Great Western Telegraph Co. v. Gray

Welch, J. The only question submitted for our consideration was the action of the court proper in sustaining the demurrer to the declaration. In our view the action of the court was proper for the reason that it does not appear in and by said declaration that the defendant in error was a party to the suit, wherein was made and entered the decree appointing a receiver, or that he was a party to said suit wherein said order of assessment was made. In the case of Lamar Ins. Co. v. Gulick, 102 Ill. 41, which was an action of assumpsit brought in the name of the insurance company for the use of the receiver upon a stock note or bond given by the defendant to the Lamar Insurance Company, the declaration avers that a bill was filed by the creditors against the insurance company, and that a receiver was appointed; “ that the receiver had exhausted all assets in paying debts except stock subscriptions, and still §100,000 of debts remained unpaid; that in said creditors' suit a petition for an assessment upon the unpaid stock subscriptions, for the purpose of paying the existing indebtedness of the company, was presented to the court; that such proceedings were had on such petition that an assessment of §10 per share of such stock was made, and the receiver was authorized and directed to prosecute each stockholder in some appropriate action for the recovery of the sum so assessed on each share of stock. The defendant was not in person made a party defendant in the chancery suit instituted by the creditors, wherein the receiver was appointed, or to the petition to the court praying for an assessment on the unpaid shares of stock to pay debts still owing, etc. Justice Scott in that case said: “ It is certain he was not a party either to the original-suit by the creditors wherein the receiver was appointed, or to the proceedings to procure an assessment to be made upon the unpaid shares of stock to pay debts. ¡Not having been made a party to either proceeding defendant is not bound or concluded thereby. He is not affected by either decree.” * * * “ A case exactly in point in principle is Chandler v. Brown, 77 Ill. 333. And as it is conclusive of this view of the law it will not be necessary to discuss it as a new question in this court.” The case of Chandler v. Brown was an action of assumpsit brought by Chandler as receiver of the Lamar Insurance Company against Brown to recover the balance remaining unpaid on his subscription to the capital stock of the company. The declaration averred the filing of a bill in chancery by certain creditors of the insurance company, against the insurance company and others; that in said proceedings said insurance company was declared insolvent; its affairs ordered to lie closed up. A receiver ivas appointed and an order of the court directing an assessment to be made of twenty per cent, more on the stock, etc. Justice Scholfield in that case .said: “ It is incumbent on the plaintiff to show clearly a legal right to institute and carry on the suit. To this end he should show his appointment by a decree which is conclusive as against the defendant. This he has failed to do '; it nowhere appears, either by the recitals in the decree copied in the several counts, or by distinct averment, that the defendant was a party to this proceeding.”" The same is true of the defendant in this case. It is insisted by counsel for plaintiff in error that as the decree of assessment found that it was impracticable in that suit and proceeding to make all the stockholders parties to it, etc., that that decree and finding is conclusive on the stockholders and the defendant in error as to this fact and can not be attacked collaterally, and we are referred to Ward v. Farwell, 97 Ill. 593, and Patterson v. Lynde, 112 Ill. 196. Ward v. Farwell, supra, was-a bill filed by the appellant as receiver of the ¡Republic Life Insurance Company, appointed as such receiver under a petition filed by the Auditor of Public Accounts against the said insurance company, setting forth among other things, that the petitioner “ had lately caused an examination of the Republic Life Insurance Company organized under the laws of this State, and that from such examination he was of opinion the condition of said company ■was such as to render its further continuance in business hazardous to the insured therein, paying,” etc. Upon filing this petition, the insurance company appeared, and the appellant was appointed receiver. The object of the bill filed by appellant was to have the action of the company in canceling certain of the original certificates of stock set aside and annulled, and also to have an assessment of sixty per cent, or whatever amount the evidence may show is necessary, made upon all the stockholders without regard to the attempted cancellation • for the purpose of meeting the liabilities of the company. It was insisted by the counsel for appellees in that case “that the stockholders were necessary parties to the proceeding in th e appointment of a receiver,” and the court having proceeded to this appointment without having them before it, its action is not binding on them. Justice Mulkey said : “ The general rule is unquestionably that when some right is sought to be enforced against a corporation, and the relief asked will only affect the stockholders as stockholders, and no discovery nor relief is sought against them as individuals, then they are unnecessary parties to a bill in chancery. Treating the petition as a bill, and testing the question by this'general rule, the stockholders were not indispensable parties to the proceeding, for the petition neither seeks discovery, nor relief against the stockholders. The only way in which they are affected by the proceeding is in their character as stockholders, and in that character, where nothing is required of them personally, they are sufficiently represented by the corporation itself.” Patterson v. Lynde, was a bill in equity brought by the appellants against the Malhener and Burnt River Consolidated Ditch and Mining Company, and Ramson R. Cable and Cornelius Lynde et ah, stockholders in that company, to compel them to pay the amount of debt owed by the company to the complainants, because of their respective indebtedness to the company on unpaid subscriptions to its capital stock. Demurrer was sustained to the bill, which was affirmed in the Appellate and Supreme Courts. We do not understand that the rule announced in 77 Ill. supra, or in 102 Ill. supra, has been modified by the rule announced in 97 Ill. supra, or 112 Ill. supra. As stated in 97 Ill. supra, “ When some right is sought to he enforced against a corporation, and the relief asked will only affect the stockholders as stockholders, and no discovery nor relief is sought against them as individuals, then they are unnecessary parties.” The converse of the rule would be, when some right is sought to be enforced against a corporation, and the relief sought is against the stockholders as individuals, then they are necessary parties. The rule announced in 112 Ill. supra, is that creditors under proper circumstances may file a creditor’s bill, and subject unpaid subscriptions to the payment of their claims against the corporation. In such case the creditor is subrogated to the place of the debtor corporation, and the proceeding is in the nature of an equitable attachment, by which the debts due the corporation may be applied to the payment of its own debts. We are of the opinion that this case falls within the rule announced in 102 Ill. supra, and 77 Ill. supra, and that it is not now an open question. The demurrer was properly sustained. The judgment is affirmed.