Anderson v. Blattau

1. Corporations — Liability for Debts in excess of Capital — Stockholding Creditors — Construction of Statute.— "Where debts contracted by a corporation in pursuit of its business exceeded the amount of its capital stock actually paid in, the directors are liable for such excess to such parties as really held debts against the company, under the provisions of section 20 of article 1 of the act concerning corporations (B. 0.1855, p. 374), even although the creditors were stockholders in the corporation.

Error to St. Louis Circuit Court. This was a suit instituted by plaintiffs in error, who were partners in business, against defendants in error, to recover the sum of $4,147.19, it being an indebtedness contracted by the Missouri Spinning Company, a corporation of which the said defendants were directors. It was alleged by plaintiffs that the debt was contracted in 1859, while they were partners, for goods, wares, and merchandise sold to the company, and for which the notes of'the company were given; that the capital stock subscribed was $62,000, and that the amount paid in on the capital stock was only $6,000 at the time the said debts were contracted; that the amount of debts due by the company at that time was, including the debt due the plaintiffs, the sum of $60,000, being $54,000 more than the amount of capital stock paid in. By order of the court, a referee was appointed to state the accounts of the company. By his report it appears that the company commenced business in April, 1859, and was dissolved in March, 1860; and that during the year 1859 the amount of the indebtedness of the company exceeded at all times the amount of the capital stock paid in by from $10,000 to $50,000 ; and that at the time these debts were contracted with the plaintiffs the amount of indebtedness was about $80,000, and the amount of capital stock paid in was about $8,000. It further appeared from the testimony that the debts were contracted for goods sold by plaintiffs to the company, in August and September, 1859; and also that John T. Watson, one of the plaintiffs, was a stockholder in the company to the amount of $500, of which he had paid in the sum of $200. 1 Upon the trial of the cause, and after the introduction of the testimony, at the instance of defendants the court gave the following instruction, to-wit: “If. the jury believe from the evidence that the plaintiff Watson was a stockholder of the Missouri Spinning Company, and that he was such stockholder at the time that the liability of the said company to said plaintiff was contracted, then plaintiffs are not entitled to recover.” Plaintiffs thereupon submitted to a non-suit, with leave to move to set the same aside. Plaintiffs afterward moved the court to set aside the non-suit, which motion was overruled by the court, and the case is brought up to this court by writ of error. This suit was brought against the defendants, as directors of a corporation, to recover a debt contracted by the corporation, under the provisions of the twentieth section of the first article of the law on the subject of corporations, in the revised code of 1855 (E. 0.1855, p. 374). In this case it appears clearly that, at the time the debt was contracted, the indebtedness of the company largely exceeded the amount of capital stock paid in, and even the amount of capital stock subscribed. But' it is contended that one of the members of the firm of Anderson & Watson (the plaintiffs in this case) was a stockholder in the corporation, and the instruction given by the court is to the effect that because of that fact the plaintiffs could not recover. In the case of Kritzer v. Woodson, 19 Mo. 327, it was held that this section was intended to protect creditors, and not stockholders; and that, as the plaintiff was simply a stockholder who had paid a debt due by the company, under that clause of the statute which renders stockholders individually liable to a certain extent for the debts of the company, he could not recover it back from the company. In other words, he had paid no more than the statute required him to pay, and he could not recover it back from the company; he was not a creditor. It is clear that a stockholder could not make himself the creditor of a corporation by discharging a liability which the law fixes upon him, because he simply pays his own debt; but in the case before the court this was a bona fide debt contracted by the corporation while the defendants were directors, and that not in favor of the stockholders alone, but in favor of a firm of which he was a member. Can it, then, be said that Anderson & Watson were not creditors of the corporation ? If the contract had been made with Anderson alone, he would certainly be a creditor. Nowhere in the decision referred to has the Supreme Court said that a stockholder could not become a creditor of the corporation, but simply that he was not a creditor in the case then under consideration. The directors are agents of the corporation, and, when they contract a debt clearly beyond the ability of the corporation to pay, they ought, upon principle, to be held liable to third persons, upon the ground that if an agent exceeds his authority he becomes liable as principal; and this seems to be the reason of the provision of the statute. There is no ground for saying that the statute is penal, and therefore ought not to be extended beyond the necessary meaning of its language. It is intended to protect creditors — not to punish the directors. Is there any reason, under the language or principle of the statute, why Anderson should not be protected as a creditor ? His rights cannot be separated from those of his partner, Watson, because it was a partnership debt. Defendant Blattau relies upon the admitted fact that one of the plaintiffs herein was, at the time of the pretended accruing of liability of defendants, under section 20 of the corporation act (R. C. 1855, ch. 34, § 20), a stockholder of the very corporation in which they were directors. The provisions of the act were clearly intended for the protection of creditors of the corporation alone, and not for its own members. A corporator cannot avail himself of the remedy against a director given by the statute on which plaintiffs proceed, if a corporator at the time of the creation of the excessive debt. (Kritzer v. Woodson, 19 Mo. 327.)