74 N.J. Eq. 32 | New York Court of Chancery | 1908
Complainant has recovered in this state a judgment against the defendant company, a corporation of the State of Arizona, and, on execution returned unsatisfied, files this bill on behalf of himself and all other creditors of the company, against the company and all of its stockholders and directors, for the general purpose of reaching equitable assets of the company for the , payment of the judgment debt. No other creditors have applied 11 to come in, and, upon the evidence, it would seem that there are :i no other creditors of the company than the complainant. The Í first source of assets applicable to the payment of this judgment ! debt of the company, asserted in the bill and at the hearing, is the right to recover from the defendants, as stockholders of the companjq the amounts alleged to be unpaid on the stock respectively held by them. The stock was in fact issued to all of the defendants as full paid and non-assessable, and was all issued and received for property purchased, at a valuation agreed on ■ by the incorporators, who at the time of the purchase constituted the board of directors and the only stockholders of the company.
As to the language of the Arizona statute, which is widely dif- ' ferent from the New Jersey statute, on the.liability of the stockholders for corporate debts, the only question, as it seems to me, is whether the liability of the stockholders asserted in this bill can be considered as an individual liability for an unpaid infftaHrNmt on the stock owned by them, and therefore excluded from theNienefit of the provision of the statute and charter, “that the private-property of members shall be exempt from corporate debts.” I de-.not think this statute can be so construed, or that the exemption clause was intended to reach any cases except those of unpaid installments, properly so called; that is, cases , whereby the contract between the company and the stockholders, ' express or implied, future payment of installments on the stock was contemplated on its issue. This clause does not seem properly to cover a case whereby the contract between the company and the stockholder, at the time of the issue of the stock, no further payment by installment or otherwise was contemplated, and where no debt to the company from the stockholder for this stock could subsequently arise, so long as the contract for its issue remained uncanceled. If this section be inapplicable, then the statutory and charter provisions that the piivate property of stockholders and officers shall be forever exempt from all corporate indebtedness, would exempt them in any cases where the liability is put solely on the liability for unpaid -installment on stock owned.
The second claim for reaching, as assets of the company or through its aid, funds for the payment of this corporate debt, is based on a resolution of the directors of the company passed on July 23d, 1902. Serious question had arisen whether an oil well, which the company was then engaged in driving on Tennessee lands, was actually located on the company’s lands, and also as to raising funds for the prosecution of the work. A meeting of directors was called on special notice to consider the advisability of directing complainant (the counsel of the company) to proceed to Nashville for the purpose of making investigations in the interest of the company in his capacity as counsel, and further to consider the question of levying an assessment on the individual directors. At this meeting a resolution was passed
“that Counsel Johnson be directed to proceed to Nashville, ascertain if leases were O. K., have surveys made of land covered thereunder and ascertain if present well is on Carroll’s land, held under lease by company and get legal advice while on the ground and with general power to act for the company in his capacity as counsel.”
This resolution was adopted and apparently without dissent. Then this motion was adopted:
“That each director be assessed $750, with the exception of Mr. Keitlinger, who is to be assessed $1,700, the money realized from this assessment to be placed in the company’s treasury to meet current expenses and cost of further development work.”
At the time of this meeting the company had nine directors, including the complainant, and of these six were present at the meeting, viz., defendants Reitlinger, W. J. Roeber, Strauss, Bondi and Meyer, and complainant. Three directors were ab
Mr. Johnson did within a day or two, and relying on the resolution, go to Tennessee on behalf of the company and perform for it the services required. He was engaged in this business from July 24th to August 19th, and his principal claim against the company is for this work. His actual expenses on the trip have been paid. In addition to the voting for the resolution, the defendants Strauss and W. J. Eoeber on July 23d, 1902, the day of. the meeting, signed a paper stating “undersigned ready to subscribe $750 to Tennessee, &c., Co. Treasury when called for,” and the defendant Bondi on the same day signed a paper “ready to subscribe $750 to T., &c., Co. Treasury within 90 days-from the date hereof.” The director Meyer, who voted against the resolution on its passage, subsequently, on August 27th, 1902, assigned his stock in the company to defendant Eeitlinger, who had voted for the resolution, the assignment containing the clause that it was “upon express condition and understanding that Eeitlinger shall assume all assessments levied and to be levied against my said interest,” and on' September 8th, 1902, L. C. Eoeber, one of the directors who was not present, also assigned all his stock and rights in the company to Eeitlinger, the latter assuming and agreeing to pay all assessments now levied or to be levied against said interest. This assignment contained a further covenant to reassign a portion of the shares to L. C. Eoeber, on payment within one year of moneys advanced by Eeitlinger, as assessments or otherwise, on account of the interest conveyed. The assessment on the assignors assumed by these assignments include the assessment of July 23d, which appears to have been the only assessment made up to that time, and these assignments, at least.in Beitlinger’s hands, are sufficient, if not conclusive, evidence of the subsequent consent to the resolution of the two assignors, Eoeber, who was hot present at the meeting, and Meyer, who voted against it.
Dunn was not present at the passage of the resolution, but at the meeting of the board held on October 4th, 1902, at which he
The defendant Zigrosser, also a director and stockholder, was not present at the meeting of July 23d, 1902. He was at that time-general manager of the company and was superintending the work of putting down the wells in Tennessee, and his letters to the company, written in July, 1902, advising them of the dispute about location of the well, and requesting that the directors get together and send him help, in the form of a good business head, brought about the action at the meeting. Complainant saw and consulted with Zigrosser in Tennessee, and the latter subsequently paid to the company $150 apparently on account of the assessment. He also, on January 3d, 1903, voted for the resolution that the directors pay complainant’s bill by a pro rata assessment on stock, but does not seem to have been present at the subsequent meeting, when this resolution was rescinded on the ground that the subject-matter of it was covered by the resolution of July 23d. His action, in part payment of the assessment and agreement for pro rata assessment, must be considered also in connection with the facts clearly disclosed by the evidence, that the enterprise was one in which the whole value of the stock was from the first purely speculative, and depended altogether on the development of the property, and that, in the absence of any working capital, the only source of .funds was understood to be
The only question of fact remaining as to the persons bound by the resolution of July 23d, 1902, is whether the complainant himself consented to his own assessment as a director. He was not at that time actually a stockholder of the company, and did not become such until some time subsequently (October, 1902), when he received stock in part payment of his bill for services up to May 1st, 1902. He had, however, been elected as a director on January 25th, 1902, and had accepted the office and acted as such since that time. He was, therefore, a de facto director of the company, and if it were a question relating to the effect of his acts in his capacity of director, the resolution, if he voted for it, would be conclusive on him. But this resolution or motion was, as I view it, legally effective only as an assessment or a mutual subscription on the part of those who actually agreed to it at the time or afterwards, and on this point complainant swears that at the time of the passage of the resolution he called the attention of the directors to the fact that, on the face of it, the resolution included him, and that they then said that he was not a stockholder and that he would not be called on to pay anything. At that time the other directors were in fact the stockholders and the only stockholders, of the company. The complainant further says that he thinks he did not vote at all on the resolution. If these statements are true, then the complainant is not bound by any agreement for his own assessment. His statement as to what occurred at the time in reference to his own liability under the resolution is not denied, and the fact that no payments have ever been made by or claimed to be due from him, under the resolution, corroborates his evidence.
A disputed question of fact is raised as to the scope of the resolution actually passed and agreed to on July 23d, 1902. ' All of the answering defendants admit the passage of the resolution,
At the hearing complainant insisted on an agreement of December 6th, 1901, as having the effect of making the defendants, or some of them, liable to another assessment, which the company might also recover as an asset to the extent that it was unpaid. But that document is an agreement inter-parties between six of the original incorporators, including five of the defendants of the first part, and the defendants Eeitlinger and Strauss of the second part, whereby, in consideration of $2,000 paid to the other party, it was agreed that all of the parties should share equally in the property, profits, &c., of the company; that the parties of the first part should advance to the company “the said sum of $2,000, and further agreed to subscribe for and sell stock of the company to an amount not exceeding $2,150 as soon as conveniently may be, to the end that the best interests of said company may be served in the premises.” The $2,000 paid by Eeitlinger and Strauss was, in fact, as I understand the evidence, paid in to the company, and the company itself obtained no right by this agreement to compel the subscription. The benefit of this agreement and any action for damages for its breach belongs solely to Eeitlinger and Strauss.
The third question relates to the amount of the complainant’s claim recoverable on the assessment agreed to by the resolution of July 23d, 1902.
I shall not consider the questions of the general rules relating to the conclusiveness of judgments against the company in actions against stockholders or directors. Some of them are considered by Vice-Chancellor Bergen in Audenried v. East Coast Milling Co., 68 N. J. Eq. (2 Robb.) 450 (1904). I think that in an action of this character, where the liability is based, not on a statutory or charter liability for a corporate debt, but on an
By the answers the issues in the cause were submitted to this court without any question 'as to its jurisdiction, but at the hearing and in the briefs it was insisted th§.t the complainant had an adequate remedy at law against each defendant separately. Without considering whether the objection does not come too late, the case, on the whole record, seems to be one where a court of equity alone can do ample and complete justice to all the parties and in a single action. The case involves not only a settlement as against each person liable^ of the character and amount of claim as coming under the assessments, together with an inquiry or accounting as to the amount paid by each person liable, and an adjustment of the amount due from each, but also the specific j, relief of the appropriation of the amounts recovered under the assessment to the payment of the debts specially included therein, j and not a payment to the company of amounts that go into its * general funds. Multiplicity of suits at law, with possible diverse or conflicting judgments on the same single issue, with a necessity of ultimate resort to equity for an accounting, both against the company and between the directors, would be the probable result of refusing jurisdiction, and it should be retained.
I conclude, therefore, that the defendants Eeitlinger, Bondi, W. J. Eoeber, Strauss, Zigrosser and Dunn are liable for the amounts for their respective assessments under the resolution of July 23d, 1902, so far as necessary to pay complainant’s claim as now fixed, and that to the same extent the defendant Eeitlinger is, in addition, liable to the amounts assessed against the directors Meyer and D. C. Eoeber assumed by him. Meyer is not a party to the suit, and L. C. Eoeber has not been served within