Matthews v. Albert

Goldsborough, J.,

delivered the opinion of this Court.

On the 1st of September, 1858, the “ Coal Oil and Par-affine Company of Baltimore,” became incorporated in accordance with the provisions of the Act of 1852, ch. 338. Soon after the organization of the company, it incurred sundry liabilities, and amongst them, the claims alleged to be due to the complainants named in the bill of complaint in this case. Judgments were obtained by the complainants against the company' on their claims. Executions were issued thereon, and were returned nulla bona. Being, as they allege, without remedy, except in a Court of Equity, and having discovered that the appellee, Wm. J. Albert, had become a stockholder of the company to a large amount of shares, the complainants seek by this bill to recover their claims from him under the provisions of the 9th section of the Act of 1852, ch. 338.

This bill was subsequently amended by making the corporators and Augustus J. Alber^ (who had become a stockholder) parties defendant.

The corporators suffered a decree pro confesso to go against them. , In this state of the case, it was “agreed that the question of the liability of the defendants other than William J. Albert and Augustus J. Albert, shall be postponed , until the determination of the liability of *535 the said Alberts, and that any decree passed in regard to the liability of said Alberts may be taken to the Court of Appeals, to be there decided without objection, either in this Court or in the Court of Appeals, on the ground that the liability of the other defendants is left undetermined by said decree. The responsibility of the Alberts is claimed upon the ground, that under the terms of the 9th section of the above Act, they, as stockholders, were “severally and individually liable to the creditors of the company to an amount equal to the amount of the stock held by them respectively, for all debts and contracts made by such company, until the whole amount of the capital stock, fixed and limited by such company, shall have been paid in; one-half thereof in one year, and the other half thereof within two years, from and after the incorporation of said company, or such corporation shall be dissolved.”

The claims sought to be recovered in this suit, were contracted while the Alberts were stockholders.

Though the doctrine of recoupment, upon which the bill in this case was dismissed, might properly arise between the company claiming the payment for stock subscribed, and the stockholders who had loaned money to the company to an amount equal to their stock, or had paid debts of the company to that amount, it by no means follows, that the stockholders are absolved from liability to creditors of the company. This responsibility is absolutely fixed by the Act of 1852, from which there is no escape, until the provisions of the 9th section are complied with, and it is not pretended that such is the case.

The defendants occupied the two-fold relation of debtors to the company for the amount of their stock at par value, and as debtors under the Statute, to the creditors of the company to an amount equal to their stock, for all debts and contracts created while they were stockholders. In Briggs vs. Penniman, 8 Cowan, 396, the Court say, “the *536 Statute does not refer to them in their corporate capacity, but as individual stockholders ; and it declares their liability, without reference to the amount they may have paid in on their stock.”

In this connection, it is proper to say that in the terms which controlled the decision, the Statute of N. Y. is substantially the same as the Act of 1852, ch. 338.

The Judge of the Superior Court has correctly construed the decision in Garrison vs. Howe, 17 N. Y. Rep., 462 , that if the stockholders had paid for their stock, and subsequently became creditors of the company to an amount equal to their stock, by so doing they would be clothed with equal equities to any other creditors who may have become so by contracts with the company. This theory is sustained by the case of Briggs vs. Penniman, before referred to. But the Alberts cannot claim to hold this relation, as they have never paid anything for their stock according to the evidence in the cause. It appears from the record that William J. Albert became the owner of 480 shares of stock, equal to $12,000, between the 3rd of October, 1858, and the 5th of November of the same year, and that Augustus J. Albert became the owner of 60 shares, equal to $1,500, on the 6th of December, 1858. Both of these defendants parted with their stock on the 29th of January, 1859.

According to the evidence of Samuel M. Dukehart,. the claim of the appellants, Thomas and Joseph Matthews, consisted of a judgment on a note of the company for $1,092.40, given on the 1st of January, 1859, and a bill of lumber furnished the company between the 4th and 15th of January, 1859.

The claim of Murray & Hazlehurst consisted of a judgment on a note of the company for $2,238.20, issued on the 1st of January, 1859, and an open account for mate *537 rials furnished between the 21st of January, 1859, and the 30th of March of the same year.

These claims are proved by Compton Spencer. But as it does not appear from the evidence what portion of the account was contracted before the Alberts parted with their stock on the 29th of January, 1859, the account is not so proved as to justify its allowance.

The claim of W. H. Tiernan is for $2,000, money alleged to be loaned to the company on the 8th of January, 1859, and is proved by James C. Barry. But it is insisted by the appellees that Tiernan, instead of being a non-stockholder creditor, is, according to the evidence, a stockholder, and as much liable as the Alberts. We do not concur in this view of the relation of Tiernan to the company. In our opinion his claim is for money loaned, and the stock transferred to him was held by him as collateral security for his loan, and so holding it, he is not personally subject to any liability as stockholder, but is protected by the provision of the 12th section of the Act of 1852, ch. 338.

According to our construction of the 9th section of this Act, we think the appellees, the Alberts, are severally and individually liable for the claims of the appellants, to the extent of their stock, except the claim of Murray & Hazlehurst for $263.11. This construction is sustained by the case of Briggs vs. Penniman, in which the Court say, ‘ ‘ every stockholder in a company of this description incurs the risk of not only losing the amount of stock subscribed, hut is also liable for an equal sum, provided the debts due and owing at the time of dissolution are of such magriitude as to require it.”

In construing the 9th section of the Act of 1852, it is manifest that the Legislature designed to protect creditors of the company from loss. Tire language is unequivocal, and clearly intends that until the amount *538 of all the stock is paid up, the stockholders shall be respectively liable to the creditors of the corporation to an amount equal to the whole of the stock respectively held by them. The proceeding here, however, is in equity where the liability of the several defendants may be ascertained, and enforced with respect to each other, and when each of them may insist upon contribution from the others ; and as it is just and proper that such other of the stockholders as are liable under the Statute, should contribute rateably their proportion of the com.plainants’ claims, we will sign a decree reversing that of the Court below, and remand the cause, that an account may be stated in conformity with this opinion.

(Decided May 1st, 1866.)

Decree reversed, with costs to the appellants, and cause remanded for further proceedings.