Chubb v. Upton
95 U.S. 665 (1877)

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U.S. Supreme Court

Chubb v. Upton, 95 U.S. 665 (1877)

Chubb v. Upton

95 U.S. 665

Syllabus

1. A party who made a contract with an organization which had attempted irregularly to create itself into a corporation, and which acted as such, or who subscribed to its capital stock, cannot, in a suit by the corporation, defend himself against a claim growing out of such contract or subscription by alleging the irregularity of such organization.

2. The same rule applies where the stock of a corporation has been increased, and the question arises upon the liability of a subscriber for the increased stock.

3. An assignee in bankruptcy of a corporation represents it and its creditors, and the defense of its irregular organization cannot be set up against him by such subscriber.

4. A party receiving a certificate for a certain number of shares of stock, at a given sum per share, thereby becomes liable to pay the amount thereof when called upon by the corporation or its assignee.

5. Upton v. Tribilcock,91 U. S. 45, Sanger v. Upton,91 U. S. 56, and Webster v. Upton,91 U. S. 65, cited and approved.

Upton, as assignee in bankruptcy of the Great Western Insurance Company, a corporation organized under the laws of Illinois, brought this suit against Chubb. The company was originally chartered by the legislature in 1857.

In 1870, acting under the general laws of that state authorizing insurance companies to increase their capital stock, the directors and stockholders of the company took measures to increase its capital stock, and filed their papers for that purpose with the secretary of state, and the auditor of public accounts. By these proceedings the company undertook to increase its stock to $5,000,000.

The company, assuming that its stock had been increased, took subscriptions and issued certificates therefor, and immediately commenced doing business, issuing policies, &c., upon the basis of such an increase. Dec. 31, 1870, it held out to the public that its subscribed stock was $1,188,000, of which $222,831 was paid in, and $965,169 subscribed, for which the subscribers or holders were liable. Chubb became a subscriber to this increased stock, and a certificate for fifty shares was issued to him on the twenty-fifth day of November, 1870.

The company had a branch office at Grand Rapids, where

Page 95 U. S. 666

meetings of the stockholders residing there were held. Chubb was president of said branch, took part in those meetings, and also in a meeting of stockholders and directors held at Chicago in January, 1871. He paid money on his stock, and at one time, while holding it, gave another person a proxy to attend and vote at a stockholder's meeting at Chicago.

The company continued to do business, issue policies, &c., until it was put into bankruptcy, February, 1872. Upton was duly appointed assignee of the company on the eleventh day of April, 1872; and the court sitting in bankruptcy made an order upon the stockholders to pay, on or before Aug. 15, 1872, the balance due upon their stock. Notice was duly served upon them.

Upon the trial of the cause, Chubb objected to the production in evidence of the proceedings by which the company increased its stock, upon the ground of their alleged irregularities, and of informality in the papers filed in the public offices. The objections were overruled, and Chubb excepted to the ruling of the court.

He also objected to the introduction in evidence of papers filed in the public offices of Illinois by the company, showing that it was doing business, and that it had stock subscribed to a large amount. This objection was overruled, and an exception taken.

He further offered to prove that he was induced to purchase the stock by false representations that he would only be compelled to pay twenty percent upon the amount subscribed; and that the holders of the stock in the original company never increased their stock or authorized any one to increase it, and never sold or transferred it to the new company. The court excluded the evidence, and he excepted.

The court substantially charged the jury, that upon the admitted facts, and upon further facts proved by the plaintiff by uncontradicted and documentary evidence, the plaintiff was entitled to recover, and that the matters offered in evidence by the defendant constituted no defense to the action. The defendant excepted to the instruction.

There was a judgment against Chubb, who thereupon removed the case here.

Page 95 U. S. 667

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