Court Opinion

ID: 7985247
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:24:47.900002+00
Date Added: 2024-06-11T16:35:07.846073
License: Public Domain

George, C. J.,
delivered the opinion of the court.
The object of this bill is to collect an alleged indebtedness of the Perkinsville Manufacturing Company to the appellant.
*737There were several demurrers, confessions thereof, and amendments to the bill; and, finally, a demurrer to the bill as amended was sustained, and leave given to the complainant to amend further, which he declined to do. The bill was dismissed, and the complainant appealed.
The bill is liable to the objection of vagueness and uncertainty in some of its most material allegations. It is difficult, if not impossible, to learn from the bill the nature and character of the appellant’s debt, even to the extent of being able to decide upon the objections raised by the demurrer, “ that the breach of the obligation sued on creates no right in favor of the complainant, and that the agreement on which the obligation is founded is ultra vires the corporation.”
It is the duty of the complainant to set out his casein plain, positive, and perspicuous language, so that his meaning may not be mistaken. Por the failure of the bill in this respect, the demurrer was properly sustained.
The appellant is a stockholder in the Perkinsville Manufacturing Company, and he also claims to be its creditor ; and by his bill he seeks to recover from the other stockholders, under a provision of the charter of that company, hereinafter to be set out, the amount of his debt. The bill is filed also in behalf of all the creditors of the company, and is against all the stockholders. The company itself is not made a party, which would have been the regular course in a bill of this character (a creditor’s bill), since it is not clear, from the alie-gations of the bill, that the company is either dissolved or entirely without assets.
The main point raised by the demurrer denied the right of the complainant, upon the ground that he was not a creditor of the company, because he did not show in his bill that the company was sufficiently organized under its charter to make the contract sued on, at the time it was made. This position is founded on the second section of the charter (Sess. Laws 1870, p. 194), which provides “that the capital stock of the said company shall amount to $60,000, and may be increased, *738at the option of the stockholders, to $500,000, and that it shall be divided into shares of $100 each.”
The obligation sued on is dated in September, 1872, and is signed by the president and secretary of the company. The authority shown for the action of these officers is a resolution and a by-law passed by the stockholders, dated in December, 1871.
The bill alleges that $60,000 of stock was subscribed before the execution of this obligation, but it does not aver that this subscription was made before the date of the resolution and by-law which constitute the authority for making the contract. The chancellor sustained the objection; but in this we are unable to agree with him.
It will here be noticed that this is not a bill by a creditor to collect the unpaid balance of stock due by a stockholder to the the company, as was the case of Vide v. Lane, ante, p. 681, but a suit to enforce a personal liability of the stockholders for ■all the debts of the company. So that the only points to be decided are>, first, whether the obligation which the complainant sued on is a valid debt of the company; and, second, whether the circumstances exist which, under the provisions of the charter, make the stockholders liable for the debts of the company. It is, therefore, wholly immaterial whether the stockholders were liable to assessments on their stock, in virtue of the failure of the subscriptions to amount to $60,000, except so far as such failure may, in law, be an obstacle to the due organization of the company, and the creation by it of the debt sought to be enforced.
In charters which are mere propositions for the organization of a corporation, and which require certain acts to be performed precedent to the existence of the corporation, no corporation can exist, and of course no corporate act can be performed, till these conditions have been complied with. In all such cases, where a certain amount is named in the charter as necessary to be subscribed as the capital stock of the company, such subscription is regarded as a condition precedent to the *739existence of the corporation, unless otherwise provided in the charter. Persons, therefore, who subscribe for stock under such a charter have a right to assume that they will not be called upon to pay until the amount named in the charter shall be subscribed; and, accordingly, in that class of charters it has been held that subscribers for stock are not liable to assessments on their stock until the full amount of the subscription has been made. But this rule does not apply if there be any thing in the charter which shows a right in the corporation to make the assessments before the full amount of the stock is subsci’ibed, as was decided in Selma and Marion Railroad Company v. Anderson, 51 Miss. 829.
The chai’ter of this company is not of that character. By the first section of it, it is provided that the twenty-one persons named in it, “ and all others who are now, or may hereafter become, associated with them, and their successors and assigns, be, and they ai’e hereby, ci’eated a body politic and corporate, under the name and style of the Perkinsville Manufacturing Company,” etc. This was no proposition to create a corporation upon the performance of precedent conditions, but it was itself the creation of a corporation, requiring no other act to be performed bjr the corporators than their acceptance of the chai’ter; and this, even, was unnecessary, if, as it is probable, the corporators had applied for the grant of the charter, and thus accepted it in advance. Action under the charter would be an acceptance of it, and hence there never could be any question as to the existence and due organization of the corporation, when determining upon the validity of a corporate act done within its charter powers; for the performance of the act itself would be an acceptance of the charter.
The distinction between the two classes of charters is thus seen to be, that in the first class the charter is a mere permission on the part of the Legislature for the formation of a corporation, upon the doing of certain acts prescribed in the charter as precedent conditions, and, as a necessary result, no corporate act can be done until these conditions have been *740performed, except such as may be expressly permitted by the charter ; and as to those acts, it would be considered that the corporation had an existence before its full investiture with its corporate franchises. In the latter class, in which is this company, the corporation is in existence, for all the purposes of its creation, from the beginning, except so far as there may be restraints placed on it by the charter, either expressly or by plain implication.
As the bill alleges that the $60,000 of stock was subscribed before the execution of the obligation sued on, it is unnecessary for us to decide whether the charter so far restricts the power of the corporation to make contracts within the scope and purpose for which the charter was granted, as to prohibit the making of this contract until such subscription is made. But it is insisted that the corporation could not elect a president or board of directors, nor confer the power on them, when elected, to make contracts, until after the subscription of $60,000 of stock should be made; and for this reason it is urged that the obligation sued on, and which was made by the president and secretary on behalf of the company, should be held as made without the proper authority of the corporation.
We do not consider the position a sound one. There is no restriction in the charter upon the exercise by the corporation, from the moment of its creation, of any of its corporate powers, unless it can be implied from the terms of the second section, fixing the amount of the capital stock, as hereinbe-fore quoted.
It has been seen that the subscription of the prescribed amount of capital stock is not a precedent condition to the organization of the corporation, — that the corporation was created by the very terms of the charter, eo instanti with its acceptance by the corporators. The charter does not prescribe how nor when the subscription is to be made, nor the time at which the subscription is to be made payable, nor does it attach any disability to the corporation prior to the subscription. It makes no provision as to how the stock shall be *741divided among the corporators named, nor as to tbe terms on which new corporators should be admitted. All these were necessarily left to the discretion of the corporation, and the power to regulate those matters was also expressly granted to the corporation as it was created by the charter, by the provision contained in the first section of that instrument, that the corporation might “make all by-laws, rules, and regulations for the management of its business, property, and effects, and the transfer of its stock, as to them may seem best.”
Even if it were conceded that this corporation was within the rule recognized in Selma and Marion Railroad Company v. Anderson, supra, — that no assessments on the stockholders could be made until the whole amount of the capital stock was subscribed, unless otherwise provided in the charter, — it would not follow that, being in full possession of all its corporate powers, it could not elect a directory, president, and secretary, and confer on them the authority to make contracts within the scope of its powers, and that this authority could not be exercised after the subscription of the capital stock was fully completed. And this is the case made by the bill.
We therefore conclude that the obligation sued on was a valid corporate act, if the agreement upon which it was based was within the powers granted to the corporation.
The next question is as to the liability of the stockholders. The sixth section of the charter pi’ovides, “that, until $30,000 of the capital stock shall have been paid in, every stockholder of said company shall be held individually liable for the debts of the company.”
The bill alleges that $30,000 had not been paid in. The plain meaning of the provision is, that notwithstanding their corporate charter, the stockholders, as to the creditors of the company, are to be considered and treated as individuals and partners until a fund, deemed by the Legislature sufficient for the protection of creditors, should be paid into the treasury of the company.
*742It is this liability which the bill seeks to enforce. The stockholders are by the sixth section, above quoted, made jointly and severally liable for all the debts of the company. They are liable in the first instance, and not as guarantors of the corporation. Until the payment of the fund required by the charter, they are to be held as contracting all their obligations as partners, and liable directly on them to their creditors ; and they are liable to be sued on these obligations just as other partners are.
When the creditor is a partner, — as in this case, — he cannot sue at law, for he is himself liable to pay the debts of the company; and if he were to sue, and recover satisfaction from one of the stockholders, this payment would make the paying stockholder a creditor of the company, and he might in turn sue the complainant, and recover back the debt created by such payment. To obviate this, the complainant must come into equity, where there can be a full adjustment and settle ment of all the rights of the parties.
It is objected that the obligation of the stockholders is several and limited, and not joint. Our view is that each stockholder, just as a partner in an unincorporated association, is liable for all the debts of the company. But in a bill like this, it being brought in behalf of all the creditors and against all the stockholders, the court should ascertain the whole amount of the indebtedness of the company, and decree that all of it shall be paid, even if it can be collected from onty one of the stockholders; but, in settling the equities between the stockholders, each should be made to contribute in proportion to the amount of his stock. Should any of them prove insolvent, the solvent partners must bear the whole burden, as if they wei-e the sole stockholders. The complainant, being a stockholder, must contribute his share, both to his own debt and to all other debts which may be established.
Because the chancellor was of opinion that the stockholders were not liable unless there had been a subscription of $60,000 before any steps were taken to authorize the creation of *743the debt, and the complainant was probably unable to amend in this particular, we shall direct, in approving the chancellor’s decree, that it be modified so as to make the dismissal of the bill without prejudice; but the appellant will pay the costs in this court and in the court below.