Germantown Passenger Railway Co. v. Fitler

• Decision Date: 14 January 1869
• Citation: 60 Pa. 124
• Parties: The Germantown Passenger Railway Company v. Fitler.
• Court: Pennsylvania Supreme Court

60 Pa. 124

The Germantown Passenger Railway Company v. Fitler.

Supreme Court of Pennsylvania.

January 14, 1869

January 5, 1869

1. A power given to a corporation to forfeit stock must be strictly pursued, and if any restrictions have been disregarded the forfeiture will be declared invalid.

2. Equity does not relieve against a forfeiture of stock, if regular.

3. A stockholder being a member of a corporation must be presumed to know the terms of his subscription.

4. At the end of the time after notice allowed by the charter to pay instalments on stock, the power to forfeit the stock was perfect.

5. The entire capital of a corporation is a trust fund for payment of its debts.

6. The unpaid subscriptions are part of the assets of a corporation and a general assignment for the benefit of creditors passes them to the assignee.

7. The assignee can proceed only in the name of the corporation, and must show that the provisions of the charter have been pursued.

8. A chancellor will compel directors to call for subscriptions when his aid is invoked by creditors or their representative.

9. When a company ceases to keep up its organization, and abandons all action under its charter, the intervention of equity for creditors becomes indispensable.

10. A corporation is not necessarily dissolved by its insolvency nor by a writ of sequestration. Its franchises, not capable of assignment, must be exercised by it but in subserviency to its legal and equitable obligations.

11. When the debts of a corporation require it, it is the duty of the managers to call for unpaid subscriptions. Their discretion relates only to the time and manner of the making the payments.

12. As a forfeiture of stock extinguishes all the rights and liabilities of the stockholder, the creditors can object to it, and invoke the aid of equity to prevent it or set it aside.

13. The right to make calls is a franchise vested in the managers whose lawful exercise can be objected to only by creditors or their representative.

14. If on the ground of notice of an assignment for benefit of creditors, stockholders object to pay the treasurer, they should make a tender to the assignee, and if he will not accept they have an equity to be relieved from forfeiture.

15. Nothing will call a court of equity into activity but conscience, good faith and reasonable dlligence. When these are wanting the court is passive and does nothing.

Before THOMPSON, C. J., READ, AGNEW and SHARSWOOD, JJ.

WILLIAMS J., at Nisi Prius.

Appeal from the Court of Common Pleas of Philadelphia: In Equity: No. 256, to January Term 1868.

The proceedings in the court below were commenced, November 12th 1863, by a bill filed by Alfred Fitler against The Germantown Passenger Railway Company. The object of the bill was to compel the defendants to issue to the plaintiff certificates for 250 shares of their stock, for which he had originally subscribed, and which the directors of the company had declared forfeited for non-payment of instalments.

The company was incorporated by virtue of an Act of Assembly of the 21st of April 1858, with a capital of $200,000, divided into shares of $50 each. The plaintiff became a subscriber for 250 shares, and paid the first instalment of $5 per share. The act provided " That if any stockholder shall omit for the space of six months to pay any instalment which may be called for, the managers of the company may either declare the shares of stock on which the instalments are unpaid as aforesaid to be forfeited, or may at their option bring suit to recover the said instalments," & c. By a supplement of March 22d 1859, the company was authorized to increase their stock to 10,000 shares. The company having become embarrassed, they assigned all their property to Lewis Seal, for the benefit of creditors, on the 22d of December 1859. About the beginning of 1860 Charles E. Lex, Esq., was substituted for Mr. Seal as trustee or assignee. About the same time he was appointed assignee of Joseph Singerly, the principal creditor of the company. Except for a short time after his appointment, Mr. Lex did not take any active part in relation to the railway, which had been completed and was in use in carrying passengers. It was committed by him mainly to the direction of the managers. He stated in his testimony that when he found they were going on well, he took the responsibility of letting Mr. Singerly and his road work themselves out of their difficulties. At the time of the assignment, almost the only debt of the company was due to Singerly for the construction of the road. His debt, by a settlement made with the company on the 9th of August 1860 appeared to he $296.860.98. Mr. Singerly was the holder of a large amount of stock on which instalments were due. At the time his account was settled, the company was credited on his indebtedness to the amount of the instalments due, and he was paid $175,000 in the bonds of the company, being at the rate of 70 per cent. on the face of the bonds. This was with his consent. On the same day the managers, for the purpose of meeting the payments of the company, resolved to call in the second instalment of $5 per share on the stock, payable on the 1st of October then next. This instalment was paid by the plaintiff. On the 3d of October it was resolved that another instalment of $5 per share be called, payable on the 5th of November then next. Notice of the calls for instalments were published in " The Press" and " The Inquirer," the call for the third instalment having been published from the 5th of October to 5th of November 1860. It appeared that at the time of the calls the stock had no market value, but afterwards advanced greatly in value. The assignee, Mr. Lex, gave no directions for calling in the instalments, nor did he call in any himself. The complainant called on Mr. Lex about paying the third instalment. He showed Mr. Lex the advertisement, and asked him if he assented to it, to which Mr. Lex replied " No; " and after some further conversation the complainant said, " Then I will not make any more payments." On the 16th of November 1860 Mr. Lex addressed this note to the treasurer of the company:--

" I received yesterday, accounts for September and October. I notice an item for instalment--with that I have nothing to do, and it should not come into my account.

I cannot recognise, as assignee, the calling in of any instalment on the stock, or agree to pay them on Mr. Joseph Singerly's stock."

On the 3d of July 1861 the managers of the railway passed the following resolution:--

" That each and every share or shares of stock in this company on which any instalment or part of an instalment is unpaid at this date, and has so remained unpaid and in arrear for the past six months, together with all the right, title and interest of each and every delinquent stockholder and stockholders therein, be and the same is hereby forfeited to the use of the company."

On the 26th of December 1865 the managers passed the following resolution:--

" Whereas, by a resolution passed by the board of managers of the Germantown Passenger Railroad Company, July 3d 1861, all the shares of stock standing upon the books of this company, upon which the second and third instalments had not been paid, and also that upon which the second instalment had been paid, but the third instalment had not been paid, were declared forfeited, and by the forfeiture the following shares of stock standing on the books of this company, to the credit of the parties herein named, become the property of this company, to wit, Alfred Fitler, 250 shares," with a large number of others, naming them.

The pleadings and proofs showed the foregoing facts:--

The plaintiff in his bill further averred that on the 23d of October 1863 he tendered to Mr. Lex $1250 for the third instalment; that Mr. Lex was willing to accept the money, but refused to accept it as an instalment on the stock; that he made a similar tender to the treasurer of the company, which was also refused. He also averred that the managers did not forfeit or intend to forfeit the stock of Singerly, who owned more than half of the shares and owed instalments upon them.

The defendants, in answer to these allegations, averred that the offer to pay was made to Mr. Lex on condition that he would allow a transfer of the stock; that Mr. Lex said he had not power over the transfer of the stock, but if the defendant would leave the money he would make application to the board of managers to allow the transfer; that the offer to pay the treasurer was on the same condition; he replied he was willing to receive the payment, but could not comply with the condition; the defendant then refused to pay the money. They also denied that they had omitted forfeiting any stock upon which instalments were due, and averred that no instalments were due on Singerly's stock.

The prayers of the bill were:--

" That it may be decreed that the acts and doings of the said defendants shall be declared void and of no effect, so far as they relate to the said two hundred and fifty shares of stock in said company, heretofore standing in the name of the complainant, upon his compliance with such terms as the said court may deem just and equitable in the premises.

2. That said defendants and its officers be enjoined from disposing said stock to any person or persons other than as said complainant may order and direct by transfer upon the books of the company.

3. That said defendants be enjoined from taking and applying the said stocks to the use of the said company, or any other person than this complainant, or to such person to whom he may assign the same.

4. That the said defendants and the officers of said company be...