Harris v. Gateway Land Co.

• Decision Date: 16 January 1901
• Citation: 128 Ala. 652,29 So. 611
• Parties: HARRIS ET AL. v. GATEWAY LAND CO. ET AL.
• Court: Alabama Supreme Court

29 So. 611

128 Ala. 652

HARRIS ET AL. v. GATEWAY LAND CO. ET AL.

Supreme Court of Alabama

January 16, 1901

Appeal from chancery court, Morgan county; William H. Simpson Judge.

Bill by C. C. Harris and John H. Sheffet, as trustees, against the Gateway Land Company and others. Decree for defendants, and complainants appeal. Affirmed.

It was averred in the bill that on October 1, 1887, E. C. Gordon Milton Humes and George E. Crane sold and conveyed to the Gateway Land Company, certain lands specifically described in the complaint. That the said Gateway Land Company executed to the complainants its promissory notes for the deferred payments due for the purchase money of said lands and to secure the payment of said notes executed a deed of trust to the complainants as trustees. That said notes were not paid at maturity, and on September 19, 1895, complainants as said trustees brought suit in the circuit court of Morgan county against the Gateway Land Company upon said note, and in 1895 recovered a judgment for $53,533, besides the costs of suit. That execution was issued on this judgment, was duly returned by the sheriff "No property found." On September 29, 1894, complainants, as the trustees named in said deed of trust, filed their bill to foreclose said deed of trust, and in August, 1895, a decree was rendered foreclosing the same that the lands conveyed therein were sold under this decree of sale, were reported to and duly confirmed by the court, and a money decree was rendered for the balance due with interest; and that said decree remains due and unpaid. It was further averred in the bill that the Gateway Land Company was duly organized under the general incorporation laws of the state, and entered upon and carried on the business for which it was incorporated, and at the time of the filing of the bill was an existing corporation for all the purposes prescribed by the law of its incorporation. That the capital stock of said company was $60,000, divided into 600 shares of the par value of $100, and largely more than 50 per cent. of the stock was subscribed for in writing and accepted as provided for by the statutes of the state. That the subscriptions to the capital stock of said company were payable on the call of the board of directors, and the directors, in the exercise of their duty, made the assessment of $33 1/3 per share against the subscribers, but they failed to make any other or further assessments and to make calls for the payment of the same.

It was further averred in the bill that the lands sold under the decree of foreclosure were substantially all of the property owned by the defendant, except the subscriptions for stock owing to said company by the subscribers thereof to its stock, and that said company was insolvent.

The prayer of the bill was that "a receiver be appointed to take charge of the assets of said company and to proceed at law or in equity, and by attachment or otherwise, as he may be advised, to collect said unpaid subscriptions from said above-named parties, and that he collect and hold said assets under the orders and directions of this court. Your orators further pray that this court make all necessary calls on said subscribers for said unpaid subscriptions, and to this end make all necessary orders and decrees for enforcing the payment of said unpaid subscriptions. And your orators further pray that said unpaid subscriptions due from each of said subscribers be condemned to the payment and satisfaction of your orator's said debt, and they pray for such other, further and different relief as the facts and equities of the case may require."

After the demurrers to the bill as originally filed were sustained, it was amended. The substance of this amendment is sufficiently shown in the opinion.

E. C. Payne made a motion to dismiss the bill as amended for the want of equity, and also demurred thereto upon many grounds, among which were the following: (1) The complainants have a plain, adequate and complete remedy at law. (2) No necessity for invoking the jurisdiction of a court of equity is found. (3) The facts as averred in the bill did not give the complainants the right to the relief prayed for. (4) The averments of said bill show that the cause of action of the complainants is barred by the statute of limitations of six years.

On the submission of the cause upon the motion to dismiss and the demurrers filed by the defendant Payne, the court rendered a decree sustaining each of them. From this decree the complainants appeal, and assign the rendition thereof as error.

Harris & Eyster and Humes, Sheffey & Speake, for appellants.

E. W. Godbey, for appellees.

HARALSON J.

1. The Code (section 823) provides, that "a judgment creditor of a corporation having an execution returned 'No property found,' may, by bill in equity, subject to the payment of his judgment, the unpaid subscription of one or more stockholders in such corporation, without joining the other stockholders, and without regard to whether the corporation has called for such subscription, or could maintain suit therefor against the stockholder." The act of which this section is a codification was approved 18th February, 1895.

This case, without reference to special defenses set up against its equity, is similar in general respects to other cases where bills of this character were upheld against demurrer which questioned their equity. Hall v. Henderson, 114 Ala. 601, 21 So. 1020; Roman v. Dimmick, 115 Ala. 233, 22 So. 109.

2. Although the grounds of demurrer are multiplied at very great length, as to the legal organization of the company, yet when reduced to the real defense intended to be set up, in this aspect of the case, there are but two grounds, out of which the others grow. First, it is seriously insisted, that the charter of this company was irregularly and illegally procured, and for that reason, the subscriptions of stock, if made, are not binding on the stockholders, and cannot be condemned to the payment of complainants' debt against the corporation. This question, however, is not an open one in this state, and ought to be regarded as finally settled.

In Bibb v. Hall, 101 Ala. 79, 96, 14 So. 98, we quoted and approved what had theretofore been so correctly and aptly said in the case of Central Agricultural & Mechanical Ass'n v. Alabama Gold Life Ins. Co., 70 Ala. 120 that "when an association of persons is found in the exercise and user of corporate franchises, under color of legal organization, their existence as a corporation cannot be inquired into collaterally. In a direct proceeding by the government they may be ousted. *** The corporation exists de facto, subject to all the liabilities, duties and responsibilities of a corporation de jure. It would produce only disorder and confusion, embarrass and endanger the rights and interests of all dealing with the association, if the legality of its existence could be drawn in question in every suit to which it was a party, or in which rights were involved, springing out of the corporate existence. No judgment could be rendered which would settle the question finally. But, when the government intervenes by an appropriate proceeding, the judgment is final and conclusive, putting an end to all controversy." It was further said in the same case: "Whoever contracts with a corporation, in the actual exercise of corporate powers and franchises, is estopped from denying the legality of the existence of the corporation, or inquiring into irregularities attending its formation, to defeat the contract, or to avoid the liability he has voluntarily and deliberately incurred. The principle is especially applicable to stockholders,...