Johnston v. Allis

Decision Date29 November 1898
Citation71 Conn. 207,41 A. 816
CourtConnecticut Supreme Court
PartiesJOHNSTON v. ALLIS.

Appeal from superior court, Hartford county; Ralph Wheeler, Judge.

Action by Frank H. Johnston, trustee in insolvency, against Fortis H. Allis, to recover an unpaid stock subscription. From a judgment for defendant, plaintiff appeals. Error, and new trial granted.

The complaint alleged that the plaintiff is the trustee in insolvency of the Yale Brick Company, a corporation organized under the joint-stock laws of this state with a capital of $100,000, divided into 1,000 shares of $100; that the defendant subscribed to 500 shares of this stock; that he had not paid for them, although payment had been demanded; and that the Yale Brick Company had been duly declared insolvent by the probate court,— and claimed to recover the amount of the subscription. The defendant made two defenses, the first being, in substance, a denial of the complaint. The second set out that, of the said shares, the defendant had paid in full for 50; 10 had been paid for in another way. And, as to the remaining 500 shares, the defense averred that "they were subscribed for by him, not in his individual capacity, but as a trustee for said corporation, by and with the authority of said corporation, and were never held by the defendant otherwise than as such trustee, and subject to the vote of the stockholders of said corporation." This defense was demurred to by the plaintiff. The court overruled the demurrer. Thereupon the plaintiff made replication "that the creditors represented by him had no notice of any kind that said subscription was for said corporation," and that: "Par. 3. On the 14th day of October, 1892, the defendant, as one of the directors of said corporation, joined with the other directors of said corporation in making, executing, and filing with the secretary of state a certificate of the articles of association of said corporation, which stated, among other things, the following: 'Art. 4. The amount of the capital stock is one hundred thousand ($100,000) dollars, divided into one thousand shares of the par value of one hundred ($100) dollars each. Art. 5. Each subscriber to these articles agrees to take the number of shares of said capital stock annexed to his name, each share to be of the par value of one hundred dollars, and to pay twenty per cent. thereof in cash at the time of subscription, and the balance thereof in installments as called for by the directors. * * * F. H. Allis, Trustee, New Britain, 510 shares,'—and in filing a like copy with the town clerk of the town of Berlin, and publishing the same in a newspaper, all as is required by the statutes of this state relating to the formation and organization of joint-stock companies. Par. 4. Immediately thereafter the said company commenced business in said town of Berlin, and continued there until, in the conduct of said business, said company had contracted certain debts, which were and still are unpaid; and the same have been presented to and allowed by the commissioners on the insolvent estate of said company, as per Ex. B, herewith filed. During all of the time that said company was doing business the defendant was a member of the board of directors thereof, was secretary and treasurer of said corporation, and was at all times active in the management thereof. Par. 5. Said creditors were induced thereby to deal with said company, and to give credit to said Yale Brick Company as a corporation lawfully authorized to do business. Par. 5 1/2 The assets of the estate of said Yale Brick Company are not sufficient to pay the said claims mentioned in said exhibits, nor any part thereof." There was a demurrer to this replication, which the court sustained. There was no further pleading. There was a hearing on the issues of fact, and the court found them in favor of the defendant, and rendered judgment that the defendant recover his costs. From this judgment the plaintiff appealed. The third fourth, fifth., and sixth, paragraphs of the finding of facts are these: "(3) The subscription of P. H. Allis as trustee was made by him on said 14th day of October, 1892, by authority of the stockholders of the new company, for the benefit of the company, and no installment upon said stock was ever called in by the directors of said company, but by a vote of the company said Allis was directed to sell ten (10) shares of said stock, of the par value of $1,000, for the benefit of the company, which he did; and the amount realized from said stock, to wit, the sum of $1,000, was paid by him into the treasury of said company for its benefit. (4) On the 12th day of October, 1890, said Yale Brick Company was, upon proper proceedings, duly declared insolvent by the probate court for the district of Berlin, and on the same day the plaintiff was duly appointed trustee upon the insolvent estate of said corporation. (5) Before the service of the writ in this action, the plaintiff, as trustee of said Yale Brick Company, called upon the defendant, and demanded from him enough money upon his subscription to said capital stock to pay the debts of the Yale Brick Company; but he did not state what the amount of those debts was, nor did he ask for any specific sum. The defendant refused to pay anything upon said demand. (0) It was admitted upon the trial that neither the trustee nor any one in his behalf had made application to the probate court for the district of Berlin for any order to call for and collect unpaid capital of said Yale Brick Company, and that said court of probate had not given any direction as to the calling in of any of said stock."

Noble E. Pierce and Bernard F. Gaffney, for appellant.

Frank L. Hungerford, for appellee.

ANDREWS, C. J. (after stating the facts). The defendant subscribed for 500 shares of the capital stock of the Yale Brick Company, idding to his name the word "Trustee." Nothing has ever been paid on these shares by the defendant or any one else. Afterwards the company was formally organized, and the defendant was chosen one of the directors and its secretary and treasurer, and he has at all times been active in the affairs of the company. This subscription and the organization of the company took place on the 14th day of October, 1892. On the same day the defendant (the other directors of the company acting with him) made, subscribed, and swore to a certificate of the organization of the said company, and filed the same in the office of the secretary of state of this state and with the town clerk of the town of Berlin, and also caused the same to be published in a newspaper in Berlin. In that certificate this subscription is stated to be one of the subscriptions to the capital stock of said company,—as, indeed, it must be, because otherwise the whole of the capital stock is not subscribed for. In his defense the defendant averred that he made the said subscription as the trustee for, and with the authority of, the said corporation, and that he was not personally liable on the same. The court, on demurrer, held this to be a good defense to the action brought by the plaintiff. This subscription was made before the corporation was organized. It is a little difficult to see how it could at that time appoint a trustee for any purpose.

But as to the trusteeship of this subscription there is another and still stronger objection: It was not a bona fide subscription. The statute (Gen. St. § 1947) forbids any Jointstock corporation to commence business until all its capital stock shall be subscribed for by bona fide subscribers. A "bona fide subscriber" means a bona fide subscription; that is, a real subscription,—one that will in fact bring to the corporation the amount of capital which the subscription denotes, and upon which its creditors and all persons dealing with the corporation can rely. Any subscription that will not do this is not a bona fide one. A corporation has at its organization no property other than the subscriptions to its capital stock. From the nature of things, it can have no property of its own, separate from the subscriptions. A subscription to its capital stock made by a trustee, if it does not bind the trustee, but only the corporation itself, would not be a bona fide one. Such a subscription could not bring to the corporation any real capital. This subscription was one which the corporation, as matter of fact, could not have made, because at the time it was not organized so that it could appoint a trustee. And, besides, it was a subscription which, as matter of law, it was forbidden to make. It did not and does not bind the corporation. Crandall v. Lincoln, 52 Conn. 94; Cook, Stock & S. §§ 199-251. Did it, then, bind the defendant? It is said in 1 Swift, Dig., side page 330, that: "Whenever a person signing a contract makes use of an addition such as Treasurer of the Jocky Club, Guardian, Executor, or the title of any office civil or military, in which he has no power to bind another the contract will be binding on himself and the addition rejected as surplusage." When an agent contracts...

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  • In re Taijha H.-B.
    • United States
    • Connecticut Supreme Court
    • 27 Septiembre 2019
    ...of the power, then there can be no implied prohibition of the power, or to the way it is to be enforced." Johnston v. Allis , 71 Conn. 207, 217, 41 A. 816 (1898) ; see also 3A S. Singer, supra, § 69:13, pp. 933–34 (with respect to termination of parental rights statutes, purely procedural l......
  • Lavell v. Bullock
    • United States
    • North Dakota Supreme Court
    • 21 Agosto 1919
    ...an action at law, and it is not proper practice to join all delinquent stockholders as defendants in one action." See also Johnston v. Allis, 71 Conn. 207, 41 A. 816. the contrary the probability or even the possibility of a multiplicity of suits is negatived by the facts in the case, nor a......
  • Beach v. Beach Hotel Corp.
    • United States
    • Connecticut Supreme Court
    • 24 Octubre 1933
    ... ... It is in its nature essentially a trust ... fund for their benefit. Crandall v. Lincoln, 52 ... Conn. 73, 95, 52 Am.Rep. 560; Johnston v. Allis, 71 ... Conn. 207, 217, 218, 41 A. 816; Buck v. Ross, 68 ... Conn. 29, 31, 35 A. 703, 57 Am.St.Rep. 60; Barber v. Morgan, ... < ?> Conn ... ...
  • Edwards v. Johnston
    • United States
    • Wyoming Supreme Court
    • 1 Noviembre 1915
    ...the stock was subscribed after January 1st, 1912, for which notes were given and which was not a bona fide subscription. (Johnson v. Allis, 71 Conn. 207, 41 A. 816.) organization without good faith subscriptions for the entire stock is invalid. (Holman v. State, 105 Ind. 569, 5 N.E. 702; St......
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