Opinion
July 22, 1931.
Suit by Leslie M. Shaw and another against the Lincoln Hotel Corporation, wherein the receiver of the Lincoln Hotel Corporation petitioned to levy an assessment on stockholders. On rule to show cause and on application of Joseph H. Himes for leave to enter a special appearance for the purpose of moving to vacate the rule.
Application denied, and receiver's petition granted.
Petition by receiver of the defendant, an insolvent corporation, that an assessment be levied upon stockholders who have not paid the par value of their stock, for the purpose of raising a fund necessary to pay the creditors. The petition shows the total of claims filed to be $80,230.54, and that there are practically no assets available for payment thereof except the sums due to the corporation on account of unpaid stock subscriptions. The receiver prays that the sum of $80,230.54 plus $20,000.00, estimated for costs and expenses incidental to the receivership and to the prosecution of suits for the collection of unpaid subscriptions, be assessed; that the delinquent stockholders be required to pay such amounts of their several unpaid subscriptions as may be necessary to pay said debts and estimated expenses, and that, after an assessment is made, the receiver may have authority to bring such suits, either at law or in equity, in the State of Delaware or elsewhere, as may be necessary to recover the money so assessed against the stockholders, to the end that the same may be applied, according to the direction of the court, to the payment of said debts, interest and expenses. On the filing of the petition a rule was issued and served by registered mail upon the two stockholders alleged by the petitioner to have not fully paid their subscriptions, to appear and show cause why an assessment or call should not be made against the stockholders of the insolvent corporation for such sums as should be found necessary to satisfy the unpaid debts and costs and expenses of the receivership.
On the return of the rule, Joseph H. Himes, a resident of Washington, D. C., through his solicitor asked leave to enter a special appearance for the purpose of moving to vacate the rule placed upon him for want of jurisdiction to enter a decree against him for the
payment of money due upon an unpaid stock subscription, because he is a non-resident and beyond the jurisdiction of the court.
E. Ennalls Berl (of Ward Gray) and Paul Leahy, both of Wilmington, for Joseph H. Himes.
John R. Nicholson, of Wilmington, for receiver.
[1-3] The receiver, by his solicitor, does not ask for any personal decree against Himes. All that he asks is for the court to make an assessment upon unpaid stock in order to put the corporation's receiver in the possession of funds necessary to pay the insolvent's debts and defray the expense incidental thereto which the delinquency of the assessable stockholder has necessitated. The propriety of such a proceeding as this in an insolvency cause has been adjudged by the Supreme Court of the State in Cooney v. Arlington Hotel Co., 11 Del. Ch. 430, 106 A. 39, affirming 11 Del. Ch. 286, 101 A. 879, 892. An assessment for the purpose shown is the equivalent of a call by the directors, had the receiver never been appointed. The court in making such a call or assessment, takes the place and exercises the office of the directors. Great Western Telegraph Co. v. Purdy, 162 U. S. 329, 16 S. Ct. 810, 40 L. Ed. 986. The order of assessment does not purport to be a judgment against any one in particular. Nor does it undertake to determine the question of whether any particular stockholder is or is not liable in any amount. 162 U. S. 329, 337, 16 S. Ct. 810, 40 L. Ed. 986.
The Chancellor in Cooney Co. v. Arlington Hotel Co., supra, recognized this as a reading of his opinion discloses.
[4-6] But upon the question of whether the assessment should be made and the amount thereof, the action of the court is conclusive on all the stockholders. Chancellor Curtis in the case just cited so held. As to the amount of claims to be paid, the deficiency of assets, the costs of the receivership — all of which are necessarily involved in an adjudication of the need of an assessment and its amount — he said, "As to all these matters, and perhaps others, stockholders are so far an integral part of the corporation that in the view of the law they are to that extent privy to proceedings by a receiver of an insolvent company on behalf of its creditors to enforce payment for stock not paid for, and cannot question the propriety of the assessment when made." Citing cases.
So much is this so that the stockholders liable to assessment are not entitled to notice of the assessment proceedings. It was so held in Brown v. Allebach (C. C.) 156 F. 697, and in Great Western Tel. Co. v. Purdy, supra.
Now Himes does not seek to appear and show cause against the rule on the ground that the claims filed are not just or for any other reason that the assessment should not be made. He desires to appear specially simply to protest against entering a decree against him, because he is beyond the jurisdiction. No decree is proposed to be entered against him personally. It is however proposed to enter an adjudication of assessment and that stockholders who have not paid for their stock should be required to pay, up to the amount of their subscriptions, such sums as are necessary to make good the assessment. If Himes belongs among those, he will be required to pay what is due, and he cannot question the propriety of the assessment or its amount, notwithstanding his absence from the jurisdiction. If he is not a stockholder, or if he is one but has a good defense other than one based on the necessity and the amount of the assessment, there is nothing now proposed to be done which would undertake to foreclose him from setting it up at the proper time.
If the assessment might prove to be too great, that constitutes no reason against making it. A refund of any excess would correct the error. Paine v. Mueller, 150 Iowa, 340, 130 N. W. 133.
The application of Himes for leave to appear specially will be denied, and the receiver's petition, there being no cause shown against it, will be granted.