Court Opinion

ID: 6963364
Source: CourtListenerOpinion
Date Created: 2022-07-24 01:49:23.823138+00
Date Added: 2024-06-11T16:08:24.752379
License: Public Domain

Mr. Justice Scholfield delivered the opinion of the Court: We have carefully considered the questions discussed in the printed arguments before us, and we concur in the conclusions reached by the Appellate Court. First—The contention of appellant is, that the liability imposed by the seventh section of the charter of the Union Bank of Quincy, upon the stockholders, is, simply, to pay the creditors of the bank the balance unpaid upon subscriptions for stock. The language of the seventh section, affecting this question, is: “Provided, also, that the stockholders in this corporation shall be individually liable, to the amount of their stock, for all debts of the corporation; and such liability shall continue for three months after the transfer of any stock on the books of the corporation.” The plain and obvious meaning of this language is, to our minds, the stockholders are liable to creditors for their debts, to an extent measured by the amount of their stock. Omitting the clause expressing the extent of liability, and we have this: “The stockholders in this corporation shall be individually liable for all debts of the corporation. ” If this were all, their liability would be unlimited,—they would be absolutely liable for all debts of the corporation The intention, however, is to limit that liability ; but to what extent ? The answer is: “To the amount of their stock, ”—not to the amount unpaid upon their stock. The language makes the liability because of the fact of being stockholders, and not because of the fact of being debtors of the corporation. If the liability intended was simply to pay the creditor the amount due the corporation, what would have been more natural and easy than to have used just that language? The difference between a stockholder, and a debtor for unpaid stock, is recognized in several of the sections, and so was, at the time, in the legislative mind, and it must therefore be presumed that words expressing the one would not have been used to express the other, in this instance. Thus, in section 3, a majority of the corporators are required to designate a time and place for the first election of the directors of said corporation “by the parties subscribing for the capital stock thereof, and each share of stock so subscribed for shall be entitled to one vote.” By section 4, “the payment of the stock so subscribed shall be made and completed by the subscribers at such time and manner as the said directors shall prescribe.” By section 14, “the directors shall have the right, in case that any stockholder shall fail to pay any installment for thirty days after a call thereof, * * * to declare the stock forfeited to the corporation, * * * or * * * sue for and recover the entire amount of subscription remaining unpaid.” By section 5, “no subscriber of the stock * * * shall have the right to vote at the first election of the directors unless he shall have paid ten per cent of the amount subscribed, * * * nor shall any subscriber or stockholder have, at any time, the right to vote at any election, held by virtue of this act, who shall be in default to the corporation for any payments, either in stock held by him, or otherwise.” And by section 10, “in all elections of directors, and in deciding all questions at meetings of stockholders, each stockholder shall be entitled to one vote for each share; * * * and no stockholder whose liability is past due, shall be allowed to vote.” In no instance is the word “stock” used in the sense of a debt or obligation due from the stockholder, but it is at all times used to express the idea of property in the corporation,—what may be the subject of'a debt, it is true, but is not itself a debt, any more than is any other property. And in this connection we will observe, that we are unable to appreciate the distinction which counsel seek to draw between the words, “liable to the amount of their stock,” and the words, “liable in a sum equal to the amount of their stock,” which is frequently found in similar charters, they conceding, as we understand their position, that, on the authority of decided cases, if the latter language had been here used, their client would be liable, as held by the lower courts. But since the words, “to the amount of their stock, ” in no view mean the thing which is itself to be paid to the creditor, but are, in every view, simply used to express the measure by which the sum of money of which the creditors may enforce payment is ascertained, “liable to the amount of their stock” is but stating elliptically what is fully stated by the words, “liable in a sum equal to the amount of their stock. ” Liable to an amount, can mean only liable to pay a sum which reaches or comes up to, or, in short, equals, the given amount. So, here, the nominal or face value of the shares of stock is $100 each; and if A have two shares, we say the amount of his stock is $200,—the nominal or face value of his stock. And, therefore, to say that he is liable, to the amount of his stock, for the debts of the corporation, is only another form of saying that he is liable to the amount of $200 for the debts of the corporation. Counsel for appellant, by contending that the liability of their client is only for the amount of his unpaid indebtedness on his subscription for stock, impliedly concede the correctness of this construction, for, if he be thus liable, the words “liable to the amount of, ” must be held to mean liable in a sum equal to the amount of the balance unpaid on his subscription for stock. The same necessity for comparison, and the same words of comparison, equally apply in either view, the Only difference being, that the measure or standard by which the comparison is to be made, is, in one view, the nominal or face value of his stock, and in the other, the nominal or face value of the amount unpaid on his subscription for stock. But this ought not now to be regarded an open question in this court. We have, in numerous cases, without much discussion, it is true, held or assumed that language of the same, or substantially the same, import, meant what we have indicated, in our opinion, this means. Culver v. Third Nat. Bank of Chicago, 64 Ill. 528; Tibballs et al. v. Libby, 87 id. 142; Bromley v. Goodwin, 95 id. 118; Wincock v. Turpin, 96 id. 141; Harper v. Union Manf. Co. 100 id. 225; Eames et al. v. Doris, 102 id. 350; Thompson v. Meisser, 108 id. 362; Queenan et al. v. Palmer et al. 117 id. 619. And the same construction has been placed upon like language in New York and Pennsylvania. Slee v. Bloom, 20 Johns. 683; Briggs v. Penniman, 8 Cow. 395; Bank of Poughkeepsie v. Ibbotson, 24 Wend. 473; Matter of Empire City Bank, 18 N. Y. 218; Lane’s Appeal, 105 Pa. St. 57. Second—The next question is, should it affirmatively appear that appellant was a stockholder when the cause of action accrued, or is it sufficient that he was a stockholder when suit was brought? In our opinion, it is sufficient that appellant was. a stockholder when suit was brought. The liability is because of being a stockholder—that is, because of the ownership of stock. (Wheelock v. Kost, 77 Ill. 298.) As was said in Brown v. Hitchcock, 36 Ohio St. 681, “the expression, ‘all stockholders,’ must be regarded, in the absence of any legislative indication to the contrary, as including not only those who were such at the time the. indebtedness was incurred, but all those who successively stand in their shoes in respect to the same stock. ” The liability being because of the ownership of stock, it follows the stock into whosesoever hands it may go, and whoever purchases it, does so at the risk of this liability; and, in consonance with this view, we have held, that the liability once discharged, the stock is thereafter free of any further liability on account of ownership. Thebus v. Smiley, 110 Ill. 316. The rule is thus stated in Thompson on Liability of Stockholders, sec. 90: “But in the absence of special statutory provisions, the general rule, applicable alike to the English joint stock company and the American corporation, is, that liability as contributors, or to creditors, attaches not merely to those who are members at the time or before the debt was contracted, but to those who were such, either, first, when by reason of the stoppage, dissolution or winding up of the company, the right to transfer shares ceased; or, second, in the case of direct proceedings by creditors against shareholders, when the right of the creditors against the shareholder became fixed in an appropriate proceeding. ” See, also, to like effect, Middleton Bank v. Magill, 5 Conn. 28; Curtis v. Harlow, 12 Metc. 3; Holyoke Bank v. Bernbow, 11 Cush. 183; Johnson v. Summerville Dr. Bl. Co. 15 Gray, 216; McCulloch v. Moss, 5 Denio, 567; Matter of Empire Bank, 18 N. Y. 223; Johnson v. Underhill, 52 id. 203; McClaren v. Franciscus, 43 Mo. 464. The fact that we have held in Buchanan v. Meisser, 105 Ill. 638, and Thompson v. Meisser, 108 id. 359, that the stockholders, in such cases, are in effect partners, is not inconsistent with this view, since every assignment of stock makes a new partnership, .and the new partnership assumes the debts of the old partnership; and the rule in such cases permits the creditor to pass by the partnership primarily liable, and sue that having assumed the debt. See Bindley on Partnership, 455, 456, and notes. In Culver v. Third Nat. Bank, 64 Ill. 528, the present question was not considered. It was sufficient, there, that there was a right of recovery under the averments of the declaration. The remarks regarded as intimating contrary to the present ruling, were unnecessary to a decision of the question then being considered, and were not intended to announce any rule of law. Fuller v. Ledden, 87 Ill. 310, merely decides that the stockholder who owns stock when the debt is incurred, is liable; but that is not inconsistent with the liability of the owner of the stock at the time suit is brought. (Thebus v. Smiley, supra.) Hull v. Burtis, 90 Ill. 213, turned on the question whether the suit should have been in the name of the corporation, or in that of the creditor. And so, in our opinion, the demurrer was properly overruled as to both counts of the declaration. The judgment is affirmed. Judgment affirmed.