Fairbanks v. Farwell

• Decision Date: 12 May 1892
• Citation: 30 N.E. 1056,141 Ill. 354
• Parties: FAIRBANKS et al. v. FARWELL et al. REMINGTON v. FAIRBANKS et al.
• Court: Illinois Supreme Court

141 Ill. 354

30 N.E. 1056

FAIRBANKS et al.

v.FARWELL et al.¹

REMINGTON

v.FAIRBANKS et al.

Supreme Court of Illinois.

May 12, 1892.

Appeal from appellate court, first district.

Bill by Samuel D. Ward, as receiver of the Republic Life Insurance Company, against John V. Farwell and others, to enforce defendants' alleged liability as stockholders of said company Josiah L. Fairbanks and Horace S. Tucker filed an intervening petition, praying to be substituted as complainants in the suit. A similar petition was filed by Hannah M. Remington. Both petitions were denied by the circuit court, and the orders denying them were affirmed by the appellate court. Petitioners appeal. Affirmed.

Hutchinson & Luff, for appellants.

George F. Westover, for appellees John V. Farwell and others.

Alex. Clark, for appellee C. V. Falley.

BAILEY, J.

On the 7th day of May, 1878, Samuel D. Ward, the receiver of the Republic Life Insurance Company, filed his bill in chancery in the circuit court of Cook county against John V. Farwell and numerous other defendants, alleging that said defendants were subscribers to the capital stock of said insurance company, and were liable to said company for certain unpaid portions of their respective subscriptions, and seeking to enforce such liability for the purpose of collecting a fund for the payment of the indebtedness of said company. Said bill alleged, among other things, in substance, that, the auditor of public accounts having filed in said court his petition against said company, under the act in relation to the dissolution of insurance companies, praying that said company be restrained from further prosecuting its insurance business, and that a receiver be appointed to take charge of its property and effects, the complainant was, on the 25th day of March, 1877, duly appointed receiver of said company, with power to take possession of its property and effects, and to institute any and all necessary proceedings for the recovery of the same. That at the same time said company was restrained from the further prosecution of its said business, from receiving and paying out money, and from transferring its property, except to said receivers. That said company was also ordered to convey and assign to said receiver all its estate, property, and assets of every nature, and that in obedience to said order said conveyance and assignment were made. Said bill further alleged that at a meeting of the stockholders of said company, held June 11, 1873, certain resolutions were adopted, instructing and empowering the directors of said company to receive from such stockholders as should so desire, and to cancel, as outstanding certificates of stock of said company upon which but 20 per cent. had been paid, and to issue in lieu thereof to each stockholder new full-paid certificates for the number of shares represented by the 20 per cent. already paid, and that the residue of the stock of said company should be held as unissued stock, subject to sale and issue, but only at par, and for cash, less expenses and commissions; that, in pursuance of said resolutions, a large number of the subscribers to the capital stock of said company surrendered their certificates of stock upon which but 20 per cent. had been paid, and received in lieu thereof certificates for one fifth of the number of shares so surrendered in full-paid stock; that most of the liabilities of said company were contracted before the passage of said resolutions, and before the surrender of said certificates of stock in pursuance thereof; that said receiver knew of no resources out of which he would be able to realize any money to pay the balance of the liabilities of said company over and above a small per cent. thereof, unless the same should be collected from said stockholders and subscribers to said capital stock. Said bill alleged and charged that said surrender of said certificates of stock, and the acceptance by said stockholders of certificates of full paid stock for 20 per cent. thereof, was illegal, fraudulent, and void as to the creditors of said company, and that the subscribers for said stock, as well as those to whom said certificates had been transferred by assignment, remained, notwithstanding such surrender, liable, respectively, for this debts of said company, to the full amount unpaid on their respective subscriptions. It is further alleged that on the 31st day of January, 1878, on petition of said receiver, an order was entered by said court in said suit of the auditor against said company, that said receiver be authorized and directed to institute such legal or equitable proceedings as he might be advised were necessary and proper against the subscribers to the stock and the stockholders of said company, or against such of them as he should be advised were or might be indebted to said company; and he was thereby directed to institute such proceedings against resident and nonresident subscribers or stockholders, or either of them, and proceed therein with convenient speed, for the purpose of collecting a fund sufficient to pay the debts and liabilities of said company. In pursuance of that order said bill was filed. The bill further alleges that on the 31st day of January, 1878, the Texas Banking & Insurance Company, a judgment creditor of said Republic Life Insurance Company, commenced an action at law in the superior court of Cook county against said John V. Farwell, alleging that said Farwell was a subscriber to the capital stock of said Republic Life Insurance Company, and that 80 per cent. of his subscription remained unpaid; and that he was therefore liable to said plaintiff under the following provision of section 6 of the act incorporating said Republic Life Insurance Company, viz.: ‘The real and personal preperty of each individual stockholder shall be held liable for any and all losses and liabilities of the company to the amount of stock subscribed or held by him, and not actually paid in. In all cases of losses exceeding the means of the corporation, each stockholder shall be held liable to the amount of unpaid stock held by him.’ Also that on the 19th day of February, 1878, Nannie H. Blair and others, simple contract creditors of said insurance company, commenced a suit at law for the collection of their debt in the circuit court of the United States for the northern district of Illinois against Franklin D. Gray, alleging that he was a subscriber to the capital stock of said company, and had paid only 20 per cent. of his subscription; that said suits were still pending, and, unless enjoined, would be prosecuted to judgment. Said bill prayed for an injunction restraining the prosecution of said suits at law, and that an account be taken of the liabilities of said Republic Life Insurance Company, and of the percentage necessary to be assessed on the capital stock of said company to pay the same; and that, upon the final hearing, a decree be entered declaring said resolution adopted at said stockholders' meeting of June 11, 1873, illegal, fraudulent, and void; and that the stockholders who had surrendered their certificates, and who were living, and the representatives of those who were dead, be placed on the same footing, and be held liable for assessments on said stock, to the same extent as they would have been if no surrender of said certificates of stock had been made. That said court make or cause to be made an assessment of not less than 60 per cent. upon all the stockholders, or their personal representatives, without regard to said surrender of said certificates of stock, or make, or cause to be made, such other assessment as should be warranted by the evidence and the law; and also a general prayer for relief.

The transcript of the record before us shows no proceedings in the matter of said bill, or whether the defendants therein named, or any of them, were served with process, or whether any process was issued prior to March 20, 1891, the date of filing the petition for a change or substitution of parties complainant, the denial of which is now assigned for error. On the day last named, Josiah L. Fairbanks and Horace S. Tucker filed in said cause a petition, on behalf of themselves and all other creditors of said Republic Life Insurance Company who should join therein and pay their proportion of the expenses of the suit, representing that on the 21st day of June, 1880, said petitioners recovered a judgment against said insurance company in the circuit court of Cook county for $714 and costs; that the petitioners thereupon sued out an execution thereon and delivered the same to the sheriff of Cook county to execute, and that said sheriff, on or about January 26, 1880, returned said execution wholly unsatisfied, and that said judgment is still wholly unpaid; that said petitioners adopt said bill filed by said receiver, and make the same a part of their petition, and they allege that the defendants to said bill are liable to pay said petitioners the amount due upon their said judgment; that the capital stock of said insurance company was 50,000 shares of $100 each; that the stockholders of said company are more than 1,200 in number; that many of them...