Atlantic De Laine v. Mason, Mason v. Atlantic De Laine , 5 R.I. 463 ( 1858 )

Ames, C. J.

The assessment, to satisfy which the stock of Messrs. Hill, Carpenter & Co. was sold by the De Laine Company, was illegal, and in consequence, the sale void, upon the double ground, of want of authority in the corporation to make it, and want of proper notice of the special meeting at which it was made. No further assessment can be imposed upon paid stock, without special authority in the charter, or by statute warranting it. Any other doctrine, in application to a subscription for a definite number of shares of an amount fixed by charter, would disappoint the contract of a subscriber and stockholder, and his just calculations founded upon it, it might be, to his ruin. The latter clause of the second section of the charter of the De Laine Company does indeed contemplate, to meet the exigencies of their, business, such further assessment; but it does so, only upon the basis, that the capital stock, fixed in amount by the charter and actually paid in, has proved insufficient to carry on the business of the corporation; when, the assessment is to be laid in equal proportions, and by the consent of the stockholders owning at least three fourths of the shares of such capital stock. The main cause of embarrassment in this case, probably was, that 'not only was not the capital stock, contemplated by the charter and by-laws, subscribed for, but that comparatively only a small portion, less than half, was paid in; and at all events, under such circumstances, the section gives no authority to the company, who seem to have started a a large business upon a small and insufficient capital paid in, contrary to their charter and by-laws, to remedy the embarrass ment thus caused, by further assessments in invitum upon paid stock. The charter remedy is, to issue stock to those willing to buy, to the amount required; not to compel, in substance, those who have subscribed and paid for thirty shares, to take, whether they will or not, forty or sixty shares, in the shape of further assessments.

It is said that this objectionable course was pursued by the De Laine Company with the assent of Hill, Carpenter & Co., prior to the failure of that firm; and that two or more assessments were laid, though not enforced, by votes in which they concurred. It is enough to say, that neither they, nor their assignees, were present at, or in any mode assented to, the assessment of $360 per share laid by the company at the special meeting held on the 6th of October, 1855 ; nor can the assent of either, to one illegal assessment, be ground for presuming an assent to another of much larger amount, so as to make it binding by way of contract. Indeed, the power of Hill, Carpenter & Co. to authorize such assessments would seem to be wholly gone after an assignment of their stock to the complainants, and notice of such assignment to the De Laine Company.

But if the company had, under their charter, power, further to assess the paid shares of Hill, Carpenter & Co., it could only be at a corporate meeting duly notified for such a purpose; and the general rule is well settled, that an act of such importance cannot be done, at a special corporate meeting, unless the stockholders are duly notified of the purpose of the meeting, so that they can attend and vote upon a matter so interesting to them. The clauses of the charter and by-laws of the company to which we have been referred, do not, as it seems to us, except the special meetings of this corporation out of the general rule. The third section of the charter, after fixing the time of the charter, or annual, meeting, for the election of officers, goes on to provide, that in case of failure then to elect them, they may be elected at any subsequent legal meeting holden within a year; and that, at special meetings, “ all or any business of the corporation may be transacted or acted on; ” and the 8th article of the by-laws, passed to cany out the charter requirement, that such meetings “ shall be notified in the manner to be prescribed by the by-laws of the corporation,” relates merely to the mode of serving notice, and, by its silence, refers us to the general law, as to what the notice shall contain.

The complainants are entitled, against the De Laine Company, to an account of the value of the stock illegally sold, not reckoning, of course, the value added to it by the paid assessments of other stockholders ; and the case must go to a master to ascertain the value at the time of the illegal sale, which, with interest, we shall allow, by way of equitable set-off, to be retained by the assignees out of the dividends due from the assigned estate to the De Laine Company; and the bill of the company, for an account of these dividends, must wait until the coming in of the master’s report.