1st. Whether the Chancery Court of the City of Richmond obtained jurisdiction over the case referred to against the National Express and Transportation Company, and others, by proper process, to justify that Court to render the decree referred to in the declaration? If so,
2nd. Whether that Court had power and jurisdiction, under the circumstances of the case, to make assessments, or to direct assessments to be made, upon the unpaid subscriptions to the capital stock of the corporation, with which to pay the debts of the company; and whether any decree making or directing assessments upon the capital stock for such purpose, can bind or affect the stockholders who were not, in their individual capacities, parties to the cause ?
3rd. Whether there was power and jurisdiction in that Court to remove the trustees appointed by the corporation, by its deed of assignment, and to appoint a new one in their stead, and to invest such new or substituted trustee with the rights and powers possessed by those removed, including the right to sue in his own name as trustee ?
4th. Whether it be competent to the defendants in this action, and as a bar thereto, to plead and rely upon the Statute of Limitations of 'this State, to the various debts due from the corporation, and which have been found to be owing, and adjudged to -be paid, by the decree of the Chancery Court of the City of Richmond, and for the payment of which the assessment uj>on the unpaid subscriptions to the capital stock was ordered ?
5th. If the present action be properly brought and by the proper party, whether the Statute of Limitations forms a bar to the right to recover ?
6th. Whether the institution and pendency of other suits in equity, not by the plaintiff, but by other parties,
The determination of these questions would seem to embrace the whole controversy as presented by the pleadings before us; and we shall consider the questions in the order we have stated them.
1. It is always competent to parties sought to be bound or affected by a judgment or decree, of any regularly organized Court, professing to have jurisdiction, whether of our own or a sister State, to allege and show that such judgment or deeree was rendered without competent jurisdiction. It is hot, however, to be assumed that there was want of jurisdiction. The presumption is the other way ; and the party seeking to avoid the effect of the judgment or decree must allege and show affirmatively, that it was rendered without jurisdiction, whether that want of power be in defect of process or otherwise. It, is alleged in the declaration in this case that the Virginia Court was one of competent jurisdiction ; but irrespective of that allegation, there is no intendment against the validity of the decree for want of jurisdiction in the Court that rendered it; for the comity and respect which are justly due from one State to another, would forbid the Courts of this State to presume that the tribunal which pronounced the decree had transcended its jurisdiction. This is abundantly shown by the cases cited and reviewed in the case of the Bank U. S. vs. Merchants’ Bank of Baltimore, 1 Gill, 429, 431.
It appears by the record made a part of the pleadings in this case, that the corporation failed to appear in its corporate capacity to the suit, and the original and amended and supplemental bills were taken as confessed against it; but it appears that it was served with process by service on two of its directors, in their official capacities and as representatives of the corporate body, and one of them appeared and answered, though not for the cor
A decree passed upon such service of process cannot be pronounced void for want of jurisdiction of the parties so served and warned. If they failed to appear in Court to make defence it was their own fault and disregard of the process of the Court; and the Court was fully justified in proceeding in their absence. It must be recollected that this Court cannot sit in review of the decree of the Virginia Court, for the correction of errors or irregularities that may have been committed in the exercise of a competent jurisdiction. If there be such errors or irregularities in the proceedings, they could,' possibly, have been the subject of a direct appeal from the decree ; but thej^ cannot be allowed to aifect the validity of the decree in a collateral proceeding like the present. Pennoyer vs. Neff, 95 U. S., 714. The Constitution of the United States requires that “full faith and credit shall be given in each State to the public acts, records, and judicial proceedings of every other State and the Act of Congress providing for the mode of authenticating such acts, records, and judicial proceedings, declares that, when authenticated as provided, “they shall have such faith and credit given to them in every Court within the United States as they have by the law or usage in the Courts of the State from
2. The second question is one that was much discussed at bar, but we do not perceive that it presents any very great difficulty in view of the facts disclosed. The corporation suspended all active operations, and was supposed to be insolvent. Its tangible property was of uncertain value, and was dispersed over the country, and consequently liable to great loss. Large debts had been contracted, with but small amount of assets in hand with which to pay them; and the only real reliable fund for the payment of the debts was the unpaid subscriptions to the capital stock of the company. In the deed of assignment for the benefit of the creditors, such unpaid subscriptions were expressly assigned to constitute a part of the trust fund with which to pay the debts; but the corporation could not, and did not attempt to, assign the discretionary power vested by law in the president and directors, as to the time and amount of the calls, in respect to the balance of the unpaid subscriptions of stock. That power was still left with the president and directors. The eorpora
But it is said, and contended for with zeal, that the Virginia decree, in determining and making the assessment upon the stock held by stockholders, for the payment of debts, is without any validity or effect whatever, as against the stockholders, because they, in their individual capacities, were not parties to the proceeding, and had no opportunity to defend against the establishment by the decree of the large amount of debts against the corporation. This objection to the decree is distinctly raised by the defendant’s eighth and ninth pleas. The argument in support of the defence thus set up is plausible, but we do not think it sound.
When the Court obtained jurisdiction of the corporation, every stockholder, in his corporate capacity, was a party to the cause, and was supposed to be represented by the president and directors, who were intrusted with the management of the corporate interest of all the stockholders. If they neglected their duty, in allowing claims to be established against the corporation that ought to have been defeated, the stockholders must have themselves to blame for not having a more active and efficient board of directors. But we cannot assume that there has been any injury done in that respect. If the decree were held to be totally without effect as against the stockholders, because they were not parties to it in their individual capacities, the consequence would be that the creditors would be without adequate remedy. It is apparent, indeed conceded, that the stockholders are distributed among several States, and but a comparatively small number of them reside in Virginia. No ordinary process from the Courts of that State could reach the non-residents, and in a proceeding where the defendants are
But are the stockholders in their individual capacities necessary parties to such a proceeding? It is very clear that in any ordinary action or suit against the corporation to establish and recover a debt, the stockholders are not. proper parties, except as they are represented by the corporation; and if they, in their separate capacities, are allowed to intervene at all, it can only be through and in the name of the corporation. And yet the judgment recovered against the corporation binds the stockholders, unless they can show that it was procured by fraud or collusion. Weber vs. Fickey, 47 Md., 196; Thayer vs. New England Printing Co., 108 Mass., 523; Milliken vs. Whitehouse, 49 Me., 527; Ang. & Am. on Corp., sec. 615. The judgment is conclusive as against the corporation and its property (Railroad Co. vs. Howard, 7 Wall., 392, 410 to 413,) and, upon principle, those who hold its property or funds for the payment of debts, ought to be concluded, except where there has been fraud or collusion. The unpaid subscriptions to the capital stock are the proper assets of the corporation, and constitute a trust fund for the payment of its debts; and as against a creditor with an established debt against the corporation, by judgment or decree, the stockholder has no right to withhold the funds of the company upon the ground that he was not individually a party to the proceedings in which the recovery was obtained.
But the question of the right and power of a Court of equity, to order or decree assessments or calls upon the
The case of Hall vs. U. S. Ins. Co., 5 Gill, 484, was an action at law, like the present, to recover of a stockholder an assessment or call made upon the unpaid subscription, to capital stock of the corporation, by the order and direction of a Court of equity, in a proceeding to which the stockholders, in their individual capacities, were not parties; and yet a recovery was had. notwithstanding the case was defended upon the ground that the stockholder was not bound by the order of the Court to which he was not a party. The question was distinctly raised, upon the admissibility in evidence of the equity proceeding in which the order directing the call had been passed.. The objection taken to the admissibility of the proceeding was, that the defendant was not a party to the cause in equity, nor to any of the proceedings therein; but the Court below overruled the objection, and the Court of .Appeals fully sustained that ruling. The Court of Appeals said, “The Court's order for the institution and prosecution of this suit was definite and final. As to the power exerted by Baltimore County Court, sitting in equity, in the proceedings before it, it is believed no well founded exception can be taken. It was indispensably necessary for the prevention of fraud; and to do justice to persons whose grievances were undeniable and incapable of relief anywhere else, or in any other way, than in that pursued by the County Court. In such a case, and under such circumstances, it cannot be necessary to cite authorities to establish the propriety of the exercise of such a power ;'' and then declared that there was no error committed by the Court below in overruling the objection taken by the defendant.
The case of Sanger vs. Upton, Assignee, 91 U. S., 56, was where the corporation was adjudged a bankrupt, and
In the opinion of the Court it is said, “ It was not necessary that the stockholders should be before the Court, when it (the order) was made, any more than that they should have been there when the decree of bankruptcy was pronounced. That decree gave the jurisdiction and authority to make the order. The plaintiff in error could not, in this action, question the validity of the decree;. and, for the same reasons, she could not draw into question the validity of the order. She could not he heard to question either, except by a separate and direct proceeding had for that purpose.” And the Court cite and approve the cases decided in chancery, and among them the case of Hall vs. U. S. Ins. Co., 5 Gill, 484.
Both upon principle and authority, therefore, we conclude that the defendants cannot successfully defend this action, upon the ground, that they were not, in their individual capacities, parties to the decree that made the assessment and authorised the bringing of the action.
The decree appointing the plaintiff, in express terms, clothes and invests him “with all the rights and powers,” and charges him “with all the duties of' executing the trusts of said deed, to the same effect as were the original trustees therein.” And as to all dioses and rights of action, pertaining to the trust, this provision of the decree passed the right thereto to the new trustee as fully as the original trustees held it. He needed no formal assignment thereof from the original trustees ; the decree itself operated as an assignment. If those trustees had been beyond the jurisdiction, or had fled the country, it would have been monstrous to contend that the trust should fail because a formal assignment from them to a successor in office could not be obtained. It was competent to a Court of equity to invest the new trustee with all the rights and powers held by the former trustees in respect to the per
4. The next question arises on the fifth and sixth pleas of the defendants. By these pleas the Statute of Limitations of this State is pleaded to all the debts decreed to be due and owing from the corporation, as a bar to this action.
Upon what principle these pleas are supposed to be maintainable it is difficult to determine. It must be recollected, this is notan action brought by those creditors, or any of them, to recover their claims of the defendants; but it is an action by the trustee, exercising and asserting rights that belonged to, and which have been derived from, the corporation itself. And such being the case, we suppose it to be clear that in an action by the corporation to recover of one of its stockholders an assessment upon unpaid stock held by him, the latter could not defeat the action, by pleading that the debts due from the corporation, and for the' payment of which the call was made, were subject to the bar of the Statute of Limitations. And if such a defence could not be availed of in an action by the corporation, there is no reason or principle that would allow it in an action by its assignee when prosecuting the same right instead of the corporation. The creditors of the corporation are not parties to this suit to vindicate their claims, or to be bound by any judgment that might be rendered in respect to the defence pleaded. It is a matter wholly collateral and forms no part of the subject-matter of the suit. It was with the corporation to
As we have already seen, by the statute of Virginia, in force at the time of the organization of the company, and still in force, the subscriber to stock was required to pay two dollars on each share subscribed for, “and the residue thereof as required by the president and directors;” and any amount not paid as required by the president and directors, to be recovered by action, &c.
All subscriptions to the stock of this corporation had reference to that provision of the statute, and the conditions or requirements there prescribed formed terms in the contract of subscription. After the payment of the two dollars per share, there was nothing due from the subscriber to stock until an authorised call was made for the residue. The contract contemplated the exercise of judgment and discretion on the part of the president and directors as to the times and amounts of future payments on the stock, and there was nothing due from the stockholder until such- amounts were determined on, and regularly called for. Until a regular call made, there was no unconditional liability on the part of the stockholder to pay. Until then he could not know when to pay, or how much he would be required to pay. The subscription, therefore, was conditional, as to the tunes and amounts of payment; and, consequently, there was no fixed obligation of the stockholder to pay, and no right of action against him, until an assessment and call made, either by the president and directors, or by the order of a Court of competent jurisdiction. It is for the amount of the assessment made that the right of action accrues, and not for the whole balance of the unpaid subscription, unless the whole amount be called for ; and it is only from the time of the assessment and call made that the Statute
In the case of Sinkler vs. Turnpike Road Co., 3 Penn. St., 149, by the terms of the subscription, the money therefor was payable “in such manner, at such times, and in such proportions as should be determined by the president and managers,” and it was held by the Supreme Court of Pennsylvania that the Statute did not begin to run thereon until after such determination, and demand made in pursuance thereof. And in the recent case of Scovill vs. Thayer, 105 U. S., 143, the subject is very fully considered, and the same doctrine maintained and applied. In that case it was said by the Court, “It is well that when stock is subscribed to be paid upon call of the company, and the company refuses or neglects to make the call, a Court of equity may itself make the call, if the interest of the creditors require it. The Court will do what it is the duty of the company to do. But under such circumstances, before there is' any obligation upon the stockholder to pay without an assessment and call by the company, there must be some order of a Court of competent jurisdiction, or, at the very least, some authorised demand upon him for payment. And it is clear the Statute of Limitations does not begin to run in his favor until such order or demand.”
Here the defendants were only bound to pay upon a general assessment made upon all the stock subscribed, and only for the purpose of paying off the liabilities of the corporation. Until it was ascertained what amount, and what proportion of the unpaid subscriptions, would be required to discharge those liabilities, no assessment could
A long time has elapsed since the suspensión of the operations of the company, but,, as we gather from the pleadings in this cause, most of that time has been occupied by litigations of various sorts, and in several Courts, in respect to the assets of the Company; and that may account for much of the delay that has occurred in bringing the proceedings in the Chancery Court of Richmond to a conclusion. The decree in that case, making the assessment, was passed on the 14th of December, 1880, and this action was brought on the 9th of April, 1881.
6. The next and last question is that raised by the several pleas 'of former suits in equity pending, in relation to the assets of the corporation, and their administration for the benefit of creditors.
These pleas fail to disclose anything that could constitute a bar to this action. At most, the matters alleged could only operate, if at all, in abatement; and as pleas in abatement they are not valid, for they are pleaded without affidavit, and together with pleas in bar. Matters in abatement and matters in bar cannot be pleaded together; the pleas in bar supersede those in abatement. Step. Pl., 430, 431; Cruzen vs. McKaig, 57 Md., 454, 459. But those pleas could not be regarded as good even as pleas in abatement. They are not sufficiently definite in their averments, as to the parties, the particular rights and subject-matter of the suits, and the form and extent
What may have been the effect if the pendency of these equity suits had been timely and properly pleaded in the case in the Chancery Court of Richmond, before the final decree therein was passed, we need not stop to conjecture, nor is it a matter with which we are concerned. The decree that was passed in that suit cannot he invalidated or affected in any way by the pendency of other suits in other jurisdictions, even if they were between the same parties and in regard to the same subject-matter. Seevers vs. Clement, 28 Md., 426.
Upon the whole we are of opinion that all the pleas 'demurred to are bad and form no defence to the action, •and that the demurrers thereto should have been sustained. We must, therefore, reverse the judgment and remand the cause for new trial.
Judgment reversed.