Court Opinion

ID: 6989487
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:22:21.8228+00
Date Added: 2024-06-11T16:09:34.235139
License: Public Domain

Moran, J. It does not appear from the record that the Texas Continental Transportation Company was organized under the General Incorporation Act of the State of Illinois, in force July 1, 1872, but the counsel for both parties in their arguments in the briefs on file in this court, discuss the question presented, on the theory that the corporation was formed under said general act. In deciding the case we shall therefore assume that the corporation in question was organized under the General Incorporation Act. Section 25 of said act is as follows: “If any corporation or its authorized agents shall do or refrain from doing any act which shall subject it to a forfeiture of its charter or corporate powers, or shall allow any execution, or decree of any court of record for a payment of money, after demand made by the officer, to be returned ‘ no property found ’ or to remain unsatisfied for not Jess than ten days after such demand, or shall dissolve or cease doing business, leaving debts unpaid, suits in equity may be brought against all persons who were stockholders at the time or liable in any way for the debts of the corporation by joining the corporation in such suit; and each stockholder may be required to pay his pro rata share of such debts or liabilities to the extent of the unpaid portion of his stock, after exhausting the assets of such corporation. And if any stockholder shall not have property enough to satisfy his portion of such debts or liabilities, then the amount shall be divided equally among all the remaining solvent stockholders. And courts of equity shall have full power on good cause shown, to dissolve or close up the business of a corporation or appoint a receiver, ” etc. It will be seen that the section limits the liability of stockholders, when suits in equity are brought against them, jointly with the corporation, to paying their pro rata share of the debts of the corporation, after the assets of the corporation are exhausted. It is plain from the allegations of the bill, that it was framed to reach the remedy provided in the 25th section of the law, and the special prayer for relief is in the words of the act. It is true the bill has a general prayer for relief, and it is also true that under such general prayer any appropriate relief might be granted to which the complainant, by the allegations in his bill and the evidence adduced, shows himself equitably entitled. The relief must be relief which the court has the legal power to grant, however, and the court has no power under such general prayer for relief, to enter a decree subjecting a stockholder in a corporation formed under the General Incorporation Act, to a liability different from or greater than that imposed upon him by the provisions of that act. By sections 8 and 25 of that act, the liability of stockholders in corporations formed under it are defined and limited. Under section 8, by the proceeding in garnishment, stockholders may be compelled to pay to. the garnishing creditor any balance unpaid upon stock owned by them respectively, whether such balance is called in or not. Coalfield Co. v. Peck, 98 Ill. 139. But under section 25, when the proceeding must be by suit in equity, the stockholder’s liability to pay anything on his unpaid stock is deferred until the assets of the corporation are exhausted. It would be inequitable to require the individual stockholders to pay any portion of the liability of the corporation debts nntil the assets of the corporation are ascertained and fully applied, or their insufficiency clearly shown. Harper v. Union Manufacturing Co., 100 Ill. 225. The proceeding involves equities between the stockholders who are defendants, and who have not paid the amount of their subscriptions, and contemplates not merely payment of the debt of one corporation creditor, but the ascertaining the debts and the liabilities of the corporation and the dissolution and closing up of the company. There is a clear distinctii n between the rights of a creditor as against a stockholder in a corporation organized under this general law, and one created by special charter. The cases cited by.counsel for defendant in error, in which creditors of the corporations were permitted to reach, through a creditor’s bill, the balance unpaid on stock of individual stockholders, are in all cases under special charters, where there was a general liability for unpaid stock. Such are the cases of Hickling v. Wilson, 104 Ill. 54, and Hatch v. Dana, 101 U. S. 205. The liability of the stockholder is upon his subscription, and when the incorporation act fixes the measure of that liability and prescribes the method and conditions of its enforcement, the conditions must be observed and the method prescribed must be pursued ; and where vhe law requires the stockholder to pay only his pro rata share of the debts after the assets of the corporation shall have been exhausted, it is error to decree to a creditor, to be applied in satisfaction of his debt, the whole amount that any stockholder may owe upon his stock, without finding that the assets have been exhausted, and that all other stockholders with whom he should pro rate are insolvent. Patterson v. Lynde et al. 112 Ill. 196. The decree of the circuit court in ordering as it did, that the plaintiffs in error should pay to the complainant in the bill the whole amount found due on the stock held by them respectively, without ascertaining under the conditions of section 25 the pro rata that might be required of them, was unauthorized, and must therefore be reversed and the ease remanded. Beversed and remanded.