Sparks v. Lower Payette Ditch Co.

• Decision Date: 12 February 1892
• Parties: SPARKS ET AL. v. LOWER PAYETTE DITCH CO
• Court: Idaho Supreme Court

29 P. 134

3 Idaho 306

SPARKS ET AL. v. LOWER PAYETTE DITCH CO

Supreme Court of Idaho

February 12, 1892

CORPORATION-ASSESSMENT OF CAPITAL STOCK-LIABILITY OF STOCKHOLDER.-1. Under an act entitled "An act concerning corporations" (Revised Laws of Idaho, 1874-75, page 618), the stockholders are individually and personally liable for their proportion of all indebtedness incurred in conducting the business of the corporation, and a joint or several action may be instituted for the collection of the same.

DIRECTORS MAY ASSESS CAPITAL STOCK.-2. Title 4 of the Civil Code of Idaho of 1887 supersedes the act above referred to and a corporation organized under the act of 1875, whose existence is continued under the provisions of said title 4, may by its board of directors proceed to collect, by assessment, on the capital stock of the corporation the legally incurred debts and liabilities thereof, as prescribed by said title.

LIABILITY OF SHAREHOLDERS.-3. The liability of the shareholders is in no wise increased by the provisions of title 4 of the Civil Code of Idaho, 1887. Action to restrain sale of stock to satisfy assessment made by board of directors. Court below refuses injunction and enters judgment for defendant sustained.

(Syllabus by the court.)

APPEAL from District Court, Ada County.

Affirmed, with costs in favour of respondent.

J Brumback, for Appellants.

Injunction is the proper remedy of the stockholders against an illegal assessment. (2 High on Injunctions, sec. 1219; Cook on Stock and Stockholders, sec. 502; Mitchell v. Mining Co., 67 N.Y. 280; Clearwater v. Meredith, 1 Wall. 41; Nugent v. Supervisors, 19 Wall. 249.) Unless the corporate charter or a constitutional statute provide otherwise, a stockholder, the full par value of whose stock has been paid in, is not liable, and cannot be made to pay any sums in addition thereto. (Cook on Stock and Stockholders, secs. 241, 242; Railroad Co. v. Copp, 38 N.H. 124; Morley v. Thayer, 3 F. 737; Chase v. Lord, 77 N.Y. 1; Gray v. Coffin, 9 Cush 192; French v. Teschemaker, 24 Cal. 518; Inhabitants of Norton v. Hodges, 100 Mass. 241; Liverpool Ins. Co. v. Massachusetts, 10 Wall. 566; Green v. Beckman, 59 Cal. 545; Terry v. Little, 101 U.S. 216.) A statute passed subsequent to the granting of a charter, and increasing the liability of a stockholder on his stock for the debts already incurred, is unconstitutional and void, unless the legislature has reserved the right to alter or amend the charter. (Cook on Stock and Stockholders, sec. 497.) Material amendments to the charter offered to the stockholders can be accepted only by a unanimous vote. (Cook on Stock and Stockholders, sec. 500.) A material and fundamental change in the charter by an amendment to the charter is an unconstitutional violation of the contract rights of any stockholder who does not assent to such amendment. (Cook on Stock and Stockholders, sec. 500.)

George H. Stewart and W. E. Borah, for Respondent.

Corporations are subject to legislative control. (Morawetz on Private Corporations, sec. 1061.) And are not exempt from future legislation. (Morawetz on Private Corporations, secs. 1062, 1064, 1065, 1075a; Cooley's Constitutional Limitations, sec. 88; Desty's Federal Constitution, 161.) All laws relating to property rights, contracts, or procedure apply to corporations unless the contrary appear. (Morawetz on Private Corporations, secs. 1081-1083, 1091; Thorpe v. Railroad Co., 27 Vt. 140, 62 Am. Dec. 625.) The necessity for a call cannot be questioned by the stockholders of a corporation, but is for the directors to determine. (Budd v. Railroad Co., 15 Or. 404, 15 P. 654; Wood's Field on Corporations, sec. 133, 19 Cent. L. J. 305; Germantown P. R. R. Co. v. Fitler, 60 Pa. St. 124, 100 Am. Dec. 546.)

SULLIVAN, C. J. Morgan, J., concurs. Huston, J., did not sit at the hearing of this case, and took no part in its decision.

OPINION

SULLIVAN, C. J.

This action was brought by the appellants, as plaintiffs, against the respondent, as defendant, to obtain an injunction to restrain the officers of the respondent from offering for sale, or selling, shares of the capital stock of said corporation belonging to the appellants. The court below refused to grant the injunction, and entered judgment for the respondent, from which judgment this appeal was taken. It appears from the record that the respondent is a corporation organized for the purpose of constructing and maintaining an irrigating ditch on the Lower Payette river, in Ada county, Idaho, under and by virtue of an act of the legislature of Idaho entitled "An act concerning corporations," approved January 12, 1875 (Idaho Rev. Laws 1874-75, p. 618). That the number of shares provided for by the articles of incorporation were eighty, of the par value of $ 100 each. That in the year 1884 the capital stock of said corporation was increased from eighty shares of the par value of $ 100 each, to one hundred and sixty shares, of the par value of $ 100 each; thus making the aggregate capital stock $ 16,000. That the appellant Sparks is the owner of thirteen and one-half shares, and appellant Kelly is the owner of eight shares, of said capital stock; and that said shares have been fully paid up to the par value of $ 100 each. That thereafter the proper steps were taken by the board of directors of said corporation to continue its existence under the provisions of title 4 of the Civil Code of Idaho. (Idaho Rev. Stats. 1887, p. 312.) That neither of the plaintiffs assented to the said action of said board. That thereafter the said board levied an assessment of eight dollars per share upon the capital stock of said corporation. That plaintiffs refused to pay said assessment on their said shares; and the respondent, by its proper officers, proceeded to collect the same by advertising plaintiffs' said shares for sale, as provided by title 4 of the Civil Code of Idaho. The complaint alleges that the attempted change of the defendant corporation by the directors, to continue its existence, under the provisions of said title 4 of the Civil Code, was for the purpose of compelling the plaintiffs to pay the said assessments on their said fully paid-up shares.

In their specification of errors, the appellants assign two errors. We will first consider the second error assigned, which is that the court made no findings of fact upon many of the material issues made by the pleadings. We have carefully considered the issues made by the pleadings, and also the findings of fact, and are of the opinion that the court found on all of the material issues made by the pleadings.

The first specification of error is as follows: "That the defendant corporation cannot compel plaintiffs to pay any assessments to the corporation upon their shares that have been fully paid up, such assessment being in violation of the obligation of the contract entered into between the plaintiffs and the corporation and the plaintiffs and other shareholders." In the argument of this specification the counsel for appellants contended that under the act first above referred to (Idaho Rev. Laws 1874-75, p 618) the board of directors had no authority to levy an assessment upon the fully paid-up shares of the capital stock of said corporation. That the action of the board of directors for the purpose of continuing the existence of said corporation, under the provisions of title 4 of the Civil Code of Idaho, was illegal, for the reason that the provisions of said title permits assessments to be made by the board of directors upon fully paid-up shares of the capital stock of said corporation, and thus changes the contract between the corporation and its stockholders, and for that reason is in conflict with the provisions of the constitution of the United States. That it changes the...