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GLENN v. LIGGETT. GLENN V. TAUSSIG.

SUPREME COURT OF THE UNITED STATES


decided: May 19, 1890.

GLENN
v.
LIGGETT.

GLENN
v.
TAUSSIG.

ERROR TO THE CIRCUIT COURT OF THE UNITED STATES FOR THE EASTERN DISTRICT OF MISSOURI.

Author: Blatchford

[ 135 U.S. Page 541]

 MR. JUSTICE BLATCHFORD, after stating the case as above reported, delivered the opinion of the court.

The writ of error is dated the 13th of December, 1886, and was allowed by the district judge, but the allowance bears no date. The writ bears the mark of having been filed in the office of the clerk of the Circuit Court on the 13th of December, 1886. The citation bears date the 13th of December, 1886, and is marked as having been filed on that day in the office of the clerk of the Circuit Court, and appears to have

[ 135 U.S. Page 542]

     been served on the attorneys for the defendant on the 22d of December, 1886. The bond bears date the 13th of December, 1886, and was approved by the District Judge, the approval bearing no date, and is marked as filed in the office of the clerk of the Circuit Court on the 14th of December, 1886.

It is objected by the defendant Liggett, that this court has no jurisidiction of the writ of error, because the writ, the citation and the bond, all of them bear date the 13th of December, 1886, and because the writ and the citation were filed in the office of the clerk of the Circuit Court on that day, while the judgment sought to be reviewed as not rendered until the 14th of December, 1886. But the record distinctly states, that, after such judgment was rendered, the plaintiff presented to the court a writ of error, a citation and a bond, and that the court allowed the writ of error, and the citation was signed by the judge, and the bond was approved and ordered to be filed as part of the record; and the writ of error, the citation and the bond are set forth at length. We must, therefore, conclude that all these things, including the filing, took place after the judgment of the 14th of December, 1886, was rendered and entered; that whatever discrepancy appears must be attributed to clerical errors; and that the matter is not open to the objection made, that the writ of error was brought, the citation signed and the bond given, before the judgment was entered, even if that fact would have been available as an objection, if it existed. The case is like that of O'Dowd v. Russell, 14 Wall. 402.

Upon the merits, we are of opinion that the judgment in favor of Liggett must be reversed. The decisions of the Circuit Court were made before the case of Hawkins v. Glenn, 131 U.S. 319, was decided by this court, on the 13th of May, 1889. All the points urged on the part of the defendant in the present case were fully argued, considered and decided by this court in Hawkins v. Glenn. The syllabus of that case correctly embodies the rulings of this court, in these words: "In the absence of fraud, stockholders are bound by a decree against their corporation in respect to corporate matters, and such a decree is not open to collateral attack. Statutes of limitation

[ 135 U.S. Page 543]

     do not commence to run as against subscriptions to stock, payable as called for, until a call or its equivalent has been had, and subscribers cannot object, when an assessment to pay debts has been made, that the corporate duty in this regard had not been earlier discharged. Rules applicable to a going corporation remain applicable notwithstanding it may have become insolvent and ceased to carry on its operations, where, as in this case, it continues in the possession and exercise of all corporate powers essential to the collection of debts, the enforcement of liabilities and the application of assets to the payment of creditors."

The facts set forth in the amended petition in the present case appeared in the case of Hawkins v. Glenn. That was a suit at law, brought in the Circuit Court of the United States for the Eastern District of North Carolina, to recover the amount of the assessment or call of 30 per cent, made by the decree of the Chancery Court of the city of Richmond, on December 14, 1880. The statute of limitations of North Carolina, of three years, was pleaded as a defence. The suit having been brought within three years from December 14, 1880, it was contended in this court, for the defendant, that the cause of action did not accrue within three years before the suit was brought; that the case was essentially unlike that of a call made by the authorities of a corporation which was still doing business; that during the whole of the three years, the provision in the subscription, as affected by the statute of Virginia, which submitted the subscriber to the descretion of the president, and directors, as to the time at which calls might be made, had become null; and that, inasmuch as, after the corporation stopped business, the time of making a call was no longer a matter of discretion, but was subject to the direction of the law, the lapse of time before bringing the suit in the Chancery Court of the city of Richmond was to be counted in reckoning, under the statute of limitations, whether the suit subsequently brought against the defendant, under the call made by that court, had been brought in good time.

It was also contended in that suit by the defendant, that the decree of the Chancery Court of the city of Richmond

[ 135 U.S. Page 544]

     was void as against him, because he was not a party to the suit. On the latter point, this court said: "We understand the rule to be otherwise, and that the stockholder is bound by a decree of a court of equity against the corporation in enforcement of a corporate duty, although not a party as an individual, but only through representation by the company. A stockholder is so far an integral part of the corporation that, in the view of the law, he is privy to the proceedings touching the body of which he is a member;" citing Sanger v. Upton, 91 U.S. 56, 58; County of Morgan v. Allen, 103 U.S. 498, 509; Glenn v. Williams, 60 Maryland, 93, 116; Hambleton v. Glenn, 13 Virginia Law Journal, 242, and 9 S.E. Rep. 129.

This court said that it concurred in the decision of the Court of Appeals of Virginia, in Hambleton v. Glenn, made as to the statute of Virginia, that "as the corporation, notwithstanding it may have ceased the prosecution of the objects for which it was organized, could still proceed in the collection of debts, the enforcement of liabilities and the application of its assets to the payment of its creditors, all corporate powers essential to these ends remained unimpaired;" and that it was the decision "of the highest tribunal of the State where the corporation dwelt, in reference to whose laws the stockholders contracted, and in whose courts the creditors were obliged to seek the remedy accorded;" citing Canada Southern Railway v. Gebhard, 109 U.S. 527; Barclay v. Talman, 4 Edw. Oh. 123; Bank of Virginia v. Adams, 1 Parsons Sel. Cas. 534; Patterson v. Lynde, 112 Illinois, 196.

This court further said: "We think it cannot be doubted that a decree against a corporation in respect to corporate matters, such as the making of an assessment in the discharge of a duty resting on the corporation, necessarily binds its members, in the absence of fraud, and that this is involved in the contract created in becoming a stockholder. The decree of the Richmond Chancery Court determined the validity of the assessment; and that the lapse of time between the failure of the company and the date of the decree did not

[ 135 U.S. Page 545]

     preclude relief, by creating a bar through statutes of limitation or the application of the doctrine of laches. And so it has been held in numerous cases referred to on the argument. The court may have erred in its conclusions, but its decree cannot be attacked collaterally, and, indeed, upon a direct attack, it has already been sustained by the Virginia Court of Appeals. Hambleton v. Glenn, supra. . . . Although the occurrence of the necessity of resorting to unpaid stock may be said to fix the liability of the subscriber to respond, he cannot be allowed to insist that the amount required to discharge him became instantly payable, though unascertained, and though there was no request, or its equivalent, for payment. And here there was a deed of trust made by te debtor corporation for the benefit of its creditors, and it has been often ruled in Virginia, that the lien of such a trust deed is not barred by any period short of that sufficient to raise a presumption of payment. Smith v. Virginia Midland Railroad, 33 Grattan, 617; Bowie v. The Poor School, 75 Virginia, 300; Hambelton v. Glenn, 13 Virginia Law Journal, 242. This deed was not only upheld and enforced by the decree of December 14, 1880, but also the power of the substituted trustee to collect the assessment by suit in his own name was declared by the Court of Appeals of Virginia, in Lewis's Administrator v. Glenn, 6 S.E. Rep. 866. See, also, Baltimore & Ohio Railroad v. Glenn, 28 Maryland, 287. By the deed the subscriptions, so far as uncalled for, passed to the trustees, and the creditors were limited to the relief which could be afforded under it, while the stockholders could be subjected only to equality of assessment, and as the trustees could not collect except upon call, and had themselves no power to make one, rendering resort to the president and directors necessary, or, failing their action, then to the courts, it is very clear that the statute of limitations could not commence to run until after the call was made."

This court then cited the rule laid down in Scovill v. Thayer, 105 U.S. 143, 155, as applying to the case before it, and said: "In that case it was said by Mr. Justice Woods, speaking for the court: 'There was no obligation resting on the stockholder

[ 135 U.S. Page 546]

     to pay at all until some authorized demand in behalf of creditors was made for payment. The defendant owed the creditors nothing, and he owed the company nothing save such unpaid portion of his stock as might be necessary to satisfy the claims of the creditors. Upon the bankruptcy of the company, his obligation was to pay to the assignees, upon demand, such an amount upon his unpaid stock as would be sufficient, with the other assets of the company, to pay its debts. He was under no obligation to pay any more, and he was under no obligation to pay anything until the amount necessary for him to pay was at least approximately ascertained. Until then his obligation to pay did not become complete.' And it was held, 'that when stock is subscribed to be paid upon call of the company, and the company refuses or neglects to make the call, a court of equity may itself make the call, if the interests of the creditors require it. The court will do what it is the duty of the company to do. . . . But under such circumstances, before there is any obligation upon the stockholder to pay without an assessment and call by the company, there must be some order of a court of competent jurisdiction, or, at the very least, some authorized demand upon him for payment; and it is clear the statute of limitations does not begin to run in his favor until such order or demand.' Constituting, as unpaid subscriptions do, a fund for the payment of corporation debts, when a creditor has exhausted his legal remedies against the corporation which fails to make an assessment, he may, by bill in equity or other appropriate means, subject such subscriptions to the satisfaction of his judgment, and the stockholder cannot then object that no call has been made. As between creditor and stockholder, 'it would seem to be singular if the stockholders could protect themselves from paying what they woe by setting up the default of their own agents.' Hatch v. Dana, 101 U.S. 205, 214.The condition that a call shall be made is, under such circumstances, as Mr. Justice Bradley remarks in the matter of Clen Iron Works, 20 Fed. Rep. 674, 681, 'but a spider's web, which the first breath of the law blows away.' And as between the stockholder and the corporation, it does not lie in the mouth of the stockholder

[ 135 U.S. Page 547]

     to say, in response to the attempt to collect his subscription, for the payment of creditors, that the claim is barred because the company did not discharge its corporate duty in respect to its creditors earlier. County of Morgan v. Allen, 103 U.S. 498. These considerations dispose of the alleged error in not sustaining the defence of the statutory bar."

We regard these rulings in Hawkins v. Glenn as disposing of the points urged by the defendant as to the statutes of limitation of Missouri, and as to the want of jurisdiction in the Chancery Court of the city of Richmond to make the call.

Under the statute of Missouri applicable to the present case, if an action was commenced within the statutory limitation of time, and the plaintiff suffered a non-suit, he was allowed to commence a new action within one year after the non-suit was suffered. The shortest period of limitation insisted on in the present case, under the statute of Missouri, is five years. The first call was made by the decree of December 14, 1880. The first suit was brought in 1884. The plaintiff suffered a non-suit on the 15th of July, 1885. He brought the present suit on the 12th of July, 1886. The statute of Missouri, so far as it applies to the present case, was, therefore, complied with.

The point is taken by the defendant that, under the statute of Virginia, the balance remaining unpaid on subscriptions to the stock was payable as called for or required by the president and directors of the company; that it appears by the amended petition that the contract between the company and the subscribers was, that the $80 per share was payable "only in such amounts and at such times as the same might be required to be paid by said company, through its president and board of directors;" and that it is not averred in the amended petition that either the president or any of the directors petition that either the president or any of the directors was a party to the suit in the Chancery Court of the city of Richmond.

But the president and directors stand for the corporation, and it is alleged in the amended petition that the corporation was a party to the amended bill, and that it was duly served with process in the cause, in accordance with the laws and

[ 135 U.S. Page 548]

     practice of the State of Virginia. The corporation sufficiently represented the president and directors in their official capacity, in which alone they were to act in making a call, and it also, as held, in Hawkins v. Glenn, sufficiently represented the defendant.

The rights of the parties in the present case must be adjudicated according to the requirements of the statutes and jurisprudence of Virginia, which State created the corporation, and in reference to whose laws the contracts of the subscribers to stock were made. The legislation of Missouri, which is invoked to the effect that, for the purposes of the statute of limitations of that State, the liability of a stockholder in a corporation to a creditor becomes fixed by the insolvency and dissolution of the corporation, and then becomes a primary and unconditional obligation, and the statute commences to run at once, can have no application to the present case. Nor can the adjudication of a court of Virginia, in a suit properly brought, and where it had jurisdiction as to subject matter and parties, be reviewed or impeached in a collateral suit like the present, except for actual fraud.

The further point is urged by the defendant, in regard to the decree of March 26, 1886, and the call for 50 per cent made thereby, that the Circuit Court of the county of Henrico was without jurisdiction to make a valid decree, and that such call or assessment was void. The view urged is, that the decree of December 14, 1880, was a final decree, without any reservation of any right to ask for a further call or assessment; and that the transfer of the cause to the Circuit Court of Henrico County was unauthorized. But we see nothing in the terms of the decree of December 14, 1880, to exclude the authority of the same court, or of any court to which the cause should be properly transferred, to make the further assessment of $50 per share; and the allegation in the amended petition as to the transfer of the suit is, that the Circuit Court of the county of Henrico was "a court of competent jurisdiction." This means that it was a court of competent jurisdiction to accept the transfer and to take jurisdiction of the suit.

[ 135 U.S. Page 549]

     In the case against the Taussigs, Charles Taussig died after the writ of error was taken, and the suit was ordered by this court to proceed against John J. Taussig and George W. Taussig, executors of Charles Taussig, deceased, and Morris taussig, as defendants in error. This claim against the Taussigs is on 100 shares of stock, and the amended complaint in the suit against them is like that in the suit against Liggett. The facts and the principles of law involved are the same as in the case against Liggett, the only differences being immaterial ones, namely, that the writ of error in the taussig case was filed in the Circuit Court on the 14th of December, 1886, and the citation was dated and filed on the 14th of December, 1886; that the defendants date, as grounds of demurrer, only that the causes of action accrued more than five years and more than ten years prior to the commencement of the suit and to the time when the non-suit mentioned in the amended petition was suffered by the plaintiff; and, as a further ground of demurrer, that the assessment of 30 per cent on the stock of the company, made by the Chancery Court of the city of Richmond, and the subsequent assessment of 50 per cent, made by the Circuit Court of Henrico County, were void and of no force or effect as against the defendants, because those courts acquired no jurisdiction over the defendants, or any jurisdiction to make any assessment which should furnish any right of action to the plaintiff against the stockholders of the company.

The judgment in each case is reversed, and each case is remanded to the Circuit Court, with a direction to overrule the demurrer to the amended petition, and to take such further proceedings as shall not be inconsistent with this opinion.

MR. JUSTICE BREWER dissented.

18900519

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