Williams v. Nall

• Decision Date: 10 March 1900
• Citation: 55 S.W. 706,108 Ky. 21
• Parties: WILLIAMS v. NALL et al. [1]
• Court: Kentucky Court of Appeals

55 S.W. 706

108 Ky. 21

WILLIAMS v. NALL et al. ^[1]

Court of Appeals of Kentucky.

March 10, 1900

Appeal from circuit court, Jefferson county, chancery division.

"To be officially reported."

Action by P. P. Williams against H. C. Nall and others for a dissolution of defendant corporation. Judgment for defendants, and plaintiff appeals. Affirmed.

Dodd &amp Dodd and Kohn, Baird & Spindle, for appellant.

Humphrey & Davie, for appellees.

HOBSON J.

The present constitution of the state was adopted September 28 1891. After this, on December 21, 1891, a corporation under the name of the Nall & Williams Tobacco Company was formed pursuant to the provisions of chapter 56 of the General Statutes, which were then in force. Among the powers of such corporations, the statute authorized the incorporators in their articles to exempt the private property of the members from liability for corporate debts (Gen. St. p. 763), and by their articles these incorporators so provided. By section 3 of the state constitution, which was then in force, it is provided: "Every grant of a franchise, privilege or exemption shall remain subject to revocation, alteration or amendment." One of the special aims of the constitution was to rid the state of special legislation, and secure a more perfect uniformity in the laws of the state. To this end, section 245 directed the appointment of commissioners to revise the statute laws of the commonwealth. The commissioners so appointed reported to the next general assembly a bill which was passed by it entitled "An act providing for the creation and regulation of private corporations" (Sess. Acts, 1891-1893, p. 612). This act with some amendments, now constitutes chapter 32 of the Kentucky Statutes, and contains, among others, the provision (section 547) that the stockholders of each corporation thereafter created shall be liable to its creditors individually to the extent of the amount of their stock at par value in addition to the amount of such stock; also the further provision (section 573) that after September 28, 1897, this statute shall apply to all existing corporations created or organized under the laws of the state, so far as it would apply to them if thereafter created. On October 13, 1897, appellant, P. P. Williams, filed this suit in equity against the corporation and the other stockholders, alleging that he held stock in the corporation to the amount of $35,000 out of a total paid-up stock of $100,000; that the stock was not profitable; that he was unwilling to be responsible for the debts of the corporation, or for it to continue in business making him responsible therefor; that on September 21, 1897, he had notified the appellees of this, demanding the liquidation of the corporation as of date September 28, 1897, and that this they had refused. He prayed the appointment of a receiver to wind up the business of the corporation, or that he be allowed to dissolve his connection with it on equitable terms. To this petition the court below sustained a demurrer, and, he failing to plead further, the action was dismissed.

It is earnestly insisted for the appellant that when he put $35,000 of his fortune in this enterprise it was on condition that the remainder of what he had was not to be responsible for the corporate debts, and, while the legislature had the power to modify the charter of the corporation, and impair the value of what he had put into it, it could not reach out into his private estate, and place that also in the power of the corporation by making it liable for the corporate debts. Several important questions are necessary to the decision of the case: (1) Does the statute above referred to make stockholders in corporations in existence when it was enacted liable personally to the extent of the amount of their stock for all debts of the corporation created after September 28, 1897? (2) Had the legislature power to make such a law as to existing corporations? (3) Can appellant demand relief from a contract made with notice of his legal rights? These questions will be disposed of in the order stated.

1. The sections of the statute in question read as follows:

"The stockholders of each corporation shall be liable to creditors for the full amount of the unpaid part of the stock subscribed for by them, and stockholders of corporations not organized for educational, religious, charitable or benevolent purposes, or for the purpose of building, constructing or operating turnpikes or bridges, lines of railroad, telegraph or telephone, or developing or improving lands, mines, or waterways, or constructing or operating water, gas or electric plants, or operating for petroleum, natural gas or salt water, shall be individually responsible, equally and ratably, and not one for the other, for all contracts and liabilities of such corporation to the extent of the amount of their stock at par value, in addition to the amount of such stock; but persons holding stock as fiduciaries shall not be personally liable as stockholders, but the estates in their hands shall be liable, in the same manner and to the same extent as the property of other stockholders; and no transfer of stock shall operate as a release of any such liability existing at the time of such transfer; provided, the action to enforce such liability shall be commenced within two years from the time of transfer." Section 547.

"The provisions of all charters and articles of incorporation, whether granted by special act of the general assembly, or obtained under any general incorporation law, which are inconsistent with the provisions of this chapter concerning similar corporations, to the extent of such conflict, and all powers, privileges or immunities of any such corporation which could not be obtained under the provisions of this chapter, shall stand repealed on September 28, 1897; and if the officers, managers or agents of such corporation shall, after said date, exercise any powers, privileges or immunities repealed by this section, or inconsistent with the provisions of this chapter, relating to similar corporations, or which could not be obtained under this chapter, the officer, manager or agent so offending, and the corporation for which he acts, shall each be guilty of a misdemeanor, and fined for each offense not less than one hundred nor more than one thousand dollars, and upon the conviction of the corporation, the trial jury may, at their discretion, direct the forfeiture of its charter or articles of incorporation, in which case the court shall so adjudge. After the twenty-eighth day of September, 1897, the provisions of this chapter shall apply to all corporations created or organized under the laws of this state, if said provisions would be applicable to them if organized under this chapter." Section 573.

It is earnestly argued by counsel for appellees that only the powers, privileges, and immunities of the corporation are affected; that exemption from liability for the debts of the corporation is not a franchise of the corporation, but a privilege of the stockholders, and is not affected by the statute quoted. Without discussing the meaning of the section, if the last...