American Spirits Mfg. Co. v. Eldridge
| Decision Date | 06 September 1911 |
| Parties | AMERICAN SPIRITS MFG. CO. v. ELDRIDGE et al. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
Brandeis Dunbar & Nutter ( J. Butler Studley, of counsel), for plaintiff.
Gaston Snow & Saltonstall (Thos. Hunt, of counsel), for defendants.
The defendants have demurred, and the question is whether the bill, the allegations of which are admitted, states a case. It is alleged, that by the laws of Illinois providing for the incorporation of associations 'organized for the purpose of constructing railways, and maintaining and operating the same, * * * each stockholder of any corporation formed under the provisions of this act shall be individually liable to the creditors of such corporation, until the whole amount of the capital stock of such corporation so held by him shall have been paid.' Hurd's Rev. St. 1909, c. 114, § 17. The defendant became a stockholder in a corporation organized under this act, and the nature and measure of his liability to corporate creditors, is to be defined and determined by the language of the statute. It must affirmatively appear, in a suit to enforce the statute, that the corporation is indebted to the plaintiff, and that the defendant stockholder, while the holder, has failed either partially or wholly, to pay into the treasury of the corporation the capital represented by the shares issued to him at its organization. Kelley v. Killian, 133 Ill.App. 102, 107. These essential requirements are complied with by the allegations of the existence of an unsatisfied indebtedness of the corporation to the plaintiff for installments of accrued rent, and that with the exception of 6 shares, the entire capital stock, consisting of 1,000 shares of the par value of $100 each, for which he has not paid, were issued to the defendant, and have been continuously held by him.
But the defendant contends that, before he can be made responsible, judgment for the debt must be obtained against the corporation. The liability imposed is contractual. Putnam v. Misochi, 189 Mass. 421, 423, 75 N.E. 956, 109 Am. St. Rep. 648; Converse v. Ayer, 197 Mass. 443, 453, 84 N.E. 98, and cases cited; Converse v. Nichols, 202 Mass. 270, 274, 89 N.E. 135; Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163. The corporation came into existence by virtue of the statute, and its stockholders were charged with notice of the provisions of the act, which was equivalent to a charter of incorporation. In voluntarily joining as an original stockholder, the defendant must be presumed to have known that, if he did not pay for his shares, creditors could compel him to pay to them the money he justly should have contributed to its capital for the stock he had received, and which would have enhanced its assets. Converse v. Ayer, 197 Mass. 443, 84 N.E. 98. The justice and expediency of the statute are not before us.
Its evident purpose is to give a direct remedy to the creditor to obtain payment for his debt out of the unpaid capital, and in no event can the defendant be made to pay more than he owes. Fleischer v. Rentchler, 17 Ill.App. 402; Hatch v. Dana, 101 U.S. 205, 25 L.Ed. 885. If this liability had been made enforceable through the corporation, a judgment against it would have been indispensable before the stockholder could be reached. E. Remington & Sons v. Samana Bay Co., 140 Mass. 494, 496, 5 N.E. 292; Train v. Marshall Paper Co., 180 Mass. 513, 62 N.E. 967. By the statute, however, a judgment not having been required, none is necessary.
The defendant's liability instead of having been made secondary, as provided in the foreign statutes involved and construed in Hancock National Bank v. Ellis, 166 Mass. 414, 44 N.E. 349, 55 Am. St. Rep. 414, Broadway Nat. Bank v. Baker, 176 Mass. 294, 57 N.E. 603, and Bearse v. Mabie, 198 Mass. 451, 84 N.E. 1015, is expressly declared to be unconditional under the law of the place of contract, which must control. Electric Welding Co. v. Prince, 195 Mass. 242, 81 N.E. 306; Hager v. Cleveland, 36 Md. 476; Gebhard v. Eastman, 7 Minn. 56 (Gil. 40); Trippe v. Huncheon, 82 Ind. 307; Morrow v. Superior Court, 64 Cal. 383, 1 P. 354; Liverpool & Great Western Steam Co. v. Phenix Ins. Co., 129 U.S. 397, 9 S.Ct. 469, 32 L.Ed. 788.
The suit for the creditor's benefit furthermore is not made dependent upon either the joinder of other delinquent stockholders, or of the corporation, or the appointment of a receiver to wind up its affairs, and distribute the assets, and if contribution from his costockholders, and the remedy over against the corporation, are deemed by him valuable rights, the defendant can establish and enforce them by appropriate proceedings. Cary v. Holmes, 16 Gray, 127; Putnam v. Misochi, 189 Mass. 421, 75 N.E. 956, 109 Am. St. Rep. 648; Montgomery Door & Sash Co. v. Atlantic Lumber Co., 206 Mass. 144, 157, 92 N.E. 71.
If an exclusive remedy for the enforcement of the liability...
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