Wadsworth v. Laurie

• Decision Date: 10 November 1896
• Citation: 45 N.E. 435,164 Ill. 42
• Parties: WADSWORTH et al. v. LAURIE.
• Court: Illinois Supreme Court

164 Ill. 42

45 N.E. 435

WADSWORTH et al.

v.LAURIE.

Supreme Court of Illinois.

Nov. 10, 1896.

Appeal from appellate court, Third district.

Action by George W. Laurie against Archibald C. Wadsworth and others. From a judgment of the appellate court (63 Ill. App. 507) affirming the judgment of the trial court, defendants appeal. Affirmed.Morrison & Worthington and Richard Yates, for appellants.

Owne P. Thompson and J. A. Bellatti, for appellee.

PER CURIAM.

After a careful consideration of this case we have concluded to adopt the two opinions of the appellate court rendered in different branches of the case, and another submitted with it. They are as follows:

‘These cases all stand upon substantially the same ground. A joint-stock company, known as the Central Illinois Banking and Savings Association, was organized December 14, 1867, with a capital stock of $100,000, divided into one thousand shares of $100 each, for the purpose of transacting a general banking business. The articles of association provided for the election of a board of thirteen directors, who were to elect a president, vice president, and a cashier, with various other provisions in regard to the mode of conducting the business, among which was one to the effect that stock in the association should be assignable and transferable only on the books with the consent of the board of directors; and, in case of refusal by the president or cashier to assent to such transfer of stock, the holder should be entitled to require the association to take it at a price to be ascertained in a specified way. The association was to continue for twenty years, and started with some twenty-eight members. Certificates of shares were issued in the usual form, and from time to time these were transferred [canceled], the stock being sold to other persons, or to the company, until, on the 25th day of August, 1893, when the bank suspended, all the stock outstanding was held by the persons who were named as defendants in the cases now under consideration. On that day the present appellants filed a bill in chancery in the circuit court, in which they named themselves and the others who were made defendants herein as the sole and only holders and owners of stock in said association, and obtained an order placing the assets of the concern in the hands of a receiver. The present actions were severally brought by depositors to recover the balances due them when the bank suspended. The only defense made at the trial was on the pleas of nonjoinder, in which it was averred that the various persons who had signed the articles of association were jointly liable, and should have been joined as defendants. This theory of nonjoinder rests upon the assumed fact that none of the parties named in the pleas had transferred their stock in the manner provided by the articles of association. They had merely sold at private sale without notice to any one, and without the consent of board of directors, or a transfer on the books of the association; yet in every instance when the sale was made to other persons the old certificates were assigned and canceled, and new ones issued instead; and when the bank bought, the certificates were merely assigned and canceled. In a word, the mode prescribed by the articles for such transfer was not observed, though the bank in every instance recognized the transfer as valid and dealt with the assignee without objection. Some of these transfers were made before the plaintiffs began doing business with the bank, and some after. As far back as 1878, the bank bought in some of the stock, and continued to do so until it had acquired some $40,000 of individual holdings. Most, if not all, of the transfers since the accounts of the present plaintiffs began were to the bank, the last one having been made on the 27th day of May, 1892. One of the persons named in the pleas, Mrs. Eliza C. Adams, held no stock in her own name, but 128shares were held by L. W. Brown, one of the defendants, as trustee for her; the certificates being issued to Brown as trustee, and he having executed a declaration of trust to that effect. Conceding that the transfers were not strictly according to the form and mode prescribed by the articles of association, yet, if they were recognized and acquiesced in by the bank,-i. e. those stockholders remaining, who exercised the functions of the association,-they cannot be heard to say as a matter of defense, when sued upon the obligations of the bank, that these stockholders who had so transferred must be joined as defendants. Whatever might be the rights of creditors, the effect of such transfers, as between the parties thereto, was to substitute the assignees for the assignors, with a corresponding transfer and release of liability in every instance. When the bank issued a new certificate of stock, it accepted the person named therein for all purposes instead of the former holder, and when the bank itself bought the stock it assumed all the burdens of the former holder. Such was the necessary lagal implication; otherwise the transaction was mere child's play. Cases cited in the briefs where creditors sought and were permitted to hold as partners stockholders who had not withdrawn according to the articles of association, are not in point. That is not the question here, but whether those who remain as stockholders can compel the creditors to join as co-defendants other former stockholders who have retired with their consent, although not in the exact manner pointed out by the articles. Those articles were for the benefit and protection of the members of the association in the first instance, and certainly it is competent for the association and its members, as between themselves, to waive any of the provisions thereof; and when they have done so they are estopped to set up the irregularity. This view will dispose of the pleas of nonjoinder as to all the...