Gebhard v. Eastman

• Decision Date: 01 January 1862
• Parties: FREDERICK C. GEBHARD vs. EASTMAN & GIBSON.
• Court: Minnesota Supreme Court

7 Minn. 40

FREDERICK C. GEBHARD vs. EASTMAN & GIBSON.

Supreme Court of Minnesota.

Appeal from order of the district court, Hennepin County.

Eastman and Gibson brought suit below against Gebhard, as a stockholder of the Saint Anthony Falls Water Power Company, to recover the amount of a note executed by that corporation. Gebhard demurred to the complaint, and his demurrer was overruled.

Points and authorities for appellant: —

1. It does not appear upon the complaint that the alleged notes of the corporation upon which suit is brought, were made within the legitimate scope of the corporate

authority, or that they were valid liabilities of the corporation. McCullough v. Moss, 5 Denio, 567.

2. It does not appear upon the complaint that the defendant was a stockholder at the time suit was brought. McCullough v. Moss, 5 Denio, 567.

3. It does not appear upon the complaint that the alleged notes were executed in the manner required by the charter of said corporation, or were authorized by said corporation.

4. The plaintiff has not shown any demand or recourse against the corporation prior to proceeding against the defendant. Under the policy and provisions of our generallaws, recourse should be first had against the corporation, and the legal remedies against the same first exhausted before proceeding against the stockholder, unless in a proceeding in equity, where the rights of all persons interested are settled and adjusted. Comp. Stat. 332-33; §§ 322-23-24; id. 609, § 20. Pratt v. Bacon, 10 Pick. 125, 127; Harris v. First Parish in Dorchester, 23 Pick. 112.

5. The charter of the water power company makes no provision as to the remedy against the stockholder in such case, and therefore the same is regulated by the general law. See Charter, Sess. Laws of 1856, p. 217. The appellant desires, in case of a decision adverse to him, that leave may be granted by the supreme court to answer under the statute.

Points and authorities for respondents: —

1. The Saint Anthony Falls Water Power Company, by its charter, is possessed of an unlimited scope of authority, to do any and all acts which the members might do individually. Sess. Laws of 1856, p. 215.

2. Each stockholder at the time when the debt was incurred, is individually and originally liable without recourse to the company. Allen v. Sewall, 2 Wend. 327; 6 Wend. 335; Moss v. Oakley, 2 Hill, 265; Harger v. McCullough, 2 Denio, 122.

3. It appears by the complaint that the notes were duly executed by the corporation.

Sanborn & Lund, for appellant.

D. A. Secombe, for respondents.

FLANDRAU, J.

The complaint was upon three promissory notes executed by the St. Anthony Falls Water Power Company, — the first one bearing date on the 15th day of October, 1858, and the last one, on the 15th day of May, 1859. The suit is brought by the holder against the defendant as one of the stockholders of the company, upon the individual liability created against the stockholders by section eight of the charter, which reads as follows: "Each of the stockholders of said company shall be personally liable for the debts of said company to an amount equal to the amount of the capital stock held by such stockholder, and no more."

The complaint alleges that the defendant was a stockholder to the amount of five thousand dollars from the date of the first note to the date of the last, both inclusive, but does not allege that he was a stockholder at the time of the commencement of the action. The charter of the company, by section 1, (Laws of 1856, p. 215, § 1) confers upon the corporation very general powers of buying, selling, and owning, property, etc., and among other things declares as follows: "And to do any and all acts that the members thereof might or could lawfully do as indivividuals." The ninth section declares the object of the corporation to be the improvement of any water power owned or possessed by the company, and the erection of mills, buildings, or other structures, for the purpose of manufacturing in any of its branches. The complaint is demurred to on the ground that it does not state facts sufficient to constitute a cause of action, and the reasons assigned are, first, that it does not appear that the notes were made within the legitimate scope of the corporate authority, etc. It has become very well settled, we believe, that trading corporations may make promissory notes for any indebtedness contracted within the sphere of their charters, and this court has frequently so held. The very general powers of the St. Anthony Falls Water Power Company, would...