Court Opinion

ID: 8795380
Source: CourtListenerOpinion
Date Created: 2022-11-26 14:08:12.858877+00
Date Added: 2024-06-11T17:03:35.928256
License: Public Domain

WALKER, Circuit Judge
(after stating the facts as above). [1] We are not of opinion that the court was in error in overruling the above-mentioned demurrer. The bill to which it was interposed was auxiliary to the original suit in which, by means of a receivership, the court had acquired possession of the assets of the World Publishing Company, Limited, for the purpose of applying them to the payment of its debts. This enabled it to cause a debtor to that corporation who was within reach of its process to be brought into the original cause, to the end that his debt might be ascertained and payment coerced. It was for the court, in its discretion, to decide whether it would determine for itself all claims of the corporation whose estate it was administering, or would allow them to be litigated elsewhere. It was within its power to hear and determine all controversies regarding such claims, at least in so far as it could acquire jurisdiction of the persons of those who were parties to such controversies, though the questions thus collaterally involved were of a purely legal nature. White v. Ewing, 159 U. S. 36, 15 Sup. Ct. 1018, 40 L. Ed. 67; Porter v. Sabin, 149 U. S. 473, 13 Sup. Ct. 1008, 37 L. Ed. 815; Bottom v. National Ry. Building & Loan Ass’n (C. C.) 123 Fed. 744; Peck v. Elliott, 79 Fed. 10, 24 C. C. A. 425, 38 L. R. A. 616; Ross-Meehan Brake Shoe F. Co. v. Southern Malleable Iron Co. (C. C.) 72 Fed. 957. It could not have so dealt with a purely legal demand, if the bill which asserted it had not been an ancillary or auxiliary one, but was an original suit brought by a receiver who derived his authority from a court of another jurisdiction. Hale v. Allinson, 188 U. S. 56, 23 Sup. Ct. 244, 47 L. Ed. 380; Fidelity Trust & Safe Deposit Co. v. Archer, 179 Fed. 32, 103 C. C. A. 16.
[2] The plea which was adjudged to be insufficient disclosed that the stock subscription liability which the auxiliary bill asserted was evidenced by a written contract by the terms of which nothing was payable or demandable until half of the authorized capital stock of the corporation, to wit, $250,000 thereof, shall have been subscribed. It further disclosed that the charter of the corporation contained the provision that “the said corporation shall be authorized to organize when fifty thousand dollars shall have been subscribed, and shall be a going concern when two hundred and fifty thousand dollars shall have been subscribed, to be paid for in cash, as and when called for by the board of directors,” and that the only payments on his subscription by the appellant were made after the directors of the corporation had informed and advised him, and announced to the stockholders and to the public generally, that the requisite amount of stock, to wit, $250,000, had been fully and honestly subscribed for, when as a matter of fact, *812to the knowledge of the directors, only $168,000 or less was subscribed for, and that the appellant’s payments were made in reliance upon the truth of said statements by the directors and in ignorance of the fact that the amount of stock required by its charter to be subscribe^ before the corporation was entitled to be a going concern was not subscribed. It is to be noted that neither in the plea nor elsewhere in the record are there any averments as to the circumstances of the accrual of any of the claims against the corporation for the satisfaction of which the asserted stock subscription liability is sought to be enforced. Nothing is disclosed to negative the conclusion that all the claimants had the dealings upon which their claims are based with full knowledge of the real facts, including the falsity of the statement made by the' directors .as to the amount of stock subscribed for, and the making of his payments by the appellant in reliance upon those statements and in ignorance of their falsity.
The liability to which the appellant subjected himself by signing the stock subscription agreement was a contract liability. That liability was expressly made a conditional one. When it.is sought to recover of the appellant the amount he thereby conditionally obligated himself to pay, he is entitled to stand on the terms of his contract, to set up the condition it expressed, and to avail himself of the fact that that condition has not been complied with, unless he has waived such compliance or estopped himself from claiming the benefit of the condition.
There would be some support for a claim that the appellant had wáived compliance with the condition, if, with knowledge that it had not been complied with, he had manifested his consent to the corporation becoming a going concern by making a payment or payments on his subscription in response to calls therefor, or had acquiesced or participated in the conduct of the undertaking by accepting a dividend or other benefit accruing therefrom. Such a state of facts is not disclosed. It is not made to- appear that the appellant did anything as a stockholder or as a subscriber for stock, except to make payments on his subscription in reliance in good faith on a false representation made to him that there had been a full compliance with the condition upon which his liability to pay was to accrue. A payment made in such circumstances is not at all inconsistent with a continued and unchanged intention on the part of the subscriber to insist upon the condition expressed in the subscription contract. “A waiver exists only where one with full knowledge of a material fact does or forbears to do something inconsistent with the existence of the right or of his intention to rely upon that right.” 40 Cyc. 259. The appellant cannot be held to have waived a compliance with the condition expressed in the contract sought to be enforced by his making a payment or payments which, without fault on his part, were induced by a false representation that the condition had been complied with. A payment made in such circumstances does not indicate an intentional relinquishment of the right to require a compliance with the condition which was made a prerequisite to the accrual of any obligation to pay anything.
[3] The rule generally applicable is that a receiver cannot maintain .an action upon an obligation running to the original- party which the *813latter could not have maintained. High on Receivers (4th Ed.) §§ 204, 205. It may be assumed, without being decided, that when the demand is sought to be enforced by the receiver for the benefit of creditors of the original obligee the receiver may avail himself of an estoppel upon the defendant of which such creditors were the beneficiaries, though the defendant had not estopped himself in favor of the party with whom he contracted. However this may be, neither the creditors nor the receiver as their representative can sustain a claim that the defendant is estopped to deny the liability asserted against him without showing that the creditors extended credit or otherwise altered their position for the worse in reliance upon something the defendant did or omitted to do. An estoppel in their favor could not arise as a result of conduct of another upon which they in no way relied or acted to their prejudice. In the absence of any showing that the creditors relied upon and were misled by the appellant’s conduct, it is not to be assumed that there was a state of facts giving rise to an estoppel in their favor. The pleadings in the case contain no allegations of facts requisite to support such a claim of estoppel. As above indicated, for aught that appears, the creditors may have had their dealings either in ignorance of what the appellant had done or with knowledge of the real facts, being fully aware that the payments by the appellant on his stock subscription were made in such circumstances as not to indicate a consent by him for the corporation to become a going concern before the stipulated amount of capital stock had been subscribed.
The conclusion is that the plea disclosed the existence of a valid defense to the demand sued on, and that its averments do not show that the appellant had waived that defense or had estopped himself to set it up. Livesey v. Omaha Hotel, 5 Neb. 50; Newport Cotton Mill Co. v. Mims, 103 Tenn. 465, 53 S. W. 736; Katama Land Co. v. Jernegan, 126 Mass. 155; Marion Trust Co. v. Blish, 170 Ind. 686, 84 N. E. 814, 85 N. E. 344, 18 L. R. A. (N. S.) 347; Exposition Railroad Co. v. Canal Street Railroad Co., 42 La. Ann. 370, 7 South. 627; Bray v. Farwell, 81 N. Y. 601. The court was in error in adjudging that the plea was insufficient.
it follows that the decree appealed from must be reversed. The cause will be remanded, with leave to the appellant to file an answer to the bill of the appellee, the subsequent proceedings to be in conformity with the equity rules now in force, the appellee or any creditor whose demand is sought to be enforced in the main suit to be afforded the opportunity of controverting any matter of defense set up in the answer, or to show the existence of any facts entitled to be given the effect of a waiver by the appellant of any such matter of defense or of an estoppel upon him to set it up.