Court Opinion

ID: 8185349
Source: CourtListenerOpinion
Date Created: 2022-09-09 23:07:45.018388+00
Date Added: 2024-06-11T16:40:23.761068
License: Public Domain

Pinney, J.
The defendant’s contention is that the provisions of R. S. sec. 1754, by which, “ unless otherwise expressly provided by law, or the articles of organization, the directors of any corporation may call in the subscriptions to’ *441the capital stock by instalments, in such proportion and at such times as they shall think proper, by giving such notice thereof as the by-laws shall prescribe,” etc., are mandatory, and that such notice could not be given until a by-law-had been adopted prescribing the substance and manner of giving such notice. The subscription of the defendant, it would seem, was not, when made, presently due, nor does it appear that there was any express provision by law, or in the articles of association, as to the time of payment. There is no law, or provision of the articles of incorporation, prescribing the particular manner in which the authority to make by-laws should be exercised. By-laws are. rules to regulate the management of the affairs of the corporation, that it may more readily and conveniently fulfill the purposes for which it was created, and the power to make them exists at common law. They may be of general or of limited duration, according to the necessity or convenience of the corporation, but must apply to all the members of the corporation alike; and it seems that by-laws may be adopted as well by the acts and conduct of the corporation as by express vote or adoption in writing, unless it is otherwise provided. Angell & A. Corp. § 328; Field, Corp. § 305; Union Bank v. Ridgely, 1 Har. & G. 324; People v. Throop, 12 Wend. 186. A regulation made by the directors in this case as to the time when any particular instalment of capital stock should be paid, if applicable alike to all such subscriptions, would be in substanpe and effect a valid by-law regulating the stock of the corporation. A call is an official declaration by the directors that the sum subscribed, or any specified instalment thereof, is required to be paid, and the call is ordinarily made effective by notice thereof to the subscribers, in accordance with the by-laws or general regulation of the corporation on that subject. Braddock v. P., M. & M. R. Co. 45 N. J. Law, 364, 365. The essential thing required is that the call shall be general, extending to all sub-*442•seriptions, and that the subscribers shall have notice thereof. Here the directors had power to make the call, and also to make a general regulation or determination as to when the call should be payable. It is said in Cook, Stock, § 104, that the term “call” is used with different meanings, and “ may refer to the resolution of the officials that a part or the whole of the subscription must be paid, or to the resolution and notification thereof, or to the combination of facts making the parties called on liable to an action for the nonpayment of the monej’' called.” As a general rule, a call must be made in order to render a subscription, or any part of it, due. The subscription is a debt payable at a future time: The time when it shall be paid is indefinite until fixed by a call. Thomp. Corp. §§ 1750, 1751. In Bank of South Australia v. Abrahams, L. R. 6 P. C. 265, the court said: “The company has no absolute right, and a shareholder is under no absolute liability to pay. The right only arises if ■and when calls are made by the directors. . . . The due making of a call by the resolution of a board of directors is an essential condition precedent.” Grissell's Case, 1 Ch. App. 528-535. The statute under considei’ation recognizes the necessity of a call, and that a notice thereof is necessary. A call without notice to the subscriber is practically no call at all. A call cannot be made so as to affect a part only of the subscribers; it must be made on all alike, or it will be void. Pike v. B. & C. S. L. R. Co. 68 Me. 445; Great W. Tel. Co. v. Burnham, 79 Wis. 47-51. And it seems that it has been held that a call need not indicate when, or to whom, or where payment is required to be made; that these are to be stated in the notice. Cook, Stock, §§ 114, 115. Unless a uniform call or notice is made or given, it is apparent that the directors may practice favoritism and act oppressively. In New York it is not entirely clear from the decisions whether notice of a call must be given, and in some other states notice does not ap*443pear to be necessary (Cook, Stock, § 117), bnt tbe better reason and weight of authority requires it.
The provisions of sec. 1754, E. S., were intended, we think, to provide a definite rule on the subject, and to avoid the conflict and uncertainty of previous decisions; and under it the call is made complete and effective by giving “ such notice thereof as the by-laws shall prescribe.”
There is nothing in the complaint to show that any by-law, resolution, or regulation of the corporation on that subject, either written or customary, ever existed. We think the want of such allegation renders the complaint fatally defective. The fact that notice was given October 25, 1892, of a call payable the 1st of the next month, does not satisfy the statute, in the absence of a by-law making notice for that length of time sufficient. If the subscription is payable only upon call, it is plain that such call, in the absence of any specific agreement as to the time of payment; must be made in conformity with the statute on this subject. We cannot say that any other method than the one pointed out in the statute would suffice. We hold, therefore, that it was intended that the statutory method of making calls should supersede previous common-law methods, and to prescribe a uniform and reasonable rule easily complied with. Tor the reason that it does not appear from the complaint that the call in the present case was made by giving such notice thereof as the by-laws of the corporation prescribe, the demurrer ought to have been sustained.. For these reasons the order overruling it must be reversed.
By the Gowrt.— The order appealed from is reversed, and the cause remanded for further proceedings according to law.