The principle of all these cases has again but recently been reiterated by the supreme court in the case of Ellis v. Davis, 109 U. S. 4,98" 3 Sup. Ct. :&ep. 327. Indeed, there is not and cannot be any dissent from it. Then, as long as the legislature of the sta'te leaves the counties with the power to make contracts with citizens of other states, to create thereby a property right in favor of such citizens, the right to sue the countie;;; in the federal courts exists. ' .It has been suggested that this scrip was taken by plaintiff subject to> allthelaws of the state. This is true,.but he takes it subject to all valid laws. If "law" is invalid ;under thatwhichis the supreme law of the land ,-the constitution of t...'1e United States,-then such statute' is, not a law, but only a simple declaration of a law-making power that is a nullity. I regard the point discussed above as the only one in the case; and, in the face of the settled law, the demurrer in this case must be overruled.
GLENN 1.'. ABELL.
(Oircuit Oourt. D. Boutl! Oarolina. May 31. 1889.) BANKRUPTCy-PROVABLE DEBTS.
The liability of a subscriber to corporate stock for his unpaid snbscription is a provable debt in bankruptcy against the estate of such subscriber. though no assessment has yet been made. under Rev. St. U. S. l\ 5067. providing that all djlbts due and payable from the bankrupt at the commencement of proceediIlgs or then existing and payable in the future shall be provable debts.
At Law. Rntledge £to Rutledge, for plaintiff. Wells £to Orr,for defendant. . ,SIMONTONjJ.i This is an action at law. Both parties by stipulation in writing waive a Ju·ry and submit all the issues to the court. ,
' { '
FINDINGS OF FACT.
, The National'Express & Transportation Company was a corporation oreated by an act of the ",tate of Virginia, 12, 1865. Its capital stock fixed at $5,000,000, the privilege of increasing it to $10,000,000. The shares fixed at $100 each. It could comnlep.ce business when one-third 9£ its shares were subscribed for, and
GLENN tl. ABELL.·
11
$100,000 paid thereon. No special provi.sion is made in the charter for the time and mode of paying subscriptions. The company was organized 12th December, 1865. Twenty per cent. of each share subscribed was paid in cash. It ceased business 20th September, 1866, and made an assignment for the benefit of its creditors, including in the assignment the unpaid amounts on the subscription toits stock. The assignee not proceeding properly, a bill was filed in the court of chancery at Richmond in behalf of creditors 7th November, 1871, to enforce the collection of assets and payment of the debts. On 14th December, 1880, a decree was made establishing debts to the sum of $500,000, removing thE1 assignee, appointing plaintiff trustee, and ordering calls on unpaid subscriptions, first for 30 per cent.. then for the whole sum unpaid. The defendant was an original subscriber for 50 shares, and paid his 20 per cent. This action was brought on 2d August, 1886, to enforce payment of the remainder. On 12th January, 1876, defendant was adjndicated a bankrupt. On 4th January, 187R, he received his He sets up in defense to this action his discharge in banfruptcy and the statute of limitations. CONCLUSIONS OF LAW.
As to the effect of the discharge in bankruptcy. Was the defendant released from this liahility? He was, if this be a debt, claim, liability, or demand provable against his estate. Rev. St. U. S. § 5119. The able counsel for plaintiff contends that the remainder of the subscription for the 50 shares made by defendant was not a debt due and payable by the defendant when he was adjudicated a bankrupt, and that it was not a debt payable at a future day, (section 5067 i) but that it was a contingent liability, the contingency whereof did not occur before the final dividend on the bankrupt's estate was declared, and that the present value thereof could not be ascertained. It was therefore not a liability included in the provision of section 5068, was not a provable debt, and was not released by the discharge. The charter of this company authorized a certain capital, divided into shares of $100 each. Every subscriber, when he made his SUbscription, agreed to take and pay for each share taken $100. Mor. Prjv. Corp. § 271. There is nothing in the act ofincorporation allowing the c:Jmpany or its board of directors to reduce the value or price of the several shares, or toperniit a subscriber to pay a part of the SUbscription price and be released from further payments thereon; There is nothing in the case to create the impression that an:y attempt was made to do this. If any such were made, it would have been null and void as to creditors. Sagary v. Dubois, 3 Sandf. eh. 501; 8a,nger v. Upton, 91 U. S 60. Nor was there anything said or done at the time of the subscription making the payment thereof conditional or contingent. For the same reason this also would have been void as to creditors. At the time of the subscription 20 per cent. only was paid in cash. This could not discharge the liability tei pay the remaining 80 per cent., nor make it depend on a contingency. Sawyer v. Haag, 17 Wall. 620j Curran v. Arkam:s(8) 15
FEDEItAL ItEPORTER,
vol. 39.
How, 307 . The liability to pay was fixed; the time-the precise moment when to pay-may have been uncertain. The subscription was an absolute promil'f\,debitum in prtesenti, a part possibly, solvendurn in.juturo. Be Iron Fed. Rep. 680. It constituted a part of the assets of the company, (MyC'l'8 v. Seeley, 10 N. B. R.411,)and as such was by it assigned for the benefit of thecreditors,-became the property of the creditors, (Sanger v. Upton, supra; Morgan Co. v. Allen, 103 U. S. 498.) The subscriber was bound to pay it in. full. If the corporation had been success.1'u1 and thus in the uncontrolled direction of its own affairs, it may posindulged its stockholders. Perhaps if its profits were sufficiently large it may have declared dividends with which the stockholder could .have been credited upon his debt for subscription and in time have so paid up the debt. But when the insolvency occurred, in 1866, its to do business was ended. It lost all self-control.· Its existence continued for no other purpose than the realization of its assets and the payment of its debts. Its duty and the duty it devolved on its was to collect in these assets immediately among them the unpale: .,nbscriptton to stock and to pay the creditors. Scovill v. Thnyer, 105 U. 8. 154. This made the obligation of the subscriber to pay fixed and certain, immediate on demand; in other words, a debt. Be Iron Works, 20 Fed. Rep. 680. No action of the corporation, of its office: s or its assignee, could discharge, alleviate, or extend this obligation. Upton v. Tribilcock, 91 U. S. 48; Sanger v. Upton, supra. But the subscriber was permitted to pay only 20 per cent. in cash. The other payments were to be made on calls by the company or its officers. The time or times, the proportion or proportions, of these calls were uncertain. It may be they· were contingent upon the necessities of the company. Does this deprive the debt on the subscription of its provable character in bankruptcy? Here, then, we have an absolute promise to pay whenever called, "that is to say, a demand existing, the accrual of the cause of action thereon dependent on a contingency, "-the call. If so, it is provable in bankruptcy. French v. Morse, 2 Gray, 111. Let us aSf;ume that a call was necessary before payment could be required; that such call nlight never have been made, either through neglect of the . corporation, its assignee, or its creditors; that thus the remainder of the subscription was "payable upon event which might never have oc, curred,"-yet the contract of subscription and the liability of the defendant to pay were in full force when the petition of bankruptcy was filed. The sum for ,vhichhe could be made liable was certain in amOtlnt,$80 per share. In the language of WAITE, C. J., in Wolf v. Stix, 99 l.T. " S. 1, this clearly is such a case as was provided for in section 5068, ;. Rev. St., and the debt was provable in bankruptcy. See also Parbury's " Case, 64 Eng.Ch. 87. Let the complaint be dismissed. ;'l'his result renders unnecessary any discussion of the defense of the ., Iltatute of limitations. NOTE By'TIiE.JUI:lGE, In the case of HaMkins v, GZmin, 9 Sup. Ct. Rep, 739, (May 13,18:89,) the. supreme court .of the United States decide .that the.statute of limitations
is not a bar, ·That case was brought by the same plaintiff as in our case against a sub!!cl'iber in like plight. . .. ., .
13 BARD V.BANIGAN.
(Circuit Court, D. Connecticut.
June 17.1889.)
1.
PRJKCIPAL AND AGE'KT-COMPENSATION OF AGENT.
Defendant, an experienced and successful rlibber manufacturer, was employed by plaintiff's company. which was then in financial difficulties, 'and not succeeding well with its rubber business. to take charge of the business as managing agent. and as a part of the transaction he purchased 4,000 sbares of its capital stock at a low price. He devoted bis attention and active services to tbe business for ,over four years, when the company became in. solvent. FrequenUy during the first year or two,h,e stated that he was serving witbout compensation, but in tbis action. involving his right to a salary, he testified that he supposed his salary would be determined at tbe proper time, when the company became more prosperous. and that he would then be paid what was right for the past. There was no evidence.of a contrary agreement. Held, that he was entitled to a reasonable salary ($2,500 per year) from the beginning of his employment. A purchaser of preferred stock issued without express statutory authority, who voluntarily subscribed and paid for it for the purpose of promoting the scheme under wbicb it was issued, and wbo was a promoter of tbe 'scbeme, cannot bold it for 28 months after the conditl0ns upon wbich it was issued have been fulfilled. and then, on the insolvency of the company, assert the invalidity of the stock, and recover back his money.
2.
CORPORATIONS-PREFERRED STOCK-UNAU'I'HOIUZED ISSUE.
At Law. Action by Charles Bard, receiver of the Hayward Rubber Company, against Joseph Banigan, for money had and n:ceived. Hnlsey & Briscoe, for plaintiff. Doolittle & Bennett, for defendant. SHIPMAN, J. This is an action at law which was tried by the court, the parties having by a duly signed written stipUlation waived a jury trial, and agreed, to a trial by the court. The first count' of the complaint was tor money had and received by the defendant for the use of the Hayward Rubber Company, before tbe appointment of a receiver. The second count was for money had and received for the use of the plaintiff, after his appointment receiver. A stipulation between said parties is as follows: "It is stipulated and agreed by and bet\veen the plaintiff and in the above-entitled action that the balance due to the plaintiff frOm the defendant under the first count of the substitnted complaint. exclusive of ,the disputed items of $21.808.40 claimed by the defendant for services as general manager, and of $17.550 had and recei ved by, Hayward Hubber. Company in paym,ent of .preferred stock, is the sum of $10,494.96, with thereon from December 15, 1887, and that the balance dUll to the plaintiff .from the defendant under the second count of the sllbstituted complaint is the sum of $24,011, with interest from January 15, 1888." .
The facts which upon such trial were found to be true, and which are true, are as fqllqw8: , . The RubberCompany was a joint-stock corporation, for the manufacture of India,rubber shqes, duly ,incorporated whh the statutes ofConnectic,ut, and located iI;lCqlcl:l!Js,ter, .state:. ,.It!>