Chappell v. Lowe

Evans, P. J.

(After stating the foregoing facts.)

1. The applicants for the charter of the Primo Motor Company, immediately on the grant of the charter, held a meeting, accepted the charter, and elected officers. At that meeting only $17,000 of stock was represented, and the minimum stock had not been subscribed for. The corporation was illegally organized; nevertheless they proceeded to do business, and to solicit subscriptions to stock. Among others who subscribed after organization was the demurrant. He signed an application addressed to the Primo Motor Company, subscribing for stock, and promising to *720pay for the same in installments represented by notes payable to the order of the Primo Motor Company. He dealt with the Primo Motor Company as a distinct entity. After his subscription was made, the Primo Motor Company continued to do business until its bankruptcy, a period of about twenty months, without dissent or objection from the subscribers to stock. The creditors of the Primo Motor Company dealt with it as a legally organized corporation, and upon the faith of the validity of the stock subscriptions. It is clear that the Primo Motor Company is estopped from denying its corporate existence as against creditors who dealt with it as such, and all of its corporate assets are liable to creditors. But the demurrant denies that his unpaid subscription is a corporate asset, because the company was illegally organized, on account of the failure to procure subscriptions to the extent of its minimum capital stock. Creditors dealing with the corporation had a right to presume that the requisite amount of stock had been subscribed. The fact alone of the commencement of business created that presumption. Hill v. Silvey, 81 Ga. 500 (8 S. E. 808, 3 L. R. A. 150). If the subscriber had paid his stock subscription, he would not have been entitled to have it paid back, to the loss of creditors who dealt with the corporation on the faith that it was legally organized. There is no material difference between the actual payment of the stock subscription and the stockholder’s liability therefor, relatively to creditors of the corporation. Creditors and subscribers to the stock dealt with the corporation as a legally organized entity, and the latter on the faith of the validity of the subscriber’s obligation to pay for stock subscribed for; and after insolvency of the corporation, whether it was a de jure or de facto corporation (see Burns v. Beck, 83 Ga. 471, 492, 10 S. E. 121), the subscriber will be estopped to deny his liability for unpaid stock subscription as a corporate asset, because of an irregularity or illegality in the organization of the company. Georgia So. R. Co. v. Mercantile Trust Co., 94 Ga. 306, 314 (21 S. E. 701, 32 L. R. A. 208, 47 Am. St. R. 153). It may have been a fraud on this stockholder for the illegally organized corporation to solicit subscriptions for stock in the name of the corporation. But persons who gave credit to the corporation on the faith of the subscription would not be affected by any fraud between the corporation and the subscribers to stock; and *721such a defense can not be interposed to a suit brought by a trustee in bankruptcy to collect unpaid subscriptions. Howard v. Glenn, 85 Ga. 238 (4), 242 (11 S. E. 610, 21 Am. St. R. 156).

2. The cause of action is one against subscribers to stock, for the unpaid subscriptions. The pleader expressly disclaims that the action is predicated on Civil Code (1910) § 2220, which imposes a liability to creditors on persons who organize a company and transact business in its name before the minimum capital stock has been subscribed for. Nor is it a suit on the notes which the subscribers gave contemporaneously with their stock subscriptions. The notes are alleged tp be in the possession of the plaintiff, and in the decree the defendants can be protected against them. The notes state in their body that they are not accepted as payment. They are only evidence of the debt; and under the allegations of the petition the defendants were not sought to be made liable on them as an independent cause of action. The transaction relating to the pledge of the subscriptions and notes to secure the sureties does not militate against the trustee’s right to sue, because there was a surrender of the right of action to him, which was approved by the referee in bankruptcy. The petition was not multifarious as containing more than one cause of action.

3. The assets of an insolvent corporation are a trust fund for creditors. This is true whether the corporation be de jure or de facto. Where the unpaid stock subscriptions to a corporation organized before the minimum capital stock is subscribed for become corporate assets, as set out in the first division of this opinion, equity will compel the payment of a sufficient per cent, of the unpaid stock subscribed to pay the debts of the corporation; and where a trustee has been appointed by the bankruptcy court for the insolvent corporation, such trustee may sue the subscribers in one action, though not all the subscribers reside in the same county. Dalton &c. R. Co. v. McDaniel, 56 Ga. 191, 195; Moore v. Ripley, 106 Ga. 556 (32 S. E. 647); Allen v. Grant, 122 Ga. 552 (50 S. E. 494); Spratlin v. Westbrook, 140 Ga. 625 (79 S. E. 536); Carlisle v. Ottley, 143 Ga. 797 (85 S. E. 1010). On examination and review of these authorities we decline to overrule them.

4. One ground of the demurrer raises the point that, as the minimum capital stock had never been subscribed for, the Primo Motor Company, though contracting business as a corporation, had *722no legal status as such, and could not be adjudicated a bankrupt. The Primo Motor Company was proceeded against in bankruptcy as a corporation, and as such was adjudicated a bankrupt, and a trustee in bankruptcy was appointed for it. The judgment of the district court of the United States, adjudicating the corporation a bankrupt, can not be collaterally attacked by showing that the corporation was defectively organized. 5 Cyc. 317. “An adjudication in bankruptcy is in the nature of a proceeding in rem, and the adjudication is in the nature of a decree in rem so far as it fixes the status of the defendant in the proceeding as a bankrupt.” Silvey v. Tift, 123 Ga. 804, 807 (51 S. E. 748, 1 L. R. A. (N S.) 386). Such judgments fall within the general rule protecting them from collateral attack.

There- was no error in overruling the demurrers.

Judgment affirmed.

All the Justices concur.