Wyman v. Bowman

United States Court of Appeals for the Eighth Circuit · 1904 · Corporations

127 F. 257 (1904)

Updated August 22, 2026

Corporationsstock subscriptionsoriginal subscribersreceiverequity jurisdictionmultiplicity of suitsrescissiondo equity

Facts

The defendants originally subscribed for stock in a Nebraska insurance company, paid 50 percent, gave notes for the balance, accepted and used the stock, voted it for years, and later sold it to solvent purchasers, after which their notes were surrendered and the purchasers gave new notes. In 1891, four director-stockholders caused an assessment of 41.625 percent on all stock, paid cash and prior advances to the corporation equal to that assessment on their own stock, received releases of their own assessment liability, and took assignments of assessment certificates against other stockholders; the corporation used the money to pay its debts. The receiver later claimed that transaction was a fraudulent preference and sought to disregard it so he could collect that 41.625 percent again from these original subscribers, along with the remaining 8.375 percent that had never been paid. The defendants raised objections including lack of equity jurisdiction, lack of receiver capacity, conditional subscription, rescission, res judicata, limitations, and laches.

Issue

May the receiver maintain a single suit in equity against several original subscribers to enforce unpaid stock subscriptions and to attack the 1891 assessment transaction, and if so, may he recover both the unpaid 8.375 percent and the already-paid 41.625 percent? Also, did the defendants' sale of their stock, the prior Iowa litigation, limitations, laches, or the alleged conditional nature of the subscription bar recovery?

Rule

Under the Nebraska constitutional provision, the original subscriber's liability for unpaid stock subscriptions is contractual and remains, after transfer of the stock, as a guaranty to pay the unpaid amount after corporate assets are exhausted; that claim is property of the corporation and may be enforced by its receiver. Equity jurisdiction is proper where the complainant must rescind releases and assignments evidenced by corporate records and where a single suit avoids a multiplicity of actions because defendants share common questions of law and fact and the equitable remedy is more prompt, practical, and efficient without deeper inconvenience to defendants. A party seeking rescission or avoidance in equity must restore or offer to restore the benefits received under the challenged transaction.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In 2012, Lena Ortiz subscribed for 100 shares in Prairie Shield Casualty, a Nebraska corporation, paying 60% and giving a note for the balance. In 2015, she sold the shares in good faith to a solvent buyer in Omaha, the corporation cancelled her note, and the buyer gave a new note for the unpaid amount. In 2023, after the corporation's assets were exhausted, a court-appointed receiver sued Lena for the unpaid balance of her original subscription.

Is Lena still liable to the receiver for the unpaid balance?

Explanation. The majority treated the original subscriber's obligation as contractual, not as a separate statutory penalty. The Nebraska constitutional provision becomes part of the subscription agreement and prevents the original subscriber from escaping liability by selling the stock until the subscription is fully paid or the corporation's debts are satisfied. After transfer, the obligation is modified into a guaranty enforceable after corporate assets are exhausted, and the receiver may enforce it as corporate property.