Case Name: Halsey Fire-Engine Company v. Joseph W. Donovan
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1885-06-11
Citations: 57 Mich. 318
Docket Number: 
Parties: Halsey Fire-Engine Company v. Joseph W. Donovan.
Judges: The other Justices concurred.
Reporter: Michigan Reports
Volume: 57
Pages: 318–322

Head Matter:
Halsey Fire-Engine Company v. Joseph W. Donovan.
Corporations — Action against stockholder.
Assumpsit cannot be maintained in the name of a corporation against an original stockholder for the price of his stock, where no assessment therefor has been made, and the required percentage of capital stock has never been paid in, and there is no showing of the assent of the directors to any special arrangement under which it is claimed that the liability arises. Nor will it lie for stock calls where none have ever been made.
Error to the Superior Court of Detroit. (Chipman, J.)
June 4. — June 11.
Assumpsit. Plaintiff brings error.
Affirmed.
Stewart dé Galloway for appellant.
When a party signs articles of association, as the holder of a certain number of shares, representing a certain figure, a liability is thereby created on his part to take and pay them for the amount called for by such articles : Thompson’s Liability of Stockholders §§ 105, 125; Boone’s Law of Corporations § 119 ; Angel & Ames on Corporations § 519 and notes ; Morowitz’ Private Corporations § 271; Dexter & Mason, Pile Pd Go. v. Millerd 3 Mich. 91; Carson v. Arctic Mining Co. 5 Mich. 288 ; Merrimac Mining Co. v. Bagley 14 Mich. 501; Upton v. Tribilcock, 91 H. S. 45 ; Phoemix and Warehousing Co. v. Badger 67 N. Y. 294; NuVton v. Cla/yton 54 la. 425 : Fisher v. Seligman 75 Mo. 13 ; Reed v. Richmond déc. R. R. Co. 50 Ind. 342 ; Hughs v. Antietam Mnfg Co. 34 Md. 326; Essex Bridge Co. v. Tuttle 2 Yt. 393; Hartford dé N. H. R. R. Go. v. Kennedy 12 Conn. 514-6, 523-4 ; Beene v. Cahawba déc. R. R. Co. 3 Ala. 660 ; Instone v. Frankfort Bridge Co. 2 Bibb 577 ; Kirksey v. Florida déc. Plk. Rd. Co. 7 Fla. 23; as to estoppel from making calls for stock on bona fide purchase: Waterhouse v. Jamieson L. R. 2 H. I.. Sc. Cas. 29; stock issued as paid-up stock must as to bona fide purchasers thereof be held to be paid up, and the only remedy is against the original holder: McCracken v. McIntyre 1 Duv. (Canada) 479 ; Foreman v. Bigelow 4 Clif. 508 ; Carling’s Case L. R. 1 Oh. D. 124; Nichol’s Case 26 W. R. 334; Riche v. Railway L. R. 9 Ex. 264; G. dé R. 1. R. Co. v. Howard 7 Wall. 409; Guest v. Worcester déc. C. C. Co. L. R. 4 C. P. 9; Holbrook v. New Jersey Zinc Co. 57 N. Y. 622; forfeiture of stock for non-payment of subscriptions is merely a cumulative remedy, and in no wayi affects the common-law action against the subscriber personally on his subscription : Carson v. Arctic Miming Co. 5 Mich. 288; in Massachusetts the statute under which the corporation is organized, gives the sole remedy against a person signing the articles of association where such articles do not contain any promise to pay, but if there is any express promise on any subscription paper or otherwise, personal action will lie : ' Worcester T. Cor. v. Willard 5 Mass. 80 ; Andover T. Cor. v. Gould 6 Mass. 40 ; subscriptions to stock made before signing the articles do not bind the association : Carlisle v. Sag. Valley c&c. B. Co. 27 Mich. 315; Poughkeepsie dc. P. C. Go. v. Griffin 24 N. Y. 150; Troy do. R. Co. v. Tidbits 18 Barb. 297; Macedón dc. P. R. Go. v. Snediker 18 Barb. 317; but a subscriber’s obligation to pay is fixed by the contract, and a call or demand -for payment need not precede an action for it: Lake Ont. R. Co. v. Mason 16 N. Y. 464; no valid assessment or call can be made before all the stock is subscribed or -taken : Boone on Corporations, § 113: Shurtz v. Schoolcraft d Three Rimers R. R. Go. 9 Mich. 269; Stoneam Branch R. R. Co. v. Gould 2 Gray 278; but a subscriber who takes part in corporate action that would be proper only where the capital is fully subscribed is estopped from claiming that it is not: Ccbot do. Bridge v. Chapin 6 Cush. 53 ; Hager v. Cleveland, 36 Md. 476 ; Bucksport dc. R. R. Co. v. Buck 68 Me. SI; JV. M. Central R. R. Co. v. Johnson 30 N. H. 407; no one can call in question the legality of any call or assessment which he participates in making: Macon dc. R. R. Co. v. Vason 57 Ga. 314; Williamette Freighting Go. v. Stannus 4 Oreg. 261; Graff v. P. d S. R. R. Co. 31 Penn. St. 489 ; Miller v. Llanover Junction 87 Penn. St. 95 ; Graff v. Railroad. Co. 31 Penn. St.<489 ; Chandler v. Brown 77 111. 335 ; Melvin v. Lamar Ins. Co. 80 111. 446; JV. H. Cent. R. Co. v. Johnson 30 N. H. 390 ; Selma dc. R. Co. v. Tipton 5 Ala. 787 ; subscriptions to the stock form a trust fund for the payment of all debts of the company: Sanger v: Upton 91 TJ. S. 56; Hatch v. Dana 101 U. S. 205, 214; Cxurry v. Woodward 53 Ala. 375; Adler v. Milwaukee dc. Brick Co. 13 Wis. 60 ; Hyatt v. McMahon 25 Barb. 457 ; Dayton v. Borst 31 N. Y. 435; Henry v. Vermillion dc. R. R. Co. 17 Ohio 187, 191; Ward v. Griswoldville Mnfg Co. 16 Conn. 601; the creditors may follow the debt, i. e. the subscription, and even compel the corporation to collect the same : Marsh v. Burroughs 1 Woods 463; Hightower v. Thornton et al. 8 Ga. 486, 497; a receiver when appointed represents both the corporation and the creditors: Morowitz § 585 ; he makes a call upon the subscribers just as the corporation would do, ■and his rights are the same as those of the corporation, and his right to recover is based on the right of such corporation to recover also, had no receiver been appointed and suit brought in its name: Ufion v. Tribilcock 91 IJ. S. 45 ; ■Griswold v. Seligmcm 72 Mo. 110; Fisher v. Seligman 75 Mo. 13: Hightower v. Thornton 8 Ga. 486: Marsh v. Burroughs 1 Woods 463; OgiT/oie v. Knox Ins. Co. 22 How. 380 ; Germcuntown &c. By. Co. v. Fitter 60 Penn. St. 124; Ward v. Griswoldville Mnfg Go. 16 Conn. 601; ■Curry v. Woodward 53 Ala. 375 ; Adder v. Milwaukee cfee. Brick Co. 13 Wis. 60 ; Dayton v. Borst 31 N. Y. 435 ; Henry v. Yermillion B. B. Co. 17 Ohio 187, 191; no stockholder can be discharged by a rescission or cancellation of his contract except with the unanimous consent of the •other members: Bedford B. B. Co. v. Bowser 48 Penn. St. 29 ; Burr add v. Bushwick B. B. Co. 75 N. Y. 211; Gill v. Balis 72 Mo. 424; United Society v. Eagle Bank 7 Conn. 457 ; recovery was had under the common counts in Southampton Dock Go. v. Bicharás 1 Man. & G. 448 ; Thrasher v. Dike Co. B. B. Co. 25 111. 393; where contracts have been •completely performed on the one side, and all that remains to be done on the other, is the payment of money, recovery will lie under the common counts: 2 Greenl Ev. §104; Blackwood v. Brown 34 Mich. 4; Begole v. McKenzie 26 Mich. 470; Moon v. Harder 38 Mich. 566; Fletcher v. Bradford 45 Mich. 349 ; Gooding v. Kingston 20 Mich. 439 ; some eases hold the liability of subscribers to stock to be the same as though they had signed a note for the same •amount: Hatch v. Dana 101 H. S. 210; II. daN. II. B. B. Go. v. Kennedy 12 Conn. 507.
J. B. McCracken and Alfred Bussell for appellee.

Opinion:
Campbell, «T.
This case appears from the bill of exceptions to have been tried on the theory that defendant was indebted to plaintiff in the sum of $1200, as part of the •amount due for capital stock-in the corporation, of which he was an original member. As the court directed a verdict for •the defendant, no other questions arise except as to the correctness of this ruling.
The company was organized under articles which set out 'that the capital stock was $500,000, being 20,000 shares of $25 each. They recited that $50,000 of the said capital stock is paid up. The number of shares taken was 16,900, of which defendant held 2000. The largest holder was Menzo D. Halsey, who held 12,000 shares, or $300,000.
The declaration contained one special count and the comunon counts. The special count averred the sale by the corporation to defendant Donovan of 2000 shares for $1200. But there was no evidence of any such sale. He was an original associate in organizing the company, and by the : articles he was put on the statutory basis of all other stockholders — -bound to pay $25 a share, in such installments as should be required, by regular assessments.
The only evidence of any $1200 arrangement was that before fhe company was organized an arrangement was made by defendant, Halsey, and Mr. Dickinson that they would organize on a basis that defendant and Dickinson should each have 2000 shares, and pay $1200 for them, and that Halsey should have 12,000 shares for the machine which was the chief purpose of the incorporation. There was never any recognition of such an arrangement by the company or its directors, and no such thing appears in the articles, which .leave these parties on the same footing with the others named, and liable to the statutory liability for what they had not paid.
The statement that $50,000 had been paid up, does not show who had paid it. All of the stock was not taken, and it could not be a percentage of two dollars and a half a share. No charge was made on the books indicating that defendant had been credited without paying, or charged on any such basis, or had assented to any such liability. No assessment was ever made.
It is impossible on such a state of things to hold defendant liable for $1200, or any other sum, as due for stock under the issue in this case.
If, as claimed, there are equities arising out of the method -of dealing after the organization, they cannot be enforced in this action of assumpsit for the price of stock, or for stock calls, as none were ever made.
The judgment below so holding must be affirmed.
The other Justices concurred.