but 60 per cent. on the allowed claims; that | swer was treated in the trial court as a mothis action was instituted upon the instruc- tion to strike out that defense on the ground tion of said court after notice of such in- that it constituted a sham pleading, a pleadstruction given to the stockholders; and ing not filed in good faith, and intended only that plaintiff so notified said stockholders, | for delay; and upon hearing it was sustainincluding the defendant, and the defendant ed. The evidence adduced upon that hearing refused to pay her ratable share of the sum required, $1,234.23. Judgment was prayed for that amount. was not incorporated in the bill of exceptions, and consequently was not presented to the Court of Appeals. That court, recognizing the presumption of the legality of the proceedings in the trial court, and assuming in the absence of any record covering that branch of the case that the finding was justified by the evidence adduced, refused to review the finding and judgment in so far as it affected the first defense of the answer. The answer of the defendant below, plaintiff in error here, consisted of four defenses: The first defense, after admitting the death of Allen E. Thomas, the probation of his will, the qualification of his executors, the settlement of his estate, and that defendant is his residuary legatee, substantially as averred in the petition, further admits that [4] The authority of the trial court to order "the final account of said executors shows a sham pleading stricken from the files has that she receipted for said stock." Then "for been recognized by this court and such prowant of information this defendant denies cedure approved in the case of White v. Caleach and every other allegation in said peti-houn et al., 83 Ohio St. 401, 94 N. E. 743. tion contained." By her second defense the defendant says that, although by the general receipt given by her as residuary legatee she did acknowledge receipt of said 25 shares of common stock, she refused to accept said stock, and neither received nor accepted it, and that the same continued to be and remain in the possession of the executors, and has never been in her possession. For a third defense the defendant avers that on October 21, 1911, Charles W. Haas was appointed receiver of the Dayton Iron Store Company, and proceeded to reduce the assets of said company to money and distribute the proceeds to creditors; that no claim was ever presented by such receiver to the executors of said estate; and that if any claim existed against said executors, or the defendant as residuary legatee, the same is barred by the statute of limitations. As a fourth defense the defendant avers that no notice was given the stockholders in the proceeding for the appointment of a master, nor of any investigation or hearing by him. No record having been presented disclosing the evidence submitted to the trial court touching that question, the Court of Appeals very properly assumed that the evidence was such as to warrant the finding made by the trial court and to support its judgment. The liability sought to be enforced in this action is a liability for unpaid subscription to the capital stock of the Dayton Iron Store Company. The facts disclosed by the pleadings, essential to a consideration of the questions of law presented, may be briefly stated as follows: Allen E. Thomas subscribed for 25 shares of the common stock of the Dayton Iron Store Company of the par value of $100 each, no part of which was paid. He died July 4, 1910, his executors were appointed and qualified July 18, 1910, a receiver of the Dayton Iron Store Company was appointed October 21, 1911, the final account of the executors of the estate of Allen E. Thomas was filed and said estate closed January 2, 1912, and the defendant as residuary legatee under the will of said Allen E. Thomas received property of value greatly in excess of the A demurrer was filed to each defense. The amount which is now claimed and sought to demurrer to the first defense was considered be recovered upon the unpaid stock subscripby the trial court as a motion to strike that tion of said Allen E. Thomas. Upon repredefense from the answer, on the ground that sentations made to the court by the receiver it was a sham pleading, not filed in good theretofore appointed, that subscriptions to faith, and intended only for delay. Upon hear- the common stock of the company were uning, the trial court ordered that defense paid, a special master was appointed, and, stricken from the answer, and sustained the pursuant to the order of the court appointing demurrer to the second, third, and fourth him, such master on October 3, 1914, reportdefenses, and thereafter rendered judgmented that none of the common stock was paid for plaintiff on the pleadings. The judgment for, though all was validly issued; that there of the common pleas court was affirmed by was a balance of unpaid debts of said comthe Court of Appeals, and error is now pros-pany of $12,352.03; that Allen E. Thomas ecuted to this court to reverse that judgment. had subscribed for 25 shares of common Davisson & Davisson, of Dayton, for plain-stock of said company of the par value of tiff in error. McMahon & McMahon, of Day- $100 each; and that in order to pay the balton, for defendant in error. ance of debts remaining after having reduced to money the property of the company and distributed the same it was necessary that each subscriber of said common stock pay MATTHIAS, J. The record discloses that the demurrer to the first defense of the an 414 49.41 per cent. of the par value of his respective subscription. The court on January 12, 1915, approved and confirmed said report in all respects and directed the receiver to institute actions to recover such portion of each stock subscription not paid by May 10, 1915. This action was instituted May 15, 1915. The right to maintain this suit against the defendant to recover from her the amount due on the unpaid stock subscription of Allen E. Thomas, or any part thereof, is challenged chiefly upon the ground that the action is barred by virtue of the provisions of section 10746, General Code, which are as follows: "No executor or administrator, shall be held to answer to the suit of any creditor of the deceased unless it be commenced within eighteen months from the time of his giving bond except as hereinafter provided. A creditor whose cause of action accrues after the expiration of eighteen months from the time the executor or administrator gave bond according to law, and before such estate is fully administered, may begin and prosecute such action within six months after the accruing of such cause, and before the estate is fully administered. No cause of action against an executor or administrator shall be barred, by lapse of time, until the expiration of six months from the time it accrues.' pany, by which the subscriber engages to pay the remaining installments on demand by the corporation." It is now well settled in this state that the liability for unpaid stock subscription arises from the contract between the subscriber for stock and the corporation. Bauman v. Kiskadden, Trustee, 94 Ohio St. 130, It was held in the case of 113 N. E. 588. Warner v. Callender, 20 Ohio St. 190, that action to recover upon unpaid written stock subscription is not barred until 15 years aftAnd in the er call was made for the same. opinion in the case of Bauman v. Kiskadden, supra, it is stated at page 138 of 94 Ohio St., at page 590 of 113 N. E.: "If a stockholder owes an unpaid amount upon his subscription for stock, then this amount constitutes an asset of the corporation which may be enforced under the provisions of our statutes by the directors after call." It clearly appears, therefore, that 10 per cent. of the amount subscribed for stock was due at the time the subscription was made. A right of action then accrued for such 10 per cent., and the claim to that extent is barred by the statute. That fact is unim portant in this case for the reason that the The contention of the defendant that ac- remaining 90 per cent. was subject to call, tion against her is barred by the provisions and only 49.41 per cent. is demanded in this of this section rests upon the theory that the action. The remaining 90 per cent. of the cause of action accrued upon the appoint-amount subscribed became due and payable ment of the receiver of the Dayton Iron Store Company, October 21, 1911; that it was incumbent upon him to present the claim for the amount due upon such stock subscription to the executors and institute action to recover the same from them within the period limited by the provisions of the section above quoted; and that the claim not having been sued upon within such time no action could thereafter be maintained against the executors or against this defendant. [1, 5, 6] The amendment of section 3, article 13, of the state Constitution, was in effect at the time of the incorporation of the Dayton Iron Store Company, and therefore no stockholder was "individually liable otherwise than for the unpaid stock owned by him or her." It is only that liability which is sought to be enforced in this action, and it arises from the subscription of Allen E. Thomas for the stock of said corporation. That subscription was made with reference to the statute then in force, and its terms Under the became a part of the contract. provisions of section 8632, General Code, 10 per cent. of the amount subscribed for capital stock was due at the time of making such subscription, and the remainder of the amount subscribed was required to be paid in such installments at the times and places and to such persons as the directors required. As said by the court in the case of Hood v. McNaughton, 54 N. J. Law, 425, 24 Atl. 497: "The subscription to the stock and the accept ance of a certificate for the shares constitute a contract between the subscriber and the com only at such time and in such installments as determined and required by the board of directors. It is clear that had the affairs of the corporation continued under the control of its board of directors it would have been necessary that a call be made for the amount required to be paid upon stock subscription before an action could be maintained to recover the same, and that the defense now interposed would, under those circumstances, be unavailable in a suit to recover after call duly made by the board of directors, for the reason that a claim for unpaid stock subscription against a stockholder or against the estate of a deceased stockholder would not become absolute until call therefor was made by the board of directors. In the case of the Great Western Telegraph Co. v. Gray, 122 Ill. 630, 14 N. E. 214, the court held that: "Where a contract of subscription to the capital stock of a corporation provides for payments in installments, as from time to time ordered by the board of directors, no cause of action will accrue until an installment is assessed and ordered to be paid." A similar view was expressed by this court in the case of Mansfield, Coldwater & Lake Michigan Rd. Co. v. Hall, 26 Ohio St. 310. It was there held, in construing provisions similar to those contained in section 8632, General Code, that, in a suit to recover unpaid installments of stock, an allegation that the board of directors required subscriptions to its stock to be paid in installments of a certain amount, at a certain time and place, was material to the right of recovery. To the same import and effect is the holding of | fied by call of the board of directors. As we the court in the case of Kilbreath v. Gaylord, have seen no call was made nor was any Adm'r, 34 Ohio St. 305. In the case of the action taken equivalent thereto until the Lake Phalen Land & Improvement Co. v. finding and order of the court January 12, Lindeke et al., 66 Minn. 209, 68 N. W. 974, 1915. it appeared that a subscriber for stock, which was to "be paid in when called for by its board of directors," died intestate before a call was made, and that after his estate was administered and the residue distributed to the heirs and next of kin by decree of the probate court, and the administrator discharged, the board of directors made an assessment upon the stock and required that a specified portion of the amounts subscribed be paid. It was there held that such assessment or call was a condition precedent to a recovery of the amount so called or assessed; that the claim for the same, before such call, was a contingent claim, which could not be proved in the probate court; and that an action would lie for the amount thereof against the distributees, to the extent of assets received by them. In Under a state of facts somewhat similar, appearing in the case of South Milwaukee Co. v. Murphy et al., 112 Wis. 614, 88 N. W 583, 58 L. R. A. 82, it was held that a debt, so long as it is wholly unknown whether there will ever be an absolute liability to discharge it, is a mere contingent claim, and that a subscription liability to pay for stock in a corporation is of that character. that case the court further held that there was no way whereby, in advance of a call regularly made, the liability upon the subscription contract could have been valued and extinguished by payment, or of determining whether any payment whatever would be required, and, consequently, that the claim was only contingent and would not be affected by statutes of limitation while such character continued to exist, and, where it did not become absolute until after the expiration of the time limited for filing claims in administration proceedings, an action would lie against the legatees or next of kin of the deceased stock subscriber to recover the value of assets received by them or sufficient thereof to satisfy such claim. The authorities are not in accord, but the rule adopted and followed in many jurisdictions is that until an account has been taken and an order of the court made in the nature of a call upon the shareholders the receiver cannot maintain an action against them, and such rule has been applied particularly where the total amount due from the shareholders will, if collected, be much more than sufficient to pay the corporate debt; and either an assessment by the directors of the necessary amount, or an order of a court of equity as a substitute for such assessment, is necessary as a preliminary to a right to sue a shareholder at law for the unpaid balance of his stock subscription. 7 Ruling Case Law, §§ 371 and 401; 10 Cyc. 732; 4 Thompson on Corporations (2d Ed.) § 3886, and cases cited. . In the case of Great Western Telegraph Co. v. Gray, supra, it appeared that a party in 1868 subscribed to the capital stock of a corporation, to be paid for in such installments as might from time to time be ordered, and on assessments or call paid 40 per cent. of the par value of his stock. The directors failed to make any order for the payment of the balance, and a court of equity at the suit of creditors in 1886 made an order of assessment or call for payment on the sub scription. The court held that the limita tion as to the unpaid subscription did not commence to run before such order of the court in 1886. If under the circumstances presented by the instant case a right of action for the recovery of unpaid stock subscription accrued only upon the order of the court, heretofore referred to, a suit against the executors of said estate to recover the unpaid subscription of Allen E. Thomas was precluded by force of the provisions of section 10746, General Code. The 18-month period during which such suit could be brought had expir ed and said estate had been fully administered. The defendant as residuary legatee received property of value far in excess of [2, 3] In the case at bar no call was made the claim asserted by the receiver. Had this by the board of directors for the unpaid claim been enforceable prior to the final stock subscriptions, nor for the payment of settlement of said estate, it would have been any part thereof. There was no ascertain- paid out of the assets of the estate before ment of the amount required to be paid on distribution, and the amount thereafter resuch unpaid stock subscriptions until the ac- ceived by the defendant would have been tion of the court approving the finding and diminished to that extent. The claim havreport of the master commissioner. Prior ing become absolute and enforceable subseto that time the claim was only contingent, quent to the settlement of the estate and and the amount which might be required, if subsequent to the expiration of time fixed any, was indefinite and uncertain. It does by statute within which actions may be not appear that it was theretofore either brought against executors, we perceive no ascertained or ascertainable. It was a lia- valid reason why suit may not be maintainbility of the estate of Allen E. Thomas, but, ed against the defendant by virtue of the under the terms of the contract, due only provisions of sections 10876 and 10877, Genat the times and in the installments speci- eral Code, if commenced within one year after the time when the right of action accrued, as required by the provisions of section 10878, General Code. That requirement was complied with in this case. There is no virtue in the defense that neither the defendant, nor the executors, nor stockholders individually, were made parties to or notified of the proceeding in the receivership case. Swing, Trustee, v. Rose, 75 Ohio St. 355, 79 N. E. 757. The court in making the order upon which this suit is predicated did only what it would have been the duty of the board of directors to do had the affairs of the company continued under its supervision and control. 7 Ruling Case Law, § 366. Upon this point the language used by the court in the case of Great Western Telegraph Co. v. Gray, supra, is so terse and so apt that we adopt it: "Defendant's promise was to pay as the directors, from time to time, might order. The directors, who were defendant's agents, having neglected to make order for payment, a court of equity, in their place, as before said, might make the order. The court here did make such tract was complete to pay the remaining amount of his stock subscription. There was then a perfect cause of action against him. His liabil ity was to pay the entire remaining unpaid amount of 60 per cent. of his subscription-at least to the extent needed to pay the debts of the corporation. Assessing him with only his gation of his legal liability, doing him an equiratable part thereof (35 per cent.) was, in mitity, and affording no just cause of complaint. In order for the board of directors to have made a valid order for payment, it would not be conbeen before the board. No more, we conceive, tended, we presume, that defendant should have was it necessary that defendant should have been before the court, when it, in place of the directors, made the call or order of assessment." The defendant could interpose any defense in this suit which Allen E. Thomas could have asserted, but no defense has been interposed which can defeat the claim for the portion of such unpaid stock subscription which is sought to be recovered in this action. The judgment is therefore affirmed. Judgment affirmed. NICHOLS, C. J., and WANAMAKER, NEWMAN, JONES, JOHNSON, and DONA order, and thereupon, or at least after demand made, defendant's legal liability upon. his con- HUE, JJ., concur. (187 Ind. 339) further description of the work to be done, such BUSH et al. v. STATE ex rel. WERNEKE. section providing that the articles shall state (No. 23179.) (Supreme Court of Indiana. April 23, 1918.) 1. QUO WARRANTO 48 INFORMATION STATEMENT of GROUNDS. Burns' Ann. St. 1914, § 1190, providing that information in quo warranto shall consist of a plain statement of the facts constituting the grounds of the proceeding, intends something more than the general statements and legal conclusions recognized as sufficient at common law, and the rules of pleading applying in civil actions generally apply thereto. 2. APPEAL AND ERROR 1039(8)-HARMLESS ERROR-RULING ON PLEADING. Refusal of motion of defendants in quo warranto, based on defendants not having been legally incorporated, to require a statement of the facts necessary to sustain the conclusions alleged in the information, while error, Acts 1913, c. 322, providing that a conclusion stated in a pleading shall be considered the allegation of all facts required to sustain it, but giving the remedy of such motion against such conclusion, is not reversible error, defendants by their answer setting out all steps taken to incorporate, on which issue of law was joined by demurrer, the ruling merely shifting the burden of pleading the facts. 3. CONSTITUTIONAL LAW 42-ATTACK OF STATUTE BY STATE. The state can attack the constitutionality of a statute under which defendants claim to be incorporated. 4. STATUTES 113(1)-TITLE AND SUBJECT. Const. art. 4, § 19, as to title and subject of an act, is not violated by Acts 1913, c. 165, as to formation of associations to drain and reclaim wet lands, the act embodying nothing foreign to the purpose as expressed in the title, merely going more in detail. - 5. DRAINS 21-ASSOCIATIONS OBJECTSSTATUTE "OR." Acts 1913, c. 165, § 1, providing that landowners affected and interested in "construction, extension, or repairs of any levee, dike," etc., for protection, drainage, or reclamation of wet or overflowed lands, may associate by written articles, stating the objects of the association, does not, by the disjunctive conjunction "or," limit the formation of an association to construction of a single one of the several classes of improvements, such a result being absurd; and an association formed for constructing the several kinds of work as parts of one general improvement not being formed for engaging in separate and distinct lines of business wholly disconnected and independent of each other. [Ed. Note.-For other definitions, see Words and Phrases, First and Second Series, Or.] 6. DRAINS 21-AssOCIATIONS-ARTICLES SIGNING AND ACKNOWLEDGING. the association's object generally, and need not give the route, or a particular description of any of the work, or its location; definite description being required only by section 12, by a survey before commencement of work or assessment therefor. Appeal from Circuit Court, Vigo County; Chas. L. Pulliam, Judge. Action by the State on the relation of Richard Werneke, against Ernest G. Bush and others. From an adverse judgment, defendants appeal. Reversed, with instruc tions. Hutchison & Burns, of Brazil, and Duvall & Whittaker, of Terre Haute, for appellants. Wm. Horsley, Finley A. McNutt, and Harry S. Wallace, all of Terre Haute, for appellee. LAIRY, J. This is an action of quo warranto brought by the state of Indiana on the relation of the prosecuting attorney of the Forty-Third judicial circuit of Indiana against appellants. The material allega. tions of the complaint are as follows: "That said defendants have been for more than two years last past, and still are, usurping the franchise of being a corporation by the name and style of the Reservoir Improvement Company, in the counties of Vigo and Clay, in the state of Indiana; and that by that name are pleading and being impleaded, contracting and being contracted with, and otherwise acting as a corporation within Vigo and Clay counties, in the state of Indiana, without being legally incorporated; that as such pretended corporation said defendants, as an association of persons, have acted within the said counties and state as a corporation without being legally incorporated. The relator would give the court to understand and be informed that said defendants have never been and are not now legally incorporated, and during a period of more than two years last past have so usurped the franchise of being a corporation as aforesaid. Wherefore this relator asks the court that said defendants be required to show by what right they claim to have and enjoy the privileges of such corporation." * Appellants' motion for an order requiring appellee to make the complaint more specific was overruled, and thereafter appellants filed a joint and several answer, to which a demurrer was addressed by appellee. The court sustained this demurrer, and upon appellants' refusing to plead further judgment was rendered against them. Under Acts 1913, c. 165, § 1, providing that Appellants assert that the court erred in a number of persons interested in reclaiming wet and overflowed lands may associate by writ-overruling their motion for an order requirten articles, signed and acknowledged by each ing the complaint to be made more specific. person who is a member at the time of the or- It is conceded that the complaint is sufficient ganization. and section 5 providing, on record- to withstand a demurrer under the authority ing and filing the articles, the association shall be a body corporate, and any person interested in the work may at any time become a member by signing the articles, a person so subsequently signing need not make acknowledgment. 7. DRAINS 21-ASSOCIATIONS-ARTICLESOBJECTS. The articles of an association for reclaiming wet and overflowed lands, stating as its object the construction of all the various kinds of improvements enumerated in Acts 1913, c. 165, § 1, sufficiently states it, and need contain no of Smith v. State ex rel., 140 Ind. 343, 39 N. E. 1060; but is is asserted that the material allegations do not tender any certain and definite issue by reason of the general and indefinite character of the language employed. It is alleged that the defendants had been for more than two years, and at the time the complaint was filed still were, usurping the franchise of being a corporation, and as such For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes 119 N.E.-27 |