Holman v. State ex rel. Gibson

Citation5 N.E. 702,105 Ind. 569
PartiesHolman and others v. State ex rel. Gibson.
Decision Date12 March 1886
CourtSupreme Court of Indiana

OPINION TEXT STARTS HERE

Appeal from Huntington circuit court.

L. M. Ninde and T. E. Ellison, for appellant.

C. W. Watkins and Milligan & Whitelock, for appellee.

Mitchell, J.

The state, by an information in the nature of a quo warranto, charged that William J. Holman and 10 others were assuming to act as a corporation under the name of the Fort Wayne, Warren & Brazil Railway Company; that, as such corporation, they were making contracts, incurring debts, soliciting aid from townships, towns, and cities, making surveys, appropriating lands, etc., without any warrant or authority of law. They were challenged to show by what authority they assumed so to act. By a special answer the defendants admitted they were acting as a railway corporation, and alleged that they were duly organized and incorporated under the law. With their answer they exhibited a copy of their articles of association, which they averred had been duly filed in the office of the secretary of state. Upon the articles thus exhibited it appeared that 15 persons had each subscribed for $3,400 of the capital stock, the whole amount of which was fixed at $60,000. A reply was filed admitting the signing and filing of the articles of association, and the subscription to the stock. It was, however, averred that many of the subscribers to the stock were, at the time of making such subscriptions, wholly and notoriously insolvent, and made no pretense of being able to pay their subscriptions, and that others of such subscribers were not worth half the amount subscribed by them; that the solicitor of the subscriptions, and promoter of the corporation, was a subscriber to the stock, was wholly and notoriously insolvent himself, and knew of the insolvency of many of the other subscribers; that one of the subscribers, in addition to being insolvent at the time of making his subscription, was also a minor, which was known to the promoters of the scheme. It was further charged that the capital stock had not been subscribed in good faith, but that the subscriptions were received for the purpose of securing a colorable organization to be made on paper. Evidence was offered tending to prove the averments contained in the reply. A judgment of forfeiture was rendered.

The statute providing for the organization of railroad corporations enacts, in substance, that, whenever stock to the amount of at least $50,000, or $1,000 for each and every mile of proposed road, shall have been subscribed, any number of the subscribers, not less than 15, may, under certain regulations prescribed, form a railroad corporation. The questionpresented for consideration is, must the $50,000 of stock, which is required to be subscribed as a condition precedent to the organization, be subscribed in good faith by persons who had a reasonable expectation that they will be able to pay, or will subscriptions, some of which are merely simulated, fulfill the purposes of the statute? Where the information is against the corporation eo nomine, an inquiry such as that proposed cannot be made. In such a case the bringing of the suit against the corporation in its corporate name is an admission of its corporate existence, and it is not necessary for the corporation to show that it had performed the conditions precedent to its corporate existence. High, Extr. Rem. § 661. So, also, where the question of the regularity of the organization is made in a collateral proceeding, it is not admissible to show the insolvency of subscribers to the stock. It was accordingly held in Miller v. Wild-cat Gravel Road Co., 52 Ind. 51, that in a suit upon an unconditional subscription of stock evidence of the insolvency of some of the subscribers was immaterial. There are cases which hold that an assessment against a subscriber to stock cannot be collected until at least the minimum amount required by the statute has been subscribed by persons apparently able to pay for the shares subscribed. In such ca...

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