Court Opinion

ID: 6999709
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:39:49.898335+00
Date Added: 2024-06-11T16:09:53.318103
License: Public Domain

Mr. Justice Sears delivered the opinion of the court. Section 18 of the Corporation Act provides as follows: “ If an)?" person or persons being, or pretending to be, an officer or agent, or board of directors, of any stock corporation, or pretended stock corporation, shall assume to exercise corporate powers, or use the name of any such corporation, or pretended corporation, without complying with the provisions of this act, (or) before all stock named in the articles of incorporation shall be subscribed in good faith, then they shall be jointly and severally liable -for all debts and liabilities made by them, and contracted in the name of such corporation, or pretended corporation.’’ The word “ or ’’ included above in brackets, is not written in as a part of the statute. But the Supreme Court have so construed section 18, as to make it operate as if the word “ or ” had been so written in as a part of it. Loverin v. McLaughlin, 161 Ill. 417. The statute as so construed operates, therefore, to make directors of a corporation personally liable for all debts and liabilities made by them, and contracted in the name of the corporation before all the capital stock named in the articles of incorporation, has been .subscribed in good faith. The question presented.here is whether upon the facts of this case all the capital stock of the Dubuque Building Company named in its articles of incorporation had been subr scribed in good faith when appellees incurred the debt and liability to appellant in the name of that corporation. It is admitted that no such bona fide subscription had been made by the ostensible subscribers who signed their names to the subscription list. But it is contended that ■they were but acting for appellees and others, the contractors, and that the contractors were in reality the bona fide subscribers. To this we can not assent. In order to .constitute them such bona fide subscribers, it was essential that they should have intended to have taken and paid for all the capital stock, that they should have obligated themselves to so do,'and that, their intention and obligation in .this behalf should have been published to the world by their signatures to the subscription list. In no one of these particulars were these requisites complied with. They did intend to take all the capital stock, but it is conclusively established by testimony of at least one of their number, which is practically uncontradicted, that .they did no.t intend to pay for all of such.stock. Neither did they obligate themselves to pay any subscription beyond such amount as the labor and material furnished might cover. And their names as subscribers, indicating to the public their undertaking and obligation, were not published as subscribers to the capital stock. If they had not chosen to come forward and so declare themselv.es, the public could not have learned that they were obligated as subscribers to any extent whatever;. and now that they do so declare themselves, it is learned that they are not so obligated to the extent of the entire amount of the capital sto.ck .named, in the articles of incorporation. There were, then, no bona fide subscribers to. all of the capital stock when this debt was incurred by appellees , in the name of the corporation. Therefore, they are liable under the provision of section 18 above set forth. ■ But it is argued that the full amount of stock subscription has been paid, and that such payment is conclusive of the lona fides of the subscribers. It appearing that the contractors were not subscribers at all, and it being conceded that they who did subscribe were not Iona fide subscribers,'it is difficult to perceive how any fact, however well established, can be said to'conclusively show that which the parties, by their counsel, admit to be untrue. However, the question is obviated by the fact that no such -complete payment was ever made. The amounts, paid into the corporation, which it is contended constitute such payment in full, are $53,000 received from Bradley, being the unpaid part of the purchase price of. the land, and the $45,800 of labor and materials contributed by the contractors, and $14 actually paid in cash. These sums do not, together, makeup the $100,000 subscribed. The amounts received for rent and for bonds issued are not claimed to so apply. Hor can the $2,000 deducted by Bradley from $55,000, which he had agreed to-pay, apply, nor can any part of the money paid by him be held to have been paid by the subscribers upon their stock subscription. This $53,000 was not even absolutely an asset of the corporation; for if the Carolina Building Company redeemed, that amount inured to the benefit of that company. It is argued somewhat strenuously, that the method of organizing corporations here-attempted, is a method sanctioned by custom and practice. Whether customary or not, it is a method which, under the provision of the statute and its interpretation by.our Supreme Court, imposes a liability upon those thus assuming to act as directors. - In Loverin v. McLaughlin, supra, the court said of the statute in question: “ The intention was to secure the public, dealing Avith corporations, against the .evils of illegal or incomplete organization, and fictitious or bogus subscriptions,, by placing upon the managing officers or directors the responsibility of seeing to it, that the provisions of the incorporation act shall be fully complied with, and that the subscriptions to the capita] stock shall be made in good faith. * * * The capital stock is not required to be paid in cash, but only to be subscribed. What is to prevent the making of subscriptions by impecunious and irresponsible parties ? No provision is made for examination as to the financial ability of the subscribers. But there is provision made in section 18 for careful investigation by the managing officers and directors. They are "required to see to it. that all stock named in the articles of incorporation shall be subscribed in good faith.” The judgment of the Superior Court is reversed, and judgment is entered here for $660, the amount which it is stipulated is due to appellant. Reversed, and judgment here.