Glenn v. Howard

Alvey, C. J., delivered the opinion of the Court. The two appeals, the one of Howard and the other of Savage, at the suit of Glenn, trustee, may be considered together, as they both present the same state of pleading, and the same questions for consideration. The defendants in these appeals were each a subscriber to a certain number of shares of the capital stock of the National Express and Transportation Company, a corporation duly incorporated under the laws of the State of ⁵⁴ Virginia; and being sued for a call on tbe stock, tbe principal question.is, whether the discharge of the defendant in bankruptcy, under the Bankrupt Law of-the United States, before the call on the stock sued for was made, will bar the recovery ? The question in each case arises upon a demurrer to-the pleading; and the contract of subscription to the stock, as set out in the declaration, is, that the defendant “ thereby undertook and promised to pay to the said company, for each and every share so subscribed for by the defendant, the sum of one hundred dollars, in such instalments and at such times as said defendant might be lawfully called upon and required to pay the same, according •to the legal tenor and effect of the law under which said company was so incorporated.” The law under which the company was incorporated, as shown by the case of Glenn, Trustee vs. Williams, 60 Md., 93 , requires that there shall be paid, upon each share subscribed for, two dollars, at the time of subscribing, and the residue thereof as required by the president and directors; and if any money which any stockholder has to pay upon his shares be not-paid as required by the president and directors, the same,, with interest thereon, may be recovered by warrant or action, according to amount, &c.

The subscription of each of the defendants was made-in 1865, and the company was duly organized and went-into operation; but soon becoming embarrassed, on the 20th of Sept., 1866, it made a general deed of assignment, for the benefit of its creditors. In the fall of 1871,. certain of the creditors of the company instituted suit in the Chancery Court o the .City of Richmond, against the corporation, and the trustees named in the deed, for the-purposes of account and liquidation of the affairs 'of the corporation; and in that proceeding a decree was passed on the 14th of December, 1880, whereby the former trustees were displaced and • the present plaintiff appointed in ⁵⁵ their stead, to execute the trust created by the deed of assignment. At the time of that decree there remained about eighty per cent, of the amount of each share of stock subscribed, still uncalled for and unpaid; and the Court, upon adjudicating the amount of the indebtedness of the corporation, ordered and directed an assessment of thirty per cent, of the par value of each share, to be made on the unpaid subscriptions, for the purposes-of liquidation, with authority and direction to the plaintiff, as trustee, to proceed by suit or otherwise to collect such call. To the suits instituted under this authority against the defendants, they each pleaded in bar his discharge under the Bankrupt Law of the United States.

In the case against, the defendant Howard, the petition for adjudication was filed on the 22nd of January, 1870, and the final discharge was ordered the 14th of Sept., 1871; and in the case against the defendant Savage, the petition for adjudication Avas filed on the 24th of June, 1878, and his final discharge was ordered the 15th day of November, 1879. In each case the final discharge was obtained, and, for aught that appears, the estate fully settled, before the assessment was ordered by the decree; though it is alleged in the plea, in both cases, that the debt or claim sued for existed on the dtiy of the filing of the petition for adjudication in bankruptcy, and that the same was provable against the bankrupt estate in those proceedings. To this plea the plaintiff interposed a demurrer, and also, by agreement, filed a replication, setting forth that the stock of the company, long prior to defendant’s bankruptcy, had ceased to be of any value, and Avas onerous and unprofitable to the holders thereof, and was so at the time of the defendant’s assignment in bankruptcy; and being so worthless and onerous, it was the duty of the assignee in bankruptcy not to accept the defendant’s stock as part of his estate in bankruptcy, and that he did not accept it, nor did it vest in him, but continued the prop ⁵⁶ erty of the defendant, and the defendant continued to be a stockholder in the company, and was registered as such on the books of the company at the time of the making of the assessment under the decree of the 14th of December, 1880. To this replication there was a demurrer by the defendant.

The case was thus presented, by agreement of the parties, upon the demurrer; and the plaintiff’s demurrer to the plea was overruled, and that of the defendant to the replication sustained; and upon this ruling there was judgment for the defendant. ■ • The facts alleged in the replication may be taken to be admitted by the demurrer, unless by operation of the bankrupt law the title to the stock passed to and was vested in the assignee in invitum. It would appear, however, that there could be no object or beneficial purpose subserved by casting valueless property upon the assignee against his consent; and which could only be onerous to him, and ■ detrimental to the interest of the creditors. The great object of the assignment in bankruptcy is -to appropriate the bankrupt’s estate to the payment of his debts, but property that will yield nothing to this purpose the law will not compel the assignee to accept. If in fact the shares of stock, in respect of which tlie call sued for was made, were transferred to the assignee in bankruptcy, by virtue- of the general assignment from the bankrupt, then, of course, the defendant is not liable for any of the subsequent calls on the shares.

But we discover nothing in the law that made it compulsory upon the assignee to accept the shares, and it is alleged in the replication, and admitted by the demurrer, that he did not accept them, but that the same still belong to the defendant; and such we must take to be the fact. In the recent case of the American File Co. vs. Garrett, 110 U. S., 288, 295 , where there was a question involved as to the liability of assignees in bankruptcy in respect to shares of stock held by the bankrupt, and ⁵⁷ whether the title to the stock had so devolved upon the assignees as to make them, or the assets in their hands, liable for and on account of the individual liability of the stockholders for the debts of the corporation, the Supreme Court said: “It is well settled that under the circumstances of the case, neither the assignees nor the assets in their hands are subject to the individual liability which attaches to stocks held by the bankrupt. The evidence does not show that the assignees acted in any way as stockholders, that they ever attended any meetings of the corporation, or that-their names appeared upon its books, or that they treated the stock standing in Chapman’s name as an asset of his estate.” And further on in the opinion the Court said: “It has long been a recognized principle of the bankrupt laws that the assignees were not bound to accept property of an onerous or unprofitable character; and as the assignees of Chapman never accepted the stock, and never consented to become stockholders in the American File Company, it follows, that neither they nor the assets of Chapman in their hands are subject to the individual liability of stockholders for the debt of the corporation.” And in support’of the proposition that the assignees did not take the stock, and were -not bound in respect .to it, the Court cite with approval the cases of South Staffordshire R. Co. vs. Burnside, 5 Ex., 129; Furdoonjee’s Case, 3 Ch. Div., 268; Ex parte Davis, 3 Ch.

Div., 463; Streeter vs. Sumner, 31 N. H., 542; Amory vs. Lawrence, 3 Cliff., 523 ; Rugely & Harrison vs. Robinson, 19 Ala., 404 . But while it is true that the stock has never passed to or been accepted by the assignee in bankruptcy, it does not follow, as a necessary legal consequence, that the discharge in bankruptcy may not constitute a bar to the plaintiff’s right to recover for the calls on the stock. This depends upon the question whether the unpaid subscription for the stock constituted such a debt or liability ⁵⁸ as was. provable in the bankruptcy proceedings against the bankrupt’s estate. 'If calls had been made prior to the bankruptcy of the defendant, and remained unpaid, they, beyond doubt, would have been covered by the discharge, and their recovery barred. But where, as in this case, the subscription price of the stock is only to be paid in such instalments and at such times as it may be called for by the company, and at the time of the bankruptcy of the stockholder, and for a considerable time thereafter, and after the settlement of his- estate, there is in fact no call made, the question arises, what claim could' have been proved, and by what means proved, against the bankrupt’s estate ?

The determination of this question must depend upon the terms of the statute, and the judicial construction of those or similar terms, in cases that have arisen upon the subject. Section 5061, United States Rev. Stats., provides that “ All debts due and payable from the bankrupt at the time of the commencement of proceedings in bankruptcy, and all debts then existing but not payable until a future day, a rebate of interest being made when no. interest is payable by the terms of the contract, may be proved against the estate of the bankrupt.” Section 5068, provides, that “In all cases of contingent debts and contingent liabilities contracted by the bankrupt, and not herein otherwise provided for, the creditor may make claim therefor, and' have his claim allowed, with the right to share in the dividends, if the contingency happens before the order for the final dividend; or he may, at any time, apply to the Court to have the present value of the debt or liability ascertained and liquidated, .which shall then be done in such manner as the Court shall order, and he shall be allowed to prove for the amount so ascertained.” And sect. 5119 provides that a discharge in bankruptcy duly granted, shall release the bankrupt from all debts, ⁵⁹ claims, liabilities, and demands, which were or might have been proved against his estate in bankruptcy.* But no debt or liability not provable as provided could be allowed, and, of course, would not be affected by the discharge of the bankrupt. Sect. 5072. Sections 5067 and 5068 of the Rev. Stats, just quoted, were provisions embraced in sect. 19 of the Bankrupt Act of 1867, ch. 176, and upon examination it will be found that that section of the Act of 1867, in providing for the proof of debts payable in futuro, and debts and liabilities depending upon contingencies, is in no material respect different from section 5 of the Bankrupt Act of 1841.

And the provisions of these sections in regard to the proof and allowance of debts payable at a future day, and of contingent debts and liabilities, while somewhat different in phraseology, do not essentially differ from the provisions found in sections 51 and 56 of the Bankrnpt Act of 6 Geo. 4, ch. 16. The construction, therefore,