Jewell v. the Rock River Paper Co.

• Citation: 101 Ill. 57,1881 WL 10686
• Parties: JAMES S. JEWELL et al.v.THE ROCK RIVER PAPER COMPANY et al.
• Decision Date: 10 November 1881
• Court: Illinois Supreme Court

101 Ill. 57

1881 WL 10686 (Ill.)

JAMES S. JEWELL et al.

v.THE ROCK RIVER PAPER COMPANY et al.

Supreme Court of Illinois.

Filed at Ottawa Nov. 10, 1881.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the First District;--heard in that court on appeal from the Superior Court of Cook county; the Hon. JOHN A. JAMESON, Judge, presiding.

Mr. JOHN H. HAMLINE, for the appellant James S. Jewell:

1. The full amount of capital stock demanded by the articles of association of the Chicago Publishing Company was never subscribed, and the company was never legally organized in accordance with the act concerning corporations. Ullman v. Havana and Rantoul R. R. Co. 88 Ill. 521; Pitchford v. Davis, 5 M. & W. 2; Bray v. Farwell, 81 N. Y. 600; Fox v. Clifton, 6 Bing. 776; Salem Mill Dam Corporation v. Ropes, 6 Pick. 23; Cabot and West Springfield Bridge Co. v. Chapin et al. 6 Cush. 50; Stoneham Brand R. R. Co. v. Gould, 2 Gray, 277; Littleton Manufacturing Co. v. Parker, 14 N. H. 543; Old Town and Lincoln R. R. Co. v. Veazie, 39 Maine, 571; Sanford v. Handy, 25 Wend. 475; Thompson on Liability of Stockholders, sec. 120, and cases cited; Swartwout v. Michigan Air Line, 24 Mich. 396; Mokelume Hill Manufacturing Co. v. Woodbury, 14 Cal. 424; Fire Dept. of New York v. Kilp, 10 Wend. 266.

2. The appellant is not estopped from showing this. Cross v. Pinckneyville Mill Co. 17 Ill. 54; Slocum v. Providence Steam and Gas Co. 10 R. I. 113.

3. The case being distinguished from the following cases, for the reason that the acts of appellant have given no ground for estoppel, while in the latter cases the defendant has invariably done some act himself affirming the existence of the corporation. Rice v. Rock Island and Alton Railroad Co. 21 Ill. 93; Tarbell v. Page et al. 24 Id. 46; Thompson v. Candon, 60 Id. 244; McCarthy v. Lavasche, 89 Id. 275; Dows v. Naper, 91 Id. 44; Chubb v. Upton, 5 Otto, 666; Corwith v. Culver, 79 Ill. 502.

4. The majority of the stock purporting to have been subscribed was fictitious, and hence the capital stock of the Chicago Publishing Company was not fully subscribed, and the company was not legally organized. Angell and Ames on Corporations, (9th ed.) sec. 86; McConaby v. Centre Turn. Co. 1 Pa. 426; Jersey City Gas Co. v. Dwight, 29 N. J. Eq. 242.

5. Appellants' contract was a conditional one, and the conditions expressed on the face thereof have not been complied with. Thompson on Liability of Stockholders, secs. 116, 117, 118, and cases cited; Chase v. Sycamore and Courtland R. R. Co. 38 Ill. 215; Melvin v. Lamar Ins. Co. 80 Id. 459; Jersey City Gas Co. v. Dwight, 24 N. J. Eq. 242; McConaby v. Centre Turn. Co. 1 Pa. 426.

6. Appellant not being a member of the corporation, the books were not evidence against him. Chase v. Sycamore and Courtland R. R. Co. 38 Ill. 215. Mr. WILLIAM C. WILSON, and Mr. DAVID L. ZOOK, for the other appellants:

1. The entire capital stock of the alleged company was never in fact fully subscribed, and until that was done there could be no organization or transaction of business in the name of the company. Bray v. Farwell, N. Y. Court of App.; Ullman v. Havana and Rantoul R. R. Co. 88 Ill. 521.

2. Many of the subscriptions were fraudulent upon the other subscribers. The subscribers were insolvent, and known to be so to appellees. Angell & Ames on Corporations, (10th ed.) secs. 88, 517; 1 Pa. 426.

3. The corporation had no authority to buy the subscription list, good will, and old debts due to the Post and Mail Printing Company. The notes given for the purchase money were ultra vires, and imposed no obligation whatever. Re Saxon Life Ass. Society, 2 J. & H. 400; on appeal, 1 De G. J. & Sm. 29; on rehearing, 1 H. & M. 672; Ernest v. Nicholls, 6 H. of L. Cases, 401; Ashbury Railroad Carriage Co. v. Riche,L. R. 7, Eng. and Irish App. 653; East Anglican Ry. Co. v. Eastern Counties Ry. Co. 11 C. B. 775; Re Empire Assurance Co.L. R. 8 Ch. 340.

4. At the time of the alleged assumption of said indebtedness no stock was held in said corporation by any of these appellants, nor have they ever held or owned any stock, and no liability can be incurred by them or imposed upon them in the absence of stock. Baker et al. v. Admrs. of Backus, 32 Ill. 79; Steele v. Dunne, 65 Id. 298; Rev. Stat. 282, sec. 8.

5. Unless a subscriber ratifies with a full knowledge, he is not bound. Angell & Ames on Corporations, sec. 517.

6. A false and fraudulent representation by an agent or commissioner, to obtain subscriptions to the stock of the company, will avoid the subscriptions. Crossman v. Penrose Ferry Bridge Co.26 Pa. St. 69. Mr. A. H. LAWRENCE, for the appellees:

The appellants are concluded by the approval of the master's report, as to all the findings of facts by him. The exception by White, after the report was filed, was too late. The report can not be questioned here for the first time. Reigard v. McNeil, 38 Ill. 401; Clark v. Laughlin, 62 Id. 278; McClay v. Norris et al. 4 Gilm. 386; Prince v. Cutler, 69 Id. 267; Pennell v. Lamar Ins. Co. 73 Id. 303; Hurd v. Goodrich, 59 Id. 450; M. E. Church v. Jacques, 3 Johns. Ch. 77.

It was inadmissible for defendants to show that their subscriptions were in fact qualified and limited by parol conditions. Corwith v. Culver, 69 Ill. 506; Melvin v. Lamar Ins. Co. 80 Id. 456; Graff v. Pittsburg and Steubenville R. R. Co.31 Pa. St. 489; Robinson v. Pittsburg R. R. Co. 32 Id. 339; Downie v. White, 12 Wis. 176; Mann v. Cook, 20 Conn. 178; White Mountain R. R. Co. v. Eastman, 34 N. H. 124; Johnson v. Crawfordsville R. R. Co. 11 Ind. 280; Blodgett v. Merrill, 20 Vt. 509; Pickering v. Templeton, 2 Mo. App. 425; Thornburgh v. Newcastle R. R. Co. 14 Ind. 499.

Every subscription to the capital stock of a company is a separate and independent contract. Price v. Grand Rapids R. R. Co. 18 Ind. 137; Conn. and Pass. R. R. Co. v. Bailey, 24 Vt. 465; Hatch v. Dana, 11 Otto, 210.

Having taken part in the proceedings of the company, paid stock assessments, and in various ways recognized the existence of the company, appellants above named are, by such acts on their part, estopped from questioning the legality of the organization of the company, or their liability as stockholders therein. Thompson on Liability of Stockholders, secs. 162, 163, 164, 165, 170; Black River and Utica R. R. Co. v. Clark, 25 N. Y. 208; Maltby v. Northwestern Va. R. R. Co. 16 Md. 422; Hager v. Cleveland & Bassett, 36 Id. 476; Frost v. Walker, 66 Maine, 468; Dayton and Cin. R. R. Co. v. Hatch, 1 Disney, 84; Corwith v. Culver, 69 Ill. 506; Central Plank Road v. Clements, 16 Mo. 359.

Appellants having suffered the company to hold itself out to the world as a legally created body corporate, they can not, as against creditors, attack the organization of the company. This can not be done in a collateral proceeding. Angell & Ames on Corporations, secs. 635, 636; Swartwout v. Mich. Air Line R. R. Co. 21 Mich. 389; Slocum v. Providence Steam Co. 10 R. I. 112; Slocum v. Warren, 10 Id. 116; Tarbell v. Page, 24 Ill. 46; Price v. Rock Island and Atchison R. R. Co. 21 Id. 93; Thompson v. Candor, 60 Id. 244; McCarthy v. Lavasche, 89 Id. 270; Dows v. Naper, 91 Id. 44; Chubb v. Upton, 5 Otto, 665.

This being a suit by creditors against stockholders, to enforce payment of their unpaid stock subscriptions, it is no defence for such stockholders to say they were induced to subscribe by false and fraudulent representations made to them by the company, or by Willard, its agent. Ogilvie v. Knox Ins. Co. 22 How. 380; Upton v. Tribilcock, 91 U. S. 45; Chubb v. Upton, 95 Id. 667; Payson v. Withers, 5 Biss. 269; Litchfield Bank v. Church, 29 Conn. 137; Clark v. Thomas, 34 Ohio St. 46; Ruggles v. Brock, 6 Hun, 164; Goodrich v. Reynolds, 31 Ill. 490.

Messrs. DUPEE & JUDAH, also for the appellees.

Mr. JUSTICE MULKEY delivered the opinion of the Court:

This is an appeal from a judgment of the Appellate Court for the First District affirming a decree of the Superior Court of Cook county, in favor of appellees, as creditors of the Chicago Publishing Company, and against the company and certain of its stockholders, to recover from the latter unpaid subscriptions to its capital stock.

The company was organized under the general Incorporation act of 1872, entitled “An act concerning corporations,” in the latter part of the winter of 1878, with O. A. Willard, since deceased, as its president and business manager. The statement filed with the Secretary of State, as required by the second section of the Incorporation act, shows the company was organized for the purpose of doing a general printing business, including the publication of a newspaper in the city of Chicago, the business place of the company, and that its capital stock was limited to $150,000, being divided into 1500 shares, of $100 each. Its organization, so far as we are able to discover, seems to have been in strict conformity with the statutes. It was evidently the purpose of the promoters of this company that it should, as it subsequently did, supersede the Post and Mail Printing Company, an existing organization then engaged in the same business, proposed to be conducted on a more extensive scale by the new company, under whose management a daily newspaper, known as the “Chicago Post,” was then being published, the said O. A. Willard being the president and general manager of that company also.

At the time of the organization of the new company the Post and Mail Printing Company was indebted to various individuals in the sum of $45,000, which indebtedness was represented by forty-five notes of the company, for the sum of $1000 each, and all secured by a deed of trust executed by the company to Arnold Tripp, as trustee, on the entire assets of the concern, ten of these notes belonging to appellee the Rock River Paper Company. Default having been made in the payment of these notes, the trustee, at the instance of the holders, proceeded to advertise for sale the mortgaged...