Matthews v. Albert

• Decision Date: 01 May 1866
• Citation: 24 Md. 527
• Parties: THOMAS MATTHEWS, Joseph Matthews, James Murray, and Others v. AUGUSTUS J. ALBERT and Others.
• Court: Maryland Court of Appeals

24 Md. 527

THOMAS MATTHEWS, Joseph Matthews, James Murray, and Others v. AUGUSTUS J. ALBERT and Others.

Court of Appeals of Maryland

May 1, 1866

Appeal from the Superior Court of Baltimore City:

The facts of this case are stated in the opinion of this court.

The cause was argued before BOWIE, C.J., and BARTOL GOLDSBOROUGH, COCHRAN and WEISEL, JJ.

George H. Williams, for the appellants, argued:

1st. That the 9th section of the Act of 1852, ch. 338, makes all the shareholders, "severally and individually liable" to an amount equal to their stock, unless the capital be paid in as therein prescribed.

2nd. That sec. 12, of said law, peremptorily declares "that nothing but money shall be considered as payment of any part of the capital stock."

3rd. That sec. 13 provides that no person holding such stock as collateral security shall be personally subject to any liability as stockholders of such company; but the person pledging the stock shall be considered as holding the same and shall be liable as stockholders accordingly.

4th. That the prayer of the bill suffices to cover responsibility for all indebtedness of the company, certainly up to the 29th of January, 1859, and further, if any liability exists by the true construction of the 9th section of the Act; and it is submitted the liability by it is not restricted to debts while the defendants were shareholders; on the contrary, in the event of the capital not being paid in, all the stockholders (without saying at what time they must be such) are to be liable. The proof shows the indebtedness to have existed at the time the Alberts were shareholders, except the sum of $263.77 due to Murray & Hazlehurst, and this amount is too trifling when compared with the rest of the debts to be worth much controversy; all the residue of the indebtedness beyond doubt existed while the Alberts' held the stock.

5th. That as nothing but money can be considered as payment for stock, how stand the Alberts? Usury is not payment in money. The Legislature stipulated in these charters (for the protection of creditors and the community) for actual cash, and which was to be paid within a certain time.

Taking stock from the company at an usurious bonus on a loan to the company, is not paying in money for its capital stock. William J. Albert therefore owes for his stock $12,000, and for his liability under the 9th section $12,000 more, say $24,000. Now assuming the case cited, Garrison v. Howe, 14 N.Y. 465, to be good law (and which is denied), after crediting him with his claim of $12,000 as a creditor of the company, he is still liable for the remaining $12,000.

So with A. J. Albert, he is liable for $1,500 for his stock; and for his liability under the 9th section for $1,500 more. And after, in like manner, crediting him with his claim, as creditor, he also yet remains liable for $1,500.

6th. That there can be no pretense upon the proof that Tiernan ever was, or meant to be anything but a creditor holding stock as a collateral security, and exonerated from all liability by the 13th section; that a corporation may pledge its own stock, and that the word "person" includes "corporations." Angell and Ames on Corp Germania v. State, 7 Md. 6.

Aud further, that said stock was issued to Tiernan without his knowledge, and in the hope that he would also take it as usury; but that so soon as sent to him and before the maturity of the loan, he returned it for the purpose of having the truth indorsed on it, declining the usury. There is no proof in the cause that anything was said to him about taking it as a bonus. On the contrary, he would not hold it as issued.

7th. That the object of the appellees as indorsed by the decree below is to add to the simple and plain language of the Act of Assembly, words not placed there by the Legislature, and such as the following: Provided, however, that if any stockholder pays in his proportion of the capital stock within the time prescribed, he shall not be further liable and provided also that if liable, stockholders may offset to the claims of creditors seeking to make them liable, any demands of their own against said company, though the capital be not so paid in. And provided also, that furnishing commodities to such company or usury charged to it, shall be equivalent to money, and considered as money paid in, the 12th sec. of this Act, to the contrary notwithstanding. Upon the construction of statutes, see Abley v. Dale, 73 Eng. C. L. 390. Allen v. Mut. Fire Ins. Co., 2 Md 111. Collins v. Carman, 5 Md. 529. Alexander v. Worthington, Ib. 485. Scaggs v. Balto. & Wash. R. R. Co., 10 Md. 277. Frazier v. Warfield, 13 Md. 301. State v. Wayman, 2 G. & J. 254.

J. Mason Campbell and Bernard Carter, for the appellees:

The alleged liability of the defendants grows out of the provisions of the Act of Assembly of Maryland of 1852, ch. 338; the 9th section of this Act is in these words:

" And be it enacted, That all the stockholders of every company incorporated under this Act, shall be severally and individually liable to the creditors of the company in which they are stockholders, to an amount equal to the amount of stock held by them respectively, for all debts and contracts made by such company, until the whole amount of capital stock, fixed and limited by such company, shall have been paid in, one-half thereof in one year, and the other half thereof within two years, from and after the incorporation of said company, or said corporation shall be dissolved."

The prayer of the bill of complaint in this case is, "that the liability of the defendants may be decreed as to debts created while they were stockholders." The complainants must therefore establish, that the Alberts were stockholders of the "Coal Oil and Paraffine Company," and that the debts of the complainants were created while they were such stockholders.

W. J. Albert first became a stockholder on the 12th of October, 1858, when he took 80 shares; on the 12th of November, 1858, he took 400 shares; and on the 7th of December, 1858, he took 40 shares. He ceased to be a stockholder on the 29th of January, 1859. Augustus J. Albert first became a stockholder on the 15th December, 1858, when he took 60 shares; and ceased to be a stockholder on the 29th of January, 1859.

Each of the complainants must therefore show, in order to recover against William J. Albert, that their debts were contracted between the 12th of October, 1858, and 29th of January, 1859; and as to Augustus J. Albert, that the said debts were contracted between the 15th of December, 1858, and 29th of January, 1859.

We have said that the prayer of the bill limits the liability of the stockholders to debts of the company contracted while they were stockholders. That this is the limit of their liability, see Bank v. Burnham, 11 Cush. 183. Curtis v. Harlow, 12 Met. 3. Moss v. Oakley, 2 Hill, 265, 268. Tracey v. Yeates, 18 Barb. 152, 154. Adderly v. Storm, 6 Hill, 624. Garrison v. Howe, 17 N.Y. 465. See also 9 Cush. 199.

It will hardly be contended we suppose by the complainants, (though hinted at in the bill,) that the transfer of their stock by the Alberts, on the 29th of January, 1859, did not divest them of their interest in the stock, nor end their liability under the statute, so far as any are concerned who became creditors of the company after the 29th of January, 1859. There is nothing in the language of the Act of 1852, ch. 338, which compels those who become stockholders, always to remain so; and whatever might be the principles of law governing the case of a stockholder who should transfer his stock to an insolvent, for the purpose of defeating creditors, it is sufficient for this case to say, that there is nothing in this record which gives any such character to the transfer of this stock by the Alberts.

That a stockholder in these manufacturing corporations may transfer his stock, and so end his connection with the company and his liability for its debts, subsequent to the date of the transfer, see Angell & Ames on Corp. sec. 534. Bank v. Burnham, 11 Cush. 183.

But secondly, we contend that upon a proper construction of the Act of 1852, ch. 338, considered in connection with the facts in the case, neither of the complainant creditors can recover against either of the Alberts. The relation of each of the Alberts to the company is two-fold; they are stockholders in the company, and at the same time they are creditors of the company. The amount of stock held by William J. Albert, in the company, was 520 shares, which, at $25 per share, is $13,000. The 9th section of the Act of 1852, ch. 338, makes the amount of stock held, the measure of the liability of the stockholder to the creditor of the company. If, therefore, the only relation which W. J. Albert occupied to the company was that of stockholder, he would be liable to the creditors of the company to discharge the debts due by it to them, to the extent of $13,000. But W. J. Albert is a creditor of the company to the amount of $13,000, for money loaned and which was appropriated to the payment of the debts of the company from time to time. We contend, therefore, that though bound as stockholder to discharge the debts of the company to the extent of $13,000, yet that in point of fact he has fulfilled this duty by paying the debts of the company, by advancing the $13,000, the advancing of which constitutes him a creditor. Garrison v. Howe, 17 N.Y. 461. Bank v. Iverson, 24 Wend. 479. See also 4 J. J. Marshall, 1.

But 3rd, we contend that William and Augustus Albert, as creditors, are entitled to stand on the same footing, and...