5 F. 403 | D. Cal. | 1881
At the request of counsel I indicate the grounds for the denial of the application heretofore made to order an assessment to be levied on the shareholders of the above corporation. The assessment is asked for with the object of collecting the same by suits in personam against delinquent shareholders. The question whether they are personally liable must, therefore, first ne determined. I do not question the power of the court to compel contribution of unpaid subscriptions to the capital stock of an insolvent corporation for the purpose of paying its debts. Upton v. Tribil
All these positions, which the counsel for petitioners have
But the question in this case is: Does the acceptance of stock in a mining corporation, as they are usually formed in this state, create any obligation, either by contract or under the law, to pay to the corporation or to its creditors the nominal par value of the stock so accepted ? The mode in which mining companies are formed in this state is familiar to us all. The owners of the property, or persons expecting to become such, by complying with a few simple formalities, form themselves, with such others as they may take into the association, into a corporation, to which the property is conveyed. The amount of the capital stock, which is required to be stated in the certificate of incorporation, is usually fixed at a purely arbitrary sum, and divided into as many shares as convenience or/caprice may dictate. It neither bears, nor k. intended nor supposed by the public to bear, the slightest relation to the real value of the property—a value nearly always conjectural, and very often imaginary. It has recently become the practice to divide the capital stock into 100,000 shares of the value of $100 each, making $10,000,000 in all; a sum which, it is apparent, can have no reference to any estimate of the real or intrinsic value of what is usually a mere' hole in the ground, supposed to afford favorable indications. A striking proof of this is afforded in the present case. Among the first acts of the corporation was to place (in effect) 5,000 shares of their stock on the market, at the price of one dollar per share. The organization having been effected and the property 'conveyed to the company, the stock is issued to the former owners, to the amount which may have been pro
It was urged on the part of the stockholders that the shares held by them are to be treated as fully paid-up stock. I do not concur in this suggestion. It might have some plausibility in cases where all the stock has been distributed among the owners of the mine in proportion to their respective interests; but where stock has been reserved, and subsequently sold at perhaps one-hundredth part of its nominal par value, it can in no sense be called or treated as fully paid-up stock.
But, even in the case of shares distributed among the mine owners, the view suggested seems to me inadmissible. It is a pure fiction. The mine owners do not, in fact, agree to take the stock and pay for it at its nominal par value—payment to be made by conveying the mining ground at a valúa
To call the stock fully paid up is to admit the obligation to take and pay for it, and to suppose that obligation to have been fulfilled in a mode the'law will not permit. In my view no such obligation esc contractu was at any time created. If the liability to pay the nominal par value of the stock for the benefit of creditors exists, it must arise from the positive provisions of the statutes, and not from the contracts of the parties. This question I will now proceed to examine. The statutory provision by which this liability is supposed to be created is found in the 349th section of the Code of Civil Procedure. The previous sections of the article of the Code contain detailed and minute provisions regulating the levying of assessments; then to the sale of delinquent stock.
Section 349 provides that “on the day specified for declaring the stock delinquent, or at any time subsequent thereto and before the sale of the delinquent stock, the board of directors may elect to waive further proceedings under this chapter, for the collection of delinquent assessments, or any part or portion thereof, and may elect to proceed hy action to recover the amount of the assessment and the costs and expenses already incurred, or any pa/rt or portion thereof.”
It is this last clause which is supposed to create a legal liability on the part of of the stockholders to pay assessments up to the par value of the stock, when necessary to satisfy the indebtedness of the corporation.
But to this view there are grave, and, in my judgment, insuperable objections.
1. The statute does not, in terms, declare or create the liability. It merely authorizes the directors “to elect to proceed by action to recover the amount of the assessments.” Its language would be satisfied by restricting its operation to
By section 290, the articles of incorporation must set forth —“First, * * sixth, the amount of the capital stock and the number of shares into which it is divided; seventh, if there is capital stock, the amount actually subscribed, and by whom.”
These provisions are retained in the latest amendments to the Code, 1880. The only meaning I can attach to them is that the legislature contemplated two classes of corporations, in both of which the amount of the so-called capital stock, and the number of shares into which it is divided, are required to be stated; but in only one of these classes the stock was supposed to be subscribed for, and an obligation incurred to take and pay for it. This latter class includes, as we have seen, railroad, wagon-road, and telegraph companies, and banking, insurance, and other associations based on capital paid in or agreed to be paid in. It is to this class that the clause giving the directors the right to elect “to proceed by action to recover by action the amount of the assessment” must, in my judgment, be deemed to refer.
2. The argument of the learned counsel for the creditors admitted that the liability contended for was limited to an amount equal to the par value of the stock held by the stockholders, and that it could only be enforced for the benefit of creditors. But if the construction of section 349, contended for, be sound, I fail to perceive on what grounds this limitation or restriction can be imposed.
Section 34Q confers, as we have seen, the right to proceed by action to recover any delinquent assessment; and if this power be not restricted, as I have suggested, to cases wherein the stockholder has, by express or implied contract, agreed to pay, it will extend to all cases of assessments levied to meet expenses or conduct business, as well as to pay debts, and may be exercised against a stockholder who has paid his subscription in full, or who has already been assessed up to the par value of his stock. This result, startling and absurd as it is, seems to be Unnecessary consequence of the construction of section 349 contended for.
3. It will not be disputed that the ordinary rule which requires such a construction to be given to the provisions of a statute as will make them consistent and harmonious should be applied to the provisions of our Code with regard to corporations.
By section 322, as amended March 15,1876, the individual liability of a stockholder of a corporation is limited to such proportion of its debts and liabilities as the amount of stock or shares owned by him bears to the whole stock of the corporation;, and, on payment of his proportion of any debt due from the corporation, incurred while he was a stockholder, he is relieved from any further personal liability for such debt.
I am unable to reconcile these provisions with a construction of section 349 which would give it the effect and operation contended for.
The court is asked to order an assessment to be levied, in order that the assignee in bankruptcy, representing the cred
The section just referred to limits his personal liability for the corporate debts incurred while he is stockholder to such proportion of those debts as the number of shares owned by him bears to the whole numbers of shares of the capital stock." But, if he is personally liable on the assessment to bo levied, lie may be obliged, if he is the only solvent stockholder, to pay the whole amount of the indebtedness of the corporation, provided it does not exceed the fanciful and exaggerated par value mentioned in the articles.
If, as in the case at bar, the whole number of shares is 100,000, at $100 each, the stockholder who owns 1,000 shares is liable for one one-hundredth part of the debts. If the aggregate indebtedness is $100,000, he acquits himself of all personal liability by the payment of $1,000. But if he is liable to the amount of the par value of his stock, he may be compelled to pay $100,000.
Will it be contended that a stockholder who has paid his full proportion of the debts incurred while ho was a stockholder would still remain personally liable to pay any assessment that may be levied, and that such a payment, which the statute declares shall relieve him from any further personal liability for such debts, and shall be a good defence in an action brought by a creditor, shall be unavailable in an action brought by an assignee in bankruptcy in behalf of creditors to collect an assessment levied for the payment of debts ?
It seems to me that such a position is wholly untenable. I conclude, therefore: First. That the stockholders of mining corporations, organized as the corporation in this case was formed, incurred no liability ex contractu, either express or implied, to pay in, either for the prosecution of the enterprise or the payment of the debts of the company, the nominal par value of their shares. Second. That unless they h'ave subscribed for stock, or are the successors of subscribers,