Court Opinion

ID: 4917102
Source: CourtListenerOpinion
Date Created: 2021-09-22 00:11:15.555608+00
Date Added: 2024-06-11T08:13:54.491223
License: Public Domain

Taylor, J.
(after stating the facts.)—The first question presented by the demurrers to this bill is: can the' creditors of a corporation bring suit against the stockholders of such corporation to enforce their statutory liability without first having exhausted their remedies against the corporation itself, or without first reducing their claims to judgments at law against the corporation and having executions issued and returned nulla bona?
While the general rule is well established that a corporate creditor’s suit to enforce payment of unpaid subscriptions to its stock can properly be brought only after a judgment at law has been obtained against the corporation, and an execution returned unsatisfied for lack of corporate property upon which to levy, yet this rule has its exceptions, and one of these exceptions to the rule is that where the corporation has been adjudged a bankrupt, or is notoriously insolvent, or has been dissolved, then the remedy against the corporation need not *740first be exhausted. The reason assigned for such exception is that the law does not require wholly idle and useless things to be done, i Cook on Corp. (5th ed.) §§204, 205, 206, 207 and 219 and citations; McDonnell v. Alabama Gold Life Ins. Co., 85 Ala. 401, 5 South. Rep. 120; 3 Clark & Marshall on Private Corp., §798 e and citations; See v. Heppenheimer, 69 N. J. Eq., 36, 61 Atl. 843; First Nat. Bank v. Greene, 64 Iowa 445, 20 N. W. Rep. 754; Hardware Co. v. Tintic Milling Co., 13 Utah 423, 45 Pac. Rep. 200; Hodges & Wilson v. Silver Hill Mining Co., 9 Ore. 200; Fletcher v. Bank of Lonoke, 71 Ark. 1, 69 S. W. Rep. 580. In the last cited case the correct rule we think is stated as follows: “To hold stockholders in a corporation liable on their unpaid subscriptions, creditors must show that they have exhausted their legal remedies, or that it is insolvent.” Harrison v. Remington Paper Co., 140 Fed. Rep. 385, 3 L. R. A. (N. S.) 954; Hospes v. Northwestern Mfg. & Car Co., 48 Minn. 174, 50 Nw. Rep. 1117, 15 L. R. A. 470. The case last cited is quite similar to the one under discussion in that it was a suit by the creditors of an insolvent corporation to compel its stockholders to pay for so-called “bonus stock” issued to them without being paid for, in which it was held that such stockholders were liable to creditors of the corporation to pay for such stock in full. Cleveland v. Marine Bank of Milwaukee, 17 Wis. 562; Morgan v. Lewis, 46 Ohio St. 1, 17 N. E. Rep. 558; Barrick v. Gifford, 47 Ohio St. 180, 24 N. E. Rep. 259; Latimer v. The Citizens’ State Bank, 102 Iowa 162, 71 N. W. Rep. 225; Judge Freeman’s Notes to Thompson v. Reno Sav. Bank, 3 Am. St, Rep. 814; Waeit on Insolvent Corporations, '§§41—621.
In construing section 20, page 232 of McClellan’s Digest of the laws of Florida, which section is in part brought forward as section 2681 of the General Statutes *741of 1906, consummating the right of corporate creditors to proceed against the stockholders for the collection of their claims upon a dissolution of the corporation, this court, in the case of Gibbs v. Davis, 27 Fla. 531, 8 South. Rep. 633, has held that such ¿dissolution, in the sense in which the term is used in the statute' takes place when the corporation comes into the condition of having debts and no assets, and has ceased to act and exercise its corporate functions, or has suffered acts to be done which end the object for which it was created.
The bill in this case, we think, sufficiently alleges the insolvency of the corporation to entitle the complainants to the relief they seek, without first having reduced their claims to judgment. It alleges in substance that all of the corporation’s property and assets have been sold under foreclosure proceedings, and that there is no property of the corporation out of which its existent debts can be enforced. It is also- well established that when a corporation is insolvent, and there exist subscriptions which have not been fully paid, a court of equity will disregard the formality of a call, and will order the unpaid subscriptions to be paid to a receiver for the benefit of the corporate creditors, or such court may, in its discretion, require its receiver to make and enforce a call upon the stockholders _j£>r_, unpaid subscriptions. 1 Cook on Corp. (5th ed.) §§108 and 207 and citations; 3 Clark & Marshall on Corp. §799; Easton Nat. Bank v. American Brick & Tile Co., 70 N. J. Eq. 732, 64 Atl. Rep. 917. In the case la.st cited the settled rule is adhered to that an agreement between a corporation and its stockholders to the effect that corporate stock shall be issued to- them without receipt by the company of money or property equivalent in value to the par value of the stock, is void because contrary to law, and such an issuance of stock does not relieve the parties to whom the same has been gratui*742tously issued from liability to the corporation’s creditors to pay for the same. To the same effect is the cause of Handley v. Stutz, 139 U. S. 417, 11 Sup. Ct. Rep. 530, and Morrow v. Nashville Iron & Steel Co., 87 Tenn. 262, 10 S. W. Rep. 495, 3 L. R. A. 37; 2 Thomp. on Corp. § 1586.
In-the case of Stutz v. Handley, 41 Fed. Rep. 531, the rule is further correctly announced as follows: “This liability for the full amount represented by the unpaid stock, on the insolvency of the corporation, extends to persons to whom a portion of the new stock was issued as, an inducement to purchase bonds of the corporation, though they, too, received certificates reciting that the stock was paid up, since their acceptance and holding of the stock, is, in the legal effect, a subscription therefor which imports a promise to pay:” Vermont Marble Co. v. Declez Granite Co., 135 Cal. 579, 67 Pac. Rep. 1057, S. C. 87 Am. St. Rep. 143.
The bill in this case alleges in substance that the entire capital stock of the defendant corporation .is still unpaid, but was issued gratuitously to the parties sued as stockholders, upon their, purchase of.the bonds of the company. This, if true, according to. the well established rule above announced, makes them, upon the corporation’s insolvency, liable to the corporation’s creditors, under our statute, for the full amount that remains unpaid upon such stock so issued to them, whether they formally subscribed therefor or. not, their acceptance and holding thereof being equivalent to a formal contract of subscription, which imports a'promise to pay.
It is again contended in support of said demurrers to the bill in this case that under the provisions of section 2677 General Statutes of 1906, the only resource of the complainants as corporate creditors against them as stockholders is against their stock, that is, that no matter what may be their legal liability as stockholders *743to the creditors of the corporation, that under said section such liability can only be enforced by a levy upon •and sale of their stock in such corporation, all of their other property both real and personal being by said section expressly exempted from such liability except'their stock in such corporation. The said section 2677 General Statutes of 1906, provides as follows: “If any execution shall issue against the property or effects of any corporation, and there cannot be found whereon to levy, then such execution may hp iggnprl pgain^j- any, of the stockholders to an extent equal in amount for so much as may remain unpaid upon the subscription.and no further; and all property whether real or personal of any stockholder in any corporation aforesaid shall be exempt from the debts and. liabilities of such corporation contracted in its corporate capacity, except the stock of said stockholder cf or in said corporation to the extent mentioned aforesaid.” This section of the revision is an awkward combination of a part of the words of section 22 of chapter 1639 of the laws enacted in 1868, and of section 1 of chapter 3729 approved May 31st, 1887, which last named act was entitled: “An Act Defining the Liability of Stockholders in any Corporation Organized Under the General Incorporation Laws of this State,” and which changed the former liability of stockholders from that of the full amount of the face value of their stock to a liability only for the amount that remained unpaid upon their stock. The said section 2677 from its peculiar phraseology may admit of the construction contended for by the defendants, but to put upon it that construction would be to convict the law-making power of doing the farcical by declaring in one breath that stockholders in corporations shall be liable for the debts of the corporation to the extent of their unpaid subscriptions, while in the next breath it declares that such liability shall be an empty sound and *744vain delusion inasmuch as it must not be enforced except out of the worthless stock itself in an insolvent corporation, which stock is of less value even than the paper upon which the certificates of shares are printed when in its blank condition before being rendered useless by the printing of worthless matter thereon. . Maxwell on Stats. (4th ed.) p. 305, and Endlich on Interp. of Stats. §§264 and 265 and citations. Statutes must be so construed as to' give effect to the evident legislative intent, even if the result seems contrary to rules of construction and the strict letter of the statute. Winters v. City of Duluth, 82 Minn. 127, 84 N. W. Rep. 788. It was the evident intention of the legislature in the enactment into law of said section 2677 to make the stockholders of corporations liable tO' its creditors upon the insolvency of the company to the extent of any balance that remained unpaid upon the stock by them held at its par or face value, and the latter part of said section that exempts the property of such stockholders from the debts of the corporation, though awkwardly worded, was designed to exempt the stockholders’ property from all of the corporation’s debts, except the debt due by the stockholders for the unpaid subscriptions to the corporation’s capital -stock. Such is our construction of this statute, and such is the only construction possible for it without convicting the legislature of enactingan absurdity into ’ the form of law. Section 2681 of the General Statutes of 1906, itself also a confusedly worded combination of parts of two or more formerly existing provisions of law, has nothing in it that militates against our construction of said section 2677, but should itself be construed in the same way.
We think that the averments of the bill are sufficiently direct and positive to call for answers.
Neither do we think that this bill is multifarious.
If, 'as is alleged in the bill, the defendant stockholders *745entered into an agreement in writing to pay the corporate debts in consideration of forbearance on the part of the complainant creditors in the enforcement of their claims, then such forbearance is a well recognized consideration for such agreement and it may be enforced. We think also that the discovery sought of the defendants by the bill is proper, vis: the amount of stock held by each of the defendants, and the amount of any balance that remains unpaid upon such stock.
From what has been said it follows that the circuit court erred in its rulings sustaining the several demurrers of the defendants to the bill of complaint herein, and said orders appealed from are hereby reversed, and the cause remanded with' directions for such further proceedings in the cause as shall be consonant herewith and comfortable to proper equity .practice, the appellees to be taxed with the costs of this appeal.
Shackleford, C. J., Cockrell, Hocker and Whitfield, JJ., concur;
Parkhill, J., not participating.