St. Paul daily globe., 1891-11-12
A DOUBLE LIABILITY.

A very important question will come
before the supreme court of Minnesota
for decision about the middle of De-
cember.' This is the Interpretation of
section of article 10 of the states
constitution, which concerns the La
bilIty of stockholders i'll corporations
organized under our laws. The c0nSti-
tutional provision, as amended in 1872,
is in these words:
Each stockholder in any corporation, eX-
cepting those organized for the purpose of
carrying on any kind Of manufacturing or
mechanical business shall be liable to the
amount of stock held or owned by him.
The profOundest difference of opinion
has long existed as to what this may
mean, and, strangely enough, in spite
of the lapse of years since the adoption
of the constitution, the highest court
has never been directly called on to eX
press its views i'll reference TO it. Now
at last the problem is to be submitted
directly to it, and its solution is awaited
with popular interest which has not
been felt over anything of the kind
since the time of the famous tax declS-
ions of 1886.
tensiyeIy employed by business Orgaul-
cations in this st ate, and especially dur
ing the last decade. This is character
istic of a new country. Strangers pour
inc III from every quarter ind oppor-
tunities for the investment of their cap
ital in association with others of whose
character and antecedentS they have no
knowledge. They hesitate to form part
nership relations with them. because
this implies a closenesS of connection
unwarranted by their situation. Under
such circumstances they make cor
poration, by which device they hope to
define with eXactneSS their liability. the
limit of their venture, and the methods
by which it shall be carried out. Thou
sands aud thousands of such companies
have been started in st. Paul and Min
neapOliS for every sort of commercial
pslrpoSe Imaginable. and there are few
men with any fortune who do not hold
stock in some of them.
An impression more or less strong has
prevailed to the effect that, if these
corporations did not succeed. those who
were behind them would have TO put up
sums of money additional to what they
had paid for their stock in order to
satisfy their creditors. But this i'm
preston has been at the best a yerv
vague and general one. Even very good
lawyers have not been able to ad wise
their clients with eXactneSS as to what
they were exposing themselves when
they embarked in such enterprises, and
it is entirely accurate to say that few
men of the people who have been most
active in their promotion have had any
realization of the nature Of the so-caIled
double liability, while the average in
veStors probably never heard that any
such thing was claimed to exist. They
have appreciated the fact that, when
they contided their capital to a board of
directors to manage aud control, they
ran the risk of never seeing it again; but
they have had no idea that in addition to
its loss they might be called on for as
much again to make good anv obligations
these directors might have incurred
over and above the company'S assets.
Ignorance of the law l., of course, no
excuse in general; but if there is any
law blind enough to carry exemption
because even the most intelligent could
not understand it, it would be the one
which applies in such cases. In the
past few years a good many of these
corporations have become involved. and
actions instituted to recover from their
stockholders sufficient to discharge
their debts. By course of judicial
legislation a code Of procedure effective
for this purpose has been spelled out
from the statutes, and the resisting
stockholders have in the lower courts
been defeated. The matter, as has al
ready been said is now pending before
the court of final appeal. Should it de-
eide that there is double liability
attaching to the ownership of stock in
Minnesota corporations. it means that
there will be no more Minnesota eorpO-
ratiOns, and avlcIous blow will be struck
at our local prosperity. The laws of all the
prominent Eastern states where this con-
venient device has given rise to the most
gigantic industries, impose no such bur
den on their members; nor, in fact. do
the laws of any states, with a few con
spicuOus exceptions. If a man who
buys stock i'll a Minnesota company
runs twice the risk that his neighbor
does who invests in the stock of an
Iowa company, business concerns will
be organized in Iowa rather than here.
and the states revenue from organ iZ-
ing fees and from the taxation of cor
poratiOnS' personal property, as we'll as
the prestige accrung from the presence
OF large and important domestic corpo-
rate interests. will ali be lost, 10 the gain
Of our more enlightened and liberal
neighbors. These considerations, to be
sure. Will have no weight with the
courts, which will decide according to
the law, and not according to its prob
able effects; but they suggest how much
is involved In proper presentation of
the question, and what important re-
suits will follow If it is finally decided
that the double liability actually exists.