Court Opinion

ID: 5565530
Source: CourtListenerOpinion
Date Created: 2022-01-11 00:59:27.293415+00
Date Added: 2024-06-11T08:35:35.994525
License: Public Domain

Lumpkin, Justice.
1. It is well settled law that unpaid stock subscriptions are assets of an insolvent corporation, which, when properly reached, may be applied for the benefit of its creditors. It is primarily the duty of the proper officers of the corporation to compel, for this purpose, payment of such unpaid subscriptions; but if they fail or refuse to call for and collect the same, a court of equity, by an appropriate proceeding, will enforce such collection, and properly apply the proceeds thereof to the claims of the creditors. To such a proceeding, however, the corporation itself is a proper and necessary party.
The above propositions are so obviously sound, and so generally recognized as correct, it is hardly necessary to support them with authority. We have before us, however, two cases directly in point, which we will cite: Wetherbee v. Baker et al., 35 N. J. Eq. 501; First National Bank of Hannibal v. Smith et al. (Mass.), 6 Fed. Rep. 215.
One reason, among others, why the corporation is a necessary party, is the fact that it has an undoubted right to be heard upon the question as to whether or *627not there is a necessity for collecting the unpaid stock subscriptions, and if so, as to what disposition should be made of the same. The equities existing between the corporation and its stockholders who have not fully paid for their stock are involved, and these equities cannot be adjusted without haying the corporation before the court, so that it can be precluded by the judgment or decree rendered. Otherwise, if the' creditoi’s of a corporation were to compel payment of unpaid subscriptions from its stockholders without making the corporation a party, there would be apparently nothing to prevent the corporation from again compelling payment to itself by these same stockholders, as it would not be bound by a judgment or decree rendered in a case in wffiich it had not been heard.
A proceeding of the kind above mentioned is, so far as the corporation is concerned, a pi’oceeding in personam; and therefore, in order to give the court jurisdiction for the purpose indicated, actual service is essential. In the case of a foreign corporation which has no office, officer, agent or place of business in this State, such jui’isdiction cannot be obtained by merely serving the corporation by publication. This doctrine is supported by the principle announced in Pennoyer v. Neff, 95 U. S. 714, in which it was held that a personal judgment, rendered by a State court against a non-resident of the State, in an action upon a money demand, was without validity, where the defendant was served by publication, but upon whom no personal service of process within that State was made, and who did not appear.
2. Another object of the petition filed in the present case was to compel some of the stockholders of the corporation who resided in this State to surrender certain bonds and stocks of the Chattanooga, Nome and Columbus Nailroad Company, without further description of the same, and which the petition, on mere information and *628belief, charged that tbe Nome & Carrollton Construction Company had, without consideration, delivered to these stockholders. The theory of the petition was, that these securities really belonged to the latter company, and should be subject to the payment of its debts. In so far as the relief thus sought is concerned, the proceeding is one quasi in rem, there being, for the reasons already stated, no jurisdiction over the construction company giving the petition any standing in court as a proceeding in personam. Had the petitioners endeavored to reach these alleged assets of the construction company by attachment and levy, it would have been necessary to have the assets seized by the levying officer before the court would have jurisdiction to render a judgment; and in order to have the levy made, it would be incumbent upon the plaintiffs to locate and identify the property so that the same could be pointed out to the sheriff'. This being an effort to proceed by petition against the stocks and bonds as specific assets of the foreign corporation, and it being in the nature of a proceeding in rem, we think the description given of the stocks and bonds entirely insufficient. It would be impossible, under such a description, to identify and seize them. We think the jurisdiction of the court to make any adjudication or decree as to these assets, in a case of this kind, depends upon an actual seizure lawfully made before, or psnding, the action. Otherwise the plaintiffs, by a mere fishing petition, might secure a substantial right to obtain which the remedy by attachment and levy would seem to be amply sufficient if they could identify and point out the property sought to be reached and appropriated to their claims. The fact that they cannot do this may make the remedy by attachment and levy unavailable; but even if this be so, it affords no reason for placing them upon better ground merely by going into equity. Had they begun by attachment, and caused garnishments to *629be served on the stockholders who, according to their allegations, were holding property really belonging to the corporation, the question presented would be different.
8. We do not think the prayer that each of the stockholders who was made a party defendant to the action might be compelled to answer whether, at any time, he received from the corporation any bonds or stocks, and for the appointment of a receiver to sue for and realize their value for the benefit of the complaining creditors, aided the jurisdiction. In order to authorize the granting of the relief sought by the petition so far as these stocks and bonds are concerned, it was necessary for the corporation to have been served in such a way as to give the court jurisdiction over it in personam, and as this could not be done by publication, we are at a loss to perceive how, by a mere prayer for discovery against some of the stockholders, the plaintiffs could be put on any better footing, so far as the question of jurisdiction is concerned. The jurisdiction depends, not upon the prayers and allegations of the petition, but upon the fact of service.
Besides, the prayer for discovery hardly amounted to a proper compliance with the requirements of section 4176 of the code, which declares that when discovery is sought, not only shall it be specially prayed, but also that interrogatories regularly numbered shall be embodied in the petition as to every point on which discovery is sought, and the names of the defendants stated from whom answers under oath or affirmation are required. Judgment reversed.'