Court Opinion

ID: 8057964
Source: CourtListenerOpinion
Date Created: 2022-09-09 04:34:53.748149+00
Date Added: 2024-06-11T16:37:56.031104
License: Public Domain

Vredenburgh, J.,
(dissenting.) The declaration in this case sets out that certain persons, on the 15th of July, 1853, became incorporated under the general manufacturing law, by the name of the Perry Patent Arm Company, and did certify “ that the capital stock was $300,000, and to commence business with a capital of $288,000, and did in all things comply with the provisions of said act; that the corporation, in February, 1854, and while the defendants were stockholders and officers thereof, became indebted to the plaintiffs in the sum of $3000, which went to judgment in September, 1855; that the said defendants, as officers of said corporation, on the 9th of January, ■1855., did, within thirty days after the payment of the last installment of the capital stock fixed upon as the *312amount of stock with which they would commence 'business, make a certificate, as required in tile act, by which' the defendants did, under oath, certify that the amount of capital stock with which, by the original certificate of incorporation, it was declared that the said company would commence business was $288,000, and that the whole amount so fixed upon had been paid into the treasury of the company in cash, the last payment (hereof having been made the 20lh of December, 1854, and did in all tilings comply with the said act in making and giving publicity to the said certificate. And (hen the declaration avers that the capital stock of $288;OQO, so fixed upon as' stated in said certificate, was not'paid into the treasury of said company in casi), as in said certificate, and publica-1 ti on thereof, is certified, and that said certificate and notice are false in said material representations, by meiut$ whereof the defendants, as stockholders and' officers off said company, became liable to the plaintiffs for the said debt of the said corporation. A verdict having been rendered for the plaintiffs, a motion is uow made in arrest:of judgment.
I think this declaration discloses no legal cause of action.
In the first place, it avers that, in July, 1853, the Perry Patent Arm Company was legally incorporated; that, in 1854, the corporation became indebted to the plaintiffs; that, in 1855, the defendants made this false certificate, by means whereof they became liable; so that this is a claim against the defendants, not as partners or as stockholders on account of any original credit given to them, or because of any scintilla of common law liability remaining in them notwithstanding the act of incorporation, but against them, as officers, for an act done by them long - after the credit was given. The question whether their common law liability as partners has been taken away by the act of incorporation, does not arise. The plaintiffs5 debt'was created solely upon the credit of the *313corporation, as such. For a long time after the debt was created, neither the stockholders nor the defendants, as officers, were individually liable. The claim is, that a year after the debt was created the defendants did an act which neither procured the credit, or did the plaintiffs any injury, but which, solely by force of the statute, made them personally responsible, not for their own debt, but for the debt of another. The plaintiffs cannot say that, in 1854, they trusted the corporation upon the credit that in 1855 the defendants would commit perjury. They could give credit upon no such speculation. If the defendants are liable at all, it is only because the statute has made them liable, as for a penalty, by matters subsequent, consequently their legal liability should be made clearly manifest.
In the next place, the declaration avers that the capita! stock was three hundred thousand dollars, divided into shares of one hundred dollars each, and to commence business with a capital of two hundred and eighty-eight thousand dollars ; that the defendants, as officers, did, within thirty days after the payment of the last installment of the said capital stock of two hundred and eighty-eight thousand dollars, certify that the whole amount of said last-mentioned capital had been paid in, in cash, and then avers that the same had not been paid in, in cash, by means of which falsehood the defendants became liable.
This is plainly a contradiction in terms. It seeks to hold the defendants liable by averring—1st, that the said §288,000 was all paid in ; 2d, that the defendants then certified that it was all paid in, in cash • and 3d, that it was not paid in, in cash.
Now is not the first proposition of precisely the same legal import and meaning as the second? It is an averment that the defendants had paid in two hundred and eighty-eight thousand what? horses, cattle, patents—no, but dollars. Are not dollars cash ? Is not a dollar as much an object of sense as a steamboat or a locomotive? Does *314not payment ex- vi termini, mean cash ? Can there be any possible difference between saying, I paid into the treasury one thousand dollars, and I paid therein one thousand dollars in cash? If one should say he paid into-the treasury $1000 in horses or patents, it would be equivalent to saying he did not put dollars or cash, but horses or patents into the treasury, which were of the value- of $1000;- So here, if the declaration had averred that the defendants paid into the treasury a patent of the value of $288,000, and then certified they had paid it in, in cash, there would have, been a difference in, the two propositions. But averring that they paid into the treasury two hundred and eighty-eight thousand dollars in cash, is in no way different from saying they paid in two hundred and'eighty-eight thousand dollars, unless it can be shown that dollars may not be cash; that payment in dollars may not be payment in cash. Not only is this the necessary construction of this language, but the legislature, all through this aet, nay, in the next preceding line in the very section under which it is sought to hold the defendants liable, have - demonstrated that such was their idea of'the meaning of the terms they were using. Thus the 19th section of the act of 1849 (Nix. Dig. 458) provides that the president and directors, with the secretary and treasurer, within thirty days after the payment of the last installment of the capital stock, (this it will'be observed is the language of the declaration) shall make a certificate stating the amount of the capital so paid in cash. This is the first time the word cash is used in the, act, and we must give significance to the word “so.” How paid in cash? The answer can only be, so paid in cash as the act had previously prescribed, which was only in dollars, showing that the legislature could not have eon tern plated,, that a payment in cash could be anything different, from the payment prescribed by the preceding portions of the act, otherwise they could not have said, so paid in cash.
But again-, the words in the act, “ in cash,” mean- either *315the same thing as payment of the capital stock, or it means something different. If it means the same thing, it can be used only by way of emphasis. If it means a different thing, then the act authorizes the payment of the capital slock in something else besides cash, to wit, in cattle, patents, &c. But wherever or however the capital stock is paid in, in any way, in pursuance of the act, the officers are compelled by the act to certify under oath and under the penalty of being liable individually for future debts of the company, that the capital has been paid in, ill cash; that is, when the capital has been paid in, in horses or patents, the officers must certify, under oath, that it has been paid in cash. Under this construction, the act commands the defendants to commit perjury under the penalty of becoming liable for all the future debts of the company. It is manifest, therefore, that the legislature used the words “so paid in cash” as synonymous with the kind of payment previously prescribed in the act. When, therefore, the declaration, pursuing the language of the act, avers that the capital stock has been paid in, the further averment that the defendants certified that it has been paid in, in cash, cannot, by possibility, be false. The declaration amounts to only this—1st, an averment that the capital stock was all paid in ; 2d, that the defendants then certified that it was all paid in; and 3d, that it was not paid in ; and thus1 commits suicide upon its face, and shows no legal cause of action.
This is not a mere inadvertence in the pleader, but grows out of the exigencies of the case, and must always continue to exist, however the declaration may be framed, as long as it is sought to hold the defendants responsible as officers and by way of penalty. This will appear from a further consideration of the case.
Suppose the allegation that the capital stock had been paid, be stricken out, so that upon its face it would appear that the certificate could, by posssibility, be false, would the declaration then show a legal cause of action? It is evident that the pleader did not so think, otherwise *316he would not have subjected Ills declaration to this criticism.
If the declaration be so amended, then if the defendants are responsible, it is conceded that it must be by virthe of the 19th and 30th sections of the act of 1849. Nix. Dig. 458.
This 30th section provides that “if any certificate made, or public notice given, by the officers of any company, in pursuance of the provisions of this act, shall be false in any material representation, all the officers who shall have signed the same shall be jointly and severally liable for all the debts of the company contracted while they were stockholders or officers thereof.”
It will be perceived that a certificate, to come within the purview of this section, must have two qualifications—1st, it ■ must be made in pursuance of the act; 2d, it must be false • in some material representation.
It is conceded that the certificate now in question was intended to be made in pursuance of the provisions of the 19th section ; and it is apparent that, if not made in pursuance of the provisions of this section, it is not made in pursuance of the provisions of any other. This 19th section provides as follows: “The president and directors, with the secretary" and treasurer of each company, within thirty days after the •payment of the last installment of the capital stock so fixed and limited, by the company, shall make a certificate stating the amount of capital so fixed and paid in, in cash.” If the certificate here in question- is made in pursuance of • this 19th section, and is also false in some material representation, it comes within the operation of the said 30th section ; but if it lacks either of these qualifications it does not.
Now this 19lh section commands that, after the capital is paid in, the officers shall certify it is paid in, in cash. A certificate made after the payment, is a certificate made in pursuance of tlie act; but there is no command in the section to make the certificate before it is paid in, and *317consequently a certificate before it is paid in cannot be made in pursuance of the provisions of the act. A certificate before payment is in pursuance of no provisions of the act. If it is so, in pursuance of what provision is it? can any one tell us ?
A. certificate in pursuance of the provisions of the act must be one that the' act authorizes or requires to be made, otherwise it is a mero voluntary thing, upon which the 30th section cannot attach its penalties. If the officers make it before the capital is paid in, they simply do an act which they were under no obligation of law or duty to do, which was not commanded or required by the statute to be done, and which they could not do in pursuance of, on the following of .the provisions of the statute. Their duty to certify, the command upon them to certify, their certificate in pursuance of the provisions of the act, could only arise and exist after the fact had happened, to wit, after the payment of the last installment of the capital stock. The only kind of certificate authorized and commanded by the 19th section is one to be made after, and not before the payment of the last installment, and therefore such certificate cannot by possibility be false. Falsehood cannot by possibility bo predicated, of a certificate made in pursuance of the provisions of the 19th section.
The penalties prescribed by the 30lh section could never have been intended to embrace certificates made in pursuance of the 19th section, because a certificate under the 19th section can, upon the very condition of its existence, have only one, and cannot have both the qualifications required by the 30¡h section. It cannot, at the same time, he made in pursuance of the act, and at the same time be false. If made in pursuance of the provisions of the act it cannot be false, and if false it cannot he made in pursuance of the provisions of the act. This difficulty, it is apparent, was staring the pleader in the face when he was drawing his declaration. He saw it would not do *318to show a -certificate made before payment of the last installment, even if it was false, or a certificate after payment, unless it was false, so he averred parts of both. But the inevitable result'of thus attempting to reconcile contradictions was, as we have seen, to force the declaration se ipsum murdrare.
But, again, it is manifest that the 30th section wás not intended to include those certificates called for in the 19th section, from the fact that the 21st section of the act' pre-. scribes specifically what shall be the penalty for a false certificate under the 19th section.
Jt is the legal presumption that when the legislature, in one section of an act, prescribes a duty, and in connection with it enacts the next section solely for the purpose of prescribing a specific penalty for its false performance, that they did not intend a subsequent section, providing much more severe penalties generally applicable to other provisions of the act, and without specifying the particular section for which they had so specifically provided, should extend to such section so specifically provided for.
Again, a reference to the history of the act will show that the 30th section does not relate to certificates under the 19th section.
The 19th and 80th sections of the act are identical, respectively, with the 20th and 32d sections of the act of 1846. The 32d section of the act of 1846 was intended to protect creditors, while its 20th section was intended to protect, not creditors, but stockholders. The act of 1846 was a wise and well-considered law, protecting all interests carefully, while its characteristic feature was to enforce the payment of the capital stock for the security of creditors.
Thus, by the 19th section of the act of 1846, the stockholders, notwithstanding their incorporation, were still liable, as partners, for all the debts of the company, until all the capital they were to commence business with was *319paid up : not only so, but if they made a new assessment upon their stock, or increased their capital stock, they thereby ipso facto again immediately became liable as partners, until every dollar of such additional stock was paid up: not only so, but were, after they had paid up their whole capital, whether original, or increased, or additional, still liable as partners, until the officers should have made and recorded such a certificate as we are now considering. But the officers might refuse or neglect to make or record such a certificate, and so the stockholders still remain liable as partners, notwithstanding they had paid up all their capital stock.
It was to relieve the stockholders in this regard, and not to secure creditors, that the 20th and 22d sections of the act of 1846, corresponding to sections 19 and 21 in the act of 1849, were incorporated in the act of 1846. They were intended to provide a punishment for the officers for neglecting to relieve the stockholders after all the capital was paid in, by certifying the fact of such payment.
In the 22d section of the act of 1846, a penalty was prescribed for neglect, to make the certificate after payment, because refusing to certify was the only way in which the officers could injure the stockholders; but no penalty was therein provided for the certificate being false, for two very obvious reasons—-1st, because such certificate could not by possibility be false; 2d, because, if the certificate was made before the payment, it could .not benefit or injure the stockholders. Their liability, notwithstanding such a certificate, would have remained as before, and until the whole capital was in fact paid up; nor could the certificate being false, or made before the capital was paid up, injure the creditors, because if false the creditors held not only all the property of the corporation, but also the personal responsibility of all the stockholders, whereas if the certificate was true, they could only hold the property of the corporation; so that, so far *320as this certificate under the act of 1846 was concerned, all the creditors had to fear was not that the certificate should be false, but that it should be true. It is not to be presumed that the legislature, in the 32d section of the act of 1846, corresponding to the 30th section of the act of 1849, in providing in the interest of creditors for acts which might injure them, intended to make the officers responsible for an act which could only benefit them* It is obvious, from the whole purview of the act of 1846, that the legislature, in the 20th and 22d sections of that act, were throwing guards around, not the creditors, but the stockholders, after they had 'paid up all their stock, and were not then contemplating the interest of the creditors.
But the act of 1849 was a very different affair from the act of 1846-. It seems to have been contrived for the sole purpose of emasculating the act of 1846 of all power to protect creditors. This was accomplished by passing the same act over again, only quietly dropping out of it its 19th section, and introducing a few immaterial alterations in some other sections by way of diverting the attention of the legislature from the real object. Under the act of 1849, I do not see why persons may not become incorporated without paying in a cent of the capital; they have certified they will commence business with, or of any of the capital afterwards called in, and that without assuming any responsibility as partners. The act of 1849, indeed, gravely retains the section requiring the officers to certify after all the stock is paid in, and creates a penalty for not doing so the same as before, but provides no means for compelling the stockholders to pay in a single dollar. As .the capital, under the act of 1849, need never be paid in, the officers can never be compelled to eeiv tifv; and if they do happen so to do under a mistake- of their legal duties, as it is apparent was the case here, it is a mere voluntary act, for which they incur no legal responsibility. When the act of 1849 dropped, the 19th section *321of the act of 1846, the 19th and 21st sections of the act of 1849 became mere dead matter, and should have been amputated from the body of the act. They belonged to and had no vitality, except as connected with the 19th section of the act of 1846, and should have been buried with it. There was nothing in the act of 1849 upon which they could operate. If it had simply been proposed to repeal the 19th section of the act of 18-16, it is doubtful if it would lmve got a vote in either branch of the legislature; if more than one section liad been dropped, it might have led to inquiry, but only dropping this 19th section, it would appear to have passed mb silentio. One member, indeed, seems to have been struck with some kind of vagrant instinct that there was something wrong somewhere. He became alarmed, not that the stockholders should not pay in their capital stock, but lest, after it was all paid up, the creditors should be cheated by the officers falsely certifying that it had been paid up. So he interpolated, in the 21st section, a special provision against that calamity.
It is somewhat amusing to see how the legislature, in attempting to create a penalty ibr falsity in a certificate, which by the very supposition upon which it was made could not by possibility be false, found themselves involved in the same contradictions that the plaintiffs did in framing their declaration. The 22d section of the act of 1846 provides that if any of the said officers shall neglect or refuse to perform the duties required of them in the 20th section of the same act, they shall be jointly and severally liable for all debts of the company contracted after the expiration of said thirty days and before such certificate shall he recorded. As the office of this section in the act of 1846 was to compel the officers, after all the stock was paid in, to file the certificate of that fact, so as to relieve the stockholders from longer responsibility, when the act of 1849, by dropping out the 19th section of the act of 1846, relieved the stockholders from all respon*322sibility. Whether the capital was paid in or not, the said ,22d section was of no further use. Still it was left in the act of 1849, some one interpolating in it, however, these words, “ or the certificate made by them shall be untrue,” so that the section now reads, if after the whole stock has been paid in, the officers shall falsely certify that it has been paid in, they shall be liable for all debts contracted after it has been paid in, and before such certificate shall be recorded.
Is it possible to compress a greater number of contradictions in the same space? After it is paid in, how can it be false to certify that it. is paid in, and what is the penalty prescribed ? Why, that the officers shall be liable for.all debts contracted after it is paid in. But as the complaint is that the capital has not been paid in at all, how can any debts be contracted after it is paid in ? In severe sequence, as just as it is logical, by way of punishing the officers for falsehood which could never be committed, they are made liable for debts which could never be contracted.
The mere striking the 19th sectiou out of the act of 1846, and retaining its other provisions in the act of 1849, raised no presumption that the legislature intended that the 30th section of the act of 1849 should apply to any more sections in the act of 1849, or have any broader application than it had in the act of 1846, and more especially not to the 19th section of the act of 1849, as the penalty for the violation of that section is specifically provided for in the 21st section.
I am of opinion that the certificates and notices named in the 19th section of the act of 1849 are not embraced within the provisions of the 30ih section, and that judgment must be arrested.
Affirmed, 4 Dutch. 533.