Chetlain v. the Republic Life Ins. Co.

• Decision Date: 30 September 1877
• Citation: 1877 WL 9698,86 Ill. 220
• Parties: AUGUSTUS L. CHETLAIN, Administrator,v.THE REPUBLIC LIFE INSURANCE COMPANY et al.
• Court: Illinois Supreme Court

86 Ill. 220

1877 WL 9698 (Ill.)

AUGUSTUS L. CHETLAIN, Administrator,

v.THE REPUBLIC LIFE INSURANCE COMPANY et al.

Supreme Court of Illinois.

September Term, 1877.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Cook County; the Hon. E. S. WILLIAMS, Judge, presiding.

Messrs. SMALL & MOORE, for the appellant.

Mr. JOHN I. BENNETT and Mr. F. H. KALES, for the appellee.

Mr. JUSTICE WALKER delivered the opinion of the Court:

The Republic Life Insurance Company was incorporated by an act of the General Assembly of this State, and became organized, and entered upon the business for which it was created. Appellant's intestate became a subscriber for 500 shares of $100 each of its capital stock; and as a payment of twenty per cent thereon the company permitted him to execute his notes therefor, drawing interest, payable five years after date, and he executed a deed of trust on property in the city to secure the payment of principal and interest. Walker, in his life-time, paid $400 of interest on this indebtedness. Having died intestate, appellant was duly appointed the administrator of his estate, and, the money not having been paid, appellee filed a bill against the administrator, widow, and heirs of Walker, to foreclose the deed of trust, and subject the trust property to sale for the payment of this indebtedness.

Answers and a cross-bill were filed, and a trial was had on the original bill, answers, replications, exhibits, and proofs. The court found that there was due on the notes, for principal and interest, the sum of $14,357.30, and ordered its payment in ten days, and, in default thereof, that the premises be sold, subject to redemption, and the proceeds of the sale be applied to discharge the decree, and, if not sufficient, that the unpaid balance be paid in due course of administration. From that decree the administrator appeals.

In defense it is urged that the company misappropriated their funds by purchasing the stock, etc., of the National Life Insurance Company; in purchasing a building at a price beyond the wants and means of the company, which impaired the value of Walker's stock; and because the company reduced the amount of its capital stock. This is a statement of the grounds relied on as a defense.

That there was a sufficient consideration to support these notes at law there would not seem to be the slightest doubt. And the question is presented whether the consideration has failed, or whether for any reason it has become inequitable to enforce the payment of this money.

The mere mismanagement of the affairs of a corporation has never been held to release stockholders or others from their obligations to the company. When Walker purchased and became the owner of this stock--whether paid for in money, notes, or otherwise--he became entitled to all the privileges and benefits of a stockholder, and liable to all the burdens the relation imposes. Had there been dividends, he would have been entitled to share in them. Had there been losses imposing liabilities on stockholders, he would have been required to respond to them.

The stockholders are the owners of the franchise, property, and assets of the company which remain after its debts and liabilities are discharged. For convenience in the transaction of business, and to carry out the purposes of the organization, the charters of such bodies usually authorize the stockholders to choose a certain number from among themselves, as directors, who are empowered to transact its business and exercise its franchises. And in doing so they are agents or trustees for the stockholders, and the latter are bound by their acts within the scope of their authority. When their acts are outside of, and beyond, the scope of their authority, the stockholders are not bound by such...