The Assistant Vice-Chancellor.
Several of the points presented on the part of the defendant, have been settled by various adjudications in our courts of law and equity. Thus, it is decided in the court of last resort, that the act to authorize the business of banking, usually called the General Banking Law, is constitutional, although on its passage it did not receive the assent of two-thirds of the members elected to each branch of the legislature. ( Warner v. N. A. Trust and Banking Co., 23 Wend. 103 ; Farmers Bank of Hudson v. Livingston, Dec. Term, 1845, not yet reported.(a)
It has also been decided in the same court, in the supreme court, and by the chancellor, as well as by the assistant vice-chancellor, that the associations organized in pursuance of the act, are corporations, and as such are liable to the provisions of law in respect of monied corporations, except where such provisions are inconsistent with the special legislation relative to these associations. Indeed this proposition was decided in the suit of Boisgerard v. The New York Banking Company, in which the complainant was appointed receiver, in both branches of this court in the first circuit, and by the chancellor on appeal from the order for a receiver.
That order, and the final decree in the suit of Boisgerard, decide two other questions, viz.: that Boisgerard was a creditor of the N. Y. Banking Company; and. that the association had subjected itself to the proceeding which resulted in the appointment of a receiver. These are questions which are not open to inquiry in a suit against the defendant as a stockholder of the association.
[486] All these points were presented, for ulterior purposes, and it is sufficient to notice them thus briefly.
The right of the receiver to bring this suit, under the provisions of the revised statutes relative to Proceedings against Corporations in Equity, is adjudged, so far as I am concerned, in the case of Mann, Receiver of the Catskill and Canajoharie R. R. Co. v. Pentz, January 6, 1845, not yet reported;(a) in which case, I gave the subject a thorough consideration.
The same decision overrules the objection that the receiver’s remedy to compel stockholders to fill up their stock, is at law and not in equity.
In this case no action at law could be maintained, for the reason that no calls had been made for the unpaid amount of stock.
As to the remedy being at law for legal causes of action, and in equity only when there is no legal remedy; it may be answered, that the statute gives a new remedy for a new state of things, and expressly declares it may be pursued at law or in chancery.
It was said that the act was unconstitutional, as depriving the party sued in equity of the benefit of a jury trial. Without entering at large upon so grave a question, I think this defendant is not at liberty to urge such an objection. The legislature created new rights and privileges, and new remedies in respect of such rights, and the defendant voluntarily subjected himself to both. He cannot accept the franchises conferred, and repudiate the terms and conditions with which the legislature accompanied them.
It was also objected, that the receiver should have brought into the suit all the stockholders of the association, so that the court could enforce contribution as should be just.
The statute provides otherwise, in the 69th section of the title before mentioned. (2 R. S. 469, § 69.) A joint suit, in order to carry out the idea of contributions, would require all the claims against the corporation and all its assets to be adjusted, and [487] would, I apprehend, prove to be a very slow process for creditors.
These are all the formal or preliminary points, which it is necessary to notice, and I now come to the interesting question in the cause ; is the defendant liable by reason of his subscription to the capital stock of this association, to pay to the receiver, the amount remaining unpaid on such stock, so as to make the same full stock ?
The act to authorize the business of banking, (Laws of 1838, chapt. 260,) enabled any number of persons to associate and establish banks, and expressly conferred on the institutions organized under it, subject to the prescribed limitations, all the powers usually exercised by the banks previously incorporated in this state. They were authorized to discount bills, notes, and evidences of debt; to receive deposites ; to issue bank notes for circulation ; to buy and sell bullion, coin, and bills of exchange; to loan money on real and personal security, and to exercise all incidental powers necessary to carry on such business.
The 15th section of the act provided, that the aggregate amount of the capital stock of any such association, should not be less than $>100,000.
By the 16th section, the associates were required to make a certificate under their hands and seals, which should specify; “ 1. The name assumed to distinguish such association, and to be used in its dealings. 2. The place where the operations of discount and deposit of such association are to be carried on, designating the particular city, town or village. 3. The amount of the capital stock of such association, and the number of shares into which the same shall be divided. 4. The names and places of residence of the shareholders, and the number of shares held by each of them respectively. 5. The period at which such association shall commence and terminate.” This certificate, was to be duly acknowledged or proved, and recorded in the clerk’s office of the county where the association should be established, and a copy was to be filed in the office of the secretary of state.
The 19th section made the shares transferable, and imposed upon all who became shareholders by a transfer, the rights and liabilities of the prior holder of such shares. And no change [488] should be made in the Articles of Association by which the rights, remedies, or security of existing creditors, should be weakened or impaired.
By the 20th section, every association by its .original articles, might provide for an increase of its capital from time to time.
By section 26th, each association was required on the first Mondays of January and July in every year, to make and transmit to the comptroller, a statement upon oath, containing amongst other things,
“ 1. The amount of the capital stock paid in according to the provisions of this act, or secured to be paid.”
“ 8. The amount of the losses of the association ; specifying whether charged on its capital or profits, since its last preceding statement, and of its dividends declared and made during the same period.”
“11. The amount which the capital of the said association has been increased during the preceding six months, if there shall have been any increase of the said capital,” &c.
By the 28th section, “If any portion of the original capital of such association shall be withdrawn for any purpose whatsoever, whilst any debts of the association remain unsatisfied, no dividends or profits on the shares of the capital stock of the association, shall thereafter be made, until the deficit of capital shall have been made good, either by subscription of the shareholders, or out of the subsequently accruing profits of the association,” Ac.
The Articles of Association of The New York Banking Company, provide that the capital stock of the association shall be one million of dollars, divided into ten thousand shares of $100 each, and may be increased to twepty millions of dollars. By the sixth article, this increase might be made by the board of directors from time to time, either by subscription, or by a sale of the shares, until the twenty millions should be subscribed and paid for, or secured to be paid, as the directors might require. And “If any shareholder shall omit to make payment, pursuant to any call of the directors, for an instalment or instalments due on the stock standing in the name of such shareholder, or omit to fulfil any of the covenants and agreements of this contract, the shares held by such stockholder shall be forfeitéd to the use of [489] the association, together with all previous payments made thereon.” Article 7th allowed the association to commence business, as soon as $100,000 of its capital was subscribed for and paid. After the end of six years, shareholders owning one-fourth of the capital paid, might annually designate one director who should retire, and an election should then ensue to fill the vacancy. (Article 8th.)
The defendant signed and sealed the Articles of Association, and annexed to the same was an agreement of the same 'date, which all the associates signed, including the defendant, and which is in these words:
u We, the undersigned, do hereby subscribe for and agree to take the number of shares set opposite to our respective names, as shareholders of The New York Banking Company, having paid an instalment on the same, at the time of subscribing, of five dollars on each share, and we do bind ourselves and assigns, to fulfil all the covenants and engagements contained in the Articles of Association.” The defendant set twenty-five shares opposite to his name, upon this instrument.
The Articles of Association and agreement appended, were proved and recorded in pursuance of the act, and a copy was filed in the secretary’s office; and the association commenced business as a banking company.
The defendant contends, that his obligation by his subscription, was merely to take the twenty-five shares, which he has done; that he incurred no personal liability to 'pay for such shares; and that the only remedy which the association had, for his omission to pay the calls upon his stock, was to forfeit it to the use of the association, under the sixth Article.
I think this is altogether too restricted a view of the effect of his subscription for this stock.
The provisions of the General Banking Law, to which I have referred, demonstrate that the legislature had no intention to create banks without actual capital. For more than thirty years previous to the passage of that act, the business of banking had been a privileged pursuit in this state, variously guarded by penal laws, and its exercise conferred only by special acts of [490] legislation. By the general banking law, it was designed to throw the business open to the public, so far as to dispense with special charters ; but in no respect departing from the system of prescribing and defining its limits, and preventing frauds and abuses upon the community, which had so long been a marked feature in our legislation. Hence the various restrictions as to circulating notes, the capital stock, &c., which are contained in the act of 1638. No, institution could organize under it, with a Jess capital than $100,000. The privileges conferred, and the prior course of legislation show, .that this was intended to be actual capital, and not nominal; a substantial reality, not a bubble. The exemption of stockholders from personal liability for the debts of the association, affords a further reason for the legislature’s insisting upon a known and actual capital. The subsequent provisions confirm this view, so as to leave no room for a doubt. The certificate, which was to make known to the public the existence, sphere of operations, and resources of the bank, was to specify the amount of its capital stock, and the number of shares composing it, and by whom they were held. The capital stock might be increased from time to time, not by paying in upon the capital first subscribed and set forth in the certificate ; but by an addition to such original capital; precisely as the Articles of the New York Banking Company prescribe. Then in the semi-annual statements, which were to be filed with the comptroller, in order to keep the community informed of their progress'and stability, each association was required to state the amount of its capital stock paid in according to the provisions of the act, or secured to be paid.
Now the act makes no provision in express terms, for the paying in of the capital.. But the paying in or securing it, is a necessary consequence of the provisions, that the capital stock shall not be less than $100,000, and that the amount of it shall be determined upon and specified, in the certificate upon which it becomes organized.
The semi-annual statement is to show the amount of its losses, and to specify whether they have been charged on its capital or profits. Here again is evidence that the word capital, throughout, means not a name, but a thing; not a nominal sum para[491] ded to a credulous public, but a sum fixed by the organic articles, and actually paid or secured.
So of the 28th section of the act; it does not admit of the possibility of a nominal capital. It treats of a withdrawal from a paid up capital, and designates the same as the original capital.
To test this proposition farther, I will suppose that the.Ne.w York Banking company had set out with a capital of $ 100,000, in shares of $100 each; so subscribed and so stated in its articles and filed certificate; and the defendant had appeared, as he now does, a subscriber for twenty-five shares.
I will also suppose that the shareholders had paid in proportion, as they have in this case, and that the defendant had paid in cash and dividends, fifty per cent, on the amount of his stock. What kind of a return to the comptroller could this bank make? Could the president or cashier, make oath that its capital was $100,000, paid in, or secured to be paid ? Assuredly not. Only half is paid in; and the other half is neither paid, or in any manner secured, on the defendant’s view of his subscription.
Would not the return show on its face, that the bank had no legal existence, and that it was usurping the franchises intended to be granted by the act ?
These brief considerations, which might be much extended, and probably to the advantage of the argument, convince me that the capital stock fixed by these associations, and specified in their certificates, is an amount which the legislature required to be paid, or secured to be paid, as the foundation of the operations which the statute permitted to them.;; And that such payment or security, of the known and designated capital, was a part of the declared policy of the law, and was imperatively demanded for the public security. A different construction, would subject the community to the evils of a horde of showy but irresponsible institutions, which under the imposing title and provisions of this act, might swindle the credulous and the unwary, without restraint or redress.
Such being the character and intent of the law, what did the defendant undertake, when he subscribed these articles of association? He thereby declared to the public and his colleagues, that he was one of a number of associates in this bank, that its capital should be a million of dollars, and that he had subscribed [492] for and agreed to take twenty-five hundred dollars of such stock. He contracted, and made this declaration, in direct reference to the statute, and the statute itself thus became a part of his undertaking. ■
Is his agreement satisfied or fulfilled in any sense, by his simple signature to the articles and certificate ? Is that a taking of the shares, within the meaning of the statute and articles.
It seems to me there can be no doubt upon these questions. When the defendant subscribed for and agreed to take this stock, he contracted to become a stockholder according to the banking law. He agreed to receive, and pay up or secure, $2500, of the capital stock of this company. It was this undertaking, that he put forth to his associates and to the community; and he could scarcely have imagined that his subscription imposed no personal liability, unless he was willing to lend his name to a scheme which was more likely to prove dishonest and fraudulent, than' to promote any honest purpose.
His subscription imposed upon him, by force of the act, the duty of paying for his stock, or securing it to be paid, and the .duty is recognized by'the language of the sixth article. The law implies an obligation from this duty, upon which an action may be maintained. The articles it is true, in effect require that calls, should be made by the directors, and probably the association could not maintain an action at law, until such calls were regularly made ; but that does not impair the remedy in behalf of the receiver. The provision for the forfeiture of the shares does not affect this construction. If that were the only remedy, the statute which is paramount to the articles, would be evaded • and infringed. The law requires payment or security, up'on such a subscription, and forfeiture of stock, is not a compliance with its requisition. It might result in payment, but such a result is never probable. The subscribers would pay, if the stock were worth purchasing.
Nor is the “ capital stock,” in this bank, to be deemed only $100,000, within the meaning of that, term in the bankin g law. The associates provided that they might commence business when $100,000, was paid in ; but at the same time, they agreed [493] with each other, and declared to the world, that the capital stock should be a million.
I am by no means satisfied that Í ought not to hold the defendant liable to pay the full amount of his shares, upon the terms of his written contract, without reference to the statute. To “ subscribe for” shares, in one of the ordinary significations of the word, subscribe, is to promise to give the thing subscribed for, or to - contribute to the undertaking accordingly. In this case, it would be equivalent to a promise to contribute $2500, towards the capital stock of the bank. So when he agreed to take twenty-five shares, what was this but an agreement to receive the shares, and get them into his possession, which could only be effected by paying for them. One who agrees to take a thing, which is the subject of price or compensation, ex vi termini, agrees to pay for such thing, the price attached, or what ever it is worth. But without resting upon the language of the defendant’s subscription alone,, my conclusion upon the articles, the subscription and the statute, is clear and unhesitating, that * he was personally liable to pay the full amount of the capital stock which he subscribed.
it was insisted by the defendant, that the banking law, as well as the articles of Association, expressly exempted him from personal liability for the debts of the association. This is very true, but it does not apply to the case. This suit is brought to compel the defendant to pay his own debt to the association. It is not an attempt to subject him to the debts due from the company, any farther than it requires him 'to make good his subscription to the capital stock, on the faith of which the company acquired a corporate existence, and the power and credit to contract obligations.
I have thus considered the question upon principle, because the authorities in this state, were deemed by the defendant’s counsel, inconclusive ; and I believe the point has not been expressly decided, either in this court or the court for the correction of errors.
I will next recur to those authorities. The first case is that of the Union Turnpike Company v. Jenkins, (1 Caines R. 381.) The subscription contained an express promise to pay, and one [494] contested question was, whether there was any consideration to support it. The court decided that the interest in the shares of stock acquired by subscribing, was a sufficient consideration to support the action. The charter required ten dollars On each share to be paid at the time of subscribing, and as it did not appear that the defendant had complied with this condition, Lewis) Chief Justice, dissented, on the ground that the defendant had not become a member of the company.
On the latter ground, the judgment was reversed in the court for the correction of errors, 1 Caines C. in E. 86. One senator pronounced an opinion for reversal, for this and the further reason that the charter authorized the company to forfeit the stock for non-payment of the calls. But the chancellor held the latter to be a cumulative remedy, and the decision has always been regarded by the courts, as proceeding on the other ground exclusively. (See Goshen Turnpike Company v. Hurtin, 9 Johns. 217, per Curiam ; Dutchess Cotton Manufactory v. Davis, 14 Johns. 244, per Thompson, Ch. J.)
It is difficult to perceive wherein an express promise in these subscriptions, enhances the liability. The consideration which is requisite to sustain such a promise, is raised by inference of law, from the subscription itself and the privileges thereby conferred. From the same circumstances, will not the law infer a duty to pay for the stock, and an implied obligation of equal validity with an express promise ? I think it will, in the usual forms of subscription, where there is nothing in the charter repugnant to such an inference; and many of the adjudications appear to sustain this principle.
In the Goshen Turnpike case, above cited, the decision was that an action lies against a stockholder, on a note given for shares, payable in instalments as the corporation should require. The court say that an action would lie for the instalments, on a subscription for the stock, promising to pay the amount.
In the Highland Turnpike Company v. McKean, (11 Johns. 98,) and the Dutchess Cotton Manufactory v. Davis, (14 ibid. 238,) the actions were maintained on the subscription, containing an express promise to pay.
The Harlaem Canal Company v. Seixas, and v. Spear, (2 [495] Hall’s Rep. 504, 510.) in the New York Superior Court, are to the same effect. The cases were upon demurrer, and the promise averred in the declaration, might therefore be assumed to be express. In Spear v. Crawford, (14 Wend. 20,) which was an action against a stockholder of the Harlaem Canal Company, at the suit of a creditor, the defendant had done no act whatever as a stockholder, except to sign a paper, by which he agreed to take sixteen shares of the capital stock of the company; and the court held him to be liable. Judge Sutherland, delivering the judgment of the court says, 11 The promise of the defendant and the other subscribers, although it is,in form, to take the shares subscribed by them respectively, is undoubtedly, (when taken in connection with what precedes it, and with the act of incorporation, which is there referred to and in part recited,) a promise not only to. take the shares, but to pay for them, to take them upon the terms and conditions set forth m the subscription paper; and the corporation could, undoubtedly, in the appropriate form of action, and upon a declaration containing the necessary averments, have enforced payment of the subscription price of the shares, from the subscribers.” In The Herkimer Manufacturing and Hydraulic Company v. Small, (21 Wend. 273,) and again before the supreme court in 2 Hill’s R. 127, the court assume it to be the settled law, that a stockholder is liable by force of his mere subscription for the stock, without an express promise.
In The Troy Turnpike and Rail Road Company v. McChesney, (21 Wend. 296,) the promise of the subscribers to the stock was express, but it was to pay ip the manner specified, upon pain of forfeiting to the company all previous payments made thereon.” The court decided that the company could recover on this subscription, and that it might be counted upon as an absolute promise.
These authorities go far to show that the settled. law of this state is, that one who subscribes for shares, or agrees to take shares, in an incorporated company, thereby becomes liable to pay the amount of such shares to the company.
On another point presented in this case, they are perfectly decisive, viz, that the authority, to forfeit the stock for the non payment of instalments, does not take away or impair .the right of action against the stockholder upon his subscription, and that [496] the remedy by forfeiture is cumulative. This was held in 1 Caines R. 381, and in several of the subsequent cases which I have cited. The Herkimer Manufacturing Company case, (21 Wend. 273,) went farther, and decided that an actual forfeiture of the shares did not preclude an action for the sum payable thereon, unless the value of the forfeited shares was equal to such sum. If the value were less, the company was entitled, to recover the difference.
This subject has been much discussed in the courts of the different states. In Massachusetts, it is held that a subscriber is not liable upon his subscription for stock, unless he expressly agrees to pay. See the cases collected in Angelí and Ames on Corporations, 419 to 426, 2d Ed.
In the Worcester Turnpike Corporation v. Willard, (5 Mass. 80,) the court nevertheless enforced an express promise to pay assessments on the shares, although there was a clause of forfeiture superadded. Similar in principle is the Bear Camp River Company v. Woodman, (2 Greenleaf, 404.)
The courts in New Hampshire and Maine, appear to have adopted the rule as established in Massachusetts.
In Vermont, it is held that an action of assumpsit, may be maintained upon the subscription, without an express promise, where the charter or by-laws provide no other remedy for the recovery of assessments. (Essex Bridge Company v. Tuttle, 2 Vermont R. 393.)
In the case of Instone v. The Frankfort Bridge Company (2 Bibb, 576,) the action was assumpsit against a stockholder, counting upon a subscription for twenty shares, and a call by the directors. There was no express promise or provision for payment. The court of appeals in Kentucky, sustained the action, on the grounds which I have attempted to illustrate in this suit.
In that case, the charter contained a clause authorizing the directors to forfeit the stock for non-payment, and the directors had proceeded to order a sale of the defendant’s shares, and had advertised them and offered them accordingly. Two shares .were sold, and they could obtain no bid for the others. The court held that the forfeiture was a cumulative remedy, and did not interfere with the one by action.
[497] The principle upon which this bill is maintained, was decided in Dugan v. The Mayor &c. of Baltimore, (1 Gill & Johns. 499.) The charter of the city of Baltimore authorized the laying of taxes, and the collection of the same by distress. It w'as adjudged that the corporation could maintain an action of assumpsit for a tax regularly imposed. In the previous case of The May- or &c. of Baltimore v. Howard, (6 Harr. & Johns. 383, 394,) the same ground was taken by the court, but the decision was on another point, viz., that where a distress or action was authorized for the recovery of a tax, they were cumulative remedies. In Bend v. The Susquehanna Bridge and Banking Company, (6 Harr. & J. 128,) an action was maintained for instalments called on the stock, against the assignee of shares from an original subscriber. The court say that a subscription for the stock, or the taking a transfer, raises an assumpsit to pay all calls regularly made. .
But the case which from its intrinsic merit and unanswerable argument, outweighs all the others, was decided in 1838, by the supreme court of errors in Connecticut, and it is precisely in point. I refer to the Hartford and New Haven Rail Road Company v. Kennedy, (12 Conn. R. 499.) The action was assumpsit to recover the assessments on ten shares of stock which Kennedy had subscribed for in that company. The subscription contained no promise. Its operative words were, “ we do hereby subcribe to the stock of the said rail-road, the number of shares annexed our names respectively on the terms, conditions and limitations mentioned in the said resolution,” (incorporating the company.) The 13th section of the charter provided that the directors-might require payment of the sums subscribed to the capital stock, as they might deem fit, and in case any stockholder should refuse or neglect to make payment, his stock might be sold by the directors, after six months from the time when the payment became due. The court decided that from the relation of stockholder and company created by the charter and the subscription, a promise by the defendant, was implied to pay the instalments on the shares; and that the remedy given by a sale of the stock of delinquent shareholders, was cumulative merely, and left such promise in full force. The opinion of the court was delivered by [498] Mr. Justice Huntington, with an ability and cogency of reasoning which has excited my highest admiration, and which it would be vain for me to attempt to imitate. It is in my judgment, unanswerable upon the great question involved, the force and effect of a subscription for shares in these stock corporations; and it is reposed upon the solid foundations of the end and design of the legislature, and the sense and meaning of the act of subscription.
The learned counsel for the defendant, argued that the rail road case differs from this, in the fact that there was an express authority in the charter, to require payment of the stock, Avhile here no such power is given. This is true as to an express power, for the general banking law contains none. But it of necessity confers on every association organized under.it, the power ■to call in its capital stock, either by its directors or by such other officers as the persons associating may designate. This power is essential to the existence of the association as a legal entity.
In several of the Massachusetts cases, the charters and statutes confer an express authority to require the payment of the stock by instalments, but this Avas never held to render subscribers liable. In 12 Conn. R. 530, (The Hartford R. R. Co. v. Boor-man,) on the same charter before stated, a stockholder who derived his stock by a transfer from an original subscriber, and received a certificate from the company, was held liable to pay the instalments subsequently called for, in an action of assump•sit.
These decisions in Connecticut, although they are not authority here, command my entire assent and concurrence.
The Society for the Illustration of Practical Knowledge v. Abbott, (2 Beavan, 559,) is analogous in principle. There, four projectors of a public company, obtained a charter, by which they and all persons Avho might become subscribers, were incorporated. The capital was declared to be £.20,000, which was to be divided into 400 shares. The four projectors advanced and expended in the prosecution of their enterprise, about £8000, and before any other subscribers joined, they divided the 400 shares among themselves, agreed to call their investment £16,000, and the balance, £4000, they paid to the corporation. After this# [499] they disposed of a large number of the shares. On the facts becoming known to the new shareholders, a bill was filed by the corporation against the four projectors, to compel them to pay up the full consideration of áJ20,000, for the shares they had originally taken. Lord Langdale, Master of the Rolls, sustained the bill, and held that it was not competent for them to take the shares without paying the full consideration, although at the time they were the only persons interested in the company.
The authorities to which I have referred, with the few exceptions stated, concur in maintaining the principle upon which I deemed the defendant liable to pay for his shares of stock, and are decisive by their weight and character.
The defendant being liable by force of his subscription for the stock, the resolution of the directors in September, 1841, not to make any further calls upon the shares, was unavailing to discharge his obligation in respect of the association and its credk tors. (See Mangles v. The Grand Collier Dock Company, 2 Railw. Cas. 359, & 10 Sim. 519.) A subsequent board might have rescinded the resolution, and a receiver acting for creditors must disregard it.
Another question of moment arises in respect of the dividends declared, and which were so arranged as to be cotemporary with the payments of three of the instalments called in on the capital stock, and were applied to the discharge of such instalments.
The 28th section of the general banking law, prohibits dividends by withdrawing the capital stock, or out of profits while the paid up capital is deficient, so long as there are any debts ow? ing by the association. And the law relative to monied corporations, (1 Rev. Stat. 589, § 1,) makes it unlawful for such corpo-' rations to make dividends, except from their surplus profits.
The defendant was an active director of the New York Banking Company, and must be deemed chargeable with knowledge of the state of its affairs. According to the statutes, which I have just cited, his right to receive and apply the dividends in question, depends on the state of the institution, and the existence of surr plus profits.
There is some doubt upon the testimony, whether the two first dividends did not exceed the profits actually earned when they [500] were paid, but the point is not so clear as to authorize me to say that any part of those dividends was made by a withdrawal of the capital.
In regard to the third dividend, payable Nov. 1, 1840, it is clear to my mind that it ought not to have been made. The Hernando Rail Road and Banking Company, had failed long before that period, to meet its engagements with the New York Banking Company, and the balance against it on the books of the latter company, was at that time more than $112,000. The failure of the Hernando Company, had been communicated to the board of directors of the New York Banking Company, in April, 1840, and again on the 19th of October, 1840, when the dividend was declared. I have no doubt but that the directors believed what the president hoped, that there would be no ultimate loss from this debt, and that they declared the dividend in good faith; but I think it was improvident and improper, to divide their apparent surplus, when nearly a third part of their whole capital was locked up in a suspended debt of an uncertain, if not doubtful character. In support of this opinion, I refer to the chancellor’s observations in De Peyster v. The American Insurance Company, (6 Paige, 486 ;) and Scott v. The Eagle Fire Company, (7 ibid. 198.)
The consequence is, that the credit which the defendant received upon his capital stock for the amount of the third dividend, is'not to be regarded as a payment of such amount, and the same is still due and payable upon his subscription.
In regard to interest upon the unpaid balance of the defendant’s stock, the rule at law appears to be, that the shareholder is liable for interest on the sums called in on his stock, from the times when the calls are payable respectively. By analogy to this rule, it will be proper to charge the defendant with interest from the day fixed in the receiver’s advertisement under the statute, for the debtors of the association to make payment, which was the 15th of January, 1844.
As to costs, I have with some hesitation concluded that the defendant should not be charged with the complainant’s costs, and they must be borne by the fund. This is a pioneer suit, presenting a question of great importance, and which was an open question in this court. The defendant has made the litigation . [501] more burthensome than was necessary, but on the other hand the complainant claimed more against him than he was entitled to recover.
The decree will direct the defendant to pay to the receiver the unpaid balance of his twenty-five shares of stock, without any credit for the third dividend, and with interest from January 15, 1844. The amount can be ascertained and inserted in the decree, without going into the master’s office.