Merchants' Nat. Bank v. Minnesota Thresher Mnfg. Co.

• Decision Date: 03 July 1903
• Docket Number: Nos. 13,479-(123).,s. 13,479-(123).
• Citation: 90 Minn. 144
• Parties: MERCHANTS' NATIONAL BANK OF ST. PAUL v. MINNESOTA THRESHER MANUFACTURING COMPANY.<SMALL><SUP>1</SUP></SMALL>
• Court: Minnesota Supreme Court

90 Minn. 144

MERCHANTS' NATIONAL BANK OF ST. PAUL v. MINNESOTA THRESHER MANUFACTURING COMPANY.¹

Nos. 13,479-(123).

Supreme Court of Minnesota.

July 3, 1903.

Appeal by D. N. Morgan and eight other stockholders from an order of the district court for Washington county, Williston, J., levying an assessment of $18 per share upon each share of the capital stock of defendant corporation and upon the persons liable as the holders thereof. Affirmed.

J. H. Benton, Jr., and Koon, Whelan & Bennett, for appellants.

Davis, Kellogg & Severance, for respondent.

START, C. J.

This action was commenced in the district court of the county of Washington by the plaintiff, a judgment creditor of the defendant, an insolvent corporation, under the provisions of G. S. 1894, p. 1594 (c. 76) and a receiver was duly appointed herein. The receiver duly made and filed his petition praying the court to order, direct, and levy a ratable assessment upon the parties liable as stockholders of the defendant, pursuant to the provisions of Laws 1899, p. 315 (c. 272). The court, after a hearing on the petition, and on December 23, 1902, made its order assessing each share of the capital stock of the defendant for the sum of $18, and certain of the stockholders appealed from the order.

The sole question presented for our consideration and decision is whether the stockholders of the defendant are liable for its debts to the amount of stock held or owned by them, as provided by article 10, § 3, of our state Constitution. Or, in other words, is the defendant a corporation organized for the purpose of carrying on any kind of manufacturing or mechanical business within the meaning of the constitutional provision referred to? The answer to the question depends upon the construction to be given to the articles of association of the defendant, which, so far as here material, are in these words:

"The objects for which this corporation is formed are the purchase of the capital stock, evidences of indebtedness issued by it, and the assets of the Northwestern Manufacturing and Car Company, a corporation existing under the laws of the state of Minnesota, or any portion of said capital stock, evidences of indebtedness or assets, and the manufacture and sale of steam engines of all kinds, farm implements and machinery of all kinds, and the manufacture and sale of all articles, implements and machinery of which wood and iron or either of them form the principal component parts, and the manufacture of the materials therein used."

It is manifest from this language that the defendant was not organized for the purpose of carrying on any mechanical business; hence the question is whether it is a manufacturing corporation within the meaning of the Constitution. It is important, before analyzing the articles of incorporation, to determine the rule by which they are to be construed. The rule is to be deduced from the constitutional provision imposing the liability of stockholders for the debts of their corporation, the statute as to the organizing of manufacturing corporations, and the decisions of this court construing them. The Constitution provides that:

"Each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him." Article 10, § 3.

And the statute as to the statement of the purposes for which a manufacturing corporation is organized in its articles requires that:

"The purpose for which every such corporation shall be established shall be distinctly and definitely specified by the stockholders in their articles of association, and it shall not be lawful for said corporation to direct its operations or appropriate its funds to any other purpose." G. S. 1894, § 2807.

It is obvious from these provisions that the liability of stockholders for the debts of the corporation is the general rule, and their nonliability therefor the exception, and that, to bring them within the exception, the purpose for which the corporation is organized must be so definitely stated in the articles of association as to show fairly upon their face that the corporation was organized only for the purpose of engaging in the business of manufacturing. And, further, that the actual intention of the incorporators, except so far as it appears on the face of their articles, must be immaterial, for creditors proposing to give credit to the corporation have no other means of determining such intention, and whether or not the stockholders are liable for its debts.

These premises have been uniformly accepted as correct by this court in all of its decisions relating to the liability of stockholders for the debts of their corporation; and, basing our conclusion upon such decisions, we hold that the rule in such cases by which the articles of the corporation are to be construed is this: It is immaterial that the corporation was organized under the statute providing for organizing manufacturing corporations or what the actual intention of the incorporators was, or that the corporation in fact carried on only a manufacturing business, but its articles of incorporation are the sole criterion as to such intention and the purposes for which the corporation was organized; and, unless it fairly appears therefrom that it was organized for the exclusive purpose of engaging in manufacturing and such incidental business as may be reasonably necessary for effectuating the purpose of its organization, its stockholders are not within the exception to the general rule of constitutional liability of stockholders for the debts of their corporation. State v. Minnesota T. Mnfg. Co., 40 Minn. 213, 41 N. W. 1020; Mohr v. Minnesota Ele. Co., 40 Minn. 343, 41 N. W. 1074; Arthur v. Willius, 44 Minn. 409, 46 N. W. 851; Densmore v. Shepard, 46 Minn. 54, 48 N. W. 528; First Nat....