Hawkins v. Citizens' Real-Estate & Inv. Co.

• Court: Oregon Supreme Court
• Writing for the Court: BEAN, C.J. (after stating the facts).
• Citation: Hawkins v. Citizens' Real-Estate & Inv. Co., 64 P. 320, 38 Or. 544 (Or. 1901)
• Decision Date: 25 March 1901
• Parties: HAWKINS v. CITIZENS REAL-ESTATE & INVESTMENT CO. et al. [1]

64 P. 320

38 Or. 544

HAWKINS v. CITIZENS REAL-ESTATE & INVESTMENT CO. et al. ^[1]

Supreme Court of Oregon

March 25, 1901

Appeal from circuit court, Multnomah county; John B. Cleland, Judge.

Bill by D.R. Hawkins against the Citizens' Real-Estate &amp Investment Company and others. From a judgment in plaintiff's favor, defendants George S. Clark and others appeal. Affirmed.

This is a suit by a judgment creditor of an insolvent corporation to reach and subject to the payment of his judgment unpaid balances on the shares of the capital stock of the company subscribed for by the defendants. The complaint, after alleging the organization of the company, the loan of $6,000 to it by L.L. Hawkins on September 19, 1891, and the execution of its note therefor on May 1, 1893, the loan of $3,500 to it by E.A. King, and the execution of its note therefor on February 21, 1894, the assignment by King of the latter note to Hawkins, and by Hawkins of both notes to the plaintiff, his recovery of a judgment thereon against the corporation, upon which there was due and unpaid at the commencement of this suit about $8,000, and the insolvency of the corporation, further alleges that the defendant Clark subscribed for and became the owner of 10 shares of the capital stock of the company on March 15, 1890 (1 share June 13, 1890, 1 share January 12, 1891, 3 shares July 11, 1891 and 5 shares December 12, 1894), and that there remains due and unpaid thereon the sum of $1,044.60 and interest; that defendant A.S. Nichols subscribed for and became the owner of 5 shares on March 11, 1889, 5 shares February 21, 1890, 5 shares April 23, 1890, 5 shares June 14, 1890, 5 shares December 5, 1890, 5 shares July 23, 1891, and 13 shares May 16, 1894, upon which there is due and unpaid $511.20 and interest; that the defendant C.L. Nichols subscribed for and became the owner of 15 shares of the capital stock of the company April 23, 1890, 5 shares December 5, 1890, 3 shares July 23, 1891, and 2 shares March 22, 1892, upon which there is due and unpaid $220 and interest; that the defendant Gordon subscribed for and became the owner of 5 shares of the capital stock of the company on March 30, 1891, and 1 share July 11, 1891, upon which there is due and unpaid $350 and interest; that all of such subscriptions are in terms as follows: "County of Multnomah, State of Oregon--ss.: We whose names are hereby subscribed, agree to take the number of shares of the capital stock of the Citizens' Real Estate and Investment Company of Portland, Oregon, a private corporation duly organized under the laws of the state of Oregon, set opposite our respective names, and to pay therefor the par value thereof in United States gold coin, at the rate of five dollars per month for each share subscribed until the same is fully paid;" that the by-laws of the company provide that "the stock of this corporation shall be paid for in monthly installments of five per cent. upon the par value thereof." The defendants Clark and the two Nicholses answered jointly, and, after denying certain allegations of the complaint, alleged that the pretended assignments of the notes mentioned in the complaint by E.A. King and L.L. Hawkins to the plaintiff were without consideration, and that Hawkins and King are the real parties in interest in this suit, which is being prosecuted in the name of D.R. Hawkins for their use and benefit, and, as a further and separate defense for Clark, aver that while it appears from the stock book of the corporation that on March 15, 1890, he subscribed for 10 shares, such apparent subscription was a mistake, and should have been for 5 shares only, and that such shares were fully paid up before the commencement of this suit; that the shares alleged to have been subscribed for on June 13, 1890, and January 12 and July 18, 1891, were issued to him in payment of dividends declared by the corporation,--it being expressly understood and agreed by the corporation, its stockholders and officers, that he was not to be personally liable thereon, but such stock was to be representative of his share in the profits arising out of the business of the company; that on November 21, 1894, such stock was retired and canceled by a resolution of the stockholders of the corporation, and has never since been considered by any one connected with the company as of force or effect; that the alleged subscription of December 12, 1894, was conditional, and never became operative or binding because the conditions upon which it was made were never complied with. The defendant A.S. Nichols admits that he subscribed for 5 shares of the capital stock of the company on March 11, 1889, and 5 shares on February 21, 1890, which he alleges were fully paid up before the commencement of this suit, and as to the alleged subscriptions of April 23, June 4, and December 5, 1890, and July 23, 1891, he adopts all that part of Clark's separate defense in reference to the so-called dividend subscriptions; that as to the 13 shares, under date of May 16, 1894, he avers that 12 shares were subscribed for by another person and transferred to him before the commencement of this suit, and have been fully paid up, and the other was for dividend stock, and is subject to the same defense as other like stock. The defendant C.L. Nichols admits that he subscribed for 15 shares of the capital stock of the company on April 23, 1890, and avers that they were fully paid up before the commencement of this suit; that as to the alleged subscriptions of December 5, 1890, July 23, 1891, and March 22, 1892, he also adopts Clark's defense in reference to the dividend subscriptions. The reply put in issue all the material allegations of the answer and, for a further and separate defense to the affirmative matter therein, alleged that Clark ought to be and is estopped to aver that the subscription made in 1894 was upon a condition precedent, because he waived such condition and received and accepted certificates of stock on such alleged subscription, and has allowed himself to be charged on the books of the company as a stockholder. The defendant Gordon answered separately, and, after denying some of the allegations of the complaint, alleged that he subscribed for 5 shares of the capital stock of the corporation on March 30, 1891, and that the alleged subscription of July 11, 1891, was for stock issued to him in payment of dividends; that, as to the latter subscription, he adopts the separate defense of Clark, heretofore referred to, and, for a further and separate answer, alleges that on or about the 1st of September, 1891, for a valuable consideration, he sold, assigned, and transferred all his stock in the company to one Eugene D. White, since which time he has not been a stockholder and has had no interest in the corporation, and that neither the plaintiff nor his alleged assignors were creditors of the corporation at the time of such transfer. Upon the trial the court found the facts as to the defendants Clark and Nichols substantially as alleged in the complaint, except that Clark's subscription of December 12, 1894, was conditional, and had not become operative because the condition had not been complied with. It also found that Gordon had sold and assigned his stock, but that such sale was subsequent to the date when the indebtedness upon which plaintiff's judgment was rendered accrued, and therefore he was liable for an unpaid balance of $335 due on such stock, with interest. A decree was accordingly entered against the defendants for the unpaid balances due on the stock subscribed by them, with legal interest from the date the last installment became due, and defendants appeal.

Geo. H. Williams, for appellants Geo. S. Clark, A.S. Nichols, and C.L. Nichols. Cecil H. Bauer, for appellant W.A. Gordon.

H.K. Sargent, for respondent.

BEAN C.J. (after stating the facts).

The contention is made for the defendants that L.L. Hawkins and E.A. King, and not the plaintiff, are the real parties in interest in this litigation; but the judgment in plaintiff's favor and against the corporation is conclusive on this point. When a judgment is rendered against a corporation, it establishes the matter in litigation and the liability of the corporation to pay the debt; and this judgment is conclusive, in the absence of fraud, in a suit by the judgment creditor to enforce his remedy against the stockholders. 1 Cook, Corp. (4th Ed.) § 209; 3 Thomp.Corp. § 3392; 2 Mor.Priv.Corp. (2d Ed.) § 865. So we think the defendants are precluded from questioning the validity or ownership of the judgment upon which the plaintiff is proceeding.

For convenience, the stock involved in this suit may be divided into three classes: (1) Original stock, or that subscribed before the organization of the company; (2) what is known and designated in the record as "dividend stock"; (3) the alleged conditional subscription made by Clark on December 12, 1894. The only controversy arising upon the subscription for the original stock is that made by the denial of the defendant Clark that he subscribed for 10 shares on March 15, 1890, or any greater number than 5 shares. The stock subscription book of the company shows that Mr. Clark...