Court Opinion

ID: 6503229
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:15:46.198578+00
Date Added: 2024-06-11T15:54:39.929430
License: Public Domain

COLLIER, C. J.
The act of January, 1836, “ to incorporate the Gainesville and Narkeetah Rail Road Company,” directed the commissioners designated therein to open books of subscription for stock, &c.' and among other powers conferred upon the president and directors, authorized them to “require such instalments to be paid upon the stock, and at such times as they may [might] think best for the interests the said company.” Further, if any stockholder failed to pay the amount due upon his stock in pursuance of such call, the president and directors were authorized to sell his shares or such part thereof as they might think best, to the highest bidder; and if these shares should sell for less than their par value, the stockholder is made liable to pay the deficiency. Upon the failure of a stockholder to pay the amount of a call made upon his stock, or upon a deficiency after a sale of his shares, the president and directors having first given notice to him, &c. might recover the amount called for, or the deficiency, by motion for judgment, either in the county or circuit court of t.he county, in which the stockholder resides.
By the act of 1841, the plaintiff in a judgment against a corporation “ is entitled to the rights and benefits of all the laws now in force regulating the issuance of writs of garnishment,” &c.; and upon an affidavit being made as directed, a garnishment is required to issue, summoning the “ garnishee to answer what he is indebted as stockholder or otherwise,” &c. Further, the stockholders of any incorporated company ■“shall be liable, respectively, to the creditors of such company, for the amount of stock subscribed by them, and unpaid, in character of debtors to such corporation, and such liability may be enforced by garnishment, as .above provided for.” Again; “ The stockholder of any company compelled to *477pay the whole or any part of the debts of the company of which he is a member, shall have the right to, and be deemed an assignee of the judgment, or so much thereof as shall have been paid by him, and shall be entitled to the remedy provided by law, for co-securities, to compel contribution from the other stockholders, or any of them.” [Clay’s Dig. 260, 261, § 8, 9, 10.]
The act incorporating the Gainesville and Narkeetah Rail Road Company, does not impose upon the subscriber for stock an immediate and absolute liability to pay the full amount of his subscription; but it contemplates a payment by instalments upon the requisition of the president and directors. In the language of this court in Bingham v. Rushing, (5 Ala. Rep. 403,) “ It is therefore perfectly obvious, that until such call was made, there was no such indebtedness on the part of the stockholder as would authorize the corporation to maintain an action against him, either by the common law, or by the summary remedy given by the statute, (acts 1818-1823) — and if the corporation could not maintain the action because there was no indebtedness, it is .clear the proceeding by garnishment cannot be maintained,” unless it is given by the act of 1841. In Cooper v. Frederick, 9 Ala. Rep. 738, it is said the design of this act appears to have been to reach the stockholder as a debtor to the corporation, through his stock, and without any call of the company.” If the enactment is constitutional, the court say that a judgment could be rendered against a stockholder when summoned as a garnishee, though he was not in default for calls made upon his stock by the directory.
It may perhaps be regarded as a settled principle, that the capital stock of a corporation is a trust fund for the payment of its debts, and a stockholder is not entitled to any dividend or share of its capital, until all the debts are paid. And if the stock should be distributed before the debts are paid, each stockholder receiving his share would be compelled to contribute pro rata to the payment of such debts, from the funds in his hands. But this is a remedy which can only be obtained in equity, where all the proper parties may be brought before the court, and the full amount of the debts, the mode of contribution, the number of the contributors, or *478the cross equities and liabilities, which may be required for a proper adjustment of the rights of all parties, as well as of the creditors, ascertained. [2 Story’s Eq. $ 1253.] Whether this principle applies to stockholders whose shares have not been paid or called for, we will not now stop to inquire.
In respect to the constitutionality of the act of 1841, several questions suggest themselves: 1. Did the subscription for stock, under the terms of the charter, impose a present liability upon the stockholder, or does not the times of payment and amount of instalments depend upon the requisition of the directory ? Does not the charter require that the assessments upon each share should be equal, and if one stockholder should, by process of garnishment, be compelled to pay for all his stock, would not the requisition operate unequally, and practically modify the contract, which the subscription and charter evidences ? We do not propose to answer these questions at this time. It may be conceded, that a statute which merely gives a remedy at law, where it could previously have been made available in equity only, or vice ver-sa,xmy consistently with the constitution operate retrospectively, so as to embrace contracts already made. Perhaps, if the president and directors of a corporation under a charter such as that before us, failed to call for instalments as their duty required, a court of equity might be resorted to, by a creditor, and upon the stockholders being brought before the court, an assessment could be made upon each one of them agreeably to the spirit of their subscription and the charter.
At common law, upon the dissolution or civil death of a corporation, all its real estate remaining unsold reverts back to the original grantor, or his heirs, for the law annexes a condition to every gift or grant, that if such body politic be dissolved, the donor or grantor shall not re-enter. The personal estate vests in the king; in this country in the people, or State, as succeeding to this right and prerogative of the crown. The debts due to and from the corporation are totally extinguished ; so that neither the members nor directors of the corporation can recover, or be charged with them in their natural capacities; according to the civil law maxim, si quid universitati debetur, singulis non debetur; nee quod debit universitas, singuli debent. [Aug. A A. on *479Corp. 128-9, 667.] In Mumma v. The Potomac Company, 8 Pet. Rep. 281, it was said, that a corporation, by the very terms and nature of its political existence, is subject "to dissolution, by a surrender of its corporate franchise, and by a forfeiture of them for wilful misuser and nonuser. Every one must be presumed to understand the nature and incidents of such a body politic, and to contract with reference to them. And it would be a doctrine new in the law, that the existence of a private contract of the corporation, should force upon it a perpetuity of existence, contrary to public policy, and the nature and objects of its charter: Further, that a scire facias to revive a judgment cannot be maintained against a dead corporation any more than against a dead man. [See 1 Bla. Com. 485; 3 Step. Com. 187.]
The act of 1841, requires the debtor of the company to state what he is indebted to it, as stockholder, or otherwise. Its terms, as well as the character of the proceeding, suppose that there is a subsisting indebtedness, though it may not have matured, or the contract out of which it arises may not be absolute. A corporation is an artificial body, depending for its existence upon a legislative act, to which it either mediately or immediately owes its vitality. It may exist ad infinitum, or its being may be limited, and although there may be no limitation, expressly prescribed, it is subject to dissolution and civil death in various ways. But for whatever cause it may become defunct, we have seen that the “ debts due to and from it are totally extinguishedand in no just sense can one be said to be its debtor, either as a stockholder or otherwise. A corporation, after dissolution for all legal purposes, is a nonentity, incapable of suing and being sued, and a judgment which assumes that a garnishee is its debtor, is untrue in point of fact, as well as law. Whether the creditors have a remedy in equity against the real and personal estate, or the debts which were due to a corporation that is civilly dead, we need not inquire ; for however this may be, it is certain that there is no right to proceed by garnishment under the statute.
It has been repeatedly decided by us, that the answer of a garnishee, if not controverted, will be taken to be true. We *480must then understand in the present case, that the affirmation in the answer, that the garnishee was informed and believed, that the corporation ceased to have “ any legal existence,” previous to the issuing of the garnishment, is equivalent to an assertion that it was dissolved; and that the fact of dissolution is conceded — leaving its effect only to be decided by the court. By this we have seen, its debts, and of consequence the legal remedies for their collection are extinguished. This view is decisive of the cause, and relieves us from considering the other questions made at the argument. The judgment of the circuit court is therefore affirmed.