Farmer's Co-operative Trust Co. v. Hazen

Opinion by

William W. Porter, J.,

This action is brought in the name of a corporation for the recovery of a forty per cent assessment on certain shares of stock held by the defendant as transferee of original subscribers. In July, 1894, the company was notified by the banking department of the commonwealth that it was conducting a business unauthorized by its charter. In January, 1896, without action by the stockholders, the directors sold the fixtures of the plaintiff company to a new company (formed by some of the stockholders of the plaintiff company) and entered into an agreement by which the new company agreed to assume the liabilities of the plaintiff company and to take over all of its assets (some without recourse and others subject to collection), provided the plaintiff company should make “ good any and all losses or discrepancies that may occur between the assets and liabilities.” It is to be observed that no obligation was assumed by the new company to administer the assets for the benefit or possible. profit of the old company, its stockholders or creditors; but that the old company agreed to indemnify the new against loss. The new company collected the available assets, paid the liabilities, and presented a claim of $4,000 to the old company, being the alleged resulting discrepancy between the assets realized upon and the liabilities paid. To meet this demand the directors of the old company made the assessment of forty per cent on its stock. It will be noticed that this is not an application on the part of creditors to compel payment of an unpaid subscription to capital stock. It is a suit in the name of the company based on an assessment made by directors (without warrant of by-law, or other authority given by stockholders) to raise funds to pay an alleged indebtedness arising out of an agreement (made by directors without authority from stockholders) by which was surrendered the administration of all of the corporate assets. Whether at the time the agreement was made, the company was insolvent, or solvent but incapable of proceeding in its business by reason of want of corporate power, it was the duty of the directors to proceed according to law, to place the assets of the company in such custody as to protect the interests of the stockholders and creditors, and with those who should be accountable for the administration of the trust in winding up the corporate affairs. No justification can be found for the course taken by the directors in making voluntary alienation of all the assets and in entrusting their administration to a company which assumed no obligation to account for profits, but reserved the right to hold the plaintiff company good for deficiencies. Therefore, there was no warrant to the directors to impose an assessment on stockholders based upon an alleged indebtedness growing out of the agreement made as aforesaid. Holding this view, which is believed to be sustained by Temperance Association v. Friendly Society, 187 Pa. 38, and Mercantile Library Hall Co. v. Pittsburg Library Association, 173 Pa. 30, reference to other matters of defense seems unnecessary.

Judgment affirmed.