Bent v. Underdown

• Decision Date: 23 April 1901
• Docket Number: 19,106
• Citation: 60 N.E. 307,156 Ind. 516
• Parties: Bent, Receiver, v. Underdown et al
• Court: Indiana Supreme Court

60 N.E. 307

156 Ind. 516

Bent, Receiver, v. Underdown et al

No. 19,106

Supreme Court of Indiana

April 23, 1901

From the Wabash Circuit Court.

Affirmed.

Alvah Taylor and W. G. Sayre, for appellant.

C Cowgill, C. E. Cowgill and T. L. Stitt, for appellees.

OPINION

Monks, J.

The Wabash Soap and Chemical Company was organized under the manufacturing and mining acts, §§ 5051-5063 Burns 1894, §§ 3851-3862 R. S. 1881 and Horner 1897. It was provided in the articles of association that the capital stock should be $ 50,000, divided into 500 shares of $ 100 each. It was expressly provided in said articles that only fifteen per cent. of each share of the stock subscribed should be paid in by the stockholders, and that the provision of the articles of association limiting the liability of the stockholders to pay less than the par value of the stock subscribed should not be amended, modified, or repealed, except by the unanimous consent of all the stockholders. Each stockholder signed and acknowledged the articles of association, and set opposite his name the number of shares taken by him, and the amount in dollars of fifteen per cent. of the par value of said shares. Said articles of association were filed and recorded in the office of the recorder of Wabash county, and a duplicate thereof in the office of the Secretary of State at Indianapolis, as required by law. § 5051 Burns 1894 § 3851 Horner 1897. Each stockholder paid fifteen per cent. of the par value of the stock subscribed by him as provided in the articles of association. The corporation became indebted, and at the suit of one of its creditors a receiver was appointed, who brought this action against all the stockholders, to recover the remaining eighty-five per cent. of the stock subscribed, alleging that said corporation is indebted more than $ 20,000 for borrowed money, and that there were no assets of said corporation with which to pay the same, except the unpaid subscription for stock, and that the "corporation is insolvent except for said unpaid subscriptions of stock." Appellees' demurrer to the complaint for want of facts was sustained, and appellant refusing to plead further judgment was rendered in favor of appellees. This ruling of the court is assigned for error.

An agreement between a corporation and its stockholders, that only a certain per cent. of the stock subscribed by each stockholder shall be paid in, is binding on the corporation, and the corporation can collect the per cent. specified, and no more. But if such corporation becomes insolvent, such unpaid stock subscriptions are subject to be made assets for the benefit of all creditors who gave credit to the corporation on the faith of its capital stock being paid in full without any knowledge of such agreement. Clark on Corp. § 111, pp. 302, 305, 368-370, 372-375, 383, 384, 560-562; 1 Cook on Stock and Stockholders (3rd ed.), p. 49; Scovill v. Thayer, 105 U.S. 143, 26 L.Ed. 968.

Where, however, the creditor deals with the corporation with the knowledge of the agreement that only a certain per cent. of the par value of each share of stock subscribed is to be paid, he relies only on that amount, and has no equitable right to insist on the collection of any greater sum from the stockholders than the corporation itself could claim as a part of its assets. 2 Morawetz on Corp. § 829, 831; Clark on Corp., pp. 369, 383, 384; 1 Beach on Priv. Corp. § 119; 23 Am. & Eng. Ency. of Law, 863; 2 Thompson on Corp., § 1630; First Nat. Bank v. Gustin, etc., Co., 42 Minn. 327, 44 N.W. 198, 6 L. R. A. 676, 679, 680; Hospes v. Northwestern, etc., Co., 48 Minn. 174, 31 Am. St. 637, 15 L. R. A. 470, 50 N.W. 1117; Coit v. North Carolina, etc., Co., 14 F. 12; Kenton, etc., Co. v. McAlpin, 5 F. 737; Adamant, etc., Co. v. Wallace, 16 Wash. 614, 48 P. 415; Callanan v. Windsor, 78 Iowa 193, 42 N.W. 652; State Trust Co. v. Turner (Iowa), 111 Iowa 664, 82 N.W. 1029; Walburn v. Chenault, 43 Kan. 352, 23 P. 657; Young v. Erie Iron Co., 65 Mich. 111, 128, 31 N.W. 814; Carp v. Chipley, 73 Mo.App. 22, 36; Ditch Co. v. Moffitt, 58 Neb. 642, 79 N.W. 560, 45 L. R. A. 647, 76 Am. St. 122, note on pp. 134, 135.

It is said in Morawetz on Corp. (2nd ed.), § 831: "It is clear, however, that creditors can have no equitable right against shareholders to insist on the contribution of a greater amount of actual capital than the charter provides that they shall contribute, although this may not equal the full amount of the company's nominal capital....