Hawkins v. Glenn

John Glenn, trustee of the National Express & Transportation Company, brought an action at law, November 5, 1883, against William J. Hawkins, in the circuit court of the United States for the Eastern district of North Carolina, alleging that Hawkins, on or about November 1, 1865, subscribed for 250 shares of the capital stock of that company, a body corporate of the state of Virginia, and thereby undertook and promised to pay for each and every share so subscribed for by said defendant the sum of $100, in such installments and at such times as he might be lawfully called upon and required to pay the same, according to the law under which the company was incorporated; that on the 20th day of September, 1866, the express company, by its deed of that date, assigned and transferred to Hoge, O'Donnell, and Kelly, for the benefit of its creditors, all its property, rights, credits, and effects of every kind, in trust for the payment of the debts of said company; that afterwards, in a certain cause instituted in the chancery court of the city of Richmond, in the state of Virginia, in which the official administrator of W. W. Glenn, deceased, and other persons, claiming to be creditors of the express company, were complainants, and said company, Kelly and Hoge, surviving trustees, and other persons, officers of said company, were defendants, it was, on the 14th day of December, 1880, decreed that plaintiff be, and he thereby was, appointed trustee to execute the trusts of the deed of trust in the room and stead of the trustees originally created by said deed; and it was further decreed that a large amount of the debts of the express company remained unpaid, and that, of the sum of $100 for each and every share of the stock of the company undertaken and promised to be paid for by the subscribers for said stock and their assigns, the sum of $80 per share had never been called for or required to be paid by the president and directors of said company, and remained liable to be called for and required to be paid by the subscribers for said stock and their assigns; and it was further decreed that it was necessary and proper for a call of 30 per cent. to be made, which call and assessment was accordingly ordered; and that, by force of his subscription and said call, the defendant was liable to pay the sum of $7,500 on his shares of stock, with interest.

Hawkins filed his answer January 28, 1884, in which he said that he subscribed for 200 of the 250 shares for other persons than himself, and that he was not liable thereon. He denied that he owed anything on account of any of said shares, and averred that the plaintiff was not the proper plaintiff, and 'that the plaintiff's cause of action did not accrue within three years before the commencement of this action.'

Upon the trial of the cause the plaintiff adduced evidence tending to show that in March, 1861, a corporation had been chartered by the legislature of the state of Virginia, to be known as the 'Southern Express Company,' but that no organization was had thereunder; that in 1865 it was proposed to adopt the said charter as the basis of action for the formation of a new and larger enterprise of the same kind; that, accordingly, in November of that year, subscriptions having been made to the capital stock in many states, a provisional organization was effected, in which the defendant Hawkins was named as one of the directors, and the business of the company was commenced and actively prosecuted; that on the 12th day of December, 1865, a new and amended charter was granted by the legislature of Virginia for a company to be known as the 'National Express & Transportation Company,' the defendant being named therein as one of the corporators; that the capital stock was authorized to be $5,000,000, divided into shares of $100 each, of which a part was payable at the time of subscribing and the balance as called for by the president and directors; that in January, 1866, the provisions of the charter having been complied with, the corporation was duly organized, the defendant being one of the directors; that in September, 1866, having contracted many debts, and finding itself much embarrassed, it executed a deed of assignment, conveying and assigning in trust to trustees, for the benefit of all its creditors, all of its property, including the unpaid subscriptions to the capital stock, of which only 20 per cent. had been called for by the president and directors; and that the trustees took possession of the assets November 1, 1866, and the business of the company ceased. Plaintiff further put in evidence the transcript of the record of the proceedings in the chancery court of the city of Richmond, referred to in plaintiff's declaration, in which, upon a general creditors' bill brought in 1871 against the said company and its president and directors, and the surviving trustees in said deed of assignment, the court had, by a decree entered on the 14th day of December, 1880, adjudicated the indebtedness of the said company to require an assessment of 30 per cent. of the unpaid subscriptions for the payment of the same, and the necessity and propriety of an assessment of 30 per cent. upon the unpaid subscriptions for the payment of the said indebtedness, and the substitution of the plaintiff as trustee to receive and collect the said assessment; and then the plaintiff introduced in evidence the stock-books of said company, showing the following entries as to the defendant Hawkins:

To whom transferred. Trans- Certifi- No. of Requisi- Form whom  Certifi- No. of Requisi-

fer No. cate No. shares. tion No. transferred. cate No. shares. paid.

1866...........  1865.

Feb. 5.. M. Bowes 436  302  10  50  Nov. 1,  Company  299 to 303   250..... $1,250

"  ". Geo. B. Waterhouse 437  302  10  50

"  ". B. P. Williamson  438  302  10  50

"  ". R. H. Battle, Jr  439  302  10  50

"  ". Wm. E. Anderson 440  302  10  50

The defendant testified that he subscribed for 250 shares, under the following circumstances. That at the instance of three other citizens of North Carolina, viz., K. P. Battle, J. M. Hoge, and B. P. Williamson, he went to Richmond, in the fall of 1865, and proposed to the parties superintending the reception of subscriptions to take 50 shares each for the above-named persons, and 100 shares for himself, having in contemplation other parties who might wish to take 50 shares of this 100; that the superintendent suggested that it would be more convenient to place his name only upon the books as subscriber for the whole 250 shares, and this was done, the initials of the three persons being at the same time indorsed as a memorandum on the subscription paper; that in January, 1866, when the company was organized, he, being one of the directors, informed the board of directors of the terms of his subscription as above, and no objection was made thereto; that he instructed the officer of the company whose business it was to issue certificates of stock to issue five for 50 shares each, three of them in the names of the above parties and two to himself, and at the same time paid $250 which had been assessed upon the 250 shares, $150 of which he had received from his principals, but that he had receipted for such certificates upon the books of the company; that shortly afterwards the five certificates were transmitted to him in North Carolina, all five being made out in his name only; that he did not return either of them to the company, but immediately transferred each of the three in question to the party for whom it wasi ntended; and that only one of the certificates was ever transferred upon the books of the company.

The court instructed the jury to find for the plaintiff, and the defendant excepted. The jury returned a verdict in favor of plaintiff for $9,508.75, 'of which $7,500 is principal, and bears interest from June 1, 1885,' upon which judgment was rendered and a writ of error prosecuted to this court.

The record of the chancery court of the city of Richmond shows that W. W. Clenn recovered judgment in the superior court of Baltimore city, against the express company, by default, June 8, 1869, which was entered up for $42,501.31, on assessment of damages, June 24, 1870, and that, on the 4th day of December, 1871, Glenn filed his bill on his own behalf and that of such other creditors of the express company as might become parties to the suit, against the express company, its president and directors, and the trustees named in the deed of trust, subpoenas having issued on the 28th of November, 1871, which were served on two directors of the company.

The bill sets forth the recovery of the judgment; that the trustees had collected little or nothing; that the visible property of the company had been seized by creditors in various states; that only 20 per cent. had been called for from the stockholders, of which the trustees had collected but little; that the validity and legal effect of the deed had been drawn in question in the courts of various states, and the operations of the trustees hindered; that it would be necessary to resort to the remainder of the subscription to pay the company's debts, and stockholders could not be sued until a call had been made by the company; that doubts had been expressed whether the subscriptions passed by the deed; that if they did, the trustees could not sue without a call; and that equity demanded that money should be collected by a call and assessment upon all the stockholders. The bill prayed for a construction of the deed, the appointment of a receiver, an account, and the ascertainment of the amount necessary to be assessed for the purpose of paying the debts, etc., and for general relief. Nothing further was done until August 4, 1879. when an amended and supplemental bill was filed, asking that the trustees be removed and a new trustee be appointed, and that if the company should make no assessment upon the stockholders the court might make one. This amended bill charged that nothing had been done by the company or the trustees in execution of the trust, or to pay creditors; that the books of the company had been retained by one of the two surviving trustees, who were non-residents, the third trustee being dead, etc. The does not appear that process was issued against the company upon the original bill, but upon the amended and supplemental bill a subpoena was issued against it, is officers, directors, and trustees, and this was served upon two directors and a cashier of the company, and published for four weeks in a newspaper in the city of Richmond. The surviving trustees, Hoge and Kelly, filed answers setting forth in detail a variety of causes which had operated to delay and impede their proceedings, and furnished excuses for their apparent laches, particularly litigation in Maryland and New York, in which injunctions were granted, and, in one of the suits, a receiver was appointed, to whom the books and papers of the company were consigned, and when returned, on the disposition of that case, after the lapse of some years, they were carried to New York.

A decree pro confesso was taken against the company in September, 1879, and an interlocutory order entered on the 6th of October following, referring the case to one of the commissioners of the court to take an account of the debts due by the company and the priorities thereof, and an account of its assets, etc., upon giving due notice by publication, which he did. The commissioner made report ascertaining the total of indebtedness, and the whole amount of unpaid stock; and he recommended an assessment of 20 per cent. By a sp plemental report an increase of the assessment was recommended, and a decree was finally rendered, December 14, 1880, sustaining the deed of trust, substituting John Glenn as trustee, holding that the power to make assessment remained with the company after the deed was executed, finding the amount of the indebtedness, and that there was no property to pay the debts except the 80 per cent. unpaid of the capital stock, and ordering an assessment of 30 per cent., payable to Glenn, trustee, who was thereby authorized to collect and receive the same.

S. F. Phillips, W. H. Lamar, and J. G. Zachry, for plaintiff in error.

[Argument of Counsel from pages 325-327 intentionally omitted]

Wilbur F. Boyle and John W. Dryden filed brief in behalf of plaintiff in error, by leave of court.

John Howard and Charles Marshall, for defendant in error.

Mr. Chief Justice FULLER, after stating the facts as above, delivered the opinion of the court.