Court Opinion

ID: 6994451
Source: CourtListenerOpinion
Date Created: 2022-07-24 03:30:46.336416+00
Date Added: 2024-06-11T16:09:43.658420
License: Public Domain

Opiniost op the Court, Cartwright, J. This suit was brought by appellant against appellee to recover from him upon an alleged subscription for one hundred shares of stock of appellant. The declaration set out a contract of subscription, an assessment by the Circuit Court of Cook County, Illinois, in a proceeding in that court, against the plaintiff, of $8.75 on each share of stock not fully paid for, and a deniand from defendant of the amount so assessed before bringing suit. The issues upon which the case was tried were made by pleas of the general issue, sworn to, and the statute of limitations of sixteen years. Plaintiff proved that defendant signed a contract of subscription for one hundred shares of the capital stock of plaintiff, contained in a subscription book prepared for numerous subscriptions, and ruled in columns for names and residences of subscribers, dates of subscriptions and numbers of shares, and delivered the same to the agent of plaintiff soliciting subscriptions. The subscription appeared to have been erased with pen and ink, and it appeared that about two weeks after the subscription was made, and after eight or ten other persons had subscribed for shares in the same book, following such subscription of defendant, he obtained from the agent the book and made the erasure. The book was then returned to the agent and passed to plaintiff, where it remained until a receiver was appointed, who took and has retained possession of it. The court permitted defendant, against the objection of plaintiff, to testify that the agent soliciting subscriptions applied to defendant to subscribe for stock, and after urging him to put his name down so that the agent could get a start and go to work in that town, it was orally agreed that defendant should have the privilege of afterward erasing his name, if he did not want the stock, and that the erasure was made in pursuance of such agreement. The defendant ivas a banker, and the influence of his example would doubtless be great in obtaining other subscriptions. The agent, while procuring subscriptions, made the bank a sort of headquarters, and, about the time of defendant’s subscribing, arranged with him to act as agent in collecting assessments from the other subscribers, which he afterward did. The subscription being offered in evidence, together with the decree making the assessment and the demand, the court excluded the subscription and assessment, and admitted the demand. Thereupon the court directed the jury to return a verdict for defendant, which was done, and judgment was entered against plaintiff for costs. We think that the action of the court was wrong. Upon the execution of contracts of subscription for stock mutual rights arise between the subscribers in their relation to each other, by virtue of which they are to reap the benefits or share the burdens of the enterprise. By his subscription, made for the purpose of giving the agent a start and enabling him to procure other, subscriptions, the defendant held himself out as a stockholder, and authorized the agent to so represent him. The burdens of other stockholders would be increased by the withdrawal of his subscription, and the alleged secret arrangement for so doing ivas a fraud on them, of which defendant could not be permitted to avail himself. In Melvin v. Lamar Ins. Co., 80 Ill. 446, where there was an agreement for such a withdrawal, the court said : “ All subscriptions are presumably upon the same basis, and all shares entitled to the same benefits, and subject to the same burdens. In the subscription of each person, every other subscriber has a direct interest. There purported here to' have been a large amount of stock taken, whereas, in fact, there was really no stock taken—the issue of the shares to Cushman and Hardin being coupled with the right on their part to surrender them, and take back their money. Such a private arrangement with an individual subscriber, although it may not be intended, is, in law, a fraud upon the other subscribers, and such agreement will be disregarded, and the party be held bound to all the responsibilities of a bona fide subscriber. This is the doctrine, as we regard, abundantly established by judicial decisions.” The court there cite and comment on the cases of Blodgett v. Morrill, 20 Vt. 509; White Mountain R. R. Co. v. Eastman, 34 N. H. 124; Robinson v. Pittsburgh and Connellsville R. R. Co., 32 Penn. St. 334; Graff v. Pittsburgh and Steubenville R. R. Co., 31 Penn. St, 489; Stanhope’s case, 1 Law Reports; 1 Chancery Appeals, 161; Minor v. The Bank of Alexandria, 1 Pet, 65; and other cases where the same doctrines are announced. In Jewell v. Rock River Paper Co., 101 Ill. 57, it is said to be well kno vvn, that in becoming a party to a stock subscription one is generally controlled, in a large degree, by the character of those who are, or who are expected to be identified with it, and it is held, that any artifice or trick, tending to mislead a subscriber in this respect, would be highly reprehensible in morals, as well as a legal fraud, and that to permit a subscriber to be exonerated by private understandings with the subscription agent, would be to sanction a palpable fraud upon creditors and other stockholders. In Corwith v. Culver, 69 Ill. 502, it was held that a secret condition attached to a subscription would be a fraud upon the other subscribers, and the subscription should be enforced without regard to it. See also Foy v. Blackstone, 31 Ill. 538; G. & S. W. R. R. Co. v. Ennor, 116 Ill. 55. The subscription, of the defendant was unconditional in its terms, and there was no notice to other subscribers that he had a privilege of withdrawal. Each other subscriber had a direct interest in his subscription, and a right to have it remain as it was when such other subscriber saw it, for the purpose of bearing future burdens, for which the assessment has since been made. A defense consisting merely of a fraud against those rights should not prevail. 1 Morawetz on Private Corporations, Sec. 303. It was argued that the subscription Avas not delivered to the plaintiff until after the erasure, and therefore Avas neAer an executed contract of subscription, and this upon the ground that it remained in the hands of the subscription agent until after the erasure. The evidence shows that he Avas the agent of the plaintiff, to solicit and receiA^e subscriptions to stock, and the delivery to him AAas a deliAery to plaintiff. Thé fact that he consented to and participated in the attempted fraud, by returning the book for the purpose of erasure, can make no difference. It is also contended that it Avas incumbent on plaintiff to prove that at the time defendant’s subscription Avas made, it had stock to dispose of AAdiich might be subscribed for, and that the presumption under its charter was that it had not, and therefore there was no consideration for the subscription. The question of AAant of consideration was not made an issue by the pleadings, and Avas not before the court. A contract of subscription like this has been held to be a promissory note. White v. Smith, 77 Ill. 351; Goshen Turnpike Co. v. Hurtin, 9 Johns. 217. A want of consideration should have been pleaded, if it Avas sought to raise that question. The judgment will be reversed and the cause remanded.