Quick v. Lemon

• Decision Date: 31 March 1883
• Citation: 105 Ill. 578,1882 WL 14358
• Parties: JOHN H. S. QUICK et al.v.JOHN R. LEMON.
• Court: Illinois Supreme Court

105 Ill. 578

1882 WL 14358 (Ill.)

JOHN H. S. QUICK et al.

v.JOHN R. LEMON.

Supreme Court of Illinois.

Filed at Ottawa Nov. 20, 1882.Rehearing denied March Term, 1883.

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. GEORGE GARDNER, Judge, presiding.

This was a creditor's bill, brought by John R. Lemon, in the Superior Court of Cook county, against John H. S. Quick and John T. Temple, stockholders of the Prudential Life Association, to reach unpaid subscriptions to the capital stock of the corporation, to satisfy a judgment which the complainant had recovered against the corporation. On the hearing the Superior Court found that the appellee (complainant in the bill) had recovered a judgment against the Prudential Life Association, a corporation organized under the laws of the State; that an execution had been issued on the judgment, and returned nulla bona; that John H. S. Quick and John T. Temple each owed to the capital stock of the corporation more than the amount of the judgment. Upon these findings a decree was rendered against the stockholders for the amount of complainant's judgment. This decree, on appeal, was affirmed in the Appellate Court.

The Prudential Life Insurance Association was made a co-defendant with appellants, and filed a separate answer, in which it denied the recovery of a valid judgment. It also set up that complainant in the bill agreed to take fifty shares of the capital stock of the company, upon which it avers he paid $1000, leaving $4000 yet to be paid by him, which amount the corporation offered to set off against the judgment. It also appears that the corporation presented a cross-bill, in which it is alleged that on or about April, 1874, and prior thereto, persons interested in organizing and starting the company, desiring to procure subscriptions to the capital stock thereof to enable it to commence business under the laws of Illinois, amounting to $100,000, and having procured subscriptions of $40,000 or thereabouts, the said Lemon represented and caused to be represented to them, and the then directors of this association, that he could influence and obtain persons of his acquaintance to contribute the balance of capital stock of $100,000, and agreed, in case of his election as secretary of said association, he would contribute thereto fifty shares, to wit, $5000, and procure the subscriptions for the balance of said stock by responsible parties of means; that about the same time, Gerrit L. Hoodless, who was then secretary and a director of this association, and a subscriber for forty shares of stock, offered to resign as secretary and director in case his subscription should be first cancelled, and he be paid certain moneys contributed, paid and advanced by him to promote and aid said organization; that thereupon, on the representations aforesaid of said Lemon, that in case of his election as secretary he would procure said stock to be subscribed for, as aforesaid, the resignation of said Hoodless was accepted by the directors of this association, and his subscription to stock cancelled; that said Lemon was elected secretary in place of said Hoodless, and in consideration thereof said Lemon agreed with the directors acting for the association, that he would contribute and pay into the capital stock of this association the amount of fifty shares of such stock, to-wit, $5000, and in pursuance of said agreement paid to said Hoodless ____ dollars, and also paid some other amounts, in all about $1000, to promote said organization, as contributions to and payments on account of said fifty shares of stock agreed, as aforesaid, to be contributed; that said Lemon never paid any other sum on account of said fifty shares by him agreed to be paid for, and that on account thereof he still owes the association $4000 or thereabouts, and more than the whole amount by him claimed on his said judgment, or otherwise; and the association (complainant here) offers and asks to set-off against said pretended judgment the said amount so agreed to be contributed by Lemon on the stock to the extent necessary to discharge the same, if he is entitled thereto.

The cross-bill further shows that Lemon did not obtain or procure subscriptions to stock as he promised and agreed, or any such subscriptions, but wholly failed so to do, and after remaining as secretary and director with the company till about July 2, 1874, he voluntarily abandoned the company and returned to Iowa, where he has remained ever since, and that in consequence of his breach of his agreements and representations aforesaid, and his failure to procure said subscriptions to stock, and his abandonment of said association, the association and its other promoters and members have been unable to obtain said subscriptions necessary to start business, beyond the $40,000 subscribed, as aforesaid, and has not organized as designed, or commenced the business of insurance.

The cross-bill also alleges Lemon is a non-resident, and out of the jurisdiction of this court, since he left the State, in July, 1874, and that the claim which he pretends to have put in judgment is for moneys and salary claimed to be earned and paid to promote the formation and organization of said association, and rendered and contributed as a promoter of the same to the capital stock thereof as risks and ventures on its success, for which the said Lemon could not become a creditor thereof, trusting its credit and responsibility, but at most only could occupy the place of a subscriber or contributor to the stock of said association, and could claim only a share in the distribution of its assets on dissolution thereof after its debts were paid, and that all moneys contributed or advanced by him have been paid and spent while he was a member, secretary and director of said association, and that the said association has no assets or property from which the said Lemon can recover, or claim to receive the amount of his said judgment.

Reference is made to the answer of the association for a full statement, and prays that the same may be made, so far as applicable, as a part of this cross-bill, and states the hope that Lemon would not attempt to enforce judgment on said association, or its promoters or members, and would cancel the same. The cross-bill prays an answer, and that the pretended judgment may be decreed null and void, but that if it is held valid for any purpose, an account may be taken of the amount, if anything is due on the judgment, and set-off made of the amount unpaid on stock agreed to be taken and contributed and paid by Lemon, and that Lemon be restrained from enforcing his said judgment, or any part thereof, and that it be decreed satisfied and discharged, and for further and other or different relief and process, etc., “and asked and moved that the said cross-bill be filed, and for a rule on the said original complainant, John R. Lemon, to plead, demur or answer to the same; but the court refused to permit said cross-bill to be filed or to make the said rule to answer the same, to which ruling defendants then and there duly excepted.”

Messrs. HERBERT, QUICK & MILLER, for the appellants:

The court erred in not permitting the cross-bill to be filed, and in not ruling the original complainant to answer. The right to file the cross-bill after answer is statutory, and a rule to answer it was the proper course for the court. Rev. Stat. 1874, chap. 22, sec. 30; Jones v. Smith, 14 Ill. 230; Wiley v. Platner, 17 Id. 540; Robins v. Swaine, 68 Id. 200; Beauchamp v. Putnam, 34 Id. 381; Davis v. American and Foreign Christian Union, 100 Id. 313.

The association had a right to a hearing on the cross-bill, and it was error to hear the case without an issue on such bill. Blair v. Reading, 99 Ill. 611. It was error upon the evidence disclosed, even on the answer, not to have allowed to the Prudential Life Association a set-off to the amount of the judgment.

A prior creditor's bill, under the statute, will not lie against an insolvent insurance company, for the reason that a statutory remedy lies. Such a bill will not lie in New York. Morgan v. New York and Albany R. R. Co. 10 Paige, 290; 2 Barbour's Ch. Pr. 157; Sherwood v. Buffalo and New York Central R. R. Co. 12 How. Pr. 136; Corning v. Mohawk Valley Ins. Co. 11 Id. 190; Hunds v. Canandaigua and Niagara Falls R. R. Co. 10 Id. 487; Harrison v. H. R. Q. and M. Co. 11 Id. 33; Bogardus v. Manufacturing Co. 7 N. Y. 147; Mills v. Stewart, 41 Id. 390; Griffith v. Mangum, 73 Id. 611; Rev. Stat. chap. 73, secs. 84-92; Ward v. Farwell, 97 Ill. 593; Chicago Life Ins. Co. v. Auditor, 101 Id. 82.

A creditor, by filing a creditor's bill, merely acquires a lien upon the assets of his debtor existing when the bill is filed, and if the assets consist of accounts due or choses in action, if the debtor himself could not maintain an action for the recovery of the same the creditor can not maintain the bill. Bonte v. Cooper, 90 Ill. 440; Browning v. Bettis, 8 Paige, 568.

So in garnishment, the judgment debtor, in order to hold the garnishee, must be able to maintain a suit at law. Richardson v. Lester, 83 Ill. 55; Peck v. Coalfield Coal Co. 3 Bradw. 624.

Mr. F. W. S. BRAWLEY, for the appellee:

Unpaid subscriptions to capital stock of a corporation constitute a trust fund for the payment of creditors of the corporation. Lamar Ins. Co. v. Moore, 84 Ill. 575; Union Ins. Co. v. Frear Stone Manf. Co. 97 Id. 537; Hatch v. Dana, 101 U. S. 205; Sawyer v. Hoag, 17 Wall. 610; Thompson on Liability of Stockholders, sec. 10, and cases cited.

The liability on an unpaid subscription to capital stock is that of a debtor. Terry v. Anderson, 95 U. S. 628. A court of equity will enforce payment of the subscriptions though no call was made by the board of directors. Hatch v. Dana, 101 U. S. 205; Hickling v. Wilson, 104...