Anderson-Dulin-Varnell Co. v. Williams

• Decision Date: 10 November 1923
• Citation: 255 S.W. 597,148 Tenn. 388
• Parties: ANDERSON-DULIN-VARNELL CO. v. WILLIAMS ET AL.
• Court: Tennessee Supreme Court

255 S.W. 597

148 Tenn. 388

ANDERSON-DULIN-VARNELL CO. v. WILLIAMS ET AL.

Supreme Court of Tennessee.

November 10, 1923

Appeal from Chancery Court, Knox County; Charles Hays Brown Chancellor.

Suit by the Anderson-Dulin-Varnell Company, creditors of the Whittle Springs Company, against J. W. Williams and other directors of the corporation as individuals. From a decree in favor of plaintiffs, and an order overruling a demurrer, defendants appeal. Reversed.

CHAMBLISS J.

In order to meet the growing demands of modern business, the Legislature passed, in 1875, a general act to provide for the organization of corporations. Acts 1875, c. 142. Sections 1 to 4, inclusive, provided for the organization of charitable religious, and other general welfare, or not for profit corporations. Section 5 provides:

"That the general powers of all corporations chartered for purposes of individual profit, the provisions of and restrictions in said corporations shall be as follows,"

and proceeds to set out the general powers, subject to expressed limitations, to be granted to all corporations of this class which may obtain charters in the manner prescribed in section 26 of the act. The first paragraph of this latter section reads as follows:

"Be it further enacted, that any five or more persons, over the age of twenty-one, desiring to form corporations for any of the foregoing purposes, shall copy the form of charter aforesaid adapted to the purpose, filling the necessary blanks, and append to the same an application in these words: 'We, the undersigned, apply to the state of Tennessee, by virtue of the laws of the land, for a charter of incorporation, for the purposes and with the powers declared in the foregoing instrument. Witness our hands, the ______ day of ______, 18--' (to be signed by the applicants)."

The section then provides that when this instrument has been duly registered and a certificate given by the Secretary of State under the great seal of the state the formation of the company as a body politic shall be complete, and that its validity shall not be questioned in any collateral proceeding.

It will be observed that section 26, as above quoted, expressly and definitely provides that the persons "desiring to form corporations for any of the foregoing purposes shall copy the form of charter adapted to the purpose, filling the necessary blanks," etc.

Now in preceding sections, 6 to 25 included (excepting sections 19 and 20, which relate to amendments and publication of lists by the Secretary of State), forms had been set forth for the use of persons desiring to form corporations for any one or more of the various purposes indicated. Section 18 reads as follows:

"Be it further enacted, that the form of a charter for a hotel in a city or town, or at a mineral spring, or other watering place, shall be as follows:

'State of Tennessee--Charter of Incorporation.

Be it known, that (here insert the names of five or more persons above the age of twenty-one years) are hereby constituted a body politic and corporate, by the name and style of (here insert the name of the corporation), for the purpose of erecting, furnishing and keeping a hotel for the entertainment of guests and invalids, at or near a mineral spring in the county of ______, or for the purpose of erecting or furnishing a Hotel in a town or city' (here describe the county and locality of the tract of land or lot upon which the hotel is already situated or to be built, and also the metes and bounds of the tract of land belonging to the corporation)."

The general powers, etc., are contained in section 5.

Then follow certain specific provisions applicable to this particular form of charter, for hotels, just as other specific provisions are contained in other sections providing forms of charters for other purposes.

Since 1875, in response to demands as they arose, from time to time, by amendments to this General Act the Legislature has provided forms for additional charters, always restricted to purposes specifically defined and always expressly providing that the form of charter for the purpose designated "shall be as follows," thus apparently intentionally limiting the charter in every case to the particular form described for the specific purpose.

However, with the evident purpose of eliminating the necessity of repeated amendments to the act of 1875, in 1903 the Legislature passed an act, being chapter 474, the opening paragraph reading as follows:

"Be it enacted by the General Assembly of the state of Tennessee, that all private corporations, excepting those now specifically provided for by existing statutes, for the transaction of any lawful business, or to promote or conduct any legitimate object or purpose for individual profit, may be formed and a charter obtained in the following manner. Any five or more persons over the age of twenty-one years, desiring to form such a corporation shall copy the following form of charter:

State of Tennessee. Charter of Corporation. Be it known, that by virtue of the general laws of the land (here insert the names of the incorporators), are hereby constituted a body politic and corporate, by the name and style of (here insert the name of the corporation), for the purpose of (here state specifically the purposes of the corporation, and amount of capital stock)."

Then follows, first, section 5 of the act of 1875, in harmony with the forms for the various purposes provided for by that act and its amendments, and, next, as in many other charter forms, certain specific provisions.

With this brief preliminary review we come now directly to consider the questions presented on this appeal.

The bill in this case alleges that--

"The Whittle Springs Company was incorporated under the laws of the state of Tennessee on or about July 8, 1916, with a capital stock of $80,000, and that on or about October 3, 1917, the capital stock of said company was increased to $150,000. The said company was organized for the purpose of erecting a hotel at Whittle Springs in the suburbs of Knoxville, and said hotel was actually, in fact, erected and put in operation."

It then charges that the charter of Whittle Springs Company contains a provision to this effect, namely:

"If the indebtedness of said company shall at any time exceed the capital stock paid in, the directors assenting thereto shall be individually liable to the creditors for said excess."

Predicating liability upon this charter provision, the bill then seeks to recover from defendants as directors certain large sums of indebtedness, the corporation being insolvent, alleged to have been assented to by them, in excess of...