Mitcham v. Citizens Bank , 34 Ga. App. 707 ( 1925 )

Jenkins, P. J.

The Citizens Bank of Bullochville brought joint action in two counts against the "Warm Springs Truck Growers Association and all its members. In the first count of the petition, as amended, it is alleged that the association was incorporated without capital stock, under authority of the act of the General Assembly approved August 17,1920 (Ga. L. 1920, p, 125), a copy of the charter being attached to the petition, and -that the said association and all of its members were indebted to the plaintiff on two certain notes, aggregating the principal sum of $1,767.58 (copies of which were attached), executed, signed, and delivered by the association to the plaintiff bank; the alleged liability of the members being based on a regularly adopted by-law, attached to the petition, by the terms of which the members became liable for their per capita share of the debts of the association up to and including the sum of $25,000. It is alleged that this by-law was made known to said bank by defendants, and that upon the faith of it the bank extended the credit which is the basis of this suit. In the second count, a judgment of joint liability against the corporation and its members in the sum of $5,429.10 was sought on certain individual notes, some of which were signed by members of the association and others by non-members, made payable to the association and indorsed by it to the plaintiff. The by-law embracing the liability of the members for the debts of the corporation was also set forth in the second count. Plaintiff’s contention as to the basis of this count is not that the plaintiff “is suing the members and signers of any notes set out in count 2 as makers, but is suing the association and members thereof because of the indorsement thereof by the association to the bank for a valuable consideration.” There were general and special demurrers to the petition, one of them setting up a misjoinder of parties and a misjoinder of actions. Section 8 of the act referred to (Ga. L. 1920, p. 125) provides “that each corporation shall formulate by-laws prescribing the duties of the directors and officers; the manner of distributing the profits of the business, the manner of becoming a member, and such other rules and regulations for its officers and members as will tend to make the corporation an effective business corporation; buy, sell, and own real estate and other property, and to sue and be sued in its own corporate name.” The charter of the Warm Springs Truck Growers Association contains the following language: “to make such by-laws as may be necessary or proper for the management of its property and regulation of its affairs.”

1. The theory of joint liability set up by the first count is that the association is liable on its note, and all its members are liable as members under the by-law; under the second count, that the association is liable on the notes by virtue of its indorsement of them to the bank, and that all the members of the association are liable, not as makers of the notes, but as members of the association, under the by-law. In either case there is manifestly a misjoinder of parties, unless the liability under the by-law subsists.

2. At common law the stockholders in a corporation are not individually liable for the corporate debts. Tichenor v. Williams Block Pavement Co., 116 Ga. 303, 306 (42 S. E. 505). Such liability may be created by statute (Robison v. Beall, 26 Ga. 17, 73); or. the members may incur liability by legally pledging as individuals their personal credit for the obligations of the corporation. Flint v. Pierce, 99 Mass. 68 (96 Am. Dec. 691). But the mere passage of a by-law seeking to impose individual liability upon all of the members of a corporation where neither the general statute nor the charter so provides is invalid, even though the bylaw be regularly adopted by a majority vote of the members in meeting regularly called; and it can not impose individual liability upon the members of the corporation. Reid v. Eatonton Mfg. Co., 40 Ga. 98 (2 Am. Rep. 563).

3. The question of estoppel can not be considered if it is not raised in the pleadings. Tuells v. Torras, 113 Ga. 691 (39 S. E. 455). The petition, while setting forth that the adoption of such by-law was made known to the bank by the “defendants,” and that credit was granted to the corporation on the faith thereof, does not specifically raise the question of estoppel, but appears to plant the claim of liability upon the validity of the by-law. However this may be, the doctrine of estoppel could only be invoked as a preclusion in law which would prevent the defendants from making a denial contrary to their own previous allegations acted on by the opposite party to its injury. Thus, under the allegations of the petition, the defendants could not be heard to deny that such a bylaw had been adopted, whatever the truth as to that might be; but in the absence of any false or fraudulent representation as to what had been done, their report that a by-law had been adopted,

which in law was necessarily null and void, would not render them liable under such by-law. “The fact that the individual members of the corporation may have represented to the public that they were so liable, will not bind them as stockholders.” Reid v. Eatonton Mfg. Co., supra.

4. The validity of such an attempted by-law being essential to the maintenance of the joint action, and it being ineffective, the petition should have been dismissed as involving a misjoinder of parties.

Judgment reversed.

Stephens wnd Bell, JJ., concur.