Clarkson, J.
The only question we think necessary to consider: Is this action barred by the statute of limitations ?
We
think not.
The defendants plead the three-year statute of limitations, C. S. 441(1) : “Upon a contract, obligation or liability arising out of a contract, express or implied, except those mentioned in the preceding sections.”
This is a general statute and it must be construed in
pari materia
with the statutes relating to corporations.
Section 1165, C. S., in part, is as follows: “The directors of a corporation may, from time to time, make assessments upon the shares of stock
subscribed for, not exceeding, in tbe whole, the par value thereof, remaining unpaid; and the sums assessed shall be paid to the treasurer at such times and by such installments as the directors direct,” etc., and provides for the sale of the share or shares of delinquent subscribers after notice. This provision is substantially sections 23, 24 and 25, Public Laws 1901, chapter 2, entitled “An act to revise the corporation law of North Carolina.” It will be noted that this says the
directors of a corporation.
C. S., 1160, is as follows: “Where the capital stock of a corporation
has not teen paid in
and the
assets are insufficient to satisfy its debts and obligations,
each stockholder
is bound to. pay
on each share held by him
the sum necessary to complete the amount of such share,
as fixed by the charter, or such proportion of that sum as is required to satisfy such debts and obligations,” etc. This is substantially the same as Public laws 1901, ch. 2, sec. 22.
R. R. v. Avery,
64 N. C., 491, is cited by defendants as authority on the plea of the statute of limitations. The gist óf that case is as follows: “Where the charter of a railroad company provided, that upon the failure by subscribers to its stock to pay installments as called for, The directors may sell at public auction,’ etc., such stock, and, in ease enough were not produced thereby to satisfy the subscription, might sue for and recover the balance from such subscriber:
Held,
that upon a failure by a subscriber to pay installments as called for, it was optional with the company to bring suit against him without making sale as above or, to sell, and sue for the balance. Also that the plea of the statute of limitations barred a recovery of so much of such subscription as was included in calls made more than three years before suit was commenced.” In that case the Court said, at p. 493: “Of course then, the statute commenced to run when the cause of action accrued, to wit, as to each installment, when it became due by the call of the company. 3 Parsons on Contr., 93. If a bill or note be payable by installments, the statute begins to run from the date of each installment respectively.
Gary v. Pindar,
2 B. & P., 427.”
It will be noted that the charter of the Western Railroad Company in the above case made provisions for calls similar to C. S., 1165, by its directors. That action was brought by the
corporation
against the
subscriber.
Here C. S., 1160,
supra,
makes provision for the
payment of debts
of the corporation by the
subscribers
of unpaid capital stock.
In the case of
Cooper v. Security Co.,
127 N. C., 219, this Court said at pp. 220-1: “The opinion of the Court in
Hatch v. Dana,
101 U. S., 205, contains a full discussion of this question, and is a direct decision on the point now before us. The syllabus of the decision, which is supported by the opinion, is in these words: ‘Creditors of an incorporated
company wbo have exhausted tbeir remedy at law can, in order to obtain satisfaction of their judgment, proceed in equity against a stockholder to enforce his liability to the company for the amount remaining due upon his subscription, although no account is taken of the other indebtedness of the company, and the other stockholders are not made parties, although by the terms of their subscription, the stockholders were to pay for their shares ‘as called for’ by the company, and the latter had not called for more than thirty per cent of the subscriptions. . . . (p. 222). The defendant company is the agent of the defendant stockholder.
We
will refer to
Hawkins v. Glenn,
131 U. S., 319, in support of his Honor’s view on the statute of limitations, where it is held that the statute does not run, as against subscriptions to stock payable as called for, and the principal cannot object, and say that his agent failed in his duty, and thereby defeat creditors.”
It is contended by defendant that
Hawkins v. Glenn
does not bear out the construction given to it by this Court in the
Cooper case
and refers to U. S. Supreme Court Reports Digest, Vol. 6, Limitation of Actions, but under (b) this is said: “The statute of limitations does not commence to run in favor of a stockholder of a company sued for an installment due on his stock, until a
formal call or assessment has been made by the company or by an order of the Court.
(Italics ours.)
Hawkins v. Glenn,
131 U. S., 319, 9 Sup. Ct. Rep., 739; (Anno.), 33; 184;
Glenn v. Liggett,
135 U. S., 533, 10 Sup. Ct. Rep., 867, 34, 262;
Glenn v. Marbury,
145 U. S., 499, 12 Sup. Ct. Rep., 914, 36, 790.”
Hereafter we will draw the distinction as to the application of when the statute of limitation commences to run as between the corporation and its stockholders and the creditors and the stockholders for unpaid subscriptions to stock under our statute. The
first
when a formal call or assessment has been made by the corporation or its stockholders;
second,
by the receiver representing the creditors by an order of the court.
In
Glenn v. Marbury, supra,
at p. 507, it is said: “In conformity with
Hawkins v. Glenn,
and
Glenn v. Liggett,
we hold that limitation commenced to run, in favor of the present defendant, only from the order in the Virginia court making the call or assessment on subscribers of stock.
Glenn v. Williams,
60 Md., 93, 122, 123.”
In
Harrigan v. Bergdoll,
270 U. S., at p. 564, this is said: “The nature, the'extent, and the conditions of the liability of a stockholder on account of stock not full paid depend primarily upon the law of the State or county by which the corporation was created.
Glenn v. Liggett,
135 U. S., 533, 548, 34 L. Ed., 262, 268, 10 Sup. Ct. Rep., 867. Compare
Benedict v. Ratner,
268 U. S., 353, 359, 69 L. Ed., 991, 997, 45 Sup. Ct. Rep., 566. That law determines whether the liability is to the corporation or is to creditors.”
Bronson v. Schneider,
49 Ohio, 438.
The
Cooper case
was decided 27 November, 1900. In 1901, C. S., 1160,
supra,
was enacted, following the trend in the
Cooper case,
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Clarkson, J.
The only question we think necessary to consider: Is this action barred by the statute of limitations ?
We
think not.
The defendants plead the three-year statute of limitations, C. S. 441(1) : “Upon a contract, obligation or liability arising out of a contract, express or implied, except those mentioned in the preceding sections.”
This is a general statute and it must be construed in
pari materia
with the statutes relating to corporations.
Section 1165, C. S., in part, is as follows: “The directors of a corporation may, from time to time, make assessments upon the shares of stock
subscribed for, not exceeding, in tbe whole, the par value thereof, remaining unpaid; and the sums assessed shall be paid to the treasurer at such times and by such installments as the directors direct,” etc., and provides for the sale of the share or shares of delinquent subscribers after notice. This provision is substantially sections 23, 24 and 25, Public Laws 1901, chapter 2, entitled “An act to revise the corporation law of North Carolina.” It will be noted that this says the
directors of a corporation.
C. S., 1160, is as follows: “Where the capital stock of a corporation
has not teen paid in
and the
assets are insufficient to satisfy its debts and obligations,
each stockholder
is bound to. pay
on each share held by him
the sum necessary to complete the amount of such share,
as fixed by the charter, or such proportion of that sum as is required to satisfy such debts and obligations,” etc. This is substantially the same as Public laws 1901, ch. 2, sec. 22.
R. R. v. Avery,
64 N. C., 491, is cited by defendants as authority on the plea of the statute of limitations. The gist óf that case is as follows: “Where the charter of a railroad company provided, that upon the failure by subscribers to its stock to pay installments as called for, The directors may sell at public auction,’ etc., such stock, and, in ease enough were not produced thereby to satisfy the subscription, might sue for and recover the balance from such subscriber:
Held,
that upon a failure by a subscriber to pay installments as called for, it was optional with the company to bring suit against him without making sale as above or, to sell, and sue for the balance. Also that the plea of the statute of limitations barred a recovery of so much of such subscription as was included in calls made more than three years before suit was commenced.” In that case the Court said, at p. 493: “Of course then, the statute commenced to run when the cause of action accrued, to wit, as to each installment, when it became due by the call of the company. 3 Parsons on Contr., 93. If a bill or note be payable by installments, the statute begins to run from the date of each installment respectively.
Gary v. Pindar,
2 B. & P., 427.”
It will be noted that the charter of the Western Railroad Company in the above case made provisions for calls similar to C. S., 1165, by its directors. That action was brought by the
corporation
against the
subscriber.
Here C. S., 1160,
supra,
makes provision for the
payment of debts
of the corporation by the
subscribers
of unpaid capital stock.
In the case of
Cooper v. Security Co.,
127 N. C., 219, this Court said at pp. 220-1: “The opinion of the Court in
Hatch v. Dana,
101 U. S., 205, contains a full discussion of this question, and is a direct decision on the point now before us. The syllabus of the decision, which is supported by the opinion, is in these words: ‘Creditors of an incorporated
company wbo have exhausted tbeir remedy at law can, in order to obtain satisfaction of their judgment, proceed in equity against a stockholder to enforce his liability to the company for the amount remaining due upon his subscription, although no account is taken of the other indebtedness of the company, and the other stockholders are not made parties, although by the terms of their subscription, the stockholders were to pay for their shares ‘as called for’ by the company, and the latter had not called for more than thirty per cent of the subscriptions. . . . (p. 222). The defendant company is the agent of the defendant stockholder.
We
will refer to
Hawkins v. Glenn,
131 U. S., 319, in support of his Honor’s view on the statute of limitations, where it is held that the statute does not run, as against subscriptions to stock payable as called for, and the principal cannot object, and say that his agent failed in his duty, and thereby defeat creditors.”
It is contended by defendant that
Hawkins v. Glenn
does not bear out the construction given to it by this Court in the
Cooper case
and refers to U. S. Supreme Court Reports Digest, Vol. 6, Limitation of Actions, but under (b) this is said: “The statute of limitations does not commence to run in favor of a stockholder of a company sued for an installment due on his stock, until a
formal call or assessment has been made by the company or by an order of the Court.
(Italics ours.)
Hawkins v. Glenn,
131 U. S., 319, 9 Sup. Ct. Rep., 739; (Anno.), 33; 184;
Glenn v. Liggett,
135 U. S., 533, 10 Sup. Ct. Rep., 867, 34, 262;
Glenn v. Marbury,
145 U. S., 499, 12 Sup. Ct. Rep., 914, 36, 790.”
Hereafter we will draw the distinction as to the application of when the statute of limitation commences to run as between the corporation and its stockholders and the creditors and the stockholders for unpaid subscriptions to stock under our statute. The
first
when a formal call or assessment has been made by the corporation or its stockholders;
second,
by the receiver representing the creditors by an order of the court.
In
Glenn v. Marbury, supra,
at p. 507, it is said: “In conformity with
Hawkins v. Glenn,
and
Glenn v. Liggett,
we hold that limitation commenced to run, in favor of the present defendant, only from the order in the Virginia court making the call or assessment on subscribers of stock.
Glenn v. Williams,
60 Md., 93, 122, 123.”
In
Harrigan v. Bergdoll,
270 U. S., at p. 564, this is said: “The nature, the'extent, and the conditions of the liability of a stockholder on account of stock not full paid depend primarily upon the law of the State or county by which the corporation was created.
Glenn v. Liggett,
135 U. S., 533, 548, 34 L. Ed., 262, 268, 10 Sup. Ct. Rep., 867. Compare
Benedict v. Ratner,
268 U. S., 353, 359, 69 L. Ed., 991, 997, 45 Sup. Ct. Rep., 566. That law determines whether the liability is to the corporation or is to creditors.”
Bronson v. Schneider,
49 Ohio, 438.
The
Cooper case
was decided 27 November, 1900. In 1901, C. S., 1160,
supra,
was enacted, following the trend in the
Cooper case,
looking towards protecting creditors, and provided that where the capital stock of a corporation bad not been paid in and the assets are insufficient to satisfy its debts and obligations, eacb stockholder
is bound to- pay on enlch share held,by him,,
etc., tip to the amount of their subscription to pay the debts. Tbe directors and stockholders in the present case directed the calls which was done, but did not follow it up and enforce payment by action. If this bad been done, assets may have been realized sufficient to pay the creditors in whole or in part.
It is well settled in this jurisdiction and generally in the courts of the States of this Union; that they go very far to protect corporate creditors and it is the settled doctrine that capital stock, and especially unpaid subscriptions to the capital stock constitute a trust fund for the benefit of the creditors of the corporation. Upon the faith of the capital stock, composed of paid and unpaid subscriptions, credit is given to the corporation and the public dealing with the corporation has a right to assume that the capital stock either in money or money’s worth will be paid in to pay the corporation creditors.
Marshall Foundry v. Killian,
99 N. C., 501;
Hill v. Lumber Co.,
113 N. C., 173;
Bank v. Cotton Mills,
115 N. C., 507;
Holshouser v. Copper Co.,
138 N. C., 248;
Silk Co. v. Spinning Co.,
154 N. C., 421;
Drug Co. v. Drug Co.,
173 N. C., 502;
Bassett v. Cooperage Co.,
188 N. C., 511. N. C. Code, 1927, Anno., secs. 1156, 7, 8.
Tbe unpaid stock subscriptions constitute a trust fund for tbe benefit of creditors. Tbe stockholders select tbe directors of tbe corporation, who are tbeir agents and operate' for tbe stockholders tbe business of tbe corporation, for which it was organized. A call by tbe directors of tbe corporation, duly authorized, upon tbe stockholders for unpaid subscriptions to stock, so far as tbe rights of tbe stockholders in tbe corporation are concerned, tbe statute of limitations would begin to run from tbe time demand was made .as to them, but not as to creditors. Tbe stockholders and directors are trustees for tbe creditors. Tbe demand by tbe directors of tbe corporation, an agency of tbe stockholders, would bind tbe stockholders so far as tbeir rights were concerned, in regard to tbe statute of limitations. Tbe directors and stockholders being trustees for tbe creditors, a demand by tbe receivers of tbe insolvent corporation representing tbe creditors for tbe unpaid- subscriptions, tbe statute of limitations would begin tbe run when tbe order of tbe court was made. This course is logical and orderly, and, whatever may be tbe decisions in other courts, which we have examined with care, we think this is consonant with justice and good faith to those who give credit to a corporation relying on tbe capital stock to be paid. In reaching this conclusion,
we give force to C. S., 1160, passed for the protection of creditors. We think that the statute of limitations begins to run when the receiver appointed to wind up the affairs of an insolvent corporation has been ordered by the court to make a call and has made a demand on the stockholders who had not paid their subscriptions. In the present action this demand was made by order of the court by the receivers shortly after 20 June, 1927, and the suit commenced on 3 February, 1928, and, therefore, this action is not barred by the statute of limitations. For the reasons given, the judgment of the court below is
Reversed.