Chouteau Spring Co. v. Harris

• Decision Date: 31 January 1855
• Citation: 20 Mo. 382
• Parties: THE CHOUTEAU SPRING COMPANY, Respondent, v. HARRIS, Appellant.
• Court: Missouri Supreme Court

20 Mo. 382

THE CHOUTEAU SPRING COMPANY, Respondent,

v.HARRIS, Appellant.

Supreme Court of Missouri.

January Term, 1855.

The charter of an incorporated company provides that the stock might be “transferred on the books of the company.” The company was authorized “to regulate the transfer of stock” by by-laws. A provision in the charter authorized the company, in certain cases, to make assessments on ““stockholders,” beyond their shares of stock. Held:

1. That no such assessment could be made on a party after he had ceased to be a member, by a transfer of his stock.

2. That the power “to regulate the transfer” did not include the power to restrain transfers or prescribe to whom they might be made, but merely to prescribe the formalities to be observed in making them; and that the company could not prevent a party from selling his stock even to an insolvent person.

3. That an “assignment upon the books of the company” was sufficient to effect a change of ownership, without taking out a new certificate in the name of the assignee; and that any transfer in writing was valid against the company, if, being notified, they refused to allow it to be made according to their by-laws.

Appeal from Cooper Circuit Court.

This was an action commenced before a justice of the peace to recover the amount of an assessment made against Harris as a stockholder in the Chouteau Spring company, under the 12th section of their charter. (Sess. Acts, 1849, p. 168.)

At the trial in the Circuit Court, upon appeal, it appeared in evidence that in August, 1851, Marcus Williams assigned nine shares of stock to the defendant, on the books of the company, and the treasurer issued a new stock certificate to the defendant. Afterwards, in October, 1852, the company being indebted to an amount exceeding their corporate property, a meeting was called and an assessment made upon the stockholders to pay off a portion of the debts.

Several months before this meeting was held, defendant came into the office, and wrote on the books of the company an assignment of his stock to William J. Pettit. Some days afterwards, defendant went to the office with Pettit, produced his stock certificate, and requested the treasurer to cancel it, and issue another to Pettit. The treasurer refused to do this, assigning as a reason that the company was in debt beyond its assets and Pettit was insolvent. It was in evidence that there were other instances where the treasurer had refused to allow members to transfer their stock to insolvent persons. The certificate had upon its face the words “transferable only on the books of the company in person or by attorney.”

The defendant read in evidence an assignment to Pettit, written on a separate piece of paper, and dated June 22, 1852. He also read the charter and by-laws of the company. The tenth section of the charter is as follows:

§ 10. The stock of said company shall be deemed personal property, and may be transferred on the books of said company; and transfers of certificates of stock may be made in such manner as the company may by law direct.

The twelfth section authorizes the company to make assessments “on stockholders” for raising funds required by the company for purposes of improvement or purchasing lands; provided that all assessments shall be equal, and never exceed in any one year fifty per cent. upon each share.

The by-laws of the company contained no provision whatever in relation to transfers of stock.

The court instructed the jury to find for the plaintiff, if the defendant was the owner of the stock when the assessment was made, and then instructed them that there was no legal evidence that he was not the owner. All the instructions asked by the defendant were refused, and there was a verdict and judgment for the plaintiff.

Gardenhire & Draffin, for appellant.

I. The defendant had a right to sell and transfer his stock on the books of the company, and a court would compel the treasurer to issue a certificate to the assignee. (8 Pick. 90; 16 Mass. 94; Ang. & Ames. on Corp. p. 436-- 7, § 1, and p. 439, § 3.)

II. The defendant was not liable to be sued by the company for an assessment made three months' after he had transferred his stock to Pettit. (7 Term. 36; Ang. & Ames, 426-7, § 8.)

III. The company can only assess stockholders, and not those who have ceased to be stockholders. (Acts of 1849, p. 170, § 12.)

J. W. Morrow, for respondent, argued that it was a fraud upon the other members and creditors of the corporation for a stockholder to transfer his stock to an insolvent person for the purpose of escaping liability to an assessment for debts created for the purposes named in the twelfth section of the charter.

Hayden & Stephens, on the same side, insisted in their brief that the evidence and the instruction in relation to a transfer of the stock before the assessment were wholly immaterial; that the only question was, whether the debt, to pay which the assessment was made, was contracted during the defendant's ownership of the stock or not; and that as this was not denied, the defendant had no right to complain, and the judgment ought not to be disturbed.

LEONARD, Judge delivered the opinion of the court.

The question here is, in relation to the correctness of the direction given by the Circuit Court to the jury. The suit was to recover an assessment made on the defendant as a stockholder, pursuant to the twelfth section of the charter, (Sess. Acts, 1849, p. 168,) and the matter litigated at the trial, where the defendant had so parted with his stock before the assessment as to relieve him from personal responsibility.

It seems to have been assumed in the Circuit Court, that the company's right to recover depended on the fact that the defendant was the owner of the stock at the time the assessment was made, and although it has been argued otherwise here in one of the briefs, we can see no other ground on which the recovery can stand. The power to make the assessment is derived exclusively from the charter, and has that extent and no other which is there given to it. The words of the charter are: “The company shall have power to make an assessment upon such stockholders, for raising funds required by the company for purposes of improvement or purchasing lands, in such amount as they may deem proper; provided, however, that all assessments shall be equal, and never exceed in any one year fifty per cent on each share.”

1. Of course, the legislature never contemplated giving this company power to govern any except its own members, and the authority to levy assessments is therefore confined to stockholders, and is expressly limited to fifty per cent. a year on each share. Any other construction would be unreasonable and could not be admitted. In this, as in most joint stock companies, member and stockholder are convertible terms--a person cannot be one without also being the other. In the Overseers of the Poor, of Boston, against Sears, (22 Pick. 131,) Shaw, Chief Justice, says: “In all quasi corporations, as cities, towns, parishes, school districts, membership is constituted by living within certain limits. In all bridge, railroad and turnpike companies, and generally in all corporations having a capital stock and looking to profit, membership is constituted by a transfer according to the by-laws, without any election on the part of the corporation itself. In some, the assent of the corporation is made necessary to such transfer and consequent ownership.”

It is clear that, under this charter, an...