Rehbein v. Rahr

• Decision Date: 26 February 1901
• Citation: 85 N.W. 315,109 Wis. 136
• Parties: REHBEIN ET AL. v. RAHR ET AL.
• Court: Wisconsin Supreme Court

109 Wis. 136

85 N.W. 315

REHBEIN ET AL.

v.RAHR ET AL.

Supreme Court of Wisconsin.

Feb. 26, 1901.

Appeal from circuit court, Brown county; Saul D. Hastings, Jr., Judge.

Action by A. M. Rehbein and others against William Rahr and others. From a judgment in favor of defendants, plaintiffs appeal. Reversed.

The T. C. Shove Company, a state banking corporation, having assigned April 12, 1892, plaintiffs, being creditors of said bank to the extent of $2,800 out of an aggregate of about $485,000, brought suit against defendants, nominally impleading with them the corporation and the other stockholders thereof, who, however, were not served with process, they being alleged to be insolvent. The action was brought by plaintiffs for the benefit of the creditors of said corporation, and to enforce the statutory liability of the defendants Rahr, under subsection 47, § 2024, Rev. St. 1898, for an additional amount equal to the par value of the stock claimed to have been held by them. It appeared that in 1884, preliminary to the organization of the Shove Bank by T. C. Shove, theretofore a private banker, these defendants, with their brother, Max Rahr, constituted a business partnership under the name of William Rahr's Sons; that Shove spoke to William Rahr about his firm becoming a stockholder for 25 shares in the proposed banking corporation; that William, after talking with Reinhardt, expressed his own and Reinhardt's approval of such proposition, and they, at the request of Shove, signed their names to a certificate of incorporation under the bank incorporation statute (now section 2023a), with the understanding, as found by the court, that such signature was only for the purpose of performing their individual part towards constituting the firm of William Rahr's Sons a stockholder, and that, in order to bind the firm, the other member was to subscribe and acknowledge, to accomplish which blanks were left for the name of Max Rahr. The court further found that there was no intent or understanding on the part of any one that William Rahr or Reinhardt Rahr should, individually or jointly, become contracting parties by virtue of their signatures. Max, on being informed of what they had done, did not approve, and thereupon, a day or two after their signatures had been affixed, William notified Shove, who held the paper, that they had reconsidered, and declined and refused to become stockholders. All this was nearly a month before the papers were filed with the register of deeds to create the corporation. Thereafter, on June 3, 1884, Shove, notwithstanding said notification, did file the certificate in question bearing the names of William Rahr and Reinhardt Rahr, and specifying among the list of stockholders “William Rahr's Sons, of Manitowoc, Wis., holds 25 shares.” Subsequently, about July 1, 1884. Shove brought and tendered to William Rahr a certificate of stock for 25 shares. Rahr refused, saying that the firm had declined to become a stockholder, and would not take it, and persisted in such refusal, although Shove offered to accept the note of the firm for this amount, whereupon Shove took the certificate of stock away. It appears that it was never destroyed, and that the stub in the stock book continued to show certificate No. 16, 25 shares, in the name of William Rahr's Sons, although it did not show any signature to the receipt therefor printed on the stub. Thence onward the officers of the bank continued, in their reports to the state treasurer, to include William Rahr's Sons among the list of stockholders, but of none of such facts had the respondents any knowledge. It does not appear that lists of stockholders were at any time after the incorporation filed with the register of deeds. The insufficiency of the general assets of the bank to pay more than about 29 per cent. of its debts was found. There was evidence that most of the plaintiffs had newspaper information at the time of the incorporation of the bank in 1884 that William Rahr's Sons were stockholders, and plaintiff Stolze had seen the reports of the state treasurer from time to time thereafter containing their names, and had examined the record of certificate for incorporation in the register's office. The court found that neither William Rahr, nor Reinhardt, nor both of them, were by the plaintiffs supposed to be holders or owners of any of the capital stock of said bank. There was no evidence as to whether any other creditors had knowledge or information, before the assignment, of any connection of respondents with the bank. The court found as a fact that at none of the times involved did the respondents William Rahr or Reinhardt Rahr, either jointly or severally, own or hold any of the capital stock of the insolvent banking company. Judgment was entered dismissing the complaint, from which the plaintiffs appeal.Timlin, Glicksman & Conway, for appellants.

Nash & Nash (F. C. Winkler, of counsel), for respondents.

DODGE, J. (after stating the facts).

The liability sought to be enforced in this action has been subject to many decisions in this court, the result of which is that it is strictly and distinctively contractual, but contractual not because of express agreement, but because of the statute (section 2024 subsec. 47): “The stockholders in every corporation or associationorganized under the provisions of this act shall be individually responsible to the amount of their respective share or shares of stock for all its indebtedness and liabilities of every kind.” Every individual who brings himself within its terms must be held to have contracted and agreed that he will pay all liabilities under which the bank may at any time labor while he continues that relation, to an amount, however, not exceeding the par value of his stock. The contract is said to be between him and each of the creditors. By reason, however, of the fact that all creditors have an equal right to share in that liability, and that each stockholder has a right that every other shall contribute to defray the aggregate thereof, it has been held that the proper method of enforcement is not through a suit at law by one of such creditors against one or more of such stockholders, but by all creditors against all stockholders who can be brought within the jurisdiction, together with the corporation, as defendants. Coleman v. White, 14 Wis. 700;Finney v. Guy, 106 Wis. 256, 82 N. W. 595, 49 L. R. A. 486;Bank v. Benson, 106 Wis. 624, 82 N. W. 604. Since this contract is implied from the statute, its scope is limited thereby. That statute imposes the liability upon stockholders, and no others. The primary question, therefore,--and, indeed, that most litigated in the present case,--is, were the respondents stockholders of the defendant corporation? The circuit court evidently faced exactly this proposition, and held that the respondents never became stockholders, predicating his conclusion on one specific finding of fact, namely, that they did not execute the certificate of incorporation. True, they signed their names to it, but he found as fact that the signature was preliminary only, and understood by all parties to be as if not done until consummated by the assent and signature of the third member of the firm of William Rahr's Sons, Max Rahr. Assuming the facts of the transaction to be as found by the court, the first and vital question is whether his conclusion of nonstockholding by these defendants may lawfully be drawn therefrom, notwithstanding the fact that by the filing of the paper bearing their signatures they were apparently shareholders. It must be conceded that the general rule is perfectly well settled by the decisions of this state that a document which requires delivery to be effectual is wholly ineffectual unless voluntary delivery thereof be made; that otherwise such paper never comes into existence as a legal instrument. This was decided as early as Everts v. Agnes, 4 Wis. 343, and has been reiterated in Railroad Co. v. Palmer, 19 Wis. 574;Walker v. Ebert, 29 Wis. 194; Kellogg v. Steiner, Id. 626; Tisher v. Beckwith, 30 Wis. 55; Andrews v. Thayer, Id. 228; Chipman v. Tucker, 38 Wis. 43;Hillsdale College v. Thomas, 40 Wis. 661,--most of which cases deal with the situation where the signer of a paper has left it in the hands of a depositary to be delivered only on certain conditions. If the paper be delivered contrary to those conditions, it is of no force or effect, never comes into existence as against the signer, and therefore no rights under the same can be acquired by any one, however innocent, or for value, unless the signer's conduct is so characterized by negligence as to estop him against an innocent holder from denying responsibility upon the paper. The deposit with a reasonably responsible person as a custodian, to deliver only on certain conditions, is held not negligent. Everts v. Agnes, supra. Chief Justice Dixon said, in Walker v. Ebert, supra (page 197): “The inquiry in such cases goes back of all questions of negotiability, or of the transfer of the supposed paper to a purchaser for value, before maturity, and without notice. It challenges the origin or existence of the paper itself; and the proposition is to show that it is not in law or in fact what it purports to be, namely, the promissory note of the supposed maker.” These remarks were held applicable to a mortgage delivered contrary to instructions, recorded, and transferred for value to an innocent holder. Chipman v. Tucker, supra. These cases fully recognize the distinction between an acquisition of possession which the signer has never authorized or assented to, and the inducing of the signer to make or assent to a delivery by fraud going to the motives moving such assent. In the latter case the paper becomes effectual as a legal document, subject to be defeated by proof of the fraud, unless legal rights of innocent holders for value have intervened; but in the former it is...