Page images
PDF
EPUB

Vol. II.]

OSSIPEE HOSIERY AND WOOLLEN Manufacturing Co. v. CannEY. [No. 11. essential to the creation of the corporation. If this part of the decision was correct, the foregoing observations seem to show its inapplicability to the present case.

In passing, it may be remarked that Unity Ins. Co. v. Cram is open to misapprehension in one respect. The court did not pass, and were not called upon to pass, upon the question whether a stockholder or contractor is estopped to deny the existence of a corporation. The case was submitted under an agreement of the parties, which would seem to leave the question of estoppel out of the case. When parties agree that the decision of a single point shall determine the case, the court are not called on to consider whether any other point might have been successfully raised by either side. See Gleason v. Emerson, 51 N. H. 405. Unity Ins. Co. v. Cram was submitted under an agreement, p. 640, "That if the court shall be of opinion that the plaintiffs were a corporation, and as such had a right to issue a policy of insurance to the defendant, and that the assessment . . . was legally made, judgment shall be rendered for the plaintiff; otherwise judgment shall be rendered for the defendant, with liberty of review to either party."

[ocr errors]

Under our decisions - Littleton Manuf. Co. v. Parker, 14 N. H. 543; N. H. Central R. R. v. Johnson, 30 N. H. 390; Contoocook Valley R. R. v. Barker, 32 N. H. 363—the defendant could not have been compelled to pay his original subscription and accept the stock, until the whole entire eighty shares were subscribed for. But it was competent for him to waive his right of refusal; and he did so by paying for and accepting the stock. He cannot raise now an objection, which, for aught that appears, might equally well have been taken then. In the absence of contrary evidence, it must be presumed that he would upon making reasonable inquiry have then ascertained the number of shares subscribed .for.

II. The ruling as to the challenge was not open to exception; State v. Pike, 49 N. H. 399, p. 406, and was correct. McAllister v. Stewartstown Bridge Co. Coös, 1872, not reported.

III. The testimony of Quarles was properly admitted.

To constitute

a demand, it must ordinarily appear that what was said or done was intended as a demand by the one party, and was or ought to have been so understood by the other party. "A demand may be made without words written or spoken. It is enough if both parties understand that a demand is made." Norris v. Morrill, 40 N. H. 395, p. 401. The testimony of Quarles tends to show the understanding of the party (i. e. the corporation) on whom the demand was alleged to have been made. It is no objection to the evidence that it was only one link in a chain of proof. See Delano v. Goodwin, 48 N. H. 203, 206.

IV. The ruling, that the defendant's letter was evidence competent to be submitted to the jury to show an admission of the defendant that payment of all the debts named in the assessment had been demanded, was correct.

V. The objection, that some of the debts were not binding on the corporation, comes too late. The defendant should have insisted on it before the jury. It seems effectually waived by the agreement" that there were no questions of fact except the following," &c. The facts now relied on by the defendant do not appear from the case reserved.

Vol. II.]

OSSIPEE HOSIERY AND WOOLLEN MANUFACTURING Co. v. CANNEY.

[No. 11.

VI. We come now to the principal question in the case, which is one of very great practical importance, viz., whether the statutes of this state entitled the corporation to assess the defendant for the payment of debts after he has paid in the full amount of his subscription to the capital stock. "Very clearly, a corporation has not power as incident to it to assess for its own use a sum of money on the corporators, and compel them by action at law to the payment of it. The power must be derived from an express promise or from statute. Angell & Ames on Corp. 7th ed. sec. 544.

[ocr errors]

There is, in this case, no valid promise. The promise in the defendant's letter was without consideration; there was no benefit received by the defendant, nor was there any loss or damage to the plaintiffs in consequence of the letter. It was written after the assessment, and after the liabilities had been incurred, and the corporation had ceased to do business. There is no estoppel. It is unlike the case where a subscriber stands by and sees a corporation begin works and incur expenditures on the faith of his subscription. This case lacks one essential element of an estoppel, viz., change of position by the other party.

The question, then, as already intimated, turns on the construction of the statutes. The plaintiffs claim that the power to make this assessment was conferred by Rev. Stats. ch. 146, sec. 3, substantially reënacted in Gen. Stats. ch. 136, sec. 4, as follows: "Upon demand of payment of any debt of a corporation being made, if the same shall not at once be paid, or unincumbered personal property sufficient to satisfy it be exposed, the officers of the corporation shall forthwith call a meeting of the stockholders to provide means for its payment, by assessments upon themselves or otherwise, within sixty days from the date of such demand; and if any officer, whose duty it may be to call such meeting, shall unreasonably neglect or refuse to call the same, he shall forfeit one thousand dollars, to be recovered in an action of debt by any person injured."

If the clause "by assessments upon themselves or otherwise " had made its appearance in the General Statutes as a new provision, without having been previously incorporated into our legislation, one of the defendant's arguments would be entitled to great and perhaps decisive weight. Under the General Statutes, stockholders are made personally liable to creditors for corporate debts only in limited and exceptional instances. Sec. 4, ch. 136, Gen. Stats., makes no distinction, in terms, between cases where stockholders are personally liable to the creditors, and cases where they are not so liable. But the clause in question was not new. It first appeared in the Rev. Stats. of 1842, ch. 146, sec. 3, as a part of a body of laws under which stockholders, instead of a liability only in exceptional instances, were made personally liable generally for all corporate debts. By ch. 146, sec. 1, Rev. Stats., stockholders in corporations are made personally liable to pay the debts and civil liabilities. of the corporation in the same manner and to the same extent as though the stock were owned and the business transacted by the stockholders as unincorporated copartners.

Section 2 provides that proper actions of debt, or assumpsit for the col

1 The preceding portion of this opinion was der by Mr. Justice ISAAC W. SMITH.- REprepared by Mr. Justice JEREMIAH SMITH, before he retired from the bench, and the remain

PORTER.

Vol. II.] OSSIPEE HOSIERY AND WOOLLEN MANUFACTURING Co. v. CANNEY.

[No. 11.

lection of such debts or liabilities, may be commenced and prosecuted against any one or more of said stockholders.

Section 3 provides that no suit against any stockholder for the collection of any such debt shall be commenced until after a legal demand of payment thereof shall have been made upon the company. Upon such demand being made, if officers or stockholders shall discharge such debt or liability, or expose unincumbered personal property of such company, liable to attachment, sufficient to satisfy such debt or liability and costs, so that the same may be attached in a suit against such company for the security of such debt or liability, then no suit shall be sustained thereon against the stockholders.

Whenever the officers or stockholders after demand shall not satisfy such debt or expose property to be attached, it is made the duty of the officers forthwith to call a meeting of the stockholders, and the company when met shall provide means for the payment of such debt or liability, either by assessments upon the stockholders or otherwise, within sixty days from the time when such demand was made.

And if such debt or liability shall not be discharged within sixty days, a suit may be sustained against the stockholders, as provided in sec. 2. If the officers whose duty it may be to call such meeting shall unreasonably neglect to call the same, they shall severally forfeit the sum of $1,000, to be recovered in an action of debt by any person injured thereby.

In 1846, sec. 1 of ch. 146, Rev. Stats., was repealed by ch. 321, P. L., in terms.

The repeal of sec. 1 would leave secs. 2 and 3 practically inoperative. Did the repeal of these two sections follow as incident to the repeal of sec. 1? This might be so, if there had been no further legislation in regard to the personal liability of individual stockholders.

The same legislature (of 1846), in the act (ch. 321, P. L.) in which they repealed sec. 1 of ch. 146, Rev. Stats., which imposed an unlimited personal liability on individual stockholders, made stockholders individually liable to a limited extent under the provisions of sec. 2 of the Act of 1846.

Among other cases where stockholders were made individually liable under the Act of 1846 was the provision that they should be so liable until the whole amount of the capital fixed and limited by the corporation shall have been paid in, and a certificate thereof shall have been made and recorded by the clerk of the town where such corporation has its place of business or is situated.

It is unnecessary to inquire under what other circumstances the stockholders were made individually liable. By section 4 of the Act of 1846, the process and modes of proceeding against corporations, their officers, and stockholders, who may become liable for their debts and civil liabilities, shall be the same as are provided by chaps. 141 and 146 of the Rev. Stats.; and the remedies of the officers and stockholders who have incurred such liabilities against such corporation, their officers, and stockholders, shall be the same as are provided in said chapters in like cases.

It will thus be seen that the legislature made provision for enforcing the individual liability of stockholders, as created in the Act of 1846, under secs. 2 and 3 of ch. 146 of the Rev. Stats.

Vol. II.]

OSSIPEE HOSIERY AND WOOLLEN MANUFACTURING Co. v. CANNEY.

[No. 11.

Now, under what circumstances were stockholders liable to be proceeded against under secs. 2 and 3 of ch. 146 of the Rev. Stats.? Their liability under section 1 had been repealed, and it must be clear that they could only be proceeded against when liable under the Act of 1846.

The provisions of the Act of 1846 are substantially incorporated in ch. 135 of the Gen. Stats., while the provisions of sec. 3 of ch. 146 of the Rev. Stats. are substantially incorporated in ch. 136 of the Gen. Stats. What, then, has been the law on this subject since the revision of the statutes in 1867 ?

By sec. 8 of ch. 135, every stockholder, except in banks, is liable for all debts and contracts of the corporation until the whole amount of the capital fixed and limited by such corporation shall have been paid in, and a certificate thereof, under oath, signed, &c., has been filed and recorded by the clerk of the city or town where such corporation has its principal place of business, and not afterward.

Chapter 136, Gen. Stats. provides, sec. 1, that a creditor may maintain a bill in chancery to enforce payment of a debt of a corporation against individual stockholders; but by sec. 2, not until sixty days after legal demand of payment. But he can only bring such bill when the stockholder is liable under ch. 135, Gen. Stats., and to that extent only. Sec. 3 provides for exposing property, that it may be attached to pay the debt of which payment is demanded. Sec. 4 provides for calling a meeting of the stockholders, who may provide means of payment by assessments, or otherwise, within sixty days from the date of the demand.

What debt can they thus assess themselves to pay? Clearly, only those of which payment can be legally demanded under sec. 2; that is, such debts as the stockholders are individually liable for under ch. 135. They cannot go beyond this, because then stockholders would be individually liable beyond the limit established by statute; and we have no doubt the legislature intended to give to the stockholders the power to assess themselves to this extent in order to have a prompt, decisive, and effectual remedy for the payment of their debts, and to avoid and prevent a multiplicity of suits by creditors, with the necessary costs and delay. What other means can an insolvent corporation adopt to pay its debts, or the stockholders to relieve themselves from suits? The legislature intended to give such power to the corporation to make stockholders liable to pay, in the form of an assessment, debts which the creditors could have collected by a direct suit against the stockholders; and there are strong reasons of convenience and expediency in giving them power to assess themselves to pay this liability.

As the case finds that the capital stock of this corporation was fixed and limited at $8,000, and that only $7,600 of the same has ever been paid in, the stockholders are individually liable under sec. 8 of ch. 135 of the Gen. Stats. ; and the assessment having been legally voted, the defendant is liable.

But it is further suggested that the only remedy, or at least the primary remedy, for the collection of the assessment is a sale of the shares. This might, in the absence of a promise, be true, so far as regards assessments made under sec. 11, ch. 141, Rev. Stats., to collect the sum subscribed for the original capital stock; see N. H. Central R. R. v. Johnson,

Vol. II.]

OSSIPEE HOSIERY AND WOOLLEN MANUFACTURING Co. v. CANNEY.

[No. 11.

30 N. H. 390, p. 403, and sec. 12, ch. 141, Rev. Stats. ; but this cannot ordinarily be an effectual remedy for the collection of assessments to pay debts after a failure to expose unincumbered attachable personal property. It is presumable that the shares would generally be unsalable under such circumstances. We think that the legislature, in authorizing assessments in such cases, must be taken to have authorized the use of prompt and effectual means to collect the same; Broom's Maxims 471; and that assumpsit is maintainable against a delinquent stockholder. The law often allows that action to be maintained "for the sake of the remedy" where there is no promise in fact, and even in the face of a party's refusal to perform his duty. Sceva v. True, 53 N. H. 627. In our view, sec. 16 of ch. 134, Gen. Stat., relates only to the collection of such assessments as have been levied under the authority of sec. 15, ch. 134. In Franklin Glass Co. v. White, 14 Mass. 286, cited by the defendant, the same statute that conferred power to make the assessment provided a remedy by sale of the shares, which the court held exclusive. But here, the statute conferring the power to make the assessment provides no remedy by sale. That remedy is given in another statute as a means of collecting the assessments authorized in that other statute, not this class of as

sessments.

According to these views there must be

Judgment on the verdict.

Hobbs, for the defendant, having applied to the judge who tried the cause to amend the case by adding the following: "The debts and liabilities for which the assessment was made exceeded in amount the property and assets of said corporation and all its capital stock paid in or limited;" asked for a rehearing upon the point that such debts, as to the stockholder, are ultra vires. The case was thereupon continued for further argument and consideration upon this point.

Hobbs (with whom were Allen & L. D. Sawyer), for the defendant. The amount of debt exceeds one half of the capital stock paid in, with all the corporate property. This debt was contracted by the corporation, when it is expressly prohibited from so doing by secs. 4 and 5, Gen. Stats., and the Act of 1846. While the officers who violate secs. 4 and 5 are made liable for contracting such debts, it seems impossible that they can have any right to assess a stockholder to pay such illegally contracted debts. Is not such a debt, as against a stockholder, ultra vires, - at least, as between him and the corporation or directors? Both of the latter are prohibited from contracting such a debt. Have they authority to contract it? If so, where do they get it? If not, how can they call on the defendant to pay any part? To hold otherwise is to imperil the fortunes of every one who has a share of stock in a New Hampshire corporation. Rich v. Errol, 51 N. H. It certainly would be a singular construction which should hold that a legislature that adopted the restrictions of the Act of 1846 (an act expressly repealing the antecedent copartnership liability provision of the Revised Statutes), in passing the General Statutes, did not intend that those limitations should have any force; or which should hold that the legislature of 1868, in adopting the provision of sec. 3, ch. 146, Rev. Stats., adopted it with reference to sec. 1, that had long before been repealed by the Act of 1846, ch. 321, rather than in reference to the Act of 1846 itself, which was the existing law in 1868,

« PreviousContinue »