Court Opinion

ID: 3625375
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:06:06.703636+00
Date Added: 2024-06-11T13:47:02.070604
License: Public Domain

The act of 1850 provides that each stockholder of any company formed under this act shall be individually liable to the creditors of such company to an amount equal to the amount unpaid on the stock held by them, for all the debts and liabilities of such company until the whole amount of the capital stock so held by him shall have been paid to the company.
Under this statute the first inquiry is, was the respondent a stockholder in said company on the 30th day of November, 1859, when this action was commenced. In pursuing that inquiry, we find that section seven of the said act provides, that the directors of said company may require the subscribers to the capital stock of the company to pay the amount by them respectively subscribed in such manner and in such installments as they may deem proper; and if any stockholder shall neglect to pay any installment as required by a resolution of the board of directors, the said board shall be authorized to declare his stock and all previous payments thereon forfeited for the use of the company, and directs the mode of proceeding to forfeit such stock.
The judge, who tried the cause has found that the directors of said company proceeded in accordance with the said statute and forfeited the stock of the respondent and the payment made thereon, on the 9th day of December, 1857, which was done without the procurement or privity of the respondent, and his conclusion is that he was not a stockholder when this action was commenced. In that conclusion the judge was correct. This forfeiture relieved the respondent from all liability to the company for the unpaid subscription. (Small v. Herkimer Manf. Co., 2 Coms., 330.)
This was done on the 9th of December, 1857, nearly two years before the action was commenced. The debt was contracted in January, 1857, while the respondent was a stockholder. The fact, that the debt did not become due until after the forfeiture was made, does not change the aspect of the question. It is the same as if the debt had been payable at once, and the appellants had neglected to collect it until *Page 386 
the time this action was commenced. The respondent having been a stockholder after this debt was contracted, it is insisted on the part of the appellants that under the said section 10 of said act, that the forfeiture did not absolve the respondent from liability. That he continued liable until his subscription was paid up, notwithstanding the forfeiture. This position cannot be sustained. A stockholder continues liable until his subscription is paid. But when he ceases to be a stockholder, the statute does not apply. The statute only speaks of a stockholder. It does not say a subscriber for stock shall be liable until his subscription is paid. That is in substance the appellants' position. There is no such statute in substance or effect. A stockholder is one owning stock. The statute is very particular in that respect. It says: He shall be liable to an amount equal to the amount of unpaid stock held by him, until the stock held by him shall have been paid, clearly showing the person contemplated was a person holding stock of the company.
The statute does not create a lien upon the stockholder's property, or an absolute debt against him individually, but creates a contingent liability, that if, while he is a stockholder and holds unpaid stock, a creditor of the company seeks to enforce the company's debts against him, he is liable to the amount of such unpaid stock, dependent on his being deprived of his stock in any legitimate way. By this forfeiture, the respondent having ceased to be a stockholder before this action was commenced, he is not liable. If the judge has found that this forfeiture was made by collusion and fraud between the directors of the company and the respondent, his liability would not cease. The judge has not so found.
The judgment of the General Term should be affirmed.