111 Mich. 251 | Mich. | 1896
Rouse, Hazard & Co., the plaintiff in these proceedings, recovered a judgment upon November 3, 1894, for the sum of $1,761, damages and costs, in the Wayne circuit court, against the Detroit C3rcle Company, Limited. Hpon this judgment, execution was issued, and returned wholly unsatisfied, after being in the hands of the sheriff of Wayne county for more than 20 days. The Detroit Cycle Company, Limited, is a limited partnership association, organized and existing under chapter 79 of 1 Howell’s Annotated Statutes; and the defendants herein, Edwin B. Robinson, John A. Matheson, and John T. Holmes, were the original subscribing members thereof, and remained so during the whole course of the proceedings in this case. After the execution was returned unsatisfied, plaintiff applied to the Wayne circuit
On the filing of the defendants’ answers to the plaintiff’s application, an issue was framed, and ordered tried ^.before a jury. The issue was:
“In what amount, if any, are the said John T. Holmes, John A. Matheson, and Edwin B. Robinson, and any or each of them, indebted to the said Detroit Cycle Company, Limited, on account of any unpaid subscriptions to the capital of the said company ? ”
This issue was tried before the Honorable Robert E. Frazer, circuit judge, with a jury, on April 16, 1895; and, under the charge of the court, the jury found that each of the defendants was indebted to the Detroit Cycle Company, Limited, on account of unpaid subscriptions to the capital stock of the said company, in the sum of $1,833.33.
The Detroit Cycle Company, Limited, filed its articles in the office of the register of deeds for Wayne county, Mich., as a limited partnership association, under the provisions of chapter 79 of 1 Howell’s Annotated Statutes, on November 1, 1892. The defendants were the original members of said association, and subscribed for equal subscriptions, amounting to the sum of $3,333.33 for each defendant. There was paid in by each member thereafter the sum. of $1,500, in cash; and there remained still unpaid by each of said members up to about the 6th day of October, 1893, the sum of $1,833.33. On or about October 6, 1893, the association became financially embarrassed, owing the Gormully & Jeffery Manufacturing Company, of Chicago, between $14,000 and $16,000, and owing two local banks in Detroit about $6,000. The debts to the banks were in the form of notes made by the Detroit Cycle Company, Limited, and indorsed by all three of the defendants individually, and were further collaterally secured by an assignment of bicycle contracts. An arrangement was made between the Gormully & Jeffery Manufacturing Company and the defendants, whereby the Gormully & Jeffery Manufacturing Company was given a chattel mortgage on all the property of the Detroit Cycle Company, Limited; and at the same time there were assigned to the Gormully & Jeffery Manufacturing Company all the bicycle contracts, including those held by the banks as collateral security. At the same time, and as a part of the same arrangement, each
No amendments of the original articles of association, and no schedule, as provided for in 1 How. Stat. § 2365, or any other paper except the original articles of association, were ever filed in the office of the register of deeds for Wayne county, Mich. It also appeared that in the secretary’s records of the minutes of the stockholders’ and directors’ meetings of the association, running from October 14, 1892, to January 11, 1894, no record anywhere appeared authorizing or making a call for the unpaid subscriptions of the capital stock of the association, or authorizing the receipt of the respective members’ notes therefor, although under date of October 6, 1893,
The defendants requested the court to charge the jury as follows:
“3. It appearing from the undisputed evidence in this proceeding that the defendants gave their promissory notes-to the company for the amount of their unpaid subscriptions, which notes were accepted by the company in payment thereof, and which notes are now in the hands of third parties, and the defendants are liable thereon, the verdict must be for the defendants.
“4. It appearing from the undisputed evidence in this suit that the defendants gave their promissory notes for the amount of their unpaid subscriptions to the company, which notes were taken by the company, and the amount thereof realized in cash, and applied upon existing indebtedness of the company, the making of said notes and realization of the money upon them constituted a payment of said unpaid subscription, and the verdict must be for the defendants.”
“If the foregoing are refused—
“6. If the jury believe that the notes in question were given in payment of the unpaid subscriptions, and were accepted by the company as such, and by them transferred to third parties, who now hold them, and the defendants are liable thereon, then the verdict must be for the defendants.
“7. If the jury believe that the notes in question were given for the purpose of paying up the unpaid subscriptions, and the same were taken, and cash realized upon them, which cash was applied in satisfaction of existing indebtedness of the company, so that the company received full benefit thereof, the giving of the notes and the application of the proceeds thereof constituted pay
The trial judge declined to give these requests. He entertained the view that the statute authorizing the formation of these limited copartnership associations is a special enactment, permitting such organizations with limited liability as to stockholders, and that all the necessary and essential requirements of the statute must be complied with. He held that this had not been done, and that whether the notes had been given and received for the purpose of paying the balance due on subscriptions was not important, and directed a verdict against the defendants.
It is the claim of the plaintiff that the law as applied to limited partnerships is to be applied to associations like the defendant, and that subscriptions to the capital cannot be paid by giving notes. On the part of the defendants it is claimed that the law as applicable to corporations should be applied to these associations, and that if defendants gave their notes to pay for the capital subscribed by them, and these notes were received by the defendant association as payment, and the proceeds of the notes were received by the association, and applied to the payment of its debts, this would constitute a good payment of the capital subscribed, and would release the members from further liability?
Nearly all the questions involved in this proceeding are involved in the case of Staver & Abbott Manfg. Co. v. Blake, post (decided at the present term of court). It will not be necessary to refer to the opinion in that case further than to say that, as to the question of whether the law of limited partnerships applies to the defendant association, or the law of corporations, the answer is that the case must be controlled by the law applicable to corporations.
We have no doubt that subscriptions to capital stock of corporations may be paid by the giving of promissory
The record discloses that, upon the application of the plaintiff’s attorneys, the circuit court, in chancery, had appointed a receiver for the defendant company, Joseph F. Noera filing the creditor’s bill. A judgment creditor’s bill was also filed by William A. Hulbert et al. against the defendants. John A. Stanbery was appointed receiver in both cases, and claimed the assets of defendant company. Both chancery suits are still pending. The solicitors for the complainants, in their behalf, and in behalf of the receiver in both cases, in open court, waived all claim to any of the unpaid subscriptions to the capital stock of the defendant that were unpaid by Robinson, Matheson, and Holmes, as against the claims of the plaintiff. Objection was made to this offer, and the court replied that he had serious doubt of the power of the receiver to waive the claim, or of the court to grant the waiver, but expressed himself as being settled in relation to the other points in the case. Defendants also introduced in evidence an application for execution under the same statute as is invoked in this proceed
“1. A receiver of all the property and assets of the defendant company having been appointed prior to the judgment in this suit, and being now in office, the plaintiff has no standing in this proceeding, and is not entitled to the order asked. '
“2. It appearing that, since judgment was rendered in this suit, a receiver has been appointed in another suit of all the property and assets of the defendant company, the plaintiff has no standing in this suit, and is not entitled to the order asked.”
“5. It appearing from the evidence in this case that an application similar to the one in the present case has been made against the defendants in the circuit court of the United States for the Eastern district of Michigan, upon a judgment recovered against the Detroit Cycle Company, Limited, by the W. Bingham Company, the defendants are therefore liable to have execution issued against them in each case for the amount of their subscriptions remaining unpaid, and to be subjected to a double liability not contemplated by the statute under which the defendant association is organized. This being so, the plaintiff’s remedy is in equity, where the rights of all parties can be protected, and not by an application for an execution, such as is now pending before the court.”
The court refused to give either of these requests. This is assigned as error. It is now urged by counsel for plaintiff that defendants cannot avail themselves of any defense they may have to this action, growing out of the appointment of a receiver, for the reason that the receiver was appointed before these proceedings were begun, and before the mandamus case of Rouse, Hazard & Co. v. Donovan, 104 Mich. 234, was decided. It is their claim that as the defense might then have been interposed, and was not, the matter must be treated as res adjudicata. An inspection of the Case of Rouse, Hazard & Co.
Judgment is reversed, and no new trial ordered.