Court Opinion

ID: 7893279
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:50:56.621811+00
Date Added: 2024-06-11T16:31:59.133607
License: Public Domain

Miller, J.,
delivered the opinion of the Court.
We have decided in Norris vs. Johnson, (ante 485,) that an action at law may be brought by a creditor to enforce the liability of stockholders under section 52 of Article 26 of the Code. We have also there determined that the extent of the *499liability of each stockholder is measured by the amount of stock held by him at the time the debt was contracted, continues at least until all the capital stock is paid in, and is in no wise affected by the amount thereof that may at any time remain unpaid. There is no provision in the Code by which this liability is made dependent upon any other contingency than the contracting of debts by the corporation, whilst the defendant was a stockholder, and before the capital stock is fully paid up. These two conditions make the liability determinate and irrevocable. In this respect, the Code is materially different from the statute under which the very able decision in Hicks vs. Burns, 38 N. H. Rep., 141, was made, and, in our opinion, no averment of notice to the stockholder that the debt was contracted by the corporation, need be made in the declaration ; and so far as demand on the corporation is concerned, if that were necessary, (a point on which we express no opinion,) it is sufficiently stated in the averment that the plaintiff had recovered a judgment for his claim against the corporation, no part of which has ever been paid. Tiie demurrer to the declaration was, therefore, properly overruled.
Another question which this case presents is, were the suit and proceedings therein properly instituted and conducted to final judgment, under the Act of 1884, ch. 6, regulating the return of process and taking judgments in the Superior Court and Court of Common Pleas of Baltimore City? That Act, intended to facilitate the recovery of judgments in those Courts is, by its terms, applicable to “every suit where the cause of action is a contract, whether in writing or not, or whether express or implied,” provided the plaintiff files with his declaration an affidavit or affirmation stating the true amount that the defendant is indebted to him over and above all discounts, and also “the bond, bill of exchange, promissory note or other writing or account by which the defendant is so indebted.” The inquiry before us, therefore, involves the question, what is the nature and character of this, perso*500nal stockholder-liability? In our judgment, it is very clear, it is not in the nature of a penalty, like that in other sections, imposed upon the trustees, managers, directors or other officers of the corporation, for doing that which the statute expressly or by implication forbids, or the omission to do something which the law directs to be done, and, therefore, does not come within the decision in the case of the First National Bank of Plymouth vs. Price, et al., 33 Md., 487. The section we are now considering, not only does not forbid the contracting of debts before the capital stock is paid in, but allows it to be done on condition -that those who were stockholders at the time, shall become severally and individually liable therefor. As to the true nature of this liability, there is some diversity of judicial opinion, and it is not easy to reconcile or comprehend the reasoning of all the authorities on the subject. A very elaborate and able opinion by the Court of Appeals of New York, on this question, is found in the ease of Corning vs. McCullough, 1 Coms., 47. The statute there construed, made the stockholders continuously liable for all debts of the corporation, and one of the grounds on which the Court placed the obligation, was that of contract.
The liability, they say, is for the payment of a debt of the company incurred by the purchase of merchandise of the plaintiff for the use and benefit of the company, and wherein the defendant, as one of the members, "was interested, and for which he thereby, and under the provisions of the charter, became and was, concurrently with the company from the inception of the debt, personally liable. It is, therefore, virtually and in effect a liability upon a contract and the mutual agreement of the parties, not indeed in form an express personal contract, but an agreement of equally binding obligation consequent upon, and resulting from, the acts and admissions, or implied assent of the parties. Another ground there taken is, that the Legislature by subjecting the stockholders to personal liability for the debts of the company, thereby merely removed the corporate protection from them as corporators, *501and left them liable as partners and associates as at common law. For these reasons the Court held the action against the stockholder was within that clause of their Statute of Limitations relating to actions of account, assumpsit, or on the case, founded on any contract or liability, express or implied. In a very recent case, (Storey vs. Furman, 25 N. Y. Rep., 222,) the same Court has applied the same doctrine to a case arising under a statute similar to our own, where the liability is qualified and limited in amount. Every person, say the Court in that case, dealing -with one of these manufacturing companies, organized under the Act of 1811, must also be held to trust to the personal liability of its stockholders to the extent specified in the Act of its incorporation, and such liability is part of the contract. The personal liability of the stockholder for the payment, of the debts of the company, to the extent specified in its .charter, became, and was one of the terms of the sale to the company of any property, aud constituted part of the security of the creditor for any debt contracted by the company. The Supreme Court in Hawthorne vs. Calef, 2 Wallace, 10 have decided a liability of this description is protected by the Constitution of the United States, and a law repealing or taking it away, is void as impairing the obligation of contracts. And in Matthews vs. Albert, 24 Md., 535, this Court has said the stockholders are “debtors under the statute to the creditors of the company, to an amount equal to their stock, for all debts and contracts created while they were stockholders.”
We do not wish to be understood as adopting all the reasoning of the New York cases we have cited, and especially not that which places the liability on the ground that the statute simply removes corporate exemption, and leaves the responsibility to remain as upon partners at common law, but from the best consideration we are able to give to the subject, we are satisfied the obligation does not rest so entirely upon statutory liability, as to be destitute of any of the elements of a contract. It is, in our opinion, so far an obligation arising ex contractu, as fairly to come within the spirit and intent of *502the Act of 1864. It is a debt under the statute due from the stockholder to the creditor, springing out of and coexistent with the contract between the corporation and the creditor. Such being its character the plaintiff may well make the affidavit thereto as he has done, the amount being within his own knowledge, and liquidated and ascertained by the account as well as the judgment against the corporation. Both the account and a short copy of the judgment were filed with the declaration, and either is within and a compliance with the 8th section of the law of 1864.
(Decided 20th June, 1871.)
The record shows the writ of summons was made returnable to the second Monday of July, 1870, the next return day prescribed by the statute, after the suit was commenced : that on the return day the defendant appeared and filed a demurrer to the declaration: that at the following September Term, being the first term thereafter, the plaintiff .entered a motion for judgment by default for want of a plea verified by affidavit: that the Court on the 16th of December, following, overruled the demurrer and entered judgment by default, for want of a plea and affidavit of defence, and on the same day, assessed the damages and entered final judgment thereon. In all this we discover no departure from the requirements of the statute, but strict-conformity to the proceedings it prescribes. The case therefore does not in this respect fall within the decision in King vs. Hicks, 32 Md., 460.
The power of the Court after judgment by default, to assess the damages on proof, without empannelling a jury is conferred by the 9th section of the Act of 1864, ch. 6, as well as by the Act of 1864, ch. 175. The amount of damages thus assessed, is not open for revision in’this Court on appeal from the judgment, when no exception on that ground has been taken, unless they exceed, as they do not in this case, the amount claimed in the declaration. Finding, therefore, no ground for reversal, the judgment must be affirmed.

Judgment affirmed,.