{
  "id": 3340475,
  "name": "Albert Pick & Company, Appellant, v. David L. Warshauer et al., Appellees",
  "name_abbreviation": "Albert Pick & Co. v. Warshauer",
  "decision_date": "1927-03-14",
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  "last_updated": "2023-07-14T19:23:28.054403+00:00",
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    "date_added": "2019-08-29",
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    "judges": [],
    "parties": [
      "Albert Pick & Company, Appellant, v. David L. Warshauer et al., Appellees."
    ],
    "opinions": [
      {
        "text": "Mr. Presiding Justice McSurely\ndelivered the opinion of the court.\nPlaintiff\u2019s declaration was met by a demurrer which was sustained. From the adverse judgment which followed, it appeals.\nThis is an attempt by an action at law to enforce the statutory liability of assenting directors for the debts and contracts of a corporation in excess of the capital stock. Defendants\u2019 demurrer challenged the right to proceed at law and was sustained upon the ground that the sole remedy was in equity.\nSection 16 of the Corporation Act of 1872 stated the directors\u2019 liability as follows:\n\u201cIf the indebtedness of any stock corporation shall exceed the amount of its capital stock, the directors and officers of such corporation, assenting thereto, shall be personally and individually liable for such excess, to the creditors.of such corporation.\u201d\nThis was held to give the creditors a remedy in equity and not in a court of law. Low v. Buchanan, 94 Ill. 76; Woolverton v. Taylor, 132 Ill. 197; Gay v. Kohlsaat, 223 Ill. 260; Slater v. Taylor, 241 Ill. 102.\nThis is conceded by plaintiff, which relies on the amended and revised Corporation Act of 1919, section 23:.\n\u201cThe directors shall jointly and severally be liable for the debts and contracts of the corporation in th\u00e9 following cases:\n\u201c(1) For assenting to an indebtedness in excess of the amount of the capital of the corporation, to the amount of such excess;\n\u201c(2) For declaring or assenting to a dividend if the corporation is, or is thereby, rendered insolvent, or its capital is thereby impaired, to the extent of such dividend;\n\u201c(3) For debts contracted between the time of making or assenting to a loan to a stockholder or director and the time of its repayment, to the extent of such loan.\n\u201cFor the purposes of this section the capital of the corporation shall be considered as the aggregate amount paid in on its shares of capital stock issued and outstanding.\n\u201cUnless a director was absent from the meeting at which such dividend was declared or loan made, or unless his dissent therefrom shall be entered on the corporate records, he shall be conclusively presumed to have assented thereto.\u201d\nThe argument is that the sole ground for the construction of section 16 of the Act of 1872 as limiting the remedy to equity was the presence in that section of the words \u201cto the creditors,\u201d but as these words are omitted from the revision of 1919, section 23, the legislature therefore intended to permit an action at law. . We do not so conclude. The above-mentioned decisions were not based upon the presence or absence of the words \u201cto the creditors,\u201d but upon fundamental reasons of justice and expediency. In Low v. Buchanan, supra, the court said in denying the right of an action in a lawsuit: \u201cSuch a construction would, manifestly, lead in most cases to great difficulties and hardships. In all cases, where the corporation is insolvent, to allow the individual creditor to collect the whole amount of his claim against the corporation from a solvent officer of the company to the exclusion of other creditors whose claims are equally meritorious, would certainly be the grossest inequality and manifestly unjust.\u201d\nThe opinion stresses the injustice of permitting a single creditor to pursue his action at law, quoting with approval from Hornor v. Henning, 93 U. S. 228, as follows:\n\u201cThe remedy for this violation of duty as trustees is in its nature appropriate to a court of chancery. The powers and instrumentalities of that court enable it to ascertain the excess of the indebtedness over the capital stock, the amount of this which each trustee may have assented to, and the extent to which the funds of the corporation may be resorted to for the payment of the debts; also, the number and names of the creditors, the amount of their several debts, to determine the sum to be recovered of the trustees, and apportioned among the creditors, in a manner which the trial by jury and the rigid rules of common law proceedings render impossible.\u201d\nLike reasoning also appears in Stone v, Chisolm, 113 U. S. 302, where, in holding that the liability must be enforced in chancery, the court said: \u201cOtherwise the facts which constitute the basis of liability might be determined differently by juries in several actions, by which some creditors might obtain satisfaction and others be defeated. The evident intention of the provision is that the liability shall be for the common benefit of all entitled to enforce it according to their interest; an apportionment which, in case there cannot be satisfaction for all, can only be made in a single proceeding to which all interested can be made parties.\u201d This is convincing.\nThe reason the words \u201cto the creditors\u201d were not written in the revision of 1919 was not for the purpose of changing the law with reference to the remedy, but was probably in the interest of better English. Section 23 imposes liability \u201cfor the debts and contracts of the corporation. \u2019 \u2019 To have written it \u201cfor the debts to the creditors\u201d would have been tautological. The legislative wish to avoid a solecism should not be exaggerated into an intention to change a rule of procedure founded upon justice.\nWe are not disposed to follow such decisions in other tribunals which may hold that a single creditor may proceed in an action at law. Most of the cited cases involved the right of an individual creditor to proceed under a statute malting the stockholder liable to the amount of his stock when the corporation is insolvent, where the amount of the liability is limited and fixed. Such decisions are not applicable to a case where only assenting directors are liable for a violation of their trust to all of the creditors of the corporation who may be injured thereby.\nIn other jurisdictions the liability of directors for the debts and contracts of a corporation was enforced by a proceeding in equity, regardless of the presence or absence in the statute of the words \u201cto the creditors.\u201d Among such cases are Westinghouse Elec. & Mfg. Co. v. Reed, 194 Mass. 590; Brown & Co. v. Ware, 87 Vt. 121; Lyman v. Hilliard, 154 Fed. 339. The opinions in these cases merely repeat in different forms that it is the appropriateness of the relief sought to the circumstances which determines the remedy, and that where, as in the instant case, only the directors assenting to the creation of the debts are liable, it is necessary, to do justice to all interested parties, that the proceedings should be in a court of equity, where all the parties in interest may be before the court and all the various equities determined and such a decree rendered in a single cause as shall be equitable and just to all concerned.\nA further consideration fortifying our conclusion is' that in the Corporation Act of 1919 it is specifically provided that under certain circumstances - suits at law may be prosecuted by creditors individually. Such is the provision in section 149.\nFor the reasons above indicated we hold that the demurrer was properly sustained, and the judgment is affirmed. \u25a0\nAffirmed.\nMatchett and Johnston, JJ., concur.",
        "type": "majority",
        "author": "Mr. Presiding Justice McSurely"
      }
    ],
    "attorneys": [
      "Sonnenschein, Berkson, Lautmann & Levinson, for appellant.",
      "Zane, Morse & Norman, for appellees."
    ],
    "corrections": "",
    "head_matter": "Albert Pick & Company, Appellant, v. David L. Warshauer et al., Appellees.\nGen. No. 31,286.\nHeard in the first division of this court for the first district at the October term, 1926.\nOpinion filed March 14, 1927.\nSonnenschein, Berkson, Lautmann & Levinson, for appellant.\nZane, Morse & Norman, for appellees."
  },
  "file_name": "0056-01",
  "first_page_order": 90,
  "last_page_order": 95
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