Williams v. Watters

McSherry, C. J., delivered the opinion of the Court. This suit was brought on the nineteenth day of September, 1902. On the twentieth day of October, 1890, The Lexington Development Company, one of the numerous speculative ventures which sprang into existence in the State of Virginia about the same period, was incorporated in the Thirteenth Judicial District of that State under the general incorporation laws. By the terms of the prospectus issued by the company, and in accordance with which subscriptions to its capital stock were received, it was provided that the company would offer for sale sixty thousand shares of stock of the par value of ten dollars per share; one dollar per share to be paid at the time of subscription, one dollar per share upon the call of the board of directors and one dollar per share each sixty days thereafter until by a sale of the lots owned by the company such payments should be declared unnecessary by the board of' directors.

The appellee subscribed for fifty shares of the capital stock upon the terms just above set forth. On the eleventh of November, 1890, the boarcf of directors adopted a resolution fixing December the twentieth, 1890, as the time for the payment of the second instalment of one dollar per share, and thereupon, according to the terms of the prospectus above alluded to, the subsequent instalments of one dollar per. share became due and payable on February, April, June, August, October and December the twentieth, 1891, and February and April the twentieth, 1892. The appellee paid the several instalments due on his subscription up to and including August the twentieth, 1891, by which time he had paid fifty per cent of the amount subscribed by him. No other instalments were paid by the appellee and the sequel will show the reason.

On the eighteenth of November, 1891, at a meeting of the stockholders of the company it was determined that the stock subscribed for could be finally paid ¹²¹ by dividends from the earnings of the company, and at the same meeting the solicitor for the company was instructed to secure from the Legislature of Virginia an amendment of the company’s charter declaring the stock fully paid and non-assessable on the payment of fifty per cent thereof. On the ninth of January, 1892, the Legislature of Virginia enacted an amendment of the charter whereby, in effect, it was declared that the capital stock should not be liable for further assessments after fifty per cent of the par value thereof had been paid, and that upon the payment of fifty per cent of the stock then subscribed or that might thereafter be subscribed the Development Company should be authorized to issue full paid certificates for the par value of the stock to the subscribers; and it was distinctly declared that the holders of such certificates should not be liable for further assessments thereon for the debts or liabilities of the company contracted after the passage of that statute. The amendment of the charter was accepted by the company and in conformity to its terms a full paid certificate for fifty shares of capital stock was issued to and accepted by the appellee, which it is claimed was a new and materially modified contract of subscription in the place and stead of the original contract of subscription herein above set forth. The declaration avers that “as changed and modified said contract is a conditional contract to pay the balance remaining unpaid upon said defendants original contract of subscription only in the- event of said balance being called for by the board of directors of said company for the purpose of discharging the debts or liabilities of said company contracted prior to the passage of said Act or subsequent to the passage of said Act and without notice thereof.’ Right here is the pivotal point of the case as will appear a little later on.

On the nineteenth of January, 1893, after the occurrences thus far narrated had taken place, the Glasgow Manufacturing Company filed a creditor’s bill against the Development Company in the Circuit Court for Rockbridge County in the State of Virginia, alleging that it was a creditor of the Develop ¹²² ment Company to the extent of $19,356 and praying that the assets of the latter company be subjected to the payment of its debts; but it is not -stated in the declaration filed in the pending case whether the Glasgow Company became such creditor prior or subsequent to the adoption of the statute of January the ninth, 1892, to which allusion has just above been made. The Development Company was duly summoned to appear and to answer that proceeding and upon failure to answer a decree pro confesso was entered against it whereby the amount of its indebtedness to the Glasgow Company was established. The proceedings seem to have then slumbered until 1898, when the Glasgow Company filed an amended bill in the same Court and alleged that all the tangible property of the Development Company had been sold and that nothing could be realized to pay the Glasgow Company’s claim unless resort were had to the fifty per cent of the unpaid subscriptions which had never been called by the Development Company, and which was still due by the'stockholders. The amended bill set forth that the stockholders claimed immunity from liability on account of the terms and provisions of the Virginia statute of January the ninth, 1892, and the action of the Board of Directors thereunder, which action, the bill alleged, was nugatory.

On September the twentieth, 1899, a decree pro confesso was taken on the amended bill against the Development Company, and in the decree a call was made for the payment by the stockholders of the Development Company of the fifty per cent remaining unpaid upon their several subscriptions, and a receiver was appointed to sue for and collect such unpaid sums. Under that decree the pending suit was brought by the receiver to recover the unpaid fifty per cent of the appellee’s original subscription. To the declaration which sets out in detail in a single count what has been in substance up to this point recited, the appellee interposed seven pleas and in addition quite a lengthy plea on equitable grounds. The first plea is the plea of the Statute of Limitations; the second and third are that the defendant never promised as alleged and that he was never indebted as alleged, and the others are quite lengthy ¹²³ and need not be stated, except the seventh, inasmuch as we shall not have occasion to consider any of them other than it.

By the seventh plea it is alleged that the Development Company had long prior to January, 1892, entered into a contract with the Glasgow Company for the building by the latter of an hotel for the former and that the Glasgow Company had proceeded with the execution of the contract until the latter part of 1891, when it stopped work on the hotel and received payment in full for all that had been done and all that was then due to it and abandoned its contract, the Lexington Company consenting thereto : That thereafter and after the adoption of the Virginia statute of January ninth, 1892, and after the appellee had fully paid up fifty per cent of his original subscription, the Glasgow Company, for whose sole use the pending suit was brought, with full knowledge of the Virginia Act of Assembly entered into a netv contract with the Development Company to complete the hotel, and that any indebtedness that may be due by the Development Company to the Glasgow Company was incurred under that new contract. Upon the second and third pleas the plaintiff joined issue and to all the others he demurred. The Baltimore City Court overruled the demurrers and at once gave judgment for the defendant, the appellee, and from that judgment the receiver has appealed. As there is but one count in the declaration there was no error in the Court’s action in entering final judgment on overruling the demurrers, notwithstanding there were issues of fact joined on the second and third pleas, (Boehm v. Mayor, &c., Balto., 61 Md. 259 ), unless the demurrers ought to have been sustained.

There are a number of interesting questions presented by the record and they were very admirably argued at the bar; but we do not find it necessary to go into a consideration of them for the reason that before they can be reached there are two defenses lying at the threshold and decisive of the controversy; and to them we will confine the few observations we feel called on to make. ¹²⁴ If it be assumed, though it is not distinctly alleged in the declaration, that the Glasgow Company for whose sole use, according to the concessions of the demurrers to the pleas, the pending suit was brought, was a creditor of the Development Company prior to the adoption of the Virginia Act of January 9th, 1892, then it is obvious that that Act cannot impair the right of the creditor to pursue the stockholder. If the stockholder was liable to a subsisting creditor to the extent of the amount subscribed by the former then no enactment of the Legislature could interfere with that right, if the contract between the creditor and