Somerset Railroad v. Clarke , 61 Me. 379 ( 1871 )

Appletoh, O. J.

The defendant is an owner of shares in the plaintiff corporation. Assessments were made upon his shares. Neglecting to pay them, his shares were sold at auction, and this suit is brought to recover the balance remaining due on the assessments, after deducting the proceeds of such sale.

The plaintiff to recover must prove legal assessments upon the shares of the defendant, and a legal sale before he can •“ be held accountable to the corporation for the balance, if his share or shares shall sell for less than the assessments due thereon,” with interest and costs of sale.

It must be borne in mind that this suit is not based upon any contract made by the defendant, but upon his accountability as a stockholder, by virtue of the provisions of § 4 of the plaintiff’s charter.

By § 2, the capital stock of the corporation shall consist of not less than one thousand, nor more than six thousand shares.

Before an assessment can be legally made, the number of shares or the amount of capital stock must be definitely fixed. This may be done in the charter. If so, there must be a subscription for the prescribed amount, before an assessment can be made. If not done by the legislature, the amount must be determined by the directors or stockholders. Until the number of shares forming the capital stock is fixed, there is no capital stock, and no assessments can be rightfully laid and legally collected. Worcester & Nashua R. R. Co. v. Hinds, 8 Cush. 110; Stoneham, Branch R. R. Co. v. Gould, 2 Gray, 277. In Somerset & Kennebec R. R. Co. v. Cushing, 45 Maine, 530, it was held, that it was indispensable that the number of shares should be determined before an assessment could be made, and if the number was not fixed by the charter, that it was to be presumed that it should be by the directors or stockholders.

At a meeting of the stockholders, holden on the eighteenth day of April, 1868, it was voted: “That persons and corporations are hereby authorized and invited to become subscribers to the capital stock of the Somerset Railroad Company, and the clerk is hereby authorized to receive subscriptions to the capital stock until the amount subscribed shall be equal to six thousand shares.”

At this date it would seem, by the report of the committee, that subscriptions to the amount of $316,500 bad been obtained, and it was then voted, “ that all persons and corporations who have subscribed to the capital stock of the Somerset Railroad Company, be admitted as associate members.”

By the seventh article of the by-laws then adopted, the directors were authorized “ to dispose of the residue of the capital stock authorized by the charter and not subscribed for at the time of organization, in such manner and at such times, and from time to time, as they shall judge most for the interest of the company.”

At a meeting of the directors, held May 15, 1868, it was voted: “ That the president have authority to take all necessary measures to procure subscription to the capital stock not subscribed for at the organization.”

These votes are all that have any relation to fixing the capital stock of the corporation. From a fair construction they would seem to establish the capital stock at six thousand shares. If so, then the assessments are void, because there has been no subscription for that amount of stock. If not so, then they are void because the amount of the capital stock has never been fixed, but has been left fluctuating and undetermined.

As a compliance with the prerequisites of the charter and bylaws is a condition precedent to the liability of the defendant, if the assessments of shares were not in accordance with law, this suit is not maintainable.

There are various other objections made to the regularity of the proceedings of the plaintiff corporation, but it is not necessary to consider them. Plaintiff nonsuit.

KeNT, WaltoN, BaRrows, and Virgo, JJ., concurred.