Pomeroy, Patterson, Jacobs & Co. ex rel. Hower v. Sterrett
Pomeroy, Patterson, Jacobs & Co. ex rel. Hower v. Sterrett
Opinion of the Court
Opinion by
The Juniata Canning Company was incorporated in May, 1892, with an authorized capital of $4,000. Only about $3,000 of this amount was paid in, but the company entered at once, and somewhat actively, upon the business for which it had been organized. Suitable buildings and machinery were purchased and vegetables, fruits and berries bought and canned. The capital was grossly inadequate and, at the end of the operations for 1892, the company was owing about $12,000 for money borrowed from the legal plaintiffs to carry on its operations. There is no suggestion that the money so borrowed was not honestly expended in the business of the company. Neither the personal integrity nor the business methods of the directors has been assailed. They were evidently inexperienced in the business they were to conduct, and they were without capital to carry it on. They were compelled to borrow money or to close their business at the outset. They chose to borrow money. Their decision rendered them personally liable to those who gave them credit if they were then organized as a corporation. If they were a partnership their action bound all the partners. The business was continued in the same manner until October, 1895, when the company failed, with an indebtedness for borrowed money of about $18,000. This was all due to the legal plaintiffs. In order to secure them, an agreement was entered into in pursuance of which the company executed, a confession of judgment for a sum sufficient to cover its indebtedness to them, and eighteen of the stockholders became sureties for the payment of the debt by the company, and signed a warrant of attorney confessing judgment against themselves as individuals for the same sum. Judgment was entered against them by the plaintiffs and, shortly after, the balance then due upon the judgment, which was about $8,000, was assigned to II. C. Hower, the use plaintiff. He at once issued a writ of fi. fa. and instructed the sheriff to make the money out of the property of three of the
Whatever may be said about the question of the liability of these three directors by reason of their disregard of the law limiting their authority to contract debts for their corporation, it is very clear that the subject can in no sense be treated as an original equity existing at the time this judgment was confessed. There is nothing before us to indicate that these fifteen defendants ever objected to the credits obtained by the directors in 1892. The prima facies is all the other way. The money went into the business, and the stockholders for' three years more continued the same methods, borrowing money with which to carry on the canning of fruits and vegetables, and paying as much as they could when the year’s product or any considerable part of it was sold. It was the only possible method in which, with the insignificant capital of the company, any business could have been carried on by it. This does not make the illegal loans proper, but it closes the mouth of those stockholders who did not object to this way of supplying the corporation with necessary funds, and who for three years more continued the same practice of illegal borrowing.
This consideration alone is sufficient to dispose of this case. The judgment was entered upon the express promise of eighteen stockholders to pay to the lenders the entire balance due upon all these loans without regard to their legality. This was an adoption of them as binding upon the corporation and all its members, and a waiver of all questions about their amounts or their regularity that might have been raised at that time.
Nothing has taken place since to affect the position of any of those defendants. They remain liable just as they agreed to be
The order of the court below restraining the sheriff at this time from collecting from the three defendants named more tfian their equal shares of the amount due is affirmed. As to any excess over their one eighteenth part each of the debt that may be hereafter collected from them or either of them, they will be entitled to contribution from their codefendants. No reason for discrimination between the defendants as to the extent of their liability has been shown or suggested, and they must meet their undertaking in accordance with its terms as cosureties for the corporation to which they belonged, and whose reverses they have bound themselves to share.
The discussion of the other questions raised becomes unnecessary as the view we have taken of the case is conclusive upon the rights both of the use plaintiff and the defendants.
Reference
- Full Case Name
- Pomeroy, Patterson, Jacobs & Company, for use of H. C. Hower v. W. N. Sterrett, President of Juniata Valley Canning Co., George L. Hower, Secretary of Juniata Valley Canning Co., W. N. Sterrett, George L. Hower, C. F. Hinkel, Samuel A. Thomas, Joseph Rothrock, Simon Ulsh, W. B. Horning, Emil Schott, William Puffenberger, D. W. Harley, A. J. Moist, M. H. Varnes, William Guss, J. E. Jamison, Wellington Smith, James D. Williams, J. M. Hower and William B. McCahan
- Cited By
- 2 cases
- Status
- Published
- Syllabus
- [Marked to be reported.] Execution — Direction to sheriff — Contribution. The plaintiff in an execution may properly assist the sheriff in the collection of a debt due him by suggestions as to where property may be found, as to which of several defendants has personal property that maybe reached by levy, or in any other proper and pertinent manner; but he may not settle controversies between the defendants by intervening between them so as to destroy the right of contribution which the law gives them. Corporation — Increase of debt — Agreement of stockholders to pay debt— Contribution — Execution. Eighteen stockholders of a corporation became sureties for the payment of the debt of the company, and confessed judgment against themselves for the sum. The debt had been contracted about throe years prior to the confession of the judgment, in an illegal manner, by three of the directors, who joined in the confession of judgment. Part of the judgment was paid, and the balance was assigned lo If., who had purchased the judgment as agent of fifteen of the defendants. He issued execution upon the judgment and instructed the sheriff to proceed against the three defendants under whose directorship he alleged the debt had been illegally created. Held, that it was proper for the court below to restrain the sheriff from collecting from the three directors more than their equal shares of the amount due, unless he should be unable to collect the share of one or more of the other defendants.