Court Opinion

ID: 7894857
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:51:52.568407+00
Date Added: 2024-06-11T16:32:02.455271
License: Public Domain

Robinson, J.,
delivered the opinion of the Court.
This suit is brought by the appellants, receivers of the Chesapeake Mutual Land and Building Association of Baltimore City, to recover of the appellee, certain unpaid instalments on his subscription to. the capital stock of said company.
Besides the money counts, the declaration alleges, that the defendant agreed to take five shares of the stock of the Association, and to pay therefor in weekly instalments of one dollar per share in each and every week until the whole amount due on said subscription was paid.
To support this count in the declaration, the plaintiffs offered in evidence a by-law of the Association, which provides that il Each member shall pay an entrance fee of fifty cents per share on each share of stock he subscribes for, and a weekly instalment of one dollar per share.”
*471The appellee contends, that the by-law relied on by the appellants was never ratified or confirmed at a general meeting of tbe Association duly called for that purpose, as required by sec. 50, of the Act of 1868, ch. 471, under which the Association was incorporated.
It appears that the by-laws were drawn up by a committee appointed by subscribers to the stock of the proposed Association before its incorporation ; that they were adopted at a meeting of said subscribers held March 16th, 1869, and they were printed — that the certificate of incorporation was acknowledged and recorded on the 6th of April following — that from the time of its incorporation to the time when the appellants were appointed receivers, a period of over five years, the Association was actively engaged in the prosecution of its business, by making contracts for land and leasing and otherwise disposing of the same ; that during all this time it acted under these, and had not in fact any other by-laws ; — that in September, 1871, amendments making important changes in the laws of the corporation were proposed, and afterwards adopted by the directors, and these amendments were submitted to the stockholders at a general meeting, and were by them ratified and approved.
It also appears, that the name of the appellee was entered by the secretary of the Association, in the stock-ledger, for five shares of stock, upon which the appellee paid the weekly instalment of one dollar per share, and also the entrance fee of fifty cents per share ; that at the time of such payment, a book containing the by-laws was delivered to tbe appellee, which being lost, another was substituted in its place, and this one being produced at the trial, contained the receipts of the weekly instalments paid by the appellee, and that in 1874, the appellee subscribed his name to the by-laws, after being told they were the bylaws of the corporation. It also appears, from the time of his subscription up to the time when the appellants *472were appointed receivers, he not only paid the weekly instalments due on his subscription, but also shared the profits earned by the Association.
Under such facts as these, the question is not whether the by-laws were adopted in strict conformity with sec. 50, of the Act of 1868, but whether in a suit by the appellants as receivers, representing the Association and its creditors, to recover the balance due on his subscription, the appellee can rely on such a defence. And we think it is clear both on principle and on authority that he cannot.
He has in every mode and manner recognized and admitted the validity of the by-laws under which the Association acted ; and when upon the faith of such admissions, others have been induced to act, the plainest principles of justice demand that he at least shall not be permitted to question the mode by which they were adopted.
Nor is the second ground of defence relied on in this suit, more tenable. We have said, it is true, that in corporations of this kind, where the amount of the capital stock is fixed, and the number of shares ascertained by the charter, a subscriber is not obliged to pay his subscription unless the whole capital stock has been taken. And for the obvious reason, that it is to be presumed the entire amount thus fixed by the charter is necessary for the successful prosecution of the business for which the company is incorporated, and subscriptions are made upon this implied understanding. And this well settled rule applies to subscriptions before and after the company is chartered.
But we have also said, that this is a condition which a subscriber may waive, and that the waiver may be either express or implied. Thus for instance, where one knowing the whole stock has not been taken, attends the meetings of the company, votes for the expenditure of money, and the purchase of .property, or does other acts from which it may be fairly inferred that he intends to waive the right *473to insist upon the whole capital stock being taken, he will be estopped from setting up such a defence. Hager vs. Cleaveland & Bassett, 36 Md., 491.
Here is a case in which the appellee knew at the time he subscribed for the stock, that the Association was engaged in the prosecution of the business for which it was organized, buying property, and incurring debts and liabilities, and with this knowledge he pays for a period of nearly five years, the weekly instalments on his subscription, and during all this time as a member of the Association, he receives his proportion of the profits earned ; and now when the corporation becomes embarrassed or proves perhaps a failure, he seeks to avoid the payment of his subscription, on the ground that the whole capital stock had not been taken, and this too, in a suit brought by receivers representing the creditors of the Association.
The defence thus relied on, was intended to protect subscribers who in good faith objected to the organization of a company when its capital stock which was necessary to the enterprise, had not in fact been taken, but it was never intended and Courts-will never permit it to be used as an instrument of fraud.
The Court erred therefore in granting defendant’s eleventh prayer and refusing to grant the plaintiffs’ second, fourth and fifth prayers.
The notice prescribed by sec. 65 of the Act of 1868, ch. 471, in reference to assessments or calls on subscriptions, does not apply in this cause, because the by-laws under which the corporation acted, provided that the subscribers should pay a weekly instalment of one dollar on each share.
The question presented by the first bill of exceptions is whether the book containing the proceedings of meetings of members of the proposed Association, prior to its incorporation, was admissible in evidence. The liability of the appellee on his subscription in no manner depended on, *474nor was it in any way affected by these preliminary proceedings, and the evidence was therefore wholly irrelevant and properly rejected. From what we have said it follows that the judgment below must be reversed and a new trial awarded.
(Decided 27th March, 1878.)
Judgment reversed, and neto trial awarded.