*1 ' Tribilcoce, Upton, Assignee,
Upton, Assignee, v. unpaid corporation is original in a liable for instalments 1. of stock holder ; promise pay stock, express and contract between to them without of therefor, him, liability limiting agents and is void corporation its his assignee bankruptcy. the and its to creditors of as the both non-assessability agent corporation of of a as to Representations 2. value, stock, percentage no defence to beyond a certain of its constitute its against the of the stock to еnforce of entire holder an action .diligence subscribed, has use to ascertain the where he failed to due amount falsity representations. such of truth ” upon the certificate of stock does not cancel or non-assessable 3. word upon obligation pay the due the shares created impair the amount most, holding legal effect is a acceptance certificate. At of such ' or taxation after against from further assessment stipulation paid. per cеnt shall have been of one hundred entire cómpany, as to the non- Assuming of the stock, avoid the to be fraud would assessment discovering arises, discharged duty whether the defendant account, acgount fraud, repudiating that and not on the contract on Held, plaintiff entitled to not in issue. of another fraud preeise question. opinion of on that for of tbe States ’’to tbe Circuit Court United tbe Error of Iowa. District stated in tbe the court. facts are opinion
Tbe tbe error. plaintiff O. <7.Nourse for Mr. for tbe defendant error. WrigTit G. Georgе
Mr. Hunt delivered tbe tbe court. opinion Justice
Mr. in this case. tbe first Upon point, Two points presented — are as follows: the facts Great tbe Western Insurance. Tbe plaintiff, under tbe statute of tbe State- corporation organized Company, defendant, tbe Illinois, bis action brought against alleging a stockholder said tbe amount of be' was corporation dollars; cent per ten thousand been twenty only paid stock; also tbe bis alleging bankruptcy tbe the demand plaintiff assignee, appointment claimed, amount recover tbe of tbe seeking eight thou- Tbe dollars remaining unpaid. complaint sand averred stockholder, did become verbally agree tbe such, for and, intent become a certificate tbe accept with v. Teibilcock. same, thereof, he became amount bound full whereby pay certificates; Five follows: five per upon delivery months; months; cent in three five cent in six five per months; cent in nine and the residue called whenever *2 to the charter of the and the laws according, company, company of the of State Illinois. is, that was obtained subscription by
fraudulent company effeet that the defendant would for only responsible twenty him; afterwards., cent of the made that subscription by he executed his note for the cent, and promissory twenty per “ estate; secured the same of real and that there- by mortgage of the' and upon (in language answer), pursuant agree- ment, said contract was surrendered and delivered defendant;” and also in the answer, up language “that said note awas full and of all payment discharge obliga- tions and liabilities of all kinds personal whatsoever reason . by of his contract so made and the relations created the de-. by certificate, to him of said and said note was livery received in full payment.” answer,
In his third amended the defendant avers hé tljtat mentioned; subscribe stock on the conditions after made, contract was and before a certificate was delivered to him, note, and before was made executing agreement with of Overton behalf stated; effect before company n and he made and delivered thereupon the note and mortgage which was received Overton in full by discharge due the amount on his said subscription. The evidence contained in the bill of leaves exceptions . case as is averred in the substantially The defend- pleadings. ant offered evidence tending prove representations that to be twenty per only required paid; non-assessable, cent was and created no personal liability; Overton, exhibited a blank agent, form of certificate with ” “ the word non-assessable face, across printed being similar to that filled copy delivered subsequently up to de- fendant that, Overton.” It by before the appears, made his subscription, charter and copy by-laws Overton; been to him furnished that, returns made n Oct. .1875.] v. Tribilcock. tbe of Illinois tbe State tbe Auditor company for wbicb sub- subscribed capital
tbe amount of unpaid tbe note liable,” tbe amount of defendant’s scribers included. in this tbe pleadings case standing position
Tbe the court to tbe evidence, tbe requested charge jury plaintiff — follows: tbe or its contract between agents
2d. That stockholders, their in- unpaid tbe limiting as to creditors stock, is void stalments who tbe creditors of tbe represents to tbe rights action. find tbe that tbe from evidence defend- That if 3d. Tribilcock, became a stockholder of ant, the Great Western J. D. month of and that be August, Insurance Company bold stock until said after the to own continued insolvency 1873, that tbe February, any representations *3 at the time defendant became company any matter bis to tbe for cent per stockholder oii tbe stock of tbe stock, indorsement word tbe non- assessable,” immaterial, and constitute no wholly this action. to was refused. request
This is It tbe that if necessary tbe hardly argue proposition, a-bolder tbe became of shares of .of this in capital tbe ’110,000, amount of bad surance and but paid .thereof, its cent creditors were entitled рer require' twenty tbe of tbe cent of him eighty per remaining unpaid. payment certificate and of a of sharés in an bolding The in acceptance makes bolder tbe of a responsibilities liable corporation 245; Mead, Allen, v. 10 Brigham shareholder. City Buff. 336; 14 N. Y. v. R. R. Co. v. Douglass, Seymour Sturges, stock of a 26 id. 134. Tbe capital moneyed corporation fund, of its It is a for debts. trust fund tbe wbicb payment tbe trustees. It is a trust to be tbe directors are managed life, its for tbe benefit of shareholders during of its of its creditors the event dissolution. This benefit duty one, sacred cannot be Its violation will not is a disregarded. man, not be undertaken will just-minded per- be by any 48 v. Trtbilcock.
mitted The idea that the of a capital corpora .courts. tion is a to be into market for the foot-ball thrown purposes that its be elevated or speculation, value may depressed advance interests of its is a modern and .wicked managers, invention. unsound is the that the Equally opinion, obligation of’ a subscriber to or sur released pay subscriptiоn may rendered him the trustees of the This has company. been often but never attempted, paid successfully. capital in, in, to be is a fund which the trustees can promised paid are bound to call in what is squander give away. They to husband it when received. unpaid, Sawyer carefully 610; Brown, 297; 17 Tuckerman v. 33 N. Y. Wall. Hoag, Ogil Co., 22 vie v. Knox Ins. How. 3 Osgood Laytin, Keys, 463; Gross, Stat., How. Pr. Barb. 37 48 Ill. affg. 356, 16. p. § are of the that the
We opinion alleged representation of the stock held him was immaterial. non-assessability .quite Co., It so held v. Knox Ins. How. 380. Ogilviе .was if effect is full the evidence of the defendant Again: given this, and to his in this it shows more: respect, claim nothing He became a stockholder under a certificate signed by that he was entitled to one president hundred secretary each, $100 shares of the stock of five cent on re- per payable certificate; months; five cent three five ceipt per months; date; cent in five six in nine months from the time or manner of the of the residue not being face this in red specified. Upon certificate Averestamped “ $100,” ink the and in another figures stamped place word non-assessable.” This certificate he held until the in- was knoAvnto him. solvency make the remain effect of instrument was to legal *4 the demand of the cent ing per upon company. payable in the see no result word non-assess qualification We able,” to into and to form a it be assuming incorporated to of the contract. It is quite extravagant allege part as a waiver of the created this word obligation by operates to amount of a certificate acceptance holding pay .the n im- his shares. A to take shares of stock due upon promise ' ;rts a to results from them. same effect promise pay Tkibilcocf Lawrence, Palmer v. of a certificate. holding acceptance Mead, Allen, 245. C. 3 Sand. S. Brigham most, effect of word At the legal assessment to taxation or fiirther stipulation against liability one to have fulfilled his contract pay after the holder shall the times indiсated. in the manner and hundred cent at to We it the legal cannot give consequence destroying effect of certificate. defence, it
Still,
relied
as a
again,
noticed,
will
to
effect of the defendant’s
be
legal
certificate.
It is
alleged
agent repre-
subscription
Illinois,
sented,
the laws of the
State
by
the defendant
become a sub-
charter of this company,
might
$10,000; and, means of a certificate
to the amount of
scriber
exhibited,
be
be
him like
he would
liable
to
really
given
оf one-fifth of his said
and that
the extent
subscription,
only
their advice
this effect.
had given
good lawyers
error, mistake,
no
here
There was
misrepresentation
he
defendant made the
intended
fact. The
subscription
any
for; and,
he
make,
the certificate
had stipulated
and received
no
it is
be
there is
evidence
presumed
contrary,
but,
the defendant
stated:
advised
good lawyers
Leavitt v.
than
incurred
anticipated.
larger liability
Palmer,
He had days and then had them in his charter and by-laws was as fol- section of by-laws twenty-fifth possession. $10,000 stock, subscribe for who shall : lows person Every thereof, shall be constituted a director twenty pay continue such director so as he and shall long of this company, $1,0,000; but stock an amount such equal retain of shall of other $10,000 Kot be reckoned in the election shall directors.” one, authoriz- this section and
It was under succeeding where such branch the establishment ing plaqe made, defendant became thereof, that the transaction a director рresident might took place.
VOL. I. *5 n
50 Tbibilcock. v. if did not read the charter and That the defendant by-laws, were, for a man fact, fault. It will not do was his own to its contract, and, when called to respond to enter into a it, did not read it when that he signed obligations, say If this were con not what it contained. permitted, know on which written. tracts would not be worth paper they contractor must stand the words such is not the A But law. contract; and, not read what he he alone of his if he will signs, Jackson v. 12 Johns. for his omission. Croy, is responsible Watts, 48; 474; 427; 32 Me. Stubbs, 6 v. Bryant, Leis v. Farly 457; Scott, 427; v. 13 Ill. Ves. Slafyton v. 16 Coffing Taylor, 7; Kinnaid; 29 Beav. 490. 2 Mac. & G. v. Alvanly of the law will That a misunderstanding misrepresentation no contract, where there is not vitiate a misunderstanding' facts, is well settled. Clelland, is 33 Ill. expressed In Fish v. principle' of what the law will or will A these words: representation done one on which whom it is to be is party Hot permit if he does so it is his no made has folly, right rely; him from he cannot ask the law relieve consequences. can be tested or falsehood of such representation The truth It is an opinion regard attention.. by ordinary vigilance understood as such.” v. and is See Star always 303; 506; Hill, Jones, 4 B. & C. Rashall Bennett, Lewis v. 5 Ford, Law 2 Eq. v. Rep. within the equally
The law knowledge presumed all parties. from relieve himself a stockholder
That
liability by
may
as to the effect of his contract
he was misinformed
proof
be a disastrous
he made it would
doctrine.
when
defendant,
contract
who could
relieve
lawfully
That
stockholder, can
as a
from
accomplish
himself
n
to him
that it was fraudulently represented
result
proof
himself, would be
so relieve
indeed.
he could
strange
Co.,
A statement that company stated, as should and that their was have opinion good lawyers, the that a of the been clear defendant proof representation - law was a matter of opinion only.. as We think the erred in not was requested. charging judge these: The facts arises are As- whiсh the second upon point made to the that fraudulent had been suming cent, defendant his for-the per respecting non-liability eighty and that of a character that relieve him.from were might they he had dili- contract, his it was that not used proper objected his contract. in thé fraud and in repudiating gence discovering the took and defendant The place August, transaction “ he never himself evidence that suspected any gave liability tha¿t cent, said as to said representation per eighty fаlse, until the laws of Illinois agent him cent in the a demand for the made upon eighty per year him, he never that, as no claim been made had upon truth of as to such representations made any investigation 1871, the de- In after demand in until said 1873.” February, - on untenable of his fendant ask for rescission himto represented that it had been fraudulently ground Iowa; Bloomfield, held in note be retained and should his same, a salé of the been .violated representation ex- defendant is removal-thereof city Chicagо. his that this evidence attempted repudia- plicit emphatic ” “ toas tion was was represented based what wholly of the intended notes and mortgage. disposition court to plaintiff thereupon requested charge — as follows: he, defendant, That to surrender his stock to the if offered he had been of the but not officers upon company, Assignee,- IJpton, v. Tribilcock. induced to subscribe the stock fraudulent upon representation — cent, to his liability but another eighty ground, fo.r wit, had sold and that thе note company assigned mort- immaterial, then such offer is evidence of fraud gages,— to his for the in such misrepresentations suit, cannot be available and constitutes defence made in'this no in this action. induced, 1870, 12.' That if become defendant was August, a stockholder of the Great Insurance by rep- Western Company resentation of the cent of the company eighty per non-assessable, and that the stock was laws State of Illinois allowed the to make such contract with who took those- stock, then it to use dili- reasonable duty the truth of ascertain ascer- gence representations, tain what the law Illinois on that if he did not subject; time, do so a reasonable truth did not ascertain the within matter after said until then insolvency cannot, as to the creditors maintain *7 means of such The as court instructs mat- representations. you, law, of that the defendant could have ter ascertained the truth of such a few months from the representations within time they made, not the and that so is оn doing negligence part the defend- that bars -to the ant as assignee.” The defence from the arising alleged promissory representa- tions, that note and the 'of the defendant should mortgage Bloomfield, be removed but from should be retained in charge, of the branch of the at that frivolous, company place, abandoned on the trial. The practically case was sub- to on mitted the jury question solely arising upon cent. non-assessability eighty The rescission bn account of the as аttempted representation was, however, to non-removal and its violation unfortunately introduced into the ain manner that charge prejudiced right plaintiff. n The declined; above requests stated were but the judge That, creditors, follows: charged respects one, law requires who has been fraud into the drawn by pur- stock, chase of that he shall of no want guilty negligence fraud, and, care in reasonable discovering discovering it, promptly find from the repudiating purchase. If you ' Upton, Assigneе, v. evidence, that, within a few months after the stock receiving certificate, defendant, he had been deceived discovering in some who had obtained his cer- procured agent respects, to to such his stock gó Chicago, agent delivering tificate certificate, and instructed the to surrender the stock agent up cent; back the note for demand and if the twenty per went to and offered to the Chicago, accordingly respind to surrender the stock and which the refused; -and if find that the defendant never you a member of the afterwards in acquiesced company; being an action of for the September, replevin brought fraud; note, based on the afterwards he re- and.if dividend-; fused to receive and if this took all before place — instruct, that, I bankruptcy insolvency this is a sufficient the contract point repudiation in, defendant, become a stockholder enable another living State, to resist action for the of- the- ^eighty per cent, find defendant was induced becоme provided you fraud, as before and also further stockholder explained; circumstances, find, that defendant was not in view of all the the.fraud, and was negligent discovering guilty unreasonably of no want of reasonable diligence taking steps repudiate the transaction.”
To charge plaintiff excepted. set in this no doubt forth general principles charge If the as to the sound. alleged promissory representation . available, and of the note had been ques- non-removal submittеd to the would have been tion been charge jury, But that was not before them. well enough. submitted to them related to the repre-
questions exclusively should, not be required sentations *8 was the fraud before the and the That paid. jury; question involved in the seventh twelfth was this: Assum- requests to be a fraud the that which would avoid representation ing had the his in discharged discovering duty fraud, account on of that repudiating contract fraud, and not on account of another fraud not now in ? question think the was entitled the opiniоn plaintiff We jury him 'this The refused on that question. precise charge right. 54 Upton, v. Assignee, if, The after within few months receiv- charged, certificate, defendant, he had been ing discovering deceived in some sent an to surrender respects, agent Chicago note, his certificate and demand his if he never afterwards ac- in a member of the he if an quiesced being brought company, note, action of for the and if he replevin refused receive dividend, this was sufficient evidence of This repudiation. wаs well fraud which was not enough abandoned before but was to the fraud that jury, inapplicable entirely fraud, was before them. As to that the defendant testified had no existence until knowledge suspicion after demand made him 1873 assignee, that he made to the truth of the investigation never as to until after said representation liability demand .On this 1873. there was no point contradictory evidence. It have ruled should been as a of law. question Stevens, 19; Pettibone v. 15 Bottsford, Conn. Beers v. 13 id. made, submission should been if have not ruled as. a' on these and the only, requested; facts so, to do failure introduction of the facts tending on .show of another fraud, could not repudiation ground fail 'to confuse the and was error on the part jury, judge. Case-
Wright's Rep. 12-Eq. pp. 331-351) (Law held,.first, that, It was there under authority point. surrender and cancellation of shares English.act, did not bank; relieve holder from his to creditors of the and, second, that a surrender shares of his in No Wright vember, on the of an in the ground apprehended difficulty bank, affairs him tо a rescission of claim enable' his on account of a fraudulent representation which fraud then unknown prospectus Bank, him. v. E. Henderson British & B. 7 Royal Parris C. n. s. Harding, Oates B. Turquand, L. R. Cas. 325. Ap. laid down in the that one principle charge judge, claims
who to have been into drawn a fraudulent purchase fraud,, must exercise care and discover vigilance must be on the contract prompt repudiating *9 ' 55 Assignee, . v. Upton, such, Barton, fraud, is sound one. Thomas v. 48 N. Y. of 193. to become a member corporation sought Illinois, and obtain the benefits advan
of the State and to. If he is not held to be bound of its special tages privileges. connection, of this and all know consequences accept his to use care and to ascertain is bound attention he certainly his to make choice of it with retaining position, promptly it. To abandoning responsibilities, advantages 1870, to rest subscribe for stock in corporation August, 1873, never until the making any investigation year quietly time, and until after he stood until that which position him, made a demand falls bankruptcy is this the short of what the law Requires. Especially far very State; is-shown that he lived in an case when it adjoining to that in 1871 himself went he sent Chicago, city agent for an his note from that to obtain very company mortgage ' his It was misconduct in another respect. plain duty alleged have, and to ascertained position long to have inquired use did. must reasonable to as before' he A diligence party Brown, B. Mon. 553. facts.” v. 6 certain the Buford time, not asserted his where claim Mere party lapse has. relief; is a bar to is not reasonable Relief with given diligence, Wade, on their v. to those who 17 Ves. rights. sleep Beckford Tuberville, 2 Jones Ves. Jr. 11. ; v. 87-97 a man whose condition is attributable will assist Equity to that want of diligence may fairly expected only Neald, Duke 2 & from a reasonable v. Cl. person. of Beaufort F. 248-286. shareholders, to be who relieved
Parties claim fraud, must act with the utmost diligence Case, L. R. 2 Smith's Ch. Denton promptitude. Ap. Case, 2 MacNeil, L. R. Peel's L. R. Ch. Eq. Ap. reversed, must be a new hаd. trial judgment Mr.
Mr. Justice Miller whom concurred Chief (with and Mr. Justice Waite Justice Bradley) dissenting. ,of that, where an am of an I opinion, existing corpora- a- stock in it fraudu- tion additional procures Sanger Assignee. Upton, lent representations, fraud can be relied on as a defence to a suit for the instalments, suit is unpaid when brought by *10 and that corporation; if the stockholder has in reasonable time repudiated offered to rescind before the insolvency bankruptcy corporation, , valid аgainst assignee corporation. .
I also think there was evidence of such fraud in case,. and that of reasonable in ^he offer to diligence rescind was to the the Circuit Court. fairly put jury by
Sanger Assignee. Upton, Where, States, 1. in a corporation district court of adjudged the United bankrupt, assignee appointed, and an made that order the balance unpaid upon by paid stock held the several stockholders should be day, him given a certain that notice of the order publica shоuld be otherwise, newspaper tion in a payment and that in default of he should delinquent stockholder, collect the amount due appearing from each and it given required, that he had the notice and that the-defendant below had —order, payment pursuant Held, failed to make to the that the order was right bring-suit conclusive as to-the to enforce such payment. pronouncing bankruptcy jurisdiction The court the decree of had and author- ' order; ity necessary to make was not thаt the it stockholders should -' application have received actual notice of the contemplation In ther.efor. law, they proceedings were before court touching in all the the cor- poration they of which .Weremembers. competent unpaid S. It was for the court to order stock sub-.. (cid:127) directors, scriptions, majority under the instructions of a might, bankruptcy, stockholders the decree have done. before capital incorporated company apart 4. The stock of an pay- is a fund set for the ment itsof debts. might unpaid subscription 5. As the have sued a stockholder for his assignee succeeding rights at remedy. has all the same appearing 6. It that two certificates of stock in blank as to the stock- evidence error, plaintiff holder’s were issued to the name and delivered she .that paid payable, all that was then and received a divi- dend, placed upon list, and that her name was estopped the stock she denying ownership. from her to the Circuit Court of the United States for the
Error Northern District of Illinois.
This was an action of Clark assumpsit, W. brought Upton,