Crandall v. Shepard

Hines, J. “Persons who organize a company and transact business in its name, before the minimum capital stock has been subscribed for, are liable to creditors to make good the minimum capital stock with interest.” Civil Code (1910), § 2220. Hnder that section, all persons who participate in the organization of the corporation and the transaction of business in its name, before the minimum capital stock has been subscribed for, although they be [401] not directors or officers of the corporation, are liable to creditors to make good the minimum capital stock, with interest. This is the plain meaning of the statute. John V. Farwell Company v. Jackson Stores, 137 Ga. 174 (3) (73 S. E. 13); Smith v. Citizens & Southern Bank, 148 Ga. 764 (98 S. E. 466); Athens Apartment Corporation v. Hill, 156 Ga. 437 (119 S. E. 631). In these circumstances, while individual stockholders can not bind the corporation unless expressly or impliedly authorized by the stockholders or the board of directors to act as agents of the corporation, they can bind themselves by organizing the corporation and transacting business in its name, when the minimum capital stock has not been subscribed. Applying the above principles, the court below did not err in overruling the demurrer to the first count of the petition. The petition is not multifarious because all of the defendants are not interested in all of the matters involved in the suit. It is sufficient if each party has an interest in some matter in the suit which is common to all, and that this common matter is connected with the others. Blaisdell v. Bohr, 68 Ga. 56; Brown v. Wilcox, 147 Ga. 546 (4) (94 S. E. 993); Cook v. Georgia Fertilizer Sc. Co., 154 Ga. 41 (113 S. E. 145); Cowan v. Nicholson, 158 Ga. 425 (123 S. E. 681). The plaintiff is seeking to hold all of the defendants liable in an amount sufficient to make good the minimum capital stock of the corporation, with interest thereon; and each of the defendants has an interest in this matter, which is common to all, and which is connected with the other matters involved in this suit. A suit in equity based on separate and distinct claims against different persons, where there is no common right to be established, will be dismissed on demurrer on the ground of multifariousness. George W. Muller Sc. Co. v. Southern Seating Sc. Co., 147 Ga. 106 (92 S. E. 884); Payne v. West Point Grocery Co., 151 Ga. 46 (105 S. E. 608). In the instant case, however, the suit is not based on separate and distinct claims, but is brought to enforce claims of the plaintiff and other creditors against the defendants, and a joint liability of all the defendants to the plaintiff and other creditors growing out of the fact that the defendants organized this company and transacted business in its name before the minimum capital stock had been subscribed, and to enforce a liability of two of the defendants to the plaintiff and other creditors, growing out of the misapplication of funds of said business, which [402] should have been applied to the claims of such creditors which arose while said business was being so conducted. In these circumstances a common right of all the creditors was sought to be established, and equity has jurisdiction to determine the whole matter in one suit. Civil Code (1910), § 5419. “As to set-off, equity generally follows the law; but if there is an intervening equity not reached by the law, or if the set-off be of an equitable nature, the courts of equity take jurisdiction to enforce the set-off.” Civil Code (1910), § 4593. Insolvency is a distinct equitable ground of set-off. § 4349; Lee v. Lee, 31 Ga. 26 (76 Am. EL 681); Moody v. Ellerbie, 36 Ga. 666; Tommey v. Ellis, 41 Ga. 260; Camp v. Pace, 42 Ga. 161; Melson v. Dickson, 63 Ga. 682 (36 Am. E. 128) ; Harwood v. Andrews, 71 Ga. 784; Georgia Seed Co. v. Talmadge, 96 Ga. 254 (22 S. E. 1001); Bell v. Ober & Sons Co., 111 Ga. 668 (36 S. E. 904); Hilton v. Rogers, 152 Ga. 658 (111 S. E. 33). Non-residence is a distinct equitable ground of set-off. Bibb Land-Lumber Co. v. Lima Machine Works, 104 Ga. 116 (30 S. E. 676); Hecht v. Snook & Austin Furniture Co., 114 Ga. 921 (41 S. E. 74); Case Threshing Machine Co. v. Thurmond, 144 Ga. 21 (85 S. E. 1020); Civil Code (1910), § 4349. Insolvency and nonresidence are not the sole grounds of equitable set-off. They are illustrative, but not all-comprehensive of such grounds. An equitable set-off will be allowed, although the amount is small, and although the party may have a remedy at law, if to recover that small amount he is driven to many suits - and to much trouble and expense. Burns v. Hill, 19 Ga. 22 (6). To recover the liability created by section 2220 of the Civil Code (1910), “the remedy is in equity by a petition brought at the instance of one or more creditors and in behalf of all other creditors who may come in and be made parties plaintiff to the action.” Hill v. Jackson Stores, 137 Ga. 174 (73 S. E. 13). This makes the set-off of such liability one of an equitable nature. The liability imposed by section 2220, supra, constitutes a fund for the benefit of all creditors, so far as the condition of the company renders a resort to it necessary for the payment of its debts. Hill v. Jackson Stores, supra. Such fund will be treated as a trust fund. Where one who is liable to creditors under § 2220 brings a common-law action 'on a note given by one of such creditors in renewal of an accommodation note given to a corporation which was organized without its minimum [403] capital stock having been subscribed, the maker of such note can in equity set off the liability of the holder of said note to the maker thereof, growing out of the fact that the holder participated in the organization of such company and the transaction of business in its name without the minimum capital stock having been subscribed. A mere privilege to a party to sue at law, or the existence of a common-law remedy not as complete or effectual as the equitable relief, does not deprive equity of jurisdiction. Civil Code (1910), § 4538. Equity by a writ of injunction may restrain proceedings in the same court, and for which no full, complete, and adequate remedy is provided at law. § 5490. Equity seeks to do complete justice, and to give full relief to all' parties in reference to the subject-matter of the suit, provided the court has jurisdiction for that purpose. § 4522. In view of the issues involved in this case, and the connection of the various defendants with the subject-matter of this suit, the plaintiff’s remedy at law is not as full, complete, and adequate as it is in equity; and the court below should have enjoined the proceeding on the law side of the court, so that the rights of the parties in both proceedings could be determined in the instant case. Applying the principles above ruled, the court below erred in sustaining the demurrer to the second count of the petition, and in dismissing the same. Judgment reversed on the main bill of exceptions, and affkmed on the cross-bill. All the Justices concur, except Atkinson and Hill, J.J., disqualified.