Court Opinion

ID: 3231039
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:06:33.158175+00
Date Added: 2024-06-11T09:22:21.795001
License: Public Domain

Section 7347 of the Code of 1923 provides that a judgment creditor of a corporation, having an execution returned, "no property found," may, by *Page 263 
bill in equity in the circuit court, subject to the payment of his judgment the unpaid subscription of one or more stockholders in such corporation, and section 47 of the Bankruptcy Act (U.S. Comp. St. § 9631), vests the trustee with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied. Moreover, the bill avers the bankruptcy and insolvency of the corporation and that the assets constitute a trust fund for the payment of creditors which may be marshalled and administered in equity. Section 7062 of the Code of 1923; Hundley v. Hewett, 195 Ala. 647,71 So. 419. Again, as we understand from the averments of paragraph 9 of the bill of complaint, all of the respondents occupy the shoes of subscribers and stockholders, as it charges:
"That the respective parties named in this paragraph who executed the respective notes in amount and tenor as in this paragraph set forth were either original subscribers to the capital stock of said corporation, the Walker Consolidated Petroleum Company, and executed said notes in payment of stock for which they originally subscribed, or that they purchased the stock of said company from the original subscribers to the capital stock of said corporation and executed their notes in amount and tenor as in this paragraph set forth direct to said corporation, and were accepted by said corporation as stockholders, the stock being issued direct to them and pledged by them as security for said notes."
This rendered all of them subscribers to the capital stock with equal rights and subject to the same liability. Cook on Corporations, § 52; Planters'  Merchants' Co. v. Webb,144 Ala. 666, 39 So. 562. Nor was the bill multifarious. Belleview Co. v. Faulks, 198 Ala. 579, 73 So. 927; section 6526, Code 1923.
The bill of complaint places the domicile of the corporation in the state of Texas, and, in fact, invokes the Texas law as controlling the transaction, and nowhere intimates that it was an Alabama transaction, so as to require an averment of the constitutional and statutory requirement as to foreign corporations before doing business in this state.
The amended bill concedes that the issue of the stock in question, it not being for money paid, labor done, or property actually received, was violative of the laws of Texas, and payment at the instance of the corporation would be nonenforceable, but under the decisions of the highest court of Texas said notes are enforceable by the trustee of the insolvent corporation for the benefit of its creditors. The averment does not classify the creditors, and upon demurrer as for want of equity as to those who acquired the stock subsequent to the existence of the indebtedness, the bill must be construed as meaning all creditors, and we find no ground of demurrer specifically pointing out the fact that the bill shows that some of the stock was acquired subsequent to the indebtedness. But be this as it may, the Texas cases cited (Thomson v. First State Bank, 109 Tex. 419, 211 S.W. 977; Smoot v. Perkins [Tex. Civ. App.] 195 S.W. 988; Washer v. Suyer, 109 Tex. 398,211 S.W. 987, 4 A.L.R. 1320), seem to support the averment of the bill and make no distinction between subscribers subsequent and anterior to the creation of the indebtedness by the corporation. It is urged in brief of counsel for one of the appellees, Jefferson, that the case of Thompson v. First State Bank, supra, does make such a distinction, but a close consideration of this case does not reveal the distinction. On the other hand, the opinion recites:
"Creditors dealing with a corporation have the right to assume that its capital has been or will be paid in accordance with law. It constitutes a warrant for the extension of credit. It, in effect, stands as a pledge for the security of the corporation's debts. Upon the corporation's insolvency, it becomes a trust fund for the protection of creditors."
The Alabama cases cited by one of the appellees, Birmingham News v. Collier, 212 Ala. 665, 103 So. 839, and Diamond Rubber Co. v. Fourth National Bank, 171 Ala. 420, 55 So. 100, dealt with our registration statute, and the question now considered was not involved. Moreover, in dealing with a Texas transaction, we must be controlled by the Texas decisions.
The trial court erred in sustaining the demurrer to and dismissing the amended or substituted bill.
This cause was submitted on motion and merits. The motion was by A. A. Penell and others named in the motion to dismiss the appeal as to them, and counsel for the appellant concedes that the motion should be granted. The appeal is dismissed as to said appellees, but the decree of the circuit court is reversed and the cause is remanded as to the other appellees.
Reversed and remanded.
SAYRE, MILLER, and BOULDIN, JJ., concur.
                              On Rehearing.