New Haven Horseshoe Nail Co. v. Linden Spring Co.
| Decision Date | 06 July 1886 |
| Citation | 142 Mass. 349,7 N.E. 773 |
| Parties | NEW HAVEN HORSESHOE NAIL CO. v. LINDEN SPRING CO. and others. |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
H.R. Bailey, for plaintiff.
Ambrose Eastman, for defendants.
The claim of the plaintiff, a foreign corporation, is upon certain promissory notes signed by the principal defendant also a foreign corporation. This latter corporation has no property which can be reached so as to be attached, and the plaintiff seeks to establish, as against the individual defendants, that they are under such a liability to the principal defendant that they may be treated as its debtors and ordered to pay their debt as its equitable trustees, so far as that may be necessary, in order to discharge the plaintiff's claim against the defendant corporation. The plaintiff also contends that, by the facts set forth in his bill, he states a case which is good as a creditors' bill, under the equity jurisdiction of the court.
The plaintiff does not set forth any contract made by the defendant stockholders, except that they subscribed for and took the capital stock of the corporation. Nor does it allege any promise made by them in relation thereto, or in regard to the liability which it says they incurred "independently of any statute or penal liability." In the absence of any promise definite in its character, on the part of the stockholders, there can be no liability to the corporation or the creditors of the corporation, which does not proceed from a statute of Connecticut, under which it is created. The corporation is one formed under general laws of that state, and the liabilities of stockholders, or of subscribers of the stock, are such as are prescribed by those laws. Their subscription to the stock can have imposed upon them no others. The allegation of the plaintiff must therefore be interpreted as meaning that the alleged obligation of the subscribers is independent of any statutory or penal liability, which is imposed in terms. Where no promise is alleged, the only contracted obligation on the part of the subscribing stockholder must be that which arises from this relation. Whether it be expressed in terms, or derived from this relation under the laws of the state of Connecticut as those laws may be interpreted by competent authority, it is not a common-law obligation, but one created by the statute under which the corporation is formed. Terry v. Little, 101 U.S. 216.
The liability of stockholders in a Connecticut corporation must be determined by the laws of that state. Hutchins v. New England Coal Co., 4 Allen, 580; Jones v. Sisson, 6 Gray, 288; Penobscot & K.R. Co. v. Bartlett, 12 Gray, 244; Blackstone Manuf'g Co. v. Blackstone, 13 Gray, 488. That the statutes of a state do not operate extraterritorially, proprio vigore, will be conceded. How far they should be enforced beyond the limits of the state which has enacted them must depend upon several considerations; as whether any wrong or injury will be done to the citizens of the state in which they are sought to be enforced, whether the policy of its own laws will be contravened or impaired, and whether its courts are capable of doing complete justice to those liable to be affected by their decrees. Where the rights sought to be passed upon and determined, are those which arise from the relation between a corporation and its members, they depend upon the local law which exists at the place of its creation, and true policy would seem to require us to leave them to be there determined. The liability which the stockholders are alleged to be under to the corporation and its creditors has little analogy to a demand for a debt due, according to the generally recognized principles of law. It is of a peculiar character, involving the organic law by which the corporation is created, and requiring local administration. We have heretofore, in similar cases, declined to pass upon them, and determine the relation existing between a foreign corporation and its members, and the obligations arising therefrom. Halsey v. McLean, 12 Allen, 438; Smith v. Life Ins. Co., 14 Allen, 336, 341; Kansas Const. Co. v. Topeka, S. & W.R. Co., 135 Mass. 34.
The reasons why we should not, in the case at bar, undertake to enforce the alleged obligations of the members of this corporation, appear decisive. They are quite different from those which arise in Massachusetts from a contract to have and subscribe for shares. By our laws, as settled by many decisions, in the absence of an express promise to pay for shares, none is created by a mere subscription therefor. Nor is any created by the mere agreement to take shares. No personal liability exists, as the corporation can by law assess such shares, and sell them for non-payment of assessments, which is held to be a sufficient remedy. Andover & Medford Turnpike Corp. v. Gould, 6 Mass 45; Same v. Hay, 7 Mass. 102; Franklin Glass Co. v. White, 14 Mass. 285; Ripley v. Sampson, 10 Pick. 371; Mechanics' Foundry & M. Co. v. Hall, 121 Mass. 271; Katama Land Co. v. Jernegan, 126 Mass. 156. While a different rule...
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