Weidenger v. Spruance

• Citation: 1881 WL 10708,101 Ill. 278
• Parties: JOHN B. WEIDENGERv.HARMON SPRUANCE.
• Decision Date: 18 March 1881
• Court: Supreme Court of Illinois

101 Ill. 278

1881 WL 10708 (Ill.)

JOHN B. WEIDENGER

v.HARMON SPRUANCE.

Supreme Court of Illinois.

Filed at Ottawa Mar. 18, 1881.

OPINION TEXT STARTS HERE

WRIT OF ERROR to the Appellate Court for the First District;-- heard in that court on writ of error to the Superior Court of Cook county; the Hon. JOSEPH E. GARY, Judge, presiding.

This was an action of debt, brought by Joseph B. Weidenger, for the use of T. B. Elliott, against Harmon Spruance, as a stockholder in the Commercial Insurance Company, upon the individual liability of the defendant for a debt of the company to the amount of his stock, the capital stock of the company never having been paid in. The court overruled demurrers to pleas of the defendant, and gave judgment against the plaintiff for costs. This judgment was affirmed in the Appellate Court. Messrs. SHUFELDT & WESTOVER, for the plaintiff in error:

1. The Commercial Insurance Company was organized under the public act of the General Assembly of Illinois, approved February 10, 1865. The constitution of 1848, then in force, contained this clause: “Dues from corporations not possessing banking powers or privileges, shall be secured by such individual liabilities of the corporators, or other means, as may be prescribed by law.” (Const. of 1848, art. 10.) The Commercial Insurance Company received its charter, subject to such conditions as might be imposed by law, under that constitutional provision. Massachusetts General Hospital v. State Mutual Life Assurance Co. 4 Gray, 227; Suydam v. Moore, 8 Barb. 358; Story v. Jersey City, etc. Plank Road Co. 1 Green, (16 N. J. Eq.) 13; Attorney General v. Railroad Co. 35 Wis. 435.

2. The constitution being virtually a reservation of the right to amend the charter of the corporations organized under it, as to liability of corporators, section 16 of the general law of 1869 became, by the terms of the law, a part of the charter of all such companies. Tomlinson v. Jessup, 15 Wall. 454; Miller v. The State, Id. 478; Suydam v. Moore, 8 Barb. 358; McLaren v. Pennington, 1 Paige Ch. 102; Roxbury v. Providence and Boston R. R. Co. 6 Cush. 424; Pennsylvania College Cases, 13 Wall. 190; People v. Manhattan Co. 9 Wend. 351; Schenectady and Saratoga Plank Road Co. v. Thatcher, 11 N. Y. 102.

3. The legislature thus amended the charter of this company, and by the amendment every stockholder or corporator became bound as to his individual liability. In re Reciprocity Bank, 22 N. Y. 9; Sherman v. Smith, 1 Black, 587; In re Oliver Lee's Bank, 21 N. Y. 9; Stanley v. Stanley, 26 Maine, 191; Baily v. Hollister, 12 N. Y. 112.

4. The capital stock of the company not being paid in, the defendant, a corporator in said company, became liable to the plaintiff, individually, for the amount of the debt of the corporation to the plaintiff, not to exceed an amount equal to defendant's stock. Culver v. Third National Bank, 64 Ill. 529; Butler v. Walker, 80 Id. 345.

Messrs. BOUTELL & WATERMAN, for the defendant in error:

Article 10 of the constitution of 1848 was not self-acting, in the sense of imposing upon the stockholders of corporations thereafter created, an individual liability. Legislation was needed to make it active or effective. Hill v. City of Chicago, 60 Ill. 86.

The charter of the company became and was a contract. It did not impose upon the stockholders any liability for the dues of the company. It exempted them from liability, and no legislature could thereafter, without the consent of this company, change its charter so as to impose a personal liability upon its stockholders. Washington Bridge Co. v. State, 18 Conn. 65; Wheeler v. Frontier Bank, 23 Me. 308; Enfield Toll Bridge Co. v. Connecticut River Co. 7 Conn. 44; People v. Platt, 17 Johns. 215; Dartmouth College v. Woodward, 4 Wheat. 518; Angell & Ames on Corp. secs. 4, 595.

The charter of the Commercial Insurance Company not containing any reservation to the legislature of a right to change it in any way, and not being subject to any such constitutional provision, the act of 1869 could not operate to impose upon defendant a liability which he was not before under. Wheeler v. Frontier Bank, 23 Maine, 308; Ireland v. Palestine Co. 19 Ohio St. 369.

The statute does not apply to such a case as the present:

First--Because companies theretofore organized are by section 19 especially excepted from the operation of the act. (Sec. 16, chap. 73, Rev. Stat.)

Second--Because section 16 applies only to the original corporators and trustees of companies organized under the act. (Secs. 1, 3, 10, 16, 19, chap. 73, Rev. Stat.) Defendant was neither a corporator nor trustee.

Third--Because the Commercial Insurance Company was not organized under the act. The statute makes liable only trustees and corporators of companies organized under the act.

Fourth--Because the provision imposing personal liability is to be strictly construed. Gray v. Coffin et al. 9 Cush. 192.

Mr. JUSTICE SCHOLFIELD delivered the opinion of the Court:

The present case differs from Gulliver v. Rœlle, 100 Ill. 141, in this: In that case the right to amend was expressly reserved in the charter; in the present case such right was reserved in an amendment to the charter, which the pleas aver was never accepted by the company, and so it must be taken for the present that no right of amendment was reserved in the charter; and the question therefore is, treating the 16th section of the general law as an amendment of this charter, does it impair the obligation of a contract? We are of opinion the answer should be in the negative.

By sec. 2 of art. 10 of the constitution of 1848 it is provided, that “dues from corporations not possessing banking powers or privileges, shall be secured by such individual liability of the corporators, or other means, as may be prescribed by law.” This, it is to be observed, is not the expression of a grant of power, for the General Assembly without this, under its general legislative powers, might, in creating such corporations, provide any mode for securing the payment of debts to be contracted by them, deemed advisable. It is not the expression of a prohibition upon the creation of such corporations unless certain prescribed provisions shall be inserted in the charters, for the mode of securing the dues is left to be determined by the General Assembly; and it could not, therefore, be said that any exercise of that discretion, whatever it might be, is unconstitutional. We can not suppose that in making an instrument of the importance and dignity of a constitution, a mere idle lecture to the General Assembly would be inserted; and so, to give effect to the language, it would seem we might well conclude it was designed to express the reservation of power in the General Assembly in granting charters, to provide, from time to time, as experience should suggest or wisdom dictate, for the securing of dues from the corporations, “by individual liability of the corporators, or other means.” The language employed does not seem to necessarily require that this shall be done in the charter, and be made a condition precedent to the exercise of corporate powers, but rather to cast upon the General Assembly the supervising duty of ascertaining what legislation shall be actually necessary to attain the desired end, and then to provide it. If this be conceded, then every stockholder takes his stock subject to this supervision of the General Assembly, and to be affected by whatever legislation in that regard the General Assembly may deem necessary; and so we have held in Arenz v. Weir, 89 Ill. 25.

But we shall not rest our decision purely on this ground. The 2d section of the charter of the Commercial Insurance Company provides for a capital stock of $200,000, divided into shares of $100 each; and its 3d section authorizes the board of directors to call in such an installment on the stock subscribed as they may deem necessary,--not less than twenty per cent in cash,--and for the balance of such subscription they may take bonds, secured by mortgages on unincumbered real estate in the State of Illinois, or judgment notes of responsible parties. (Private Laws of 1865, vol. 1, p. 632.)

No authority is expressly given by the charter to commence or prosecute business before the twenty per cent in cash is paid in, and the balance is paid in bonds or judgment notes, secured in the manner provided. But if it may be said that such authority is implied, this implied authority can but amount to a license, subject to be revoked, except so far as acted upon, whenever the General Assembly may so declare. It can not be said the obligation of the contract of the shareholder with the corporation, or with creditors of the corporation, or with the other stockholders, is, that the corporation shall proceed with its business when the capital stock is unpaid. On the contrary, the obligation of the contract of each subscriber is, that he shall pay for his stock, for this is his undertaking; and every creditor has a vested right that this shall be done, for he has become a creditor upon the faith of it. Every stockholder, moreover, has a vested interest in the contract of subscription of every other stockholder, for each subscription is a part of a complete whole, and the failure in the payment of one leaves the burdens to be borne by all, proportionally, that much greater. See Chandler v. Brown, 77 Ill. 333.

A mere expectation of property in the future is not a vested right. (Cooley's Const. Limitations, 359; Richardson v. Aiken, 87 Ill. 138.) And, upon like principle, a mere expectation that the law will not be enforced in requiring all the capital stock of a corporation to be paid in, can not be a vested right, nor can there be a vested right to do business upon a credit, without affording adequate security for the payment of the debts to be contracted. See Richardson v. Aiken, supra.

Whether we shall regard the rights of the corporation, treating it as a legal entity separate...