Price's Appeal

Section 12 of the Act of April 29, 1871 (P. L. 79), authorizing a corporation to assess upon each share of stock such sums of money as the stockholders think proper, not exceeding in the whole the original par value of the stock, confers the power to make such assessment upon stock the full par value of which lias been already paid by the subscriber. The liability to assessment thereby imposed is independent of, and beyond the liability for assessment up to par value.

Appeal from the Court of Common Pleas of Montgomery county: Of January Term, 1884, No. 178. This was an appeal by Jacob H. Price from a decree of said court dismissing a bill in equity filed by him, against the Min-go Valley Creamery Association, to restrain the defendant from levying an assessment upon stock of which he was the owner, in excess of the par value thereof. There was no dispute as to the material facts averred in the bill, viz: The relevant sections of the Act of 1874 are sections 11,12, and clause 2 of section 39, which are as follows : Sec. 11: “And all subscriptions to the capital stock shall be paid in such instalments and at such times as the directors may require, and if default be made in any payment the person or persons in default shall be liable to pay in addition to the amount so called for and unpaid, at the rate of one half of one per centum per month for the delay of such payment, and the directors may cause suit to be brought for the recovery of the amount due, together with the penalty of one half of one per centum per month, as aforesaid, or the directors may cause the stock to be sold in the manner provided in clause 2 of section 39 of this Act.” P. L. page 79. Sec. 12: “And every corporation may from time to time, at a legal meeting called for the purpose, assess upon each share of stock such sums of money as the corporation may think proper, not exceeding in the whole the amount at which each share was originally limited; and such sums assessed shall be paid the treasurer, at such times and in such instalments as the corporation directs.” P. L. page 79. Clause 2 of Sec. 39 (P. L. 101): “ If the proprietor of any share neglect to pay a sum duly assessed thereon, for the space of thirty days after the time appointed for payment, the treasurer of the company may sell, by public auction, a sufficient number of the shares to pay all assessments then due, with necessary and incidental charges thereon; shall give notice of the time and place appointed for such sale, and of the sum on each share by advertising the same three weeks successively before the sale, in some newspaper published in said county; and a deed of the shares so sold,” etc. The corporation defendant was incoz-porated March 21,1881, under the Act of April 29, 1874, and its supplements, and is included in the second class specified in § 2 of said Act. The complainant was a large stockholder in said corporation, and his stock was fully paid up. Considerable expense was incurred in erecting buildings, etc., to carry on the business of the association, and to provide for this an assessment of $2,00 per share on the capital stock was made at a general meeting of stockholders duly held. The complainant refused to pay this assessment and proceedings were begun under said Act of 1874, § 39, clause 2, to sell his stock at public auction, for the purpose of paying said assessment. Complainant then filed this bill praying for a preliminary injunction until hearing and a perpetual one thereafter, restraining said corporation from selling his stock, and from collecting assessments made upon said stock over and above the original par value. The parties filed an agreement in lieu of pleadizrgs and Master’s report, inter alia, as follows: Fourth. That for the purpose of this case it is admitted that the meeting of stockholders for the purpose of voting upon the resolution making said assessment, was legally called and held, and that the proceedings thereto were regular and that the notice .of the time and place of sale of the stock of plaintiff-was duly and legally given; That the whole amount of the debts which said association owed at the time said assessment of $2 per share was made, exceeded its capital stock actually paid in, and that there was no unpaid purchase money for land, but said debt was contracted in the erection and construction of the buildings by a business committee of which said Jacob H. Price, plaintiff, was a member, and it is further agreed that said assessment was not a proceeding to increase the capital stock but was made to pay off the indebtedness of said Association ci-eated prior to that time. ' Fifth. That the By-Laws of said Mingo Valley Creamery Association contain the following Article to wit: Article xx. “The shares of the stockholders shall be exeznpt from taxation except for the payment of the principal of the debt on the real estate of the association.” Sixth. That the question for the opinion of the court be the power and authority of the defendant to make the assessment under Section 12 of the Act of April 29, 1874, and Article xx of the By-Laws of the Association, and if so then the power to sell said stock as set forth in plaintiff’s bill. Seventh. That if the court be of the opinion that said Association has said power and authority, then said preliminary injunction be dissolved and decree and judgment be made in favor of defendant, but if not then said injunction to be made perpetual and decree and judgment be made in favor of plaintiff, the costs to follow the decree and judgment and either party reserving the right of appeal to the Supreme Court. The court (Boyek, P. J.), after argument, filed the following opinion and decree: By the Act of Assembly of April 29, 18T4 (P. L., 73, etc.) under which the defendants have been incorporated, there are two kinds of assessments upon the capital stock of such corporations authorized. The one is by call for instalments upon the capital stock subscribed. Such assessments may be made at the pleasure of the board of directors until the entire amount of the par value of the stock shall have beeu paid up. See section 11 of Act P. L., p. 79. The other kind cannot be laid by the directors, but must be voted by the stockholders at a meeting of the corporation called for that purpose. The words are as follows: “Every corporation may from time to time, at a legal meeting called for the purpose, assess upon each share of stock such sums of money as the corporation may think proper, not exceeding in the whole the amount at which each share was originally limited, and such sums assessed shall be paid to the treasurer at such times and in such instalments as the corporation directs.” See section 12, P. L., p. 79. Those two kinds of assessments are provided for, it will be seen, in different sections of the Act, and in very different phraseology, and are manifestly separate and distinct from each other. The calling in of the instalments upon the stock subscribed until the amount of the subscription price is reached is sufficiently provided for in section 11, and the clause quoted from section 12 would be wholly unnecessary and inoperative unless it related to additional assessments over and above the original subscription price of the stock. it would be inconsistent likewise, because the assessments called for in section 11 are to be made by the directors, whilst the assessments authorized in section 12 can be made by the corporation alone, at a legal meeting of the stockholders called for the purpose. There is a penalty also attached to default in the payments of instalments called in under section 11 not applicable to those assessed under section Í2, to wit: payment at the rate of one half per cent, per month for the delay of such payment. We are bound by a recognized maxim, in the construction of statutes, to find a meaning for each section and clause, if it can be done by a reasonable interpretation. The obvious conclusion dedueible from a comparison of the two sections is, that by section 12 the corporation is invested with the authority to assess upon each paid up share of stock such sums of money as the stockholders of the corporation may think proper, not exceeding in the whole the original par value of the same; but separate and distinct from the subscription price itself and in addition thereto. It is of course in the power of any corporation, by its charter and by-laws, to limit this authority to assess its stock still further; and. to restrict the exercise of this power to a particular object; and this has been done by the defendant corporation. By article 20 of their constitution they provide, that the shares of the stockholders shall be exempt from “taxation” except for the payment of the principal of the debt on the real estate of the association. The word “ taxation” is a somewhat awkward expression, not being used in the Act of Assembly under discussion; but no doubt it refers to the kind of assessment described in section 12. No assessment, therefore, can be levied upon the paid up stock of the plaintiff other than for the payment of the principal of the debt on the real estate of the association. This I understand from the case stated is the object of the assessment in dispute. The argument against the right of the corporation to assess the stock for this purpose, on the ground that it would practically increase the capital stock of the company, cannot prevail against the express grant of such power, as we have seen, by the Act of Assembly itself. The borrowing of money, which is also authorized by the Act, would operate in the same way by giving the corporation the temporary control of increased funds. Nor is the fact which is urged on behalf of the plaintiff, that the debts of the corporation at the time of the contested assessments exceeded its capital stock, a bar to the legality of the assessment., The object and effect of the assessment is to diminish the indebtedness. This indebtedness being contracted in the erection of buildings for carrying on the business of the corporation the directors might perhaps escape personal lia'bility, under the exception contained in the 6th clause of section 89 of the Act. But this is not material to the points involved in this case submitted for decision, to wit: 1st. Whether the defendant corporation had the authority to make the assessment complained of under section 12 of the Act of April 29, 1874, as set forth in paragraph 6 of plaintiff’s bill of complaint, and under article 20 of the constitution and by-hnvs of the association? 2d. Whether, if so, the said corporation had the authority to sell the stock of the plaintiff so assessed, as set forth in the ninth paragraph of the plaintiff’s bill? The court decides both propositions in the affirmative; it being admitted in the case stated that the meeting of the stockholders for the purpose of voting upon the resolution making said assessment was legally called and held, and that the proceedings therein were regular, and notice of the time and place of the sale of the stock of plaintiff was duly and legally given according to the second clause of section 39 of said Act of 1874; and that the purpose of the assessment was to raise money for the payment of the principal of the debt on the real estate of the association. And now, December 3, 1883, the preliminary injunction heretofore granted is dissolved, and said bill of complaint dismissed at the costs of plaintiff. The complainant took this appeal, and assigned for error: 1. The court erred in dissolving the preliminary injunction heretofore granted. 2. The court erred in holding that said corporation had the power and authority to make the assessment complained of in plaintiff’s bill. 3. The court erred in holding that said corporation had the authority to sell the stock of the plaintiff so assessed, as set forth in plaintiff’s bill. 4. The court erred in holding that said corporation had the power and authority to make additional assessments over and above the original subscription price of the stock, and separate and distinct from the same and in addition thereto. 5. The indebtedness spoken of having been created prior to the assessment (made for the purpose of paying the same) and it being admitted that these debts, at that time, far exceeded the capital stock of said association, the court erred in not holding that the directors were personably liable for said debts under clause 6 of section 39 of said Act, and therefore said assessment is illegal and void. 6. The court erred in its construction of article 20 of the by-laws of said association. 7. The court erred in dismissing said bill.