Chesley v. Pierce , 32 N.H. 388 ( 1855 )

Eastman, J.^*

The act incorporating the Contoocook Valley Railroad was passed June 24, 1848, and the grantees were made a corporation “ with all the rights and privileges, liabilities and duties, by the laws of this State incident to railroad corporations.”

By the Revised Statutes, chap. 146, § 1, it is provided that the stockholders of incorporated companies, thereafter incorporated, having for their object a dividend of profits, and the stockholders of corporations then existing, whose charters were subject to amendment or repeal, “ shall be personally holden to pay the debts and civil liabilities of such company, hereafter contracted or incurred, in the same manner and to the same extent as though the stock were owned and the business transacted by the stockholders as unincorporated copartnerssubject, however, to exceptions and modifications therein after provided for.

The exceptions and modifications spoken of require a previous demand to be made upon the company before suit against a stockholder, and the mode of proceeding is particularly set forth. There is no limitation, however, to the general liability of the stockholders to pay all the debts of the corporation, as set forth in the first section, if the proper steps are taken to charge them.

This first section of chap. 146, Revised Statutes, was in terms repealed by the act of July 8, 1846, and also such other parts of the statutes then in force as might be inconsistent with that act. (Chap. 321, Pamphlet Laws.) And instead of this section the general provision was made, as follows : “ All corporations, having for their object a dividend of profits among their stockholders, hereafter incorporated, or whose charters are subject by law to alteration, amendment or repeal, shall be governed by the provisions and subject to the liabilities in this act contained ; and the stockholders and officers thereof shall be personally liable for the debts and civil liabilities of such corporations, in the following cases and not otherwise

“ 1. They shall jointly and severally be liable for all debts and contracts of such corporations until the whole amount of the capital, fixed and limited by such 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.”

Several other instances are also enumerated in which it is declared that they shall be liable ; such as a reduction of the capital stock before the debts are paid ; but they need not be stated, as they do not affect this case.

By the Revised Statutes, chap. 146, § 6, it is provided that every such company shall, within five days from the time of its being organized for the transaction of business, cause to be delivered to the town clerk of the town in which the company has its principal place of business, a list of the stockholders, and the shares owned by each; and the 7th section of the same chapter provides that from and after the time in which such list is required to be so left, no transfer of stock by any stockholder shall exonerate him from his personal responsibility “ for the debts and liabilities of the company afterwards contracted or incurred, unless the same be in writing, and recorded in the office of the town clerk of the town in which such principal place of business is located.”

These two sections of the Revised Statutes were repealed by the act of July 10,1846, (Pamphlet Laws, chap. 822 ;) and instead thereof the provision, among others, was made, that the list of the stockholders should be filed with the town clerk in sixty days after the organization of the company and its preparation to transact business. It was also further provided, in the second section of the act, that any person whose name was on the list should be deemed to be a stockholder, until his name was stricken from the list; “ provided, that any stockholder in any such corporation who shall sell and assign all his stock in the same, may immediately notify such town clerk in writing of the time when he sold and assigned such stock, and the names and places of residence of the persons to whom he sold; and in all such cases the stockholder so selling his stock shall be exonerated from all debts and liabilities of said corporation contracted after such sale and notice ; and the persons purchasing such stock shall be liable for such debts and liabilities, contracted after such purchase and notice, in the same way and manner as the person selling such stock would have been if he had not sold.”

Now, waiving the question whether assumpsit is the proper form of action to be brought on an instrument like the one in suit, and whether the company had the right to issue bonds or obligations in the manner in which this was issued, (in regard to both of which questions we express no opinion;) and admitting that the evidence was competent to show the defendants to be stockholders at the time this action was commenced, still, a very important question arises, whether, under the provisions of the statutes cited, the defendants can be charged ?

This obligation was issued on the 3d day of May, 1849, and the plaintiff became the holder of it prior to 1850. The defendants, however, were neither of them stockholders before the 30th of April, 1850. Admitting that the defendant Pierce made a payment towards his shares as early as January, 1849, still the payments were not all made till April, 1850, and his certificate for stock was not issued till then. Sawyer made no payment till March 9, 1850, and his certificate was issued January 3, 1851.

We do not intend to say that a person may not be a stockholder in a corporation without having in his possession a certificate of his shares. If by his acts or words he makes what may amount to a proposition to become a stockholder, and pays for his stock, and the corporation accepts the money, such acts, independent of any provision in the charter upon the subject, might be sufficient for a jury to find a contract for membership between the individual and the corporation, by which he would become a stockholder without any formal vote of the corporation to that effect, and without any issuing of a certificate for shares. Or if he should subscribe for stock, and the corporation should by vote accept him as a member, this might be sufficient, without payment for the shares. Chester Glass Co. v. Dewey, 16 Mass. 94. But here certificates were issued; to Pierce on the 30th ■ of April, 1850 — on the day on which the last payment was made ; and to Sawyer on the 3d day of January, 1851. It cannot be said that they were stockholders before those dates, for the evidence is that the payments for the . stock were not all made till the day on which the certificates were issued ; and there is nothing having a tendency to show them stockholders till that time. There was no action of the corporation aecepting them as stockholders. They may have been subscribers for shares, but their shares were not paid for, and the corporation had not accepted the defendants as stockholders until the certificates were issued. And we do not understand that the plaintiff makes any particular question upon this point.

This distinct question, then, is presented, Can the defendants f be charged for a debt incurred before they became stockholders, i notwithstanding they may have been stockholders at the time the’ suit was brought ? This question has been considered upon statutory provisions somewhat similar to ours in several of the States.

The general statute of Massachusetts upon manufacturing corporations contains a section substantially the same as the first section of our act of July 8,1846. And the Supreme Court of that State, in the case of Curtis v. Harlow, 12 Met. 3, have decided that the provisions of the section extend to those who are members when the liability of the company is sought to be enforced, and is not confined to those who were members when the debts were contracted.

This decision is placed upon the ground that such is the meaning of the language of the statute. Dewey, J., who delivered the opinion, says, that the language of the statute necessarily embraces all persons who are members at the time when the liability is to be enforced ; that those who became stockholders after the date of the contract are as fully members of the company as the, earlier associates; that the term “ members” must be held to include all the actual stockholders, and that with their membership they take all the benefits and the responsibilities which attach to that relation. Whether those who are stockholders at the time the debt is contracted, but cease to be members before the commencement of the suit, are liable, is not decided by that case. In regard to that the court express no opinion, but say it may be that both are liable.

The language of the Massachusetts statute is somewhat stronger than ours; the phraseology is, “ all the members” of every manufacturing company shall be liable, &c.; and from an examination of their statute we do not find any provision like that contained in the second section of our act of July 10,1846, (above cited,) providing that a stockholder who shall sell his shares and notify the town clerk having the list, shall be exonerated from all debts contracted after such sale and notice, and that the purchaser shall be liable for the debts contracted after such purchase.

In Connecticut the court have been divided upon the question ; a majority, however, deciding the point in the same way as in Curtis v. Harlow, in Massachusetts. See Southmayd v. Russ, 3 Conn. 54 ; Middletown Bank v. Magill, 5 Conn. 28; Deming v. Bull, 10 ditto 409.

In New-York, where the provision of the act was, that “ the stockholders of said corporation shall be jointly and severally personally liable for the payment of all debts or demands contracted by the said corporation,” &c., the Supreme Court, in the case of Moss v. Oakley, 2 Hill 265, held that the suit could be brought only against such as were stockholders when the debt was contracted, and not those who become so afterwards.

In delivering the opinion of the court, Bronson, J., says, that the statute is capable of either construction without doing any violence to the language, but he thinks that the construction given by the court will best answer the end which the legislature had in view.

The phraseology of this statute is almost identical with ours; the words, “jointly and severally,” however, being introduced into the New-York statute, which are not embraced in ours.

This same statute was afterwards considered in the Court of Errors of New-York, in the case of McCullough v. Moss, 5 Hill 567. Several opinions were delivered by honorable senators, but they were not agreed in the construction to be put upon the statute. Some held that it applied to those only who were members when the suit was commenced, while others advanced the same views as those entertained by the Supreme Court in the case of Moss v. Oakley. There were other points in the case, and the decision did not turn upon this point alone.

In Allen v. Sewall, 2 Wendell 327, the words of the statute were that “ the members of the company shall be liable individually,” and Savage, C. J., said, “it was the intention of the legislature to put the defendants (the stockholders) upon the same footing as to the liability as if they had not been incorporated. Individual liability in the act must be understood in contradistinction to corporate liability ; and the defendants must, therefore, be held responsible to the same extent, and in the same manner, as if there was no act of incorporation.”

These are the only cases that we have met with that bear upon the point, and it will be seen that, so far as they go, the question is not settled. We are, therefore, brought to give such construction to the statute, independent of authority, as we think the legislature intended and the language of the act requires.

It will be observed that the first section of the Revised Statutes, which we have quoted, made the stockholders personally liable “ 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.” Such is the language of the statute ; that is, their liabilities were to be precisely the same as though the business were carried on by a partnership instead of a corporation; subject, of course, to the other provisions of the act, that the creditors should demand payment of the corporation before suit against the individual stockholders. Standing, then, under that statute in the position of partners, stockholders would be liable for the payment of such debts and such only as should be contracted while members of the corporation. Such is the general rule in regard to partnerships. A person is not individually liable for the debts of a firm contracted before he becomes a member of it, nor for those contracted after he leaves it, unless there be some agreement to that effect when he unites with or leaves the partnership. We state this as the general principle, and do not of course allude to the particular powers of partners in settling the affairs of a partnership after dissolution.

We entertain no doubt that under the Revised Statutes stockholders could be made liable in their individual capacity only as copartners ; that consequently they would be liable for those debts only which were contracted while members of the corporation ; and that were we to decide this suit under that statute, judgment would have to be entered for the defendants.

The question then arises, did the act of July 8,1846, change the law in this respect? Was it the intention of the Legislature at that time to make the personal liability of stockholders greater than that of copartners, and greater than it had been theretofore ? We think not; and the whole scope of the act appears to us to show clearly that the intention was to limit instead of extending that liability. Hence the repeal of the action fixing the general liability, and the enactment of the provisions particularising the defaults which should make the stockholders personally liable; one of which appears in this case, viz.: that the debt was contracted before all the stock was paid in.

It is true, that the act of 1846 does not in terms specify the manner and extent of the liability, as is done by the Revised Statutes ; but it is also true that there is nothing in the language of the act requiring a construction that shall impose a greater liability than that which attaches to partners. The language of the section is, that “ the stockholders and officers shall be personally liable for the debts and civil liabilities of the corporation.” Stockholders are spoken of in connection with the contracting of the debts; and such as were then stockholders, when the i debts were contracted, would seem to be those intended, and not those who might become members afterwards. At all events, there is nothing in the phraseology requiring a different construction.

And this construction is, we think, the one best calculated to do justice between the parties. He who purchases stock and comes into a corporation after it has been engaged in business, may often be deceived in relation to the number and magnitude of its debts, but while he is a stockholder he can know something about the extent of the obligations contracted by the company, and is not wholly without the means of exerting an influence over those who manage its concerns. And as to those who deal with the corporation, they bestow their labor or part with their money or property on the credit of the corporation, and those who are known to be stockholders ; and so far as the responsibility of the stockholders is to be considered, it might oftentimes be ruinous to a creditor to turn him over to persons with whom he did not deal, and who may have come into the corporation at a subsequent period; they may be much less able to respond to creditors than were those who .owned the stock at the time the debt was contracted. Moss v. Oakley, 2 Hill 270.

The stockholders are made guarantors for the payment of the debts of the corporation; not guarantors in the technical sense of the term, but they are liable in the cases stated in the act, when the corporation shall fail to make the payments. And •, what principle can be more just or equitable than that which" makes a stockholder'liable for those debts, and those only, which are contracted while he is a member of the association, participating in its business and transactions, and sharing in its advantages and profits ? And why should he be liable for debts con-’, tracted before he has become a member, when he had no con-", nection with the company, or for those incurred after he has parted with his stock, and honestly left the association? "We think that the justice of the matter requires that his liability should be coextensive with his membership; that so long as he is a stockholder he should be liable for the debts then contracted, and not for those incurred either before he joined the company or after he left it; and that such was the intention of the Legislature that passed the act, and the proper construction to be put upon it.

And we are confirmed in the opinion that such was the intention of the Legislature, by recurring to the act of July 10, 1846, a portion of which we have quoted, which provides that upon a sale of stock and notice to the town clerk where the list is filed, the stockholder so selling his stock shall be exonerated from all debts and liabilities of the corporation contracted after such sale and notice ; and that the purchaser shall be liable for such debts as may be contracted after such purchase.

This act would seem to indicate quite clearly the intention of the Legislature to place the stockholders in this respect on the ground of partners.

This list, which is filed with the town clerk, is for the benefit of those who deal with the company. They may resort to it to see who are the stockholders, that they may the better know whether to trust the corporation or not; and it is the names that they find there to which they give credit, and not those that may have been there a year before, or may be there a year after.

And by the express terms of the act, also, it is those whose names are then there who are liable for debts then contracted, and not for debts contracted thereafter ; and those who subsequently become members are not liable for the debts previously contracted.

As the decision of this point in the case goes to the foundation of the plaintiff’s right of recovery, we have found it unnecessary to examine the other questions.

According to the agreement of the parties, as expressed in the order of transfer, there must be

Judgment for the defendants.

* Peblet, C. J., and Powxeb, J., haying been of counsel, did not sit.