Brown v. Eastern Slate Company

Decision Date03 April 1883
Citation134 Mass. 590
CourtUnited States State Supreme Judicial Court of Massachusetts Supreme Court
PartiesStephen O. Brown v. Eastern Slate Company & others

Suffolk.

Bill dismissed.

E. S Mansfield, for the plaintiff.

C. S Lincoln, A. Russ, & C. F. Donnelly, for the various defendants.

Holmes J. Field & W. Allen, JJ., absent.

OPINION

Holmes, J.

This is a suit in equity against original stockholders in a Massachusetts corporation, created November 5, 1877, who have never paid in full the par value of their shares, to establish and enforce a personal liability under the Sts. of 1870, c. 224, §§ 39 & seq., 1875, c. 177, § 1, 1876, c. 1, § 1. (Pub. Sts. c. 106, §§ 61 & seq.) The original contracts on which the plaintiff recovered his judgment at law were five promissory notes, signed with the name of the company by its treasurer, and indorsed with the name of the company by its directors. These notes were delivered under a written agreement between the plaintiff and the corporation, by which the plaintiff sold property to the company and the company was to give the notes as the price, and in pursuance of a contemporaneous oral agreement, made in a talk with the directors, "that there should be no personal liability on the notes therein [that is, in the above-mentioned writing ] referred to." This agreement is one of the defences relied on.

So far as its construction is concerned, we see no reason for limiting it to the directors. No one was personally liable except by statute. The stipulation therefore must be taken to refer to statutory liability. An agreement that there should be no personal liability, in the sense of no statutory liability, means on its face no statutory liability on the part of anybody, and there is nothing in the circumstances to cut it down. The more difficult question is, whether an oral contract of this nature does not vary the written contracts, and whether evidence of it is not therefore inadmissible.

The original contract may be laid out of the case, for the reason that that would have been satisfied by the delivery of notes on which there was no personal liability. The plaintiff could not have complained if the members had paid up their stock before the notes were handed over. But the notes which were given were notes carrying a personal liability in a certain sense, and it may be argued with more force that the oral agreement attempted to vary them in their legal effect.

The agreement does not touch anything to be read on the face of the notes. In terms, the notes promise only the payment of a sum of money by the company on a certain day. They have nothing to say about the defendants at all. If then the agreement is held to vary them in their legal effect, it must be on the ground that the statute which makes stockholders liable in certain cases makes that liability a term of the notes by implication.

With regard to this, it will be observed that the statute does not create a chartered partnership which remains a partnership and contracts as such, although granted certain corporate powers. It does not make or leave the members primary contractors or debtors. It creates a corporation out and out, and then imposes a secondary and subsidiary liability upon the members "for its [the corporation's ] debts or contracts." The liability of the members does not arise until after the contract has been broken, a judgment recovered upon it, and execution returned unsatisfied. The corporation is the only promisor or debtor, it alone breaks the contract by its failure to pay, and it alone is sued. The liability of the members is no part of the original undertaking, but a consequence attached by the law to its breach.

But the rule excluding evidence of oral agreements to vary a writing goes no farther than the...

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33 cases
  • Cont'l Corp. v. Gowdy
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • May 31, 1933
    ...corporation under the bond, and if so construed it is valid. It was said by Holmes, J., speaking for the court in Brown v. Eastern Slate Co., 134 Mass. 590, 592, of a statutory liability of stockholders for the debts and contracts of a corporation asserted in somewhat similar circumstances,......
  • Continental Corp. v. Gowdy
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • May 31, 1933
    ... ... It was said by Holmes, J., ... speaking for the court in Brown v. Eastern Slate Co ... 134 Mass. 590 , 592, of a statutory liability ... ...
  • Babbitt v. Read
    • United States
    • U.S. Court of Appeals — Second Circuit
    • June 29, 1916
    ... ... capitalization of a company conveys a belief that it starts ... with an equal value in property. That ... tested, so far as we have found. Brown v. Eastern Slate ... Co., 134 Mass. 590; Fidelity Trust Co. v ... ...
  • Abercrombie v. United Light & Power Co.
    • United States
    • U.S. District Court — District of Maryland
    • March 27, 1934
    ...but an examination of these cases discloses that fraud was not involved. The state cases relied upon by defendant such as Brown v. Eastern Slate Co., 134 Mass. 590, and Basshor v. Forbes, 36 Md. 154, similarly do not involve fraud. In Babbitt v. Read, much stressed by defendant, although th......
  • Request a trial to view additional results

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