Court Opinion

ID: 6584317
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:41:05.630637+00
Date Added: 2024-06-11T15:57:24.599019
License: Public Domain

Andrews, C. J.
The defendant subscribed for five hundred shares of the capital stock of the Yale Brick Company, adding to his name the word “trustee.” Nothing has ever been paid on these shares by the defendant or any one else. Afterwards the company was formally organized, and the defendant was chosen one of the directors and its secretary and treasurer; and he has at all times been active in the affairs of the company. This subscription and the organization of the company took place on the 14th day of October, 1892. On the same day the defendant, the other directors of the company acting with him, made, subscribed and swore to a certificate of the organization of the said company, and filed the same in the office of the secretary of this State and with the town clerk of the town of Berlin, and also caused the same to be published in a newspaper in Berlin. In that certificate this subscription is stated to be one of the subscriptions to the capital stock of said company, as indeed it must be, because otherwise the whole of the capital stock is not subscribed for. In his defense the defendant averred that he made the said subscription as the trustee for and with the authority of the said corporation, and that he was not personally liable on the same. The court, on demurrer, held this to be a good defense to the action brought by the plaintiff.
This subscription was made before the corporation was organized. It is a little difficult to see how it could at that time appoint a trustee for any purpose.
But as to the trusteeship of this subscription there is another and still stronger objection. It was not a bona fide subscription. The statute, General Statutes, § 1947, forbids any joint stock corporation to commence business until all its capital stock shall be subscribed for by bona fide subscribers. A bona fide subscriber means a bona fide subscription, that is, a real subscription, one that will in fact bring to the corporation the amount of capital which the subscription denotes, and upon which its creditors and all persons *215dealing with the corporation can rely. Any subscription that will not do this is not a bona fide one.
A corporation has at its organization no property other than the subscriptions to its capital stock. From the nature of things it can have no property of its own separate from the subscriptions. A subscription to its capital stock made by a trustee, if it does not bind the trustee but only the corporation itself, would not be a bona fitde one. Such a subscription could not bring to the corporation any real capital. This subscription was one which the corporation as matter of fact could not have made, because at the time it was not organized so that it could appoint a trustee. And besides, it was a subscription which as matter of law it was forbidden to make. It did not and does not bind the corporation. Crandall v. Lincoln, 52 Conn. 73, 94; Cook on Stock and Stockholders, §§ 199, 251.
Did this subscription then bind the defendant? It is said in 1 Swift’s Digest, side page 330, that “ whenever a person signing a contract makes use of an addition, such as Treasurer of the Jockey Club, Guardian, Executor, or [the title] of any office, civil or military, in which he has no power to bind another, the contract will be binding on himself, and the addition rejected as surplusage.” Where an agent contracts for and on behalf of an irresponsible principal, that is, a principal who has no legal capacity, then the agent is responsible personally. 1 Amer. & Bug. Ency. of Law (2d ed.), 1122. “ It is elementary law that a agent must so contract as to bind his principal, or he will be himself bound.” Hall v. Bradbury, 40 Conn. 32, 37; Pierce v. Johnson, 34 id. 274. It is always presumed that persons intend to do effectually that which they contract; and where there is a conflict of construction, the parties are presumed to adopt that construction most favorable to the performance of their engagement. Therefore where the only way of enforcing a contract entered into by an agent is by making him liable, his liability will be assumed, provided it does not appear that it was intended in the tr’anaavticn that b» ahmld not be liable. Wharton on Agency, § 523; Kelner v. Baxter, L. R. 2 C. P, 174, 183.
*216The defendant, over his own signature as an officer of the said corporation, declared this subscription to be a real one. He emphasized this statement by his oath. He took part in putting this statement so verified on the records of the State in the office of the secretary of state, and on the records of the town of Berlin in the office of the town clerk of that town, and in causing that verified statement to be published in a newspaper. In these ways he invited the attention of the public to this corporation, and declared to all persons who should deal with it that this subscription furnished so much real capital on which they might rely if they should become its creditors. It is stated in the record that the creditors of the corporation did rely on these acts of the defendant, and were induced thereby to deal with the corporation and to become its creditors ; and it also appears that the assets of the corporation — other than this subscription — are insufficient to pay any part of their claims. It seems to this court that the defendant cannot, as against the plaintiff who represents these creditors, be heard to deny that his said subscription is binding upon him. Canfield v. Gregory, 66 Conn. 9. Whether we regard the liability as one resting upon the defendant directly by the subscription, or as one cast upon him by way of estoppel, it makes no difference. In either way, indeed in both ways, he is liable on it. 2 Morawetz on Corporations, § 818.
The case of Russell v. Bristol, 49 Conn. 251, is not an authority in favor of the defendant’s contention. In that case the defendant, Mr. Bristol, had, after the capital stock of the corporation had all been taken, subscribed for some additional stock, affixing to his name the words, “ Treasurer, in trust.” At a later time the organization of the corporation was fully completed. After such complete organization and while the corporation was wholly solvent, it dealt with Mr. Bristol on the basis that he was not the owner of the said shares at all, but that the corporation was itself the owner of them. As between the corporation and Mr. Bristol, such dealing was a ratification of the original subscription and cured any infirmity there was in it. The subscription was then vacated by *217the vote of the directors, and never was included in any return made by the company to the insurance department. All this took place before the corporation had incurred any of the liabilities which existed at the time of its assignment. The case, then, became one where a solvent corporation was the owner of shares of its own stock by way of surplus; the shares standing in the name of a trustee. As the coloration had at that time incurred no liability and had never made any return representing that it had a capital including the amount of these shares, there could be no claim that any person had relied on this subscription in giving credit to the corporation. The receiver had no claim therefore upon Mr. Bristol, the trustee.
The defendant claims that the facts of this case do not show a cause of action against him, for the reason that the Court of Probate had made no order in the premises according to the provision of § 519 of the General Statutes; and he cites the ease of New Haven v. Whitney, 36 Conn. 373. That was a case where the charter of the city of New Haven was under discussion. The charter of a city is an enabling Act, and when in such an Act an authority is given which would not exist except for the Act, and the Act prescribes that a thing shall be done in a particular way, there is an implied prohibition against doing that thing in any other way. Ex-pressio unius, exclusio altering. But when the power to do a thing exists and may be exercised according to the usual methods of law or equity, and the statute is only by way of regulation or enlargement of the power, then there can be no implied prohibition of the power, or to the way it is to be enforced. Section 519 is this kind of a statute. The insolvent law provides that all the property of the debtor shall vest in the trustee, and that the trustee may sue in his own name for choses in action. Hart v. Stone, 30 Conn. 94; Stanton v. Lewis, 26 id. 444. The case of Mann v. Cooke, 20 Conn. *178, *187, was a case in which the receiver of an insolvent corporation sued to recover the unpaid balance of a subscription to the capital stock of the corporation. In deciding that case this court said, by Ch. J. Chotbch ; “ It *218seems now to be generally admitted, that all subscribers to the capital stock of a corporation, which, by its charter, may require or demand payment of the capital subscribed, have incurred a debt, which may be enforced, by any appropriate common law or equitable remedy, and that such remedy is not at all impaired, by the further provision for the forfeiture of the stock ”; citing Hartford and New Haven R. Co. v. Kennedy, 12 Conn. 449; Same v. Boorman, ibid. 530; Ward v. Griswoldville Mfg. Co., 16 id. 593. The statute, now § 519, was passed in the year 1885. The law as stated in the cases just cited, was in force long before that date. The law so stated is not at all impaired by that Act. Litchfield Bank v. Peck, 29 Conn. 384, 388; Buck v. Ross, 68 id. 29. These decisions are in line with what seems to be the law elsewhere: that the assignee of an insolvent corporation may sue in his own name for the unpaid subscriptions to the capital stock. Webster v. Upton, 91 U. S. 65; Hatch v. Dana, 101 id. 205; Thompson on Corporations, § 6469. The statutory remedy is in addition to, not exclusive of, the remedy by the trustee in his own name. Thompson on Corporations, § 6469.
It is further urged on behalf of the defendant, that no action can be maintained against him for the reason that no call has been made by the Court of Probate. The purpose of a call upon the subscribers to the capital stock of a corporation, whether made by the directors of the corporation itself or by the trustee in insolvency, who for this purpose has much the same powers as the directors of the corporation, or by the Court of Probate, is to adjudge that some part or the whole of the unpaid subscription is needed to pay the debts of the corporation, and to give notice to those subscribers who have not paid, of the amount they are to pay and of the time when they are to pay it.
The finding in this case shows that the defendant is the only subscriber to the stock of the Yale Brick Company whose subscription has not been paid in full; and that the plaintiff before the bringing of this action made demand on him for a sum sufficient to pay the indebtedness of the corporation. In strictness, perhaps, he ought to have stated the precise amount needed. Instead of this he asks generally for enough *219to pay the debts. This fairly imported that he adjudged that amount to be necessary to meet the debts and expenses. But the defendant denied all liability whatever and refused to pay anything. He did not find fault with the form or the amount of the call. So far, therefore, as he is concerned, this demand fulfilled the purposes of a call. The defendant having refused to pay anything at any time, is not in a position to avail himself of any such objection. His refusal to comply with the call made upon him by the plaintiff was not because the amount or the time of payment was not stated, but on the ground that he was not liable at any time, or for any amount.
The plaintiff represents the creditors of the insolvent corporation. His duty is to pay these creditors whatever the corporation owed to them, so far as its assets will enable him to do so after paying the expenses of the insolvency proceedings. He cannot collect of a delinquent subscriber to its stock any more than is needed for this purpose. The defendant claims that what this amount is should be specially set out in the complaint. But that is a matter to be proved. A plaintiff is never obliged to prove more than the substance of his complaint. In this case the plaintiff claims to recover the whole amount of the defendant’s unpaid subscription. Under that claim he may recover so much (not exceeding the whole) as the proof shows is needed to pay the creditors in full, together with the expenses of the settlement.
We think there was error in sustaining the defendant’s demurrer to the amended reply to the second defense.' That demurrer should have been overruled. The matters set forth by the plaintiff in the complaint and in the reply to the second defense, if proved, would entitle the plaintiff to recover. For the purpose of proving these matters the inventory and the commissioners’ report would be admissible; Bassett v. McKenna, 52 Conn. 437; as well as the evidence offered by the plaintiff to prove that the assets in his hands were not sufficient to pay the expenses of the settlement of the estate.
There is error and a new trial is granted.
In this opinion the other judges concurred.