Wright, Ins. v. Hix

The complaint contains one count, and to which the defendant interposed two special pleas. The plaintiff demurred to said pleas, which were overruled by the court; and the question involved upon this appeal is the correctness vel non of the trial court in overruling the plaintiff's demurrers to said pleas.

The plaintiff, William A. Wright, sues in the capacity of Insurance Commissioner of the State of Georgia, and claims of the defendant $1,100 due upon a promissory note made to the Empire Insurance Company on May 24, 1914, with interest thereon. The complaint charges a Georgia contract, in that the note was given by the plaintiff in payment of certain stock in said insurance company subscribed to by him. The complaint also charges that the defendant was a subscriber to the stock of said company, and from the additional facts averred he may have been a stockholder as well as a subscriber. See note in case of Sarbach v. Kansas Agency Co., 28 Ann. Cas. 1913C, 418, and cases there cited, including the case of Fulgam v. Macon,44 Ga. 597. But be this as it may, the complaint charges that the defendant is a subscriber, and the fact that he is sued as a subscriber or as a stockholder, one or both, or the sufficiency of averment as to the capacity in which he is sued, is not questioned by demurrer. The complaint also charges and sets up the laws of Georgia, and such facts thereunder as authorized the maintenance of this suit by the plaintiff as for assets of the insolvent insurance company, and none of which said averments are controverted or traversed by the pleas in question.

The complaint, however, doubtless in anticipation of a defense of fraud in the procurement of the subscription to the stock and the giving of the note, charges an estoppel against such a defense by averring that, under the laws of the state of Georgia, after the insolvency of a company and the appointment of a receiver, a subscriber cannot set up fraud or fraudulent representation inducing the contract of subscription as against creditors of the company who become such subsequent to such contract of subscription, and that at the time the affairs of said company were placed in the hands of the commissioner as aforesaid the said company was insolvent, and a large amount of said indebtedness, to wit, over $30,000, had been incurred after the date of said note and the date when defendant became a stockholder in said corporation, and that a large part of said indebtedness still remains unpaid. This last averment could have possibly been omitted from the complaint and set up by way of replication to the pleas, but the plaintiff had a right to incorporate same in his complaint in anticipation of this defense, and will, of course, have to prove same, and will lose his case should he fail to prove this material averment; but the sufficiency of the averment is not challenged by demurrer, nor is the soundness of the law of Georgia as thereunder averred questioned by the pleas. They merely attempt to set up fraud in the procurement of the defendant's subscription to the stock and the execution of the note, and do not controvert or traverse the material facts averred, but attempt to evade the force of same by setting up that only a small part of the indebtedness of said company was incurred subsequent to the time of the transaction with the defendant, and that no creditor of said company whose debt was contracted subsequent to the execution of said note has requested, authorized, or empowered the plaintiff in this cause to institute this suit. These pleas do not, therefore, controvert the fact that there were subsequent creditors as averred by the complaint. They simply say that a small portion of the indebtedness was incurred subsequent to said transaction. Nor does the averment that such subsequent creditors as may have existed had not requested, authorized, or empowered the plaintiff in this cause to institute this suit, controvert or charge a legal defense to the action. The complaint sufficiently charges the right and authority of the plaintiff to maintain this suit under the laws of Georgia, whether he was requested, authorized, or empowered to do so by the subsequent creditors or not.

It is also true that the pleas deny that defendant ever participated in a stockholders' meeting of the company, or has ever been an officer of same, or that he has ever received or accepted any benefit of any character whatever from said company by reason of his said purchase of said stock. This averment, however, is in no sense a denial of the material allegations of the complaint that he subscribed for the stock and gave his note as the purchase price for same, or that the certificate was issued to him, and was held by the company as collateral security for his indebtedness. It merely negatives a circumstance which might perhaps constitute him a stockholder, though other important essentials did not exist; but this conduct was not charged or relied upon in the complaint as constituting him a subscriber or stockholder, and the plea does not traverse the material averment in the complaint charging that the defendant gave his note for the purchase price of 11 shares of capital stock which had theretofore been subscribed for by him, and that certificate for said 11 shares of said capital stock was duly issued by said company in the name of the defendant, and was retained by it as security for the payment of said note. This averment of the complaint is not traversed by the plea, and the sufficiency of same is not challenged by demurrer.

I am therefore of the opinion that the trial court erred in not sustaining the plaintiff's demurrers to pleas 1 and 2, and that the case should be reversed and remanded.

The opinion of THOMAS, J., upon the original consideration of this case, and which he now adopts as his dissenting opinion, whether sound or not as to the legal questions there discussed, is not pertinent to the real issues presented by the record, and the conclusion heretofore reached in affirming the trial court, in holding that the pleas were good, is erroneous.

The application for rehearing is therefore granted, the judgment of affirmance set aside, the cause is reversed, the judgment of nonsuit is vacated, and the cause is remanded.

All the justices concur except THOMAS, J., who dissents.