Waite, J.,
the resolve incorporating the Griswoldville Manufacturing Company, provides, that “the capital stock of the corporation shall not exceed fifty thousand dollars”—“that a share of the stock shall be one hundred dollars”—“ and that the directors may call in the subscriptions to the capital stock, by instalments, in such proportions, and at such times and places, as they may think proper, giving such notice thereof as the by-laws and regulations of the company shall prescribe.”
There is a further provision, that “the stock, property and affairs of the corporation, shall be managed by not less than three, nor more than five directors, one of whom they shall appoint their president”—and they shall have power “to make and establish such by-laws, rules and regulations, as they shall think expedient, for the better management of the concerns of the corporation, and the same to alter and repeal.”
1. The first enquiry, arising in this case, is, what obligation did a stockholder assume upon himself, when he subscribed for a share of the stock of this company? The answer obviously is, that he agreed to pay the sum of one hundred dollars, in such instalments and at such times, as should be required by the directors. There was no discretion left to him as to the times of payment, nor as to the amount, except that it should not exceed the sum of one hundred dollars. He had indeed a voice in the election of the directors; but when they were chosen, they were clothed with the power of making by-laws, prescribing the time and manner of paying the instalments upon the shares, and managing the affairs of the [598]*598corporation. Were they now to call in the balances due upon the shares, the stockholders could not successfully resist the demand.
This is not only apparent from the terms of the act of incorporation, but in conformity with principles settled by this court, in a very recent case. The Hartford and New-Haven Rail Road Company v. Kennedy, 12 Conn. R. 507. The defendant in that case had subscribed to the stock of a Rail-Road Company, and an action was brought against him to recover the amount of certain instalments on his shares, ordered by the directors to be paid. The judge who gave the opinion of the court, in that case, says, “Did the defendant, by becoming and continuing a stockholder incur a personal obligation to pay the instalments required by the directors, in the manner prescribed by the charter, on the shares by him originally subscribed, and held by him at the time such instalments were called for and were due? We think such an obligation was created; and the law coinciding, in this case, with justice and good faith, will enforce it. It is true, a promise to pay, in precise terms, does not appear to have been made. The defendant has not affixed his signature to an instrument which contains the words I promise to pay; but he has done an eqivalent act. He has contracted with the plaintiff to become a member of their corporation, and to be interested in their stock, to the extent of one hundred dollars for each share assigned to him, if that amount be required.”
And in a subsequent case, it was holden, that a stockholder, who derived his stock by a transfer from the original subscriber, and received a new certificate from the company, was personally liable to pay the instalments called for after the transfer. The Hartford and New-Haven Rail-Road Company v. Boorman & al., 12 Conn. R. 530.
The only difference between those cases and the present, is, that in the former the subscriptions were to the stock of a Rail-Road Company, and in the latter, to that of a manufacturing company. But the language, used in the two charters, is, in this respect, very much alike; and we discover nothing in the object of these companies requiring a construction to be given in one case different from that given in the other. The stockholders, therefore, are equally liable, whether they ob[599]*599tained their shares by purchase, or by virtue of an original subscription.
2. In the next place, does the amount of the shares subscribed, constitute the capital stock of the company, or only the amount actually paid in? Had these plaintiff’s, when they dealt with the company, and gave them credit, a right to look to the former, as a fund applicable to the payment of their debts, or only to the latter?
The unpaid balances of the shares are as much subject to the call of the directors, as any debts due the company. Payment can as well be enforced in the one case, as in the other. The directors can, at any time, collect those balances, and if sufficient, pay off the debts due the plaintiffs. And why should they not do it? What justice is there in withholding funds, at their command and applicable to the payment of those debts?
It is apparent, that it is not for their interest to do it. The charter requires them to be stockholders, and the bill alleges, that they are such, and actually own a large amount of the shares of the company. A call upon the stockholders for funds to pay off these debts of this insolvent company, would be in part a call upon themselves, and might materially affect their own interests. They may, therefore, prefer to let these creditors suffer, rather than become sufferers themselves.
But have they a right to do this. They, with others, have embarked in a business, perhaps hazardous, and as events have shewn unfortunate, expecting to share in the profits; and why should they not also bear their proportion of the losses?
It is true, the company was incorporated, and the members were not made liable, in their individual capacities, for the debts of the company but it was necessary for the company to create a capital before they could obtain credit. This was done by the subscriptions to the capital stock. In that, there was a limit fixed to their liability, beyond which they could not be compelled to go. No stockholder can be compelled to pay more than one hundred dollars on each share he owns, let the amount of the debts of the company be ever so great. All that is required of the defendants in the present case, is, that the members, shall discharge the obligations which they [600]*600assumed, upon becoming stockholders, or at least so much, as may be necessary to pay off the debts of the company.
Some stress has been laid, in the argument, upon the proviso in the act of incorporation, requiring the company, within three months from the passing of the act, to lodge a certificate with the town-clerk of Wethersfield, containing the amount of capital stock actually paid in and belonging to the company; and directing that it should not be withdrawn, so as to reduce the same below five thousand dollars; and further providing, that, if any part of the capital, paid in and certified, should be withdrawn, without the consent of the General Assembly, the directors allowing it should become liable, in case of the insolvency of the corporation. Hence it is insisted, that the capital thus certified, and not the amount of the shares subscribed, constitutes the stock of the company.
The act does not proscribe the amount of capital stock. It says, that it shall not exceed fifty thousand dollars; and the fair inference to be drawn from the proviso is, that it shall not be less than five thousand dollars. The company, therefore, might commence business with any capital between those sums.
Free access — add to your briefcase to read the full text and ask questions with AI
Waite, J.,
the resolve incorporating the Griswoldville Manufacturing Company, provides, that “the capital stock of the corporation shall not exceed fifty thousand dollars”—“that a share of the stock shall be one hundred dollars”—“ and that the directors may call in the subscriptions to the capital stock, by instalments, in such proportions, and at such times and places, as they may think proper, giving such notice thereof as the by-laws and regulations of the company shall prescribe.”
There is a further provision, that “the stock, property and affairs of the corporation, shall be managed by not less than three, nor more than five directors, one of whom they shall appoint their president”—and they shall have power “to make and establish such by-laws, rules and regulations, as they shall think expedient, for the better management of the concerns of the corporation, and the same to alter and repeal.”
1. The first enquiry, arising in this case, is, what obligation did a stockholder assume upon himself, when he subscribed for a share of the stock of this company? The answer obviously is, that he agreed to pay the sum of one hundred dollars, in such instalments and at such times, as should be required by the directors. There was no discretion left to him as to the times of payment, nor as to the amount, except that it should not exceed the sum of one hundred dollars. He had indeed a voice in the election of the directors; but when they were chosen, they were clothed with the power of making by-laws, prescribing the time and manner of paying the instalments upon the shares, and managing the affairs of the [598]*598corporation. Were they now to call in the balances due upon the shares, the stockholders could not successfully resist the demand.
This is not only apparent from the terms of the act of incorporation, but in conformity with principles settled by this court, in a very recent case. The Hartford and New-Haven Rail Road Company v. Kennedy, 12 Conn. R. 507. The defendant in that case had subscribed to the stock of a Rail-Road Company, and an action was brought against him to recover the amount of certain instalments on his shares, ordered by the directors to be paid. The judge who gave the opinion of the court, in that case, says, “Did the defendant, by becoming and continuing a stockholder incur a personal obligation to pay the instalments required by the directors, in the manner prescribed by the charter, on the shares by him originally subscribed, and held by him at the time such instalments were called for and were due? We think such an obligation was created; and the law coinciding, in this case, with justice and good faith, will enforce it. It is true, a promise to pay, in precise terms, does not appear to have been made. The defendant has not affixed his signature to an instrument which contains the words I promise to pay; but he has done an eqivalent act. He has contracted with the plaintiff to become a member of their corporation, and to be interested in their stock, to the extent of one hundred dollars for each share assigned to him, if that amount be required.”
And in a subsequent case, it was holden, that a stockholder, who derived his stock by a transfer from the original subscriber, and received a new certificate from the company, was personally liable to pay the instalments called for after the transfer. The Hartford and New-Haven Rail-Road Company v. Boorman & al., 12 Conn. R. 530.
The only difference between those cases and the present, is, that in the former the subscriptions were to the stock of a Rail-Road Company, and in the latter, to that of a manufacturing company. But the language, used in the two charters, is, in this respect, very much alike; and we discover nothing in the object of these companies requiring a construction to be given in one case different from that given in the other. The stockholders, therefore, are equally liable, whether they ob[599]*599tained their shares by purchase, or by virtue of an original subscription.
2. In the next place, does the amount of the shares subscribed, constitute the capital stock of the company, or only the amount actually paid in? Had these plaintiff’s, when they dealt with the company, and gave them credit, a right to look to the former, as a fund applicable to the payment of their debts, or only to the latter?
The unpaid balances of the shares are as much subject to the call of the directors, as any debts due the company. Payment can as well be enforced in the one case, as in the other. The directors can, at any time, collect those balances, and if sufficient, pay off the debts due the plaintiffs. And why should they not do it? What justice is there in withholding funds, at their command and applicable to the payment of those debts?
It is apparent, that it is not for their interest to do it. The charter requires them to be stockholders, and the bill alleges, that they are such, and actually own a large amount of the shares of the company. A call upon the stockholders for funds to pay off these debts of this insolvent company, would be in part a call upon themselves, and might materially affect their own interests. They may, therefore, prefer to let these creditors suffer, rather than become sufferers themselves.
But have they a right to do this. They, with others, have embarked in a business, perhaps hazardous, and as events have shewn unfortunate, expecting to share in the profits; and why should they not also bear their proportion of the losses?
It is true, the company was incorporated, and the members were not made liable, in their individual capacities, for the debts of the company but it was necessary for the company to create a capital before they could obtain credit. This was done by the subscriptions to the capital stock. In that, there was a limit fixed to their liability, beyond which they could not be compelled to go. No stockholder can be compelled to pay more than one hundred dollars on each share he owns, let the amount of the debts of the company be ever so great. All that is required of the defendants in the present case, is, that the members, shall discharge the obligations which they [600]*600assumed, upon becoming stockholders, or at least so much, as may be necessary to pay off the debts of the company.
Some stress has been laid, in the argument, upon the proviso in the act of incorporation, requiring the company, within three months from the passing of the act, to lodge a certificate with the town-clerk of Wethersfield, containing the amount of capital stock actually paid in and belonging to the company; and directing that it should not be withdrawn, so as to reduce the same below five thousand dollars; and further providing, that, if any part of the capital, paid in and certified, should be withdrawn, without the consent of the General Assembly, the directors allowing it should become liable, in case of the insolvency of the corporation. Hence it is insisted, that the capital thus certified, and not the amount of the shares subscribed, constitutes the stock of the company.
The act does not proscribe the amount of capital stock. It says, that it shall not exceed fifty thousand dollars; and the fair inference to be drawn from the proviso is, that it shall not be less than five thousand dollars. The company, therefore, might commence business with any capital between those sums. But that the public might know the amount, it was very proper that a certificate should be lodged with the town-clerk, for the examination of those who might wish to deal with them.
Suppose the number of shares subscribed had been five hundred; the amount paid upon each share, at the end of the three months, ten dollars; and the company had lodged a certificate, stating, that the capital subscribed was fifty thousand dollars, and the amount then actually paid in, five thousand dollars; would any one dealing with the company, hesitate in believing, that the amount subscribed constituted the capital stock of the company?—He would know that but a small portion of the capital had been paid in;—but, at the same time, he would know, from the act of incorporation, that the balance was at all times subject to the call of the directors. And if he considered them honest men, he would believe, that they would call in the remaining instalments, whenever the wants of the company required it.
The act does not prescribe the form of the certificate, but it would be natural for them to make it according to the con[601]*601dition of the case. How it was in fact made, does not appear.
3. It is further claimed, on the part of the defendants, that the power conferred upon the directors to call in the installments upon the shares, is a discretionary power, with the exercise of which, a court of chancery will never interfere. But that discretion is merely neodal, relating to the time and manner of making the payments. When the wants of the company require those payments, it becomes the duty of the directors to cause them to be made, as much so, as to require payment of debts due to the company. We think it is not discretionary with the directors to say whether the company debts shall be paid or not, when they have the means at command.
The case of Catlin v. The Eagle Bank, 6 Conn. R. 233, has been cited as an authority against this application. But that case is clearly distinguishable from this. The question there was, whether an insolvent corporation might pay one creditor in preference to others. Here the question is, whether the corporation may refuse to pay any of their creditors.
4. It is finally said, that if these plaintiffs are entitled to any remedy, it is not by a suit in chancery, but by a writ of mandamus, requiring the directors to make the necessary calls upon the stockholders. The Queen v. The Victoria Park Company, 1 Adol. & El. N. S. 288. (41 E. C. L. 544.) The Queen v. Ledgard & al. 1 Adol. & El. N. S. 616. (41 E. C. L. 697.) The King v. St. Catharine Dock Company, 4 B. & Adol. 360. (24 E. C. L. 73.)
The authorities cited shew, that there are cases where the officers of a company may be compelled to make calls upon the members, by a writ of mandamus. Whether such a writ could properly issue against the directors of this company, under any circumstances, we do not deem it necessary to enquire; because in the present case, such a writ would be wholly inadequate to give the relief prayed for in this bill.
The debts of the plaintiffs are not such as the company is bound to pay at all events. It is averred in the bill, that the company is entirely insolvent, and has no visible property. The stockholders are liable only to a certain extent. There may be other creditors entitled to share in the funds of the company, as well as these plaintiffs; and these funds may [602]*602fall far short of the amount of the debts against the company, under such circumstances.
It is in the power of a court of chancery to do more ample and complete justice to the parties interested, than can possibly be done in a court of law.
The bill shews, that the plaintiffs have proceeded as far as they can at law. They have obtained judgments against the corporation—made demand upon the company for payment of these executions,—and these executions have been returned wholly unsatisfied. They are now remediless, unless the corporate funds can be reached, by the aid of a court of chancery, on a writ of mandamus. The former, in our opinion, is decidedly the more appropriate remedy.
Upon the whole, we think that the plaintiffs, upon the allegations contained in their bill, are entitled to relief; and that, consequently, the demurrer must be overruled.
In this opinion the other Judges concurred.
Demurrer overruled.