3 Ga. App. 73 | Ga. Ct. App. | 1907
Porter was appointed receiver of the Farmers’ Trading Company, by the superior court of Colquitt- county. On investigation, he found that the corporation had never been legally organized, nor the minimum amount of capital stock subscribed for, as provided by the charter and as required by the law under which the charter was granted. He found, while the minimum capital stock of the corporation was fixed by the charter at-$10,000, divided into shares of the par value of $10 each, that as a matter of fact there had been subscribed and paid for only 152 1/2 shares, amounting to $1,525; that the stockholders who-had subscribed and paid for this number of shares had organized the corporation under its corporate name, and had transacted the business of the corporation before the minimum capital stock had been subscribed for. The receiver of the corporation, after taking possession of its assets and selling them under the direction of the court of his appointment, and paying out to the creditors of the corporation the net amount realized by him from the sale, found that there was still a balance due by the corporation to its creditors, amounting to $2,645.31, principal. On considering these facts, the judge of the superior court directed the receiver to file suit against the stockholders and organizers of the corpora-, tion, for the purpose of collecting a sufficient amount of the minimum capital stock which had not been subscribed for, to pay in full this amount of indebtedness of the corporation. Certain, specific defects in the petition, as pointed out by special demurrers, were met by appropriate amendments; and a general demurrer was filed to the petition, as amended, which being overruled, the defendants filed a direct bill of exceptions to that judgment. The plaintiff demurred to the answer of the defendants, and especially to paragraph 3, on the ground that the avermentstherein set out constituted no defense; the court overruled this demurrer, and the plaintiff’s cross-bill of exceptions assigns error-on this ruling. We will first consider the case as made by the-demurrer to the allegations of the petition.
The suit by the receiver against the stockholders and organizers; of the corporation is brought under the provisions of section 1856-of the Civil Code, which declares that “Persons- who organize a company and transact business in its name before the minimum capital stock has been subscribed for are liable to creditors to
It is insisted that the defendants, as stockholders, are not liable to the creditors of the corporation, because these creditors contracted with the corporation as a corporation either de jure or de facto, and therefore can not deny its corporate existence. Credit was given to the corporation, and not to the members of the corporation individually or as partners. In support of this position, the ease of Planters and Miners Bank v. Padgett, 69 Ga. 159, is. relied upon. We do not think that case is analogous to the one now under consideration. There the plaintiff had contracted with
The cross-bill assigns error upon the judgment of the court-overruling the plaintiff’s demurrer to defendant’s answer. As a special plea in avoidance of liability, the defendants say, that “each of said defendants sold out their stock before the date of the debts, and transferred their certificates of stock in said corporation back to the corporation, and the same was done and shown on their stock-book.” This plea was demurred to on the ground that “the defendants nor either of them, in law or equity, had any right to sell their stock to the corporation, thereby reducing the minimum capital stock not only from the amount subscribed, but from the amount advertised.” The effect of the judgment of affirmance on the main bill of exceptions is to leave the-ease to be tried in the court below; and the question raised by the cross-bill is as to a material matter of defense, and a decision by this court on this question is properly invoked. Holmes v. Langston, 110 Ga. 862 (7) (36 S. E. 251); Thornton v. Travelers Ins. Co., 116 Ga. 121 (42 S. E. 287, 94 Am. St. R. 99); Tucker v. Ball, 68 Ga. 814. Under the statutory law of this State, all persons who deal with corporations created under the laws of this State, have at least four guaranties: (1) That no corporation shall commence to exercise the privileges conferred by the charter until ten per cent, of the capital stock is paid in. (2) That no corporation can be organized and business transacted in its name before the minimum capital stock has been subscribed for. (3) That the full amount of the stock subscribed and not paid in constitutes a fund for the payment of corporate debts, (4) That all who organize a company and transact business in its name before the minimum capital stock has been subscribed for are liable to creditors, to make good the minimum capital stock with interest. Violations of the first two legal inhibitions, always and necessarily, create the two consequent grounds of personal liability for corporate indebtedness. Not only are those who deal as creditors with corporations protected by these express statutory provisions^ but they have the further assurance in the well-settled principle that the capital stock of a corporation, whether paid or unpaid, is a trust fund for the benefit of creditors; and in this State, under the provisions of the Civil Code, §1856, even when the stock sub
The plea in this case, made by all the stockholders who are sued for a violation of section 1856 of the Civil Code, is that they had sold their stock in the corporation back to the corporation itself before the debts were incurred by the corporation. This seems to'be a scheme not only for reducing the capital stock, but for destroying it altogether. All the stockholders are sued; all have sold their shares to the corporation. Who are the purchasers, and what becomes of the corporation when there are no longer any stockholders? It is a “mere shadow without substance.” Whose money paid for the stock? Eeduced to its last analysis, the plea amounts simpty to this declaration: “Before we created the debts as a corporation, we sold out, as stockholders in the corporation, to ourselves as the corporation; and therefore we are not liable for the debts of the corporation incurred after the sale.” Besides, under the allegations of the petition, which were admitted by the demurrer, this corporation never existed except in name. Its minimum capital stock had never been subscribed for. These de
Judgment, on the main hill of exceptions, affirmed; on the cross-Jill, reversed.