Court Opinion

ID: 3550800
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:03:35.854752+00
Date Added: 2024-06-11T14:06:37.417735
License: Public Domain

At common law, corporations, as one of their incidents, have the power to contract any obligation necessary to carry into effect the objects of their creation; and this, in a corporation of this character, involves the power to borrow money, to give notes or bonds for its repayment, and to secure them by *Page 83 
mortgage or pledge of their property. This power was conferred upon this corporation by the act of the legislature passed July 7, 1869 (Laws of 1869, 322), recognizing their existence, and authorizing the construction of the road in this state; but it was subject to the then existing laws relating to corporations, among which was one that no corporation, banks and insurance companies excepted, should contract debts or incur liabilities exceeding one half their capital stock actually paid in and unimpaired, and of their property and other assets. Gen. St., c. 135, s. 4.
By s. 5 of the same chapter the directors are liable for the excess of debts and liabilities above half the capital stock paid in and of the other property and assets, for all the debts and contracts of the corporation then existing or contracted while they respectively remain in office.
The plaintiffs' claim is, that the act of July 24, 1871 (Laws of 1871, 576, 577) has no effect upon these provisions of the Gen. St., and that the defendant's liability must depend upon whether they have been violated; and if this position is correct, the defendant is liable, for the debts of the corporation exceed the limit fixed by Gen. St., c. 135, s. 4. On the contrary, the defendant claims that, as to this corporation, the effect of the act of 1871 was to suspend the operation of the Gen. St., and for this reason to relieve him from liability.
The effect of c. 135, s. 4, is not to prohibit absolutely the contracting of debts in excess of the amount therein specified, nor to render such debts void, or even voidable, so far as the corporation are concerned. Its sole effect is to render the directors personally liable, but liable only when the authority conferred by s. 4 has been exceeded.
If, by the act of 1871, neither the power to contract debts was enlarged, nor the penalty removed, it is difficult to conceive anything gained by its passage. No new right was conferred, nor was any liability modified. The rights and liabilities of the corporation and the directors were the same after as before its passage. But this view is not correct. The act of 1871 was passed for the purpose of effecting a change in the existing law, so far as it related to this corporation; and if we look at the mischief to be remedied, to ascertain the intention of the legislature in the enactment of c. 135, ss. 4 and 5, and the act of 1871 (Potter's Dwar. 186), the intention will be apparent.
The provisions of c. 135, ss. 4 and 5, were enacted for the protection of the public against the recklessness and extravagance of corporations, by making the directors, in whose management the affairs of the corporation were vested, personally responsible when the limit therein fixed was exceeded.
When the act of 1871 was passed, the directors were amenable to the general law, and they could not exceed the limit fixed by s. 4 without becoming liable. *Page 84 
If this act is to have any effect, it must be to permit that which was before prohibited; and if this is its effect, it renders s. 4 of c. 135 inapplicable to this corporation, and as to it, it was a waiver of the general provisions of law applicable to all corporations. If this is its effect, and it is practically inoperative if it is not, the defendant is not liable, for his liability is dependent entirely on a violation by the corporation of s. 4. If that section does not apply to the corporation of which the defendant is a director, then s. 5 is equally inapplicable to the defendant. The question, where two statutes are in conflict, which is to govern, is one of legislative intention, and is determined like the construction of a bond, a will, a mortgage, a deed, or other written instrument, by the natural weight of all the competent evidence, and not by an arbitrary formula. Edes v. Boardman, 58 N.H. 580, 592.
The provisions of Gen. St., c. 135, ss. 4 and 5, and the act of 1871, cannot stand together. This being the case, and the question being one of legislative intention, we think the effect of the act of 1871 was to relieve the defendant and his co-directors from liability under the provisions of Gen. St., c. 135, ss. 4 and 5.
It is claimed by the plaintiffs, that if, the act of 1871 is so construed it is a grant of special privileges, and is therefore in violation of the constitution; but this objection applies with equal force to the charter itself, and to charters of all corporations. They are all grants of special privileges not possessed by the individual. It was competent for the legislature to insert in the act of 1869 a provision exempting stockholders or directors from liability for the debts of the corporation in any event. It is not claimed that such a statute would be in conflict with the constitution, and, if competent to make the corporation when chartered an exception to the general rule, it was competent to do it subsequently by an amendment of the charter. The power being admitted or proved, the time of its exercise is a matter of legislative discretion. On the facts stated, the defendant is not liable.
It may be inferred from the act of 1871 that the directors would not incur the risk of contracting corporate debts which they would be liable to pay; that the highway would not be built and equipped for the public by the corporation, under the general law of personal liability of directors and stockholders, and that the legislature suspended the operation of that law in this case for the purpose of inducing the corporation to complete the highway for the public accommodation. It being impossible to complete it, except with the public money or money hired on the credit of the corporation, without the security of the individual liability of their directors and stockholders, no wrong was done by authorizing the money to be so hired.
Case discharged.
FOSTER and BINGHAM, JJ., did not sit: the others concurred. *Page 85