75 Ind. App. 149 | Ind. Ct. App. | 1921
Complaint by appellant as trustee in bankruptcy of a bankrupt Indiana corporation against subscribers to its capital stock to recover unpaid balances on their several subscriptions. A demurrer to the amended second and third paragraphs of complaint was sustained. Appellant refused to plead further and judgment was rendered against him.
The amended second paragraph of complaint alleged that appellees with others entered into a written contract, by which they mutually agreed with each other to organize a corporation at Ft. Wayne to manufacture and sell shoes under certain United States patents, such corporation to be incorporated when $100,000 or more of subscriptions to the capital stock should be subscribed, the total capital to be $200,000, in shares of $100 each, the parties signing the contract setting opposite their names the amount of stock to be taken by each of them; that after subscriptions had reached more than $100,000, the subscribers thereto delivered the contract to a committee of their number for the purpose of having said company incorporated; that the committee in order to carry out the purpose, prepared articles of association, five of their number signing and acknowledging the same, after which it was filed in the office of the secretary of state, a duplicate copy being also filad and recorded in the recorder’s office of Allen county; that the secretary of state issued to them a certificate of incorporation of the (Cushion Heel Shoe Company, with its office and principal place of business at Ft. Wayne;'that the company was intended to be, and was
The contract, a copy of which was filed with and made a part of the complaint, provided that twenty-five per cent, of the subscriptions to stock should be payable when the company was organized and the balance in monthly installments at the call of the directors of the company.
It is also alleged that there was a balance due from appellees on their subscriptions, and that it was necessary to collect the amount so due in order to pay the debts and liabilities of the corporation; that a call and demand had been made on each appellee to pay the balance
The third paragraph of complaint, after alleging the signing of the subscription contract, alleges that all conditions precedent to the organization having been fully performed, the corporation was duly organized under and pursuant to the provisions of §5062 Burns 1914, Acts 1907 p. 295; that the subscribers to the stock of the proposed corporation caused to .be prepared articles of incorporation of the proposed association under the name of “The Cushion Heel Shoe Company,” said articles being signed and acknowledged by five of the subscribers, one copy of the articles being filed with the secretary of state and a duplicate thereof being filed in the recorder’s office of Allen county, and that a certificáte of incorporation was procured from the secretary of state.
The name, purpose, amount of capital stock, etc., as stated in the articles of incorporation, are alleged to be the same as stated in the amended second paragraph. It also alleges that, after the organization of the corporation, the board of directors accepted the appellees as stockholders and appellees accepted the rights and privileges of stockholders in such corporation; that the company engaged in the business of manufacturing and selling shoes under the patents named in the stock subscriptions from the time of the organization in 1909 to October, 1912, when it. was declared bankrupt; that prior to the bankruptcy of the company its board of directors demanded payment of the appellees of the amount of such subscriptions and that the appellant has likewise demanded payment which has been refused; that said subscriptions are due and unpaid; that the referee in bankruptcy has made assessments against appellees to the extent of sixty-five per cent, of their subscriptions and has also demanded payment which has
It is next insisted that the complaint fails to state facts sufficient to show the organization of a de jure corporation. The contention of the appellees is that the scope and purpose of the organization are broader and extend beyond the powers allowed by the statute and that, when a subscription contract recites the purpose of the corporation to be to manufacture certain articles or that a certain amount of capital shall be subscribed before it shall be binding, such acts are conditions precedent, performance of which are imperative before the contract is binding on or enforceable against the subscribers. Appellant, however, contends that, where one signs a preliminary contract by which he agrees to take stock in a corporation to be thereafter organized and after the organization of the corporation, with the assent of the corporate body, assumes the duties and accepts the privileges of a stockholder, he is estopped from denying his liability as a stockholder. If the appellees by their acts are estopped to deny their liability it is immaterial whether the corporation is a de jure or de facto corporation.
The amended second paragraph of complaint» after setting out the steps taken to perfect the organization of the corporation^ directly and specifically alleges that the appellees claimed and accepted the rights and privileges of stockholders, promised to pay their subscriptions and in fact paid the first call made by the directors, assumed all the liabilities of subscribers, participated in the affairs of the corporation, attended meetings of its stockholders and voted thereat for the election of directors and for the adoption of by-laws and by their acts and declarations proclaimed to the public and to persons
The third paragraph, after setting out the preliminary facts, alleges that after the organization of said corporation, it, by its directors, accepted appellees as stockholders and that appellees accepted the rights and privileges of stockholders in the corporation.
Are the facts alleged in either or both of these paragraphs sufficient to estop appellees from denying their liability on their subscription contract?
In 1 Cook, Corporations (7th ed.) §52, in discussing the question of estoppel, the author states the law as follows: “When, however, one accepts or assumes the position and duties and claims the right and privileges and emoluments of a stockholder, and the corporation accepts and acquiesces therein, such person is estopped to deny that he is a subscriber, even though there may have been something irregular or defective in the form or manner of his subscription, or there may have been no formal subscription at all.” And the Supreme Court of the United States, in Sanger v. Upton (1875), 91 U. S. 56, 23 L. Ed. 220, said: “Where there are defects in the organization of a corporation which might be fatal upon a writ of quo warranto, a stockholder who has participated in its acts as a corporation de facto, is es-topped to deny its rightful existence.” Citing Abbott v. Aspinwall (1857), 26 Barb. (N. Y.) 202.
In Phoenix, etc., Co. v. Badger (1875) , 6 Hun. (N. Y.) 293, the defendant by way of defense insisted that the statute did not authorize the creation of a corporation for the purposes expressed in the certificate of incorporation, and that therefore his subscription was void. “But,” said the court, “.it appears that the defendant was not only one of the originators of the enterprise, but one of the trustees, and took an active part in the organization and management of the company, aiding in holding it out to the public as a lawfully organized corporation; that the company is insolvent, and that this suit, though commenced by the corporation,
It is not material in such cases whether the corporation is a de jure or a mere de facto corporation. 1 Cook, Stock and Stockholders §§52, 183-185, 198; 1 Thompson, Corporations §§528, 1337, 1376; 2 Thompson, Corporations §§1865-1867; Sanger v. Upton, supra; Upton v. Tribilcock (1875), 91 U. S. 45, 23 L. Ed. 203; Dayton, etc., R. R. Co. v. Hatch (1855), 1 Disney (Ohio) 84; Upton v. Hansbrough (1873), 3 Bissell 317, Fed. Cas. No. 16,801; Marion Bond Co. v. Mexican Coffee, etc., Co. (1902), 160 Ind. 558, 65 N. E. 748; Rikhoff v. Brown’s, etc., Co., supra.
“Payment on subscription or an installment thereon will generally be sufficient recognition of the legal exist
Our statute §5070 Burns 1914, Acts 1913 p. 282, provides that after one year from the organization of the company the directors shall be elected by the stockholders. It is a fair inference from the allegations of the
It has been held that, if debts have been incurred by a defendant corporation, subscribers who stand by and make no objections will be estopped to plead the nonexistence of the corporation when sued for the benefit of the creditors. Allen v. Rhodes, supra; Silvain v. Benson (1915), 83 Wash. 271, 145 Pac. 175; National Realty Co. v. Neilson (1913), 73 Wash. 89, 131 Pac. 446; Cox v. Dickie (1908), 48 Wash. 264, 93 Pac. 523; 26 Am. and Eng. Ency. Law (2d ed.) 1011; 10 Cyc 244-249; 5 Thompson, Corporation (2d ed.) §5183. And this seems to be the rule in Nebraska. Lusk v. Riggs (1904), 70 Neb. 713, 97 N. W. 1033. “If the defendant, as alleged in the petition, participated as a stockholder in the election of the directory, his right to controvert the corporate existence of the company, may be very questionable.” Henderson, etc., R. Co. v. Leavell (1855), 16 B. Mon. (Ky.) 358.
The subscription contract of appellees created a debt which under the law it was their duty to pay, and it was
In view of our holding that appellees are estopped from setting up any irregularity in the incorporation of the bankrupt corporation as a defense, it is not ¡necessary for us to give any consideration to the effect of the act of March 14, 1913 (Acts 1913 p. 681, §2, §5062b Burns 1914), legalizing corporations where the certificate of incorporation embraced more purposes and objects than authorized by law.
The court erred in sustaining the demurrer to each paragraph of complaint.. Judgment reversed for further proceedings not inconsistent with this opinion.