Chouteau Insurance v. Floyd

Henry, J. In August, 1870, the defendant subscribed for fifteen shares of the capital stock of plaintiff, at the par value of $100, and then paid $21 on each share of said stock, and to secure the balance, $1,185, executed his note payable to plaintiff, “ on calls, or installments, as provided in the charter or by-laws, or under resolution of the board of directors of said company.” On the 18th of October, under a resolution of the board of directors, a call was made for payment of twenty-five per cent upon the capital stock of said corporation. This, on defendant’s stock, amounted to $315, which he paid on the 29th of January, 1874. By resolution of the board an assessment was again made of twenty-five per cent upon the capital stock, which defendant refused to pay, and this suit was instituted by the plaintiff to recover the same. The answer alleged that by a resolution of the board adopted on the 3rd of November, 1871, the said plaintiff" determined that thereafter it would do no more business,, nor take any more risks, and would pay up its existing-liabilities as soon as possible; and that, at that date, its-assets exceeded its liabilities, and that there was no necessity for the assessment last made upon the stock. For further defense, it is alleged that when defendant’s subscription for the stock in question was made, the agent of' plaintiff who procured it, exhibited to defendant a list of [290] subscribers for stock, some of whom were persons in whose judgment defendant had confidence, and relying upon the representation of said agent that such persons had subscribed for stock, was thereby induced to subscribe for the stock in question; that said persons were not bona fide subscribers for stock. Another defense alleged was, that at the date of said last assessment there were no unpaid debts of said corporation; that certain officers and directors of plaintiff, for their private gain had, prior to that time, settled and compromised said debts, and paid all claims against the corporation without the knowledge or consent of the stockholders. For further defense it is alleged that the directors, without the consent of the other stockholders, released certain of the subscribers for stock from liability therefor. There was a trial and judgment for plaintiff, from which defendant has appealed. 1. corporation: M«yh:0lasrs e s saf mentFirst, as to the necessity for the assessment. This was a matter for the determination of the board of directors. As was well observed by the supreme court Indiana, in Judah v. The American Live Stock Association, 4 Ind. 333: “ If every stockholder in an insurance company like that in question, might be allowed to dispute the necessity of every assessment upon his stock, the right of those insured to obtain a speedy reimbursement of losses, would be' placed too much at hazard.” 2. _-: «sconassessment.siness’ The resolution by which the corporation determined to cease to do business, did not amount to a dissolution, or deprive the corporation of its right of action. Kansas City Hotel Co. v. Sauer, 65 Mo. 279; State National Bank v. Robidoux, 57 Mo. 446. But whether such a defense is admissible or not, the evidence on that issue, we think, disproved the allegation that the assets of the corporation exceeded its liabilities. [291] s._: mísrepreluce*stock°sub-" seription. [290] With respect to the second of the above defenses, if one subscribe for the capital stock of a corporation, under [291] a Par°l promise by the agent who procures the subscription that the subscriber shall not be called upon to pay for the stock or respond to any assessment made upon it, he is nevertheless bound, and such promise or agreement offers no defense to a suit on an assessment. Angell & Ames on Corp, § 58. 4 _: stockholder’s liability. It is equally well settled in this State and elsewhere, that a release, by the directors of a corporation of a stock - subscriber from his liability on such subscrip^jon js 0f no avail, and that he remains bound for the amount of such subscription as to the other stockholders and creditors of the corporation. Gill v. Balis, 72 Mo. 432. In Upton v. Tribilcock, 91 U. S. 45, the Supreme Court of the United States observed, Hunt, J. delivering its opinion : “ Equally unsound is the opinion that the obligation of a subscriber to pay his subscription may be released or surrendered to him by the trustees of the company. This has often been attempted, but never successfully. The capital paid in, and promised to be paid in, is a fund which the trustees cannot squander. They are bound to call in what is unpaid, and carefully husband it when received.” 5--:-• That the directors and other officers compromised and paid the liabilities of the corporation at less than their amount, and thus extinguished its debts and liabilities, is no defense to this action. If they paid them at a discount, the corporation is entitled against such officers to whatever profit was made by such a transaction. The officers of a corporation cannot speculate on its liabilities. They are trustees, and the stockholders cestuis que trust. And to any profit made by them in the purchase or payment of the debts of the corporation, the stockholders are entitled. Angell & Ames on Corp., § 312: Lingle v. Nat’l Ins. Co., 45 Mo. 109. Public policy, we think, demands that the conduct of directors and other officers of a corporation which has not in its treasury money to pay its liabilities, in satisfying such demands out of their private means. [292] should be sanctioned, and not treated as bad faith towards the stockholders, releasing them from their liability to pay for their stock. Especially should this be so since they are not permitted to make any profit for themselves by such conduct. It is a duty of the directors to provide for the payment of the liabilities of the corporation, and they are entitled to commendation rather than deserving censure, if, of their own means, they pay its debts, when its treasury is depleted. The judgment is affirmed. All concur.