Goldstein v. Leitch

• Decision Date: 09 January 1923
• Docket Number: 57.
• Citation: 120 A. 369,142 Md. 184
• Parties: GOLDSTEIN v. LEITCH ET AL.
• Court: Maryland Court of Appeals

120 A. 369

142 Md. 184

GOLDSTEIN v. LEITCH ET AL.

No. 57.

Court of Appeals of Maryland

January 9, 1923

Appeal from Court of Common Pleas of Baltimore City; Henry Duffy Judge.

"To be officially reported."

Action by Stephen W. Leitch and others, receivers for the Druid Hill Lake Apartment Company, against Solomon Goldstein. Judgment for plaintiffs, and defendant appeals. Affirmed.

Richard M. Duvall, of Baltimore, for appellant.

Sidney A. Goodman and Jacob S. New, both of Baltimore (Julius H Wyman, of Baltimore, on the brief), for appellees.

THOMAS J.

This appeal was argued in connection with No. 82, Appeals of the October Term, 120 A. 372. In this case the appeal is from a judgment of the court of common pleas of Baltimore city recovered by the receivers for the Druid Hill Lake Apartment Company, incorporated, against the appellant, a stockholder of said company, for the balance due on his subscription to the stock of that company, while in No. 82 the appeal is by the receivers for said company from a decree of the circuit court of Baltimore city, restraining them from causing execution to be issued on said judgment and certain other judgments.

It appears from the records in the two appeals mentioned that in certain proceedings of Nathan J. Cohen and others against the Druid Hill Lake Apartment Company and others in the circuit court of Baltimore city, that court, on the 18th day of November, 1919, passed a decree rescinding the contracts of Wilbert A. Edwards and others of subscription to the stock of said company, on the ground that they had been obtained by the fraud and misrepresentations of the agents of the company, and appointing receivers to take charge of the property and collect the debts of the company, which was shown to be insolvent; that, as shown by an account stated in said equity cause, there remained in the hands of the receivers, after the payment of the costs and expenses and a mortgage indebtedness of the company, a balance of $564.48, and that the claims against the company, other than the claims of those whose contracts of subscription to the stock had been rescinded, amounted to $162.28, but that the sums paid by the subscribers to the stock, whose contracts had been rescinded, amount to several thousand dollars; that on the 19th of August, 1921, the circuit court of Baltimore city passed an order in said cause authorizing and directing the receivers to bring suit against certain of the stockholders, including the appellant in this case, for the balance due on their subscriptions.

At the trial of this case in the court below, the plaintiffs offered in evidence the two decrees or orders of the circuit court of Baltimore city referred to, and then produced evidence of the amount of the stock of the company subscribed to by the appellant, and the amount paid by him on account thereof; while the defendant, who was also one of the directors of the company, testified that he only subscribed to three shares of the stock, that he paid the sums of $250 and $218.75 to certain persons mentioned in the evidence in order to help them to purchase a lot or parcel of land on Whitelock street and Callow avenue, and that "no demand had been made on him by the receivers to put up the difference between the $468.75 (total amount paid by him) and the $1,000 (amount of stock subscribed to) till this suit." There was also offered in evidence an "abstract of the auditor's account" in said cause showing a balance of $564.48 in the hands of the receivers, a list of the creditors of the company to the amount of $162.28 and an agreement of counsel that they were the only creditors of the company, "except the creditors who became such by the cancellation of their subscriptions to" the stock of the company by the decree of the circuit court, passed on November 18, 1919.

At the conclusion of the testimony the defendant offered three prayers, the first of which was a demurrer to the evidence, and the third as follows:

"The defendant prays the court to instruct itself, sitting as a jury, that, if it finds from the evidence that the balance of $564.48 shown by the auditor's account offered in evidence is sufficient to pay or liquidate all the debts due and owing by the Druid Hill Lake Apartments Company, other than those who have become, or may become, such by decree of the court setting aside their subscriptions to the stock of the company because of misrepresentations or otherwise, then the plaintiffs are not entitled to recover, and the verdict of the court, sitting as a jury, must be for the defendant."

The defendant claims that there was error in the rejection of these two prayers, and has brought this appeal from the judgment entered against him.

The contentions of the appellant are (1) that, to entitle the plaintiffs to recover in this case, it was necessary for them to show that they made a demand upon the defendant for the amount of his unpaid subscription to the stock of the company before entering suit, and (2) that the stockholders whose subscriptions to the stock were rescinded by the court are not creditors of the insolvent company, and do not come within the provisions of section 66 of article 23 of volume 4 of the Code, which declares that--

"Every stockholder of every corporation of this state shall be liable for the benefit of the creditors of said corporation for the amount of his subscription to the stock of said corporation, less the amount which he shall already have paid thereon," etc.

In support of the first proposition the appellant cites section 61 of article 23 of the Code; Scarlett v. Academy of Music, 46 Md. 132; Morrison v. Dorsey, 48 Md. 461; Granite Roofing Co. v. Michael, 54 Md. 65; and Crawford v. Rohrer, 59 Md. 602. The notice provided for in section 61 relates, however, only to calls upon stockholders made by the directors of the corporation, and an examination of the cases cited will show that they do not hold that the requirements of that section are applicable to the collection of unpaid subscriptions of stockholders by receivers of an insolvent corporation under an order of a court of equity. On the contrary, in Crawford v. Rohrer, supra, where the suit was by a creditor, Judge Alvey said:

"It is well settled that a creditor may proceed in equity, upon an established or admitted claim, against a stockholder or stockholders, to enforce his or their liability to an insolvent

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