A., by his bond, acknowledged the receipt from an insurance
company of ten shares of its capital stock, and agreed to pay $200
therefor, in installments -- one-fourth on the receipt of the stock
certificate, and the remainder in three equal amounts at three,
six, and nine months from Jan. 7, 1871, the date of the bond. He
paid on executing it $25, and his name was entered as a stockholder
on the books of the company. The certificate was not delivered or
demanded. In 1872, the company became bankrupt.
Held that
the assignee is entitled to recover of A. the unpaid
installments.
This is an action brought July 25, 1873, by Clark W. Upton,
assignee in bankruptcy of the Great Western Insurance Company of
Chicago, Ill., to recover from Theodore Hawley the unpaid
installments alleged to be due on his contract to subscribe to the
capital stock of that company.
The court, the case having been submitted to it upon the
pleadings and proofs without the intervention of a jury, found the
following facts:
"The plaintiff is assignee in bankruptcy, as alleged in the
petition."
"On the second day of January, 1871, Rossitur, agent of the
Great Western Insurance Company, requested the defendant to take
stock in said company."
"The defendant, on certain representations by Rossitur, signed
the following paper or bond:"
"
No.___] THE GREAT WESTERN INSURANCE COMPANY [$200"
"[Stamp]"
"
Capital stock $500,000, with liberty to increase to
$5,000,000"
"
Stock non-assessable"
"
Organized July 20, 1857, under act of legislature approved
March 4, 1857"
" Know all men by these presents that for and in consideration
of ten shares of the capital stock of the Great Western Insurance
Company of Chicago, Ills., received by me, I am held and firmly
bound, and agree to pay the Great Western Insurance Company of
Chicago the sum of two hundred dollars in installments, as
follows:
Page 102 U. S. 315
twenty-five percent thereof upon receipt of stock certificate,
twenty-five percent in three months from date hereof, twenty-five
percent six months from date hereof, twenty-five percent nine
months from date, with interest ten percent after due."
" CHICAGO, 7th Jan'y, 1871."
" THEO. HAWLEY [SEAL]"
" Signed and delivered in presence of ________ "
"At the time the said bond or paper was issued to Hawley, the
latter paid Rossitur twenty-five dollars, and delivered to him the
bond. It was not delivered on any particular conditions. It was
delivered to an agent of the company's, namely the said
Rossitur."
"The company afterwards came into possession of the bond, and
entered Hawley's name on their books as a stockholder, and
published him in their publications as one of their stockholders,
Hawley having no knowledge of the publications. Hawley paid no
other money, and no calls were made upon him prior to the
bankruptcy."
"No certificate of stock was ever sent or delivered to Hawley,
and he made no demand on the company for any certificate of
stock."
"The bankruptcy of the insurance company was caused by fire in
October, 1871."
"The defendant signed no subscription paper or any other paper
than the bond above set out."
"On the foregoing facts and the pleadings judgment was rendered
for the plaintiff. The judges were opposed in opinion on the
following questions:"
"1st, whether the delivery of a stock certificate under the
above circumstances was necessary to constitute the relation of
stockholder between the defendant and the insurance company."
"2d, whether the above facts constitute a defense to the
action."
"The judges being divided in opinion on the above questions,
hereby certify such division to the supreme court pursuant to the
statute in such case made and provided. "
Page 102 U. S. 316
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
It cannot be doubted that one who has become bound as a
subscriber to the capital stock of a corporation must pay his
subscription if required to meet the obligations of the
corporation. A certificate in his favor for the stock is not
necessary to make him a subscriber. All that need be done, so far
as creditors are concerned, is that the subscriber shall have bound
himself to become a contributor to the fund which the capital stock
of the corporation represents. If such an obligation exists, the
courts can enforce the contribution when required. After having
bound himself to contribute, he cannot be discharged from the
obligation he has assumed until the contribution has actually been
made or the obligation in some lawful way extinguished.
These are elementary principles.
Upton, Assignee v.
Tribilcock, 91 U. S. 45;
Webster v. Upton, 91 U. S. 65. The
only question we have to consider is whether, from the facts found,
it appears that Hawley, the plaintiff in error, had become an
accepted subscriber to the stock of the company before the
bankruptcy. There can be no doubt that he was approached by an
agent of the company with a view of securing him as a subscriber.
It is equally true that after the representations made to him, he
was willing to become a stockholder. The result was that he
executed the paper set out in the findings, by which he
acknowledged the receipt from the company of ten shares of its
stock, and agreed within the time named to pay to the company $200,
or twenty percent of its par value. As the company could not sell
its stock at less than par, what was done amounted in law to a
subscription for the stock, and nothing else. It is true the stock
he took purported to be nonassessable, but that in law could only
mean that no assessment would be made beyond the percentage he had
specially bound himself to pay unless the legal liabilities of the
company required it.
Upton, Assignee v. Tribilcock,
supra.
The paper he signed was delivered to the company by the agent
who got it. That it was accepted by the company as a subscription
is shown conclusively by the fact that his name was entered on the
books as a stockholder and publication
Page 102 U. S. 317
made accordingly. It matters not that he had no knowledge of
such a publication. His receipt for the stock was an
acknowledgment, so far as he was concerned, that he had become a
stockholder, and after an acceptance by the company, his liability
was fixed whether any publication was made or not. The publication
is only important as a means of showing that his subscription made
to an agent had been accepted and ratified by the company. The
entries on the books had the same effect. The publication only made
it more notorious. The ultimate fact to be established is that a
subscription had not only been made by Hawley but accepted by the
company.
Both in the pleadings and the argument, the defense was put
principally on the fact that no certificate of stock had been
issued. It may be conceded that if a suit had been brought by the
company on the express promise to pay the twenty percent, there
could have been no recovery without a tender of the certificate;
but that is not this case. Here, the creditors of the bankrupt
company are proceeding against Hawley as a stockholder to compel
him to contribute to the found which the law had provided for their
security what he by his subscription agreed he would pay. The suit
is not brought on his special agreement to pay the twenty percent,
but on his general liability as a subscriber to pay for his stock
whenever it was wanted to meet the liabilities of the company. As
the certificate was not needed to perfect the subscription, its
nondelivery cannot stand in the way of a recovery in this
action.
We have no hesitation in answering each of the questions
certified in the negative, and the judgment is consequently
Affirmed.