Chubb v. Upton
| Decision Date | 01 October 1877 |
| Citation | 95 U.S. 665,24 L.Ed. 523 |
| Parties | CHUBB v. UPTON |
| Court | U.S. Supreme Court |
ERROR to the Circuit Court of the United States for the Western District of Michigan.
Upton, as assignee in bankruptcy of the Great Western Insurance Company, a corporation organized under the laws of Illinois, brought this suit against Chubb. The company was originally chartered by the legislature in 1857.
In 1870, acting under the general laws of that State authorizing insurance companies to increase their capital stock, the directors and stockholders of the company took measures to increase its capital stock, and filed their papers for that purpose with the secretary of state, and the auditor of public accounts. By these proceedings the company undertook to increase its stock to $5,000,000.
The company, assuming that its stock had been increased, took subscriptions and issued certificates therefor, and immeditately commenced doing business, issuing policies, &c., upon the basis of such an increase. Dec. 31, 1870, it held out to the public that its subscribed stock was $1,188,000, of which $222,831 was paid in, and $965,169 subscribed, for which the subscribers or holders were liable. Chubb bacame a subscriber to this increased stock, and a certificate for fifty shares was issued to him on the twenty-fifth day of November, 1870.
The company had a branch office at Grand Rapids, where meetings of the stockholders residing there were held. Chubb was president of said branch, took part in those meetings, and also in a meeting of stockholders and directors held at Chicago in January, 1871. He paid money on his stock, and at one time, while holding it, gave another person a proxy to attend and vote at a stockholder's meeting at Chicago.
The company continued to do business, issue policies, &c., until it was put into bankruptcy, February, 1872. Upton was duly appointed assignee of the company on the eleventh day of April, 1872; and the court sitting in bankruptcy made an order upon the stockholders to pay, on or before Aug. 15, 1872, the balance due upon their stock. Notice was duly served upon them.
Upon the trial of the cause, Chubb objected to the production in evidence of the proceedings by which the company increased its stock, upon the ground of their alleged irregularities, and of informality in the papers filed in the public offices. The objections were overruled, and Chubb excepted to the ruling of the court.
He also objected to the introduction in evidence of papers filed in the public offices of Illinois by the company, showing that it was doing business, and that it had stock subscribed to a large amount. This objection was overruled, and an exception taken.
He further offered to prove that he was induced to purchase the stock by false representations that he would only be compelled to pay twenty per cent upon the amount subscribed; and that the holders of the stock in the original company never increased their stock or authorized any one to increase it, and never sold or transferred it to the new company. The court excluded the evidence, and he excepted.
The court substantially charged the jury, that upon the admitted facts, and upon further facts proved by the plaintiff by uncontradicted and documentary evidence, the plaintiff was entitled to recover, and that the matters offered in evidence by the defendant constituted no defence to the action. The defendant excepted to the instruction.
There was a judgment against Chubb, who thereupon removed the case here.
Mr. J. W. Champlin for the plaintiff in error.
Mr. M. J. Smiley, contra.
The numerous questions raised u on the trial of this action depend upon a few general principles which are not difficult of application.
It is settled by the decisions of the courts of the United States and by the decision of many of the State courts that one who contracts with an acting corporation cannot defend himself against a claim on such contract, in a suit by the corporation, by alleging the irregularity of its organization. This was settled more than a half a century since in the courts of the State of New York, and has recently been affirmed in this court. Dutchess Collar Manufacturing Co. v. Davis, 14 Johns. (N. Y.) 237; Sanger v. Upton, 91 U. S. 56; Upton v. Tribilcock, id. 45; Buffalo & Allegheny Railroad Co. v. Cary, 26 N. Y. 75; Bissell v. Michigan Southern Railroad Co., 22 id. 258.
The same principle applies to the case of a subscription to the capital stock in an organization which has attempted irregularly to create itself into a corporation, and has acted as such. Methodist Episcopal Church v. Pickett, 19 N. Y. 482; Upton v. Hamborn, 3 Biss. 417.
The rule applies to increasing the stock of a corporation when the question arises upon paying a subscription for stock forming a part of such increase. The duty and the necessity of performing the contract of subscription are the same as in the case of an original stockholder.
An assignee appointed under the bankrupt laws of the United States represents both the corporation and its creditors, and the defence of irregular...
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