Natwick v. Terwilliger

• Citation: 157 P. 696,24 Wyo. 253
• Decision Date: 17 May 1916
• Docket Number: 823
• Parties: NATWICK v. TERWILLIGER
• Court: United States State Supreme Court of Wyoming

157 P. 696

24 Wyo. 253

NATWICK v. TERWILLIGER

No. 823

Supreme Court of Wyoming

May 17, 1916

Rehearing Denied October 16th, 1916, Reported at: 24 Wyo. 253 at 263.

ERROR to District Court, Carbon County; HON V. J. TIDBALL, Judge.

Action by Oscar Natwick, trustee in bankruptcy, against Charles D Terwilliger. From a judgment for defendant, plaintiff brings error. The facts are stated in the opinion.

Affirmed.

Marion A. Kline and N. R. Greenfield, for plaintiff in error.

Stockholders are liable for unpaid subscriptions. (Section 3988, Comp Stats. 1910.) Insolvency of a corporation does not release from such liability. (Section 4, Bankruptcy Act.) Corporate creditors are represented by the trustee in bankruptcy after incolvency with authority to sue. (Allen v. Grant, 122 G. 552, 50 S.E. 494, 14 A. B. R. 340; Babbitt v. Read, 173 F. 712, 23 A. B. R. 254; Roney v. Crawford, 24 A. B. R. 638.) An assessment made by a bankruptcy court is collectable by the trustee. (Sanger v. Upton, 91 U.S. 56; Hawkins v. Glenn, 131 U.S. 319; Bernheimer v. Converse, 206 U.S. 516, 532; Gt. Western Tel. Co. v. Purdy, 162 U.S. 336; In re. Newfoundland Syndicate, 28 A. B. R. 124; Edwards v. Schillinger, 245 Ill. 231, 91 N.E. 1048; Childs v. Cleaver, (Me.) 50 A. 716; In re. Remington Automobile Co., 153 F. 345, 18 A. B. R. 392; 4 Thompson on Corporations, Sections 3697 and 3455.) Failure to issue certificates of stock does not release. (10 Cyc. 526.) The records of the Bankruptcy Court are competent evidence in this case. (Section 21, Bankruptcy Act.) Terwilliger by participating in the first meeting of stockholders in voting stock is estopped to deny his ownership thereof. (10 Cyc. 531; 4 Thompson on Corporations, 2nd Ed., Sections 2810 and 2836; Casey v. Galli, 94 U.S. 673.) Conditions annexed to stock subscriptions may be waived. (1 Thompson on Corporations, Secs. 616 and 624; Wyman v. Bowman, 127 F. 257; Southern Co. v. Calendar, 29 P. 861.) Conditional subscriptions are not favored and where there is doubt as to the intention of parties, a subscription will be construed as an absolute subscription on special terms. (1 Cook on Corporations, (6th Ed.) Sec. 78; 1 Thompson on Corporations, (2nd Ed.) Sec. 632; Chamberlain v. Railroad Co., 15 Ohio St. 224; Railroad Company v. Parks, 86 Tenn. 554, 8 S.W. 842.) Defendant's subscription was upon special terms. (10 Cyc. 450; Bouton v. Dement, (Ill.) 14 N.E. 64; Upton v. Tribilcock, 91 U.S. 45; Sanger v. Upton, 91 W. S. 56; Jackson v. Traer, (Ia.) 20 N.W. 768; Morgan Co. v. Allen, 103 U.S. 508; Bank v. Am. Brick & Tile Co., (N. J.) 64 A. 920; Thomas v. Hotel Co., (Cal.) 117 P. 1041; In re. Eureka Furniture Co., 170 F. 485; In re. Putman, 193 F. 470; Miller v. Dredging Co., (Ia.) 137 N.W. 512.) Although payable in property the subscriber is liable on his subscription to creditors of the corporation. (10 Cyc. 452; Singer v. Given, 61 Ia. 93; 15 N.W. 858; Bank v. Alden, 129 U.S. 372, 32 L.Ed. 725.) If payable in materials and not so paid, it is demandable in money. (10 Cyc. 482; 4 Thompson on Corporations, Section 3968; Haywood Co. v. Bryan, 51 N.C. 82; In re. Monarch Corporation, 203 F. 667; Enslen v. Nathan, 136 Ala. 412, 34 So. 929; Henderson v. Turngren, 9 Utah 432, 35 P. 495.) The rejection of the subscription and release of defendant by the board of directors was void as to creditors. (Haines Co. v. Highland Co., 88 P. 865; Curtis v. Salmon River Co., 130 Cal. 345, 62 P. 552; Bouton v. Dement, (Ill.) 14 N.E. 62; Jackson v. Traer, (Ia.) 20 N.W. 768; Upton v. Tribilcock, 91 U.S. 45; Vol. 20 Am. & Eng. Ency. Pl. & Prac. 697; Zirkel v. Opera House Co., 79 Ill. 334; Payne v. Bullard, 23 Miss. 88, 55 Am. Dec. 74; Balfour v. Baker City Gas and Electric Co., 27 Ore. 300, 41 P. 164; Hall & Farley v. Ala. Term Co., 39 Southern, 285, 2 L. R. A. (N. S.) 130; Howell v. Crawford, 77 Ark. 12, 89 S.W. 1046; Hall v. Henderson, 126 Ala. 449, 26 So. 531, 85 Am. St. Rep. 53, 61 L. R. A. 621.) Parties are bound by their pleadings. (Pardee v. Kuster, 15 Wyo. 368, 91 P. 836.) Defendant was present at the stockholders' meetings and acted as a director up to the time of bankruptcy. This was admitted by the pleadings. The corporation could not compel performance as the agreement was within the Statute of Frauds. (Compiled Statutes 3751, 1910; Beckman v. Mepham, 97 Mo.App. 161, 70 S.W. 1094; Begley v. Treadway, (Ky.) 93 S.W. 1045; Laufer v. Powell, (Tex.) 71 S.W. 549.) The corporation was held indebted on March 11th, 1908, the date of said alleged release, and that state of things is presumed to have continued. (Hartford Insurance Co. v. Kahn, 4 Wyo. 364, 34 P. 895; Weidenhofft v. Primm, 16 Wyo. 340, 94 P. 453; Jones on Evi. 58; 2 Chamberlayne on Evidence, Sec. 1047.) The corporation was without authority to release a subscriber to the injury of its creditors. (Chrisman-Sawyer Banking Co. v. Independence Mfg. Co., (Mo.) 68 S.W. 102; Sprague v. National Bank of America, 172 Ill. 149, 50 N.E. 19; Indiana Novelty Co. v. McGill, 15 Ind.App. 1, 43 N.E. 464; Kentucky &c., Assignees, v. Schaffer, 85 S.W. 1098, 120 Ky. 227; Smathers v. Bank, 135 N.C. 410, 47 S.E. 893; MacBeth v. Banfield, 45 Ore. 553, 78 P. 693; Shaw v. Gilbert, 111 Wis. 165, 86 N.W. 188; Hall & Farley v. Improvement Co., 143 Ala. 464, 2 L. R. A. (N. S.) 130.

McMicken & Blydenburgh, for defendant in error.

The question here is not whether a certificate of stock was issued, but whether the conditions of the contract were carried out; there is no estoppel alleged in the pleadings. (16 Cyc. 808.) It is incumbent upon plaintiff to establish estoppel. (Grier v. Union Life Insurance Company, 217 F. 287; Metropolitan Life Insurance Co. v. Howle, 68 N.E. 4.) A conditional subscription contract cannot be converted into an unconditional contract by the courts or by the corporation. (Durlacher v. Frazer, 8 Wyo. 74.) The case of Wyman v. Bowman is not in point, as to the facts. There is no question of waiver in this case; the trust fund doctrine applies only to the assets of insolvent corporation. (Hart Co. v. Rogers Co., 19 Wyo. 35; Hollins v. Brierfield Co., 150 U.S. 371.) The directors have authority to reject the subscription or make any other lawful contract, as it was a going concern. (Macbeth v. Banfield, 106 Am. St. Rep. 670; Graham v. LaCrosse Co., 102 U.S., Co-op. Ed. 26.) None of the authorities cited by plaintiff with reference to the cancellation of subscriptions of stock are in point, when the facts of this case are considered. The rejection of the subscription and the assent thereto was valid and released the subscriber. (10 Cyc. 780-795.) A contract releasing a subscriber even if voidable will stand until attacked on proper grounds. (Clark & Marshall Corp. Vol. 3, 2299 and 2300; Twin Lick Oil Co. v. Marbury, 91 U.S. 587.) A contract between a corporation and its officers is not void, but voidable. (Durlacher v. Frazer, 2 Wyo. 75; Thomas v. Brownville Ft. K. & P. R. R. Co., 109 U.S. 27; 10 Cyc. 473.) Cancellation of share subscriptions may be invalid as to existing creditors, yet good as to future creditors. (20 Cyc. 453; Erssine v. Peck, 13 Mo.App. 280, 33 Mo. 465; Johnson v. Lullman, 88 Mo. 567; Taylor v. Miami Exporting Co., 6 O. St. 176; Hill v. Silvey, 3 L. R. A. 154; Republic Life Ins. Co. v. Swigert, 12 L. R. A. 328), and as against other stockholders not objecting. (Dunn v. Howe, 96 F. 160.) Terwilliger signed the subscription list conditionally and the vote of the directors with reference thereto is a sufficient memorandum to satisfy the Statute of Frauds. (Lambkin v. Baldwin Co., 44 L. R. A. 786.) Plaintiff's remedy, if any, was against the property. (Morgan v. Lewis, 46 O. St. 1.) Solvency is always presumed until the contrary is shown. (7 Enc. Ev., Page 482.) No stock was issued, no stock was forwarded, and no stock was purchased back by the corporation. The subscription was conditional. (Bank v. Brown, 92 Am. St. Rep. 339.) The case of Morgan v. Lewis, 46 O. St. 1, is quite similar on the facts, except that a deed was made to the company and the company deeded the land back. Under the terms of the contract the shares were not to be issued until the property was delivered, and the property delivered only when the shares were issued. The parties had in contemplation a concurrent transaction. (Walter A. Wood Harvester Co. v. Jefferson, 59 N.W. 532.) There was no escape from the conclusion that if the action of the committe was void, or if the corporation could not rescind its contract, then the matter was placed as it was prior to the resolution of March, 1908, and the corporation is the equitable owner of the property, while defendant is the owner of the stock not paid up and not subject to call by creditors, so that the assignee of trustee could only in such case look to the property, but could not get a money judgment in this case. When the stockholders ratified the arrangements to rescind the contract, they ratified the whole proceeding. (10 Cyc. 390.)

Marion A. Kline and N. R. Greenfield, in reply.

The facts in the case of Wood Harvester Co. v. Jefferson, 59 N.W. 532, cited by defendant in error, were quite different from an action by a trustee in bankruptcy. Under Sections 47 and 70 of the Act, the proposition of forfeiture was not considered at the trial; the Terwilliger stock was not issued to other subscribers. The records of the corporation show that Terwilliger subscribed for and voted twenty-five shares. Defendant took possession of the shares of stock and exercised ownership over the same by voting the shares at the first meeting; it was also shown that he attempted to sell the shares to another. It was his property. He was never legally released from his obligation to pay for the shares.

SCOTT, JUSTICE. POTTER, C. J., and BEARD, J., concur.

OPINION

SCOTT...