The New York herald. [volume] (New York [N.Y.]) 1840-1920, 1866-10-18
RonE, March 8. IL
LIABILITIES or INDIVIDUAL STOCKHOLDERS IN INCORPORATED
COMPANIES
Supreme COurt-SpeciaI Term.
Before Judge DanielsL

Oh pOruoh OI INC capital btOCk- CoTpOrutioR
alleged 70 have been founded under the general law Of
this State providing for the Organization Of manufactur
Ing mining. mechanical and chemical corporations but
the particular purpose and object for which II was
organized is nowhere stated In the complaint,
which is one OF the defects relied upon in sup
port Of the demurrer II is generally alleged that
tho corporation was founded under that act, and
that sufficient to warrant the conclusion that was
for Of the objects purposes contemplated and al
lowed by the act for Il could not be otherwise formed
under that act The objects for which corporations may
be formed under that act specifically declared and
unless the company formed for the promotion OF
Of such objects II could not be true that 1t
ganized under the act The allegation must therefore be
construed a. substantially declaring what must be fairly
understood and implied from the language IL usesthat
the corporation was formed for one Of the purposes
allowed and defined by the statute; for courts
allowed TO presume violation Of the law even against
corporation the contrary the presumption u the
other way where presumptious are entertained. The
next objection to the complaint % that which
arises upon the allegation OF the demand owing
from the corporation 10 the paintlns BY that
II is alleged that the corporation, for value
ceived made and delivered certain promissory notes,
which aferward endorsed 70 and at the time when
the suit commenced were held and owned by the
plaintiffs The defendants maintain that this docs not
disclose the existence OF demand legally binding upon
the corporation ITSELF And the defendants not liable.
though they we're stockholders when the claim
created unless the corporation legally liable for Its
payment But corporations formed under this statute
like Others have the Of ncurrng debts and other
liabilities arising out OF Contracts Aud as incidental
execute and deliver their promssory note notes Oh
account Of it, Moss vs.. Averil- q Seld, 449. Aud
when, In this case 1t Is alleged that the corporation
executed and delivered Its proissory nocs for value
received 1t may without Improperly be assumed that
It was done for legal consideration under the powers
with which II by law invested, and the course OF
the transaction OF It's legitimate business, and notes
so given by II would be legally binding upon
It. When a corporation has power to into
agreement 1t is presumed by the sw in favor OF the
validity OF the agreement made whore the contrary is
made armatively to appear that It made in the
proper exercise of such power not that II exceeded
It's powers or violated the law. Farmers Loan and
Trust Company agt. Curtis seld., 4G6; Chsutarqua
the allegations In the compliant therefore the CORPORA
ton Is shown be liable upon tue Of which the
plaintiffs the holders But the defendants further
object that the complaint does not exhibit legal cause
action against them, though II against the
corporation in which they were stockholders at the
time when the debt contracted; because It does
show that judgment hud boon rendered against the
company and cxecui on returned upon IL,
In whole or in part unsatished and this pre-
arising this The statute declares that the stock
holders Ia every company Incorporated under shall be
pany in which they stockholders, 10 equal
10 the amount Of stock held by them respectively for
all debts aud contracs made by such company until the
whole amount OF capital stock fixed and limited Ivy such
company shalt baye been paid in, and certificate
thereof shall have boon made by the PRECEDENT and
majority of tho trustees and recorded In the oace Of
the clerk or ile county Ia which the business OF the
company is carried on. n s., 9TH cd, sec 81, SO.
And the complaint in this case cont.ius tie proper
allegations showing that the capital or the corporation
in question not paid in aud that certificate show
ing Il to have been paid WAS ever made or recorded.
The object Of tho Legislature 10 recurring The pay
those dealing with II the means Of satisfying the obliga
toDs II might ordinarily be expected " incur and, In
of failure to observe the requirements Of the law
in that respect IN impose corresponding liability upon
those whose default occasoned such failure. Tho real
contracting debtor in all such is the corporation
and the liability Of the stockholders is subsidiary or IN
cdenal TO that not arising out or envy contract obi
CATION entered into by them with. in tes the CREDITOR
securing tho full paymen, Of the Corporate cspls IN
der such state OF the would ord nsriy and rea
resort to his immediate and actual debtor 10y the
tract for the satisfaction OF the demand arising out Of II
before he could be at liberty 70 resort 70 the ochoid
ers, whose liability Is OF a secondary character And
conformity with that expectation II viii be
found that the general laws providing for the ormao
.ns ss rsr.d h sne
ton itself before he Is at liberty 70 proceed against the
stockholders who have made default in the payment OF
formation Of telegraph companies, navigation
panes lake and river navigation companies stage
panes in the city Of New York and plank and turnpike
road companies OF this description. Or 9Th Ed
7l0 sec TO- TsQ. " 790, - el2 sec 10. s0s
1891 But that system Of Legislation has not been
uniformly followed For IN some csses The stockholders
made absolutely liable for the debts OF the com
pany without any proceedings being first taken
against IT, That is the case respecting Subscribers to
the cash capital Of certain insurance companies,
Shareholders in building and loan associations. ferry
companies and ia mining and guano companies
domestic animals 2 r. :. 9th Ed. 80. SEE. - 752
90 1885, IL, 500, sec 90 So sec. Al, SIS T.
While the liability Of the stockholders Ia saslight and
building companies ~ declared In substantially the same
terms those which are used 10 define the abilRy OF
stockholders in uanuiscturins corporations, under this
diversity in the laws which relate To this liability, no
pre- ption be entertained that the Legislature in
tended edopt uniform, general system for the reg
vls,on and ggssrn% NJ Q, IN mot cases the hsn.
Circumstances, but In many others u aries out Of cir
cumstsnces altogether dnercn1 The intention Of the
Legislature must therefore be searched for in the objects
OF the statute and the terms employed 20 express that
intention rather than IN any general system might
reasonably be supposed would be adopted on
this subject, extending alike 70 all similarly formed
corporations The only section OF the general sw under
which the corporal on IN question was formed which
bears directly the solution o The present question
that which declares thai Tho stock holders shall be per-
sonay liable for any debt contracted by any company
formed under ms act which be paid vi,hIn one
year from the time the debt u contracted unless
Fuit for the collection Of such debt shall he brought
against such company within one year after the debt
shall become due And suit shall lie brought AGAINST
any stockholder who shall 10 be stakeholder in
any such company for debt 50 contracted, unless
tho same shall no commenced within two years from
the time he shall have ceased 70 be a sockholder in
such company. And until an execution sgsinst the
company shall have been returned unsatisnsd IA
whole OF in part =, r. i. 9Th Ed, os3 ~. The
literal reading Of this section Of the statute is against
the construction claimed for IL by the defendants But
statutes not always be construed according their
literal reading. Ordinarily that Will very safe
guide by viii the legislative incni may lie asceraned
But whore that intent s doubtful the general policy
aud scope OF the statute properly be considered for
the purpose OF discovering IL aud when that intent IL
discovered must be followed even though u may fail
90 harmonic entirely with the literal reading or tho
law; for whatever IL within the spirit or intent OF the
law 10 win the law itscf although not within the
letter, while that which s within The letter and not.
within the spirit intent IL not within the law The
general policy aud object ~ these provisions of the law
were % insure 10 the creditors adequate and cncieni
remedies for the payment OF The debts incurred by the
corporation which u consistently and Justly
plshcd hy rendering tho remedy against The stockboder
dependent upon the failure 10 acquire satisfaction
from the corporation by the ordinary means OF
legal proceedng- For II the stockholders be resorted
TO IN the First insianc, many would nrse where the
secondary subsidiary debtor would he compelled 10
pay the debts where the Corporation would b. entirely
roivent and able 10 make payment 81 them itsc which
could not fail 20 introduce uncertainty and confusion
the Affairs of tbese Institutions Thee considerations
some ex,ent ind cate the probability that the Legislature
did not intend that the stockholders should be sued until