Case Name: Winter vs. Baker; Patterson vs. Baker
Court: New York Supreme Court
Jurisdiction: New York
Decision Date: 1867-10-07
Citations: 50 Barb. 432
Docket Number: 
Parties: Winter vs. Baker. Patterson vs. Baker.
Judges: 
Reporter: Barbour's Supreme Court Reports
Volume: 50
Pages: 432–435

Head Matter:
Winter vs. Baker. Patterson vs. Baker.
Although laws have no force, by their inherent vigor, beyond the territorial limits of the state in which they are made, yet a contract which is valid where it is made, is to be held valid everywhere.
Where a complaint alleged that “ the defendant is a stockholder in the said Merchants’ Bank, and that under and by virtue of a law or laws of the said state of Georgia, the said defendant is liablewithout averring that such a law was in force at the time the debt was contracted, and without showing that the liability was founded on a contract, and not on a special provision in the nature of a penalty; Held, that the allegation was not sufficient to enable the court to assume that an original liability existed by the terms of the charter, as in unincorporated associations and co-partnerships, or that it devolved in consequence of some general law. And that the allegation was obnoxious to that rule of pleading which holds that when different meanings present themselves, that construction shall be adopted which is most unfavorable to the party pleading..
Held, also, that it was to be inferred, from the terms of the allegation, that the liability of the defendants did not originate as a debt like that incurred by a member of a copartnership, which is due primarily by him, as well as by the other members, but that it was created solely by a statute of the state of Georgia, imposing a liability in the nature of a penalty; passed, (for all that could be learned from tlie complaint,) after the act of incorporation or even after the contracting of the debt.
Although in this state, liabilities imposed on stockholders by the act of incorporation, or by a general statute, have been regarded by our courts in the nature of contracts, it does not follow that all liabilities created by the legislature of another state would be enforced here.
The question is not whether they are technically regarded as contracts, but, even admitting that the nature of the liability, in certain cases, is equivalent to that of a contract, is it such a liability as the courts of this state will invariably enforce 1 Per Cbebke, J.
TvEMURRERS to complaints.

Opinion:
Clerke, J.
These, I believe, are the only actions on the October calendar, which are founded on an alleged contract, arising under an act of the legislature of the state of Georgia, approved December 21, 1830.
The main question presented by these cases is, whether this liability can be enforced within any other jurisdiction than that of Georgia ?' If this liability is founded upon contract, in the ordinary legal sense of the term, it can, without doubt, be enforced here ; - for, although laws have no force, by their inherent vigor, beyond the territorial limits of the state,- in which they are made, yet, a contract,- which is valid where it is made, is to be held valid everywhere. But, can the liability, created by the act in question, be deemed a contract, in the ordinary legal acceptation of the word. The complaint alleges that "the defendant is a stockholder in the said Mechanics' Bank, and that under and by virtue of a law or laws of the said state of Georgia, the said defendant is liable without averring that such a law • was in force at the time the debt was contracted, and without showing that the liability was founded on a contract, and not on a special provision in the'nature of a penalty. This allegation is not sufficient to enable us to assume that an original liability existed by the terms of the charter, as in unincorporated associations and copartnerships, so that it devolved in consequence of some general law. The allegation is obnoxious to that rule of pleading, which holds that when different meanings present themselves, that construction shall be adopted, which is most unfavorable to the party pleading.
Charters of incorporation, generally, exempt the stock holders from individual liability, or, rather, they do not generally impose individual liability ; and when stockholders are made liable, the liability is created by a special provision often in the nature of a penalty. In such case, in addition to the ordinary loss, which every stockholder suffers by the failure of the company, this liability is imposed upon him, not by any general law, nor by the common law, but by such special provision. I, therefore, conclude from the terms of the allegation, that the liability of the defendants did not originate as a debt, like that incurred by a member of a co-partnership, which is due primarily by him, as well as by the other members, but that it was created solely by a statute of the state of Georgia, imposing a liability in the nature of a penalty; passed for all that I can learn from the complaint, after the act of incorporation, or even after the contraction of the debt. In this state, I am aware that liabilities, imposed on stockholders by the act of incorporation, or by a general statute,, have been regarded by our courts in the nature of contracts ; but, it does not follow that all liabilities, created by the legislature of another state, would he enforced here. The question is not, whether they are, technically, regarded as contracts, but even admitting that the nature of the liability, in certain cases, is equivalent to that of a contract, is it such a liability as the courts of this state will invariably enforce ? In ex parte Van Riper, (20 Wend. 614,) the liability of a director of a Hew Jersey hank was recognized. The charter provided, that the president and directors should he and continue liable, individually, for the payment of any bills, which they might issue or circulate. This was making them primarily liable, as if they were co-partners, and continued unincorporated. In Perkins v. Church, (31 Barb. 84,) it appeared that, by the general laws of Wisconsin, stockholders in every corporation, organized under the provisions of the banking act, are individually responsible for its debts. The liabilities, in both these cases, can scarcely be called 'special; in the first, the statute providing that the president and directors should continue liable, as partners ; and in the second stockholders, without exception, are made liable by a general law. In the latter, however, the objection which we are now considering, was not taken. Both cases were decided at special term.
[New York Special Term,
October 7, 1867,
On the whole, I am of opinion that these actions should not be entertained by the courts of this state; and, being of this opinion, it is not necessary to consider the other questions raised by the demurrer.
Judgment for the defendants on the demurrer, with costs, with leave to the plaintiffs to amend within twenty days on payment of the costs of the demurrer.
Glerke, Justice.]