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Argument for Plaintiff in Error.
at law against a stockholder. His remedy was in equity in behalf of himself and other creditors who might join him. In such case the stockholder or stockholders so impleaded would have had the right by answer, or cross-bill or both to have all the other stockholders who were subject to assessments brought into court and their respective liabilities determined, because in the case at bar, when and long before this process was issued the Excelsior Insurance Company was in liquidation.
In Fairchild v. Hunt, 71 Missouri, 526, it was expressly decided, in reference to these very sections of the Revised Statutes of 1855, 1865 and 1879, that when a revision includes a previous law, it is only thereby intended to continue it in force, and not to make it operate as an original act to take effect from the date of the.revised law, and that § 11, of the act of 1865, could not retroact so as to affect Mrs. Hunt, a stockholder under a charter of 1853.
This fact is apparently conceded, but it has been argued by counsel and by the courts below, that it is harmless inasmuch as these statutes were only remedial, and did not prejudice the contractual rights of plaintiff in error.
By its charter the Excelsior Insurance Company was exempted from sec. 7, c. 34, Rev. Stat. Mo. 1555, c. 37, which provided that the charter of every corporation which should thereafter be granted should be subject to legislative control. The plain meaning of this provision is that no subsequent legislation could affect the charter rights of this corporation. Of these, one was that a stockholder should not be subject to the summary process invoked in this case. Another that when called upon to pay his pro rata share of the indebtedness of the company, when in liquidation, the amount he should pay would be determined by the proportion which the total amount of the unpaid stock due from solvent holders bore to the total indebtedness of the company.
In the court below it was argued that by his subscription to the capital stock of the Excelsior Insurance Company, the appellant agreed absolutely to pay the full amount of his subscription, and hence he cannot complain that he has been forced to pay it by this proceeding.
Argument for Plaintiff in Error.
With all due respect to the lower court, we submit that a subscriber to the capital stock of this corporation did not unconditionally agree to pay the full amount of his subscription, nor is such the inflexible rule of law.
It is true, he becomes liable, under certain contingencies, to pay the same in full, but this is only when the necessities of the corporate business require that each shareholder shall pay the full amount of his subscription.
This is especially. true where the enterprise has been abandoned as in the case at bar. In such case there is no use for capital except for winding up the company's business.
If there are no unpaid creditors, the liability of a member of the company to contribute his share of the capital, would, by the implied terms of his contract, have ceased.
If, however, there are debts of the corporation to be paid, then each shareholder agrees to contribute or pay, upon his unpaid stock his pro rata share of such indebtedness, and, when this is paid, his liability is at an end.
This court has decided that the remedy subsisting when a contract was made, is a part of the obligation, and any subsequent law of the State, which so affects that remedy as substantially to impair or lessen the value of that contract is forbidden by the Constitution of the United States. Edwards v. Kearzy, 96 U. S. 595; Seibert v. Lewis, 122 U. S. 284, 294; Denny v. Bennett, 128 U. S. 489, 494, 495. This court has also held that the remedy provided by the charter of a corporation is the only remedy that can be applied in recovering from a stockholder for his unpaid stock. Pollard v. Bailey, 20 Wall. 520; Terry.v. Tubman, 92 U. S. 156; Hornor v. Henning, 13 U. S. 228; Fourth Nat. Bank v. Francklyn, 120 U. S. 747.
The proceeding in the case at bar was such that plaintiff in error could interpose no pleadings. The only defence possible to him was to show the amount .unpaid on his stock, but he could not show that under the contract made when he subscribed for the stock he was only liable for his pro rata share. In other words, he was denied the right to show the total indebtedness of the company, or the amount of unpaid stock held by solvent stockholders and thus establish the extent of
Argument for Plaintiff in Error.
his liability. He could not even show that there were available corporate assets to pay the debt of defendant in error.
A subsequent act, which impairs rights acquired, or creates new grounds of action, or takes away defences which might be made under existing laws, or imposes new liabilities in respect of past transactions, is unconstitutional. Hope Mut. Ins. Co. v. Flynn, 38 Missouri, 483; S. C. 90 Am. Dec. 438; Provident Savings Inst. v. Bathing Rink, 52 Missouri, 557; Fairchild v. Hunt, 71 Missouri, 526, 531; Woart v. Winnick, 3 N. H. 473, 477; Society for Propagation of Gospel v. Wheeler, 2 Gallison, 105.
At common law no action would lie by a creditor of the corporation against a stockholder, because there was no privity of contract between them, though in equity he could have a bill against all or some of the stockholders of an insolvent corporation, upon an equity worked out through the liability of the corporation to him and of the stockholders to the corporation for a balance of unpaid stock, by a species of subrogation, to compel them to contribute their pro rata shares (within the amounts owed by them) towards making up the amount of the creditor's demand against the corporation; in which an account could be taken, and claims of set-off and other equitable defences could be adjusted, and an apportionment made of the common burden among all the defendants. Lionberger v. Broadway Savings Bank, 10 Missouri App. 499; Vose v. Grant, 15 Mass. 505; Spear v. Grant, 16 Mass. 915; Wood v. Dummer, 3 Mason, 308; Briggs v. Penniman, 8 Cowen, 387; S. C. 18 Am. Dec. 454; Nathan v. Whitlock, 9 Paige, 152; Mann v. Pentz, 3 N. Y. (3 Comst.) 415, 422.
The case of Hatch v. Dana, 101 U. S. 205, does not militate against this position. In that case a bill in equity was brought to enforce a demand against an insolvent corporation, against several but not all of the stockholders, and in answer to a complaint made, on appeal, that all should be joined, this court said that this was not necessary, inasmuch as those stockholders who were impleaded could secure the necessary protection by applying for a receiver, or by filing a cross-bill they might have obtained a discovery of the other stock
Opinion of the Court.
holders, brought them in and enforced contribution from all who had not paid their stock subscription. In the proceeding invoked in the case at bar, plaintiff in error was deprived of all these rights, and it is that of which we complain and which we insist was guaranteed to him hy the charter of his corporation, and of which he could not be legally deprived by subsequent legislation.
Mr. Everett W. Pattison for defendant in error.
MR. JUSTICE Harlan delivered the opinion of the court.
The plaintiff in error contends that the act creating the Excelsior Insurance Company was a private act, and its charter exempted from alteration, suspension or repeal by subsequent legislation; that its stockholders were exempted from the levy of an execution upon their individual property at the instance of a judgment creditor of the corporation in case of a deficiency of corporate property, and from actions at law by creditors; that the rights of its stockholders were not affected by subsequent legislation of a general nature; and that the method of collecting unpaid stock, specially provided for in the company's charter, was exclusive of any other remedy, except that supplied by a court of equity.
The assignment of error which gives this court jurisdiction to reëxamine the judgment of the state court is, that when the testator of the plaintiff in error purchased the stock of the Excelsior Insurance Company he entered into a contractual relation, not only with the company, but with the State, both as to the method of paying for his stock, and in respect to the extent of his liability; and that the rights vested in him by the contract were taken away, and, therefore, the obligations of his contract were impaired, by the legislation of 1879, the validity of which was sustained by the court below.
We assume, in conformity with the decision of the Supreme Court of Missouri — and that view is favorable to the plaintiff in error -- that the Excelsior Insurance Company was not subject to the seventh section of the general statute of November 23, 1855, declaring that the charters of all corporations there
Opinion of the Court.
after created should be granted subject to alteration, suspension and repeal in the discretion of the legislature; and that the other sections of that statute, specially named in the charter of the insurance company, were to stand as repealed so far as that company was concerned. The result of this construction of the charter of the insurance company is, that prior to the passage of the act of 1866, which took effect March 19,
, 1866, no specific remedy was.prescribed for creditors seeking to reach the unpaid subscriptions of stockholders. But it was open to them to proceed by a suit in equity. That such a remedy could be used without violating any provision of the company's charter, or any right of a stockholder, cannot be doubted. But neither the company nor its stockholders had any vested right in that particular remedy. They could only insist that the extent of their liability should not be increased. The act of 1866 authorized an execution to be issued against a stockholder “to an extent equal in amount to the amount of stock by him or her owned together with any amount unpaid thereon," where no property or effects of the corporation could be found. This statute, if given a retrospective operation, certainly did increase the liability of those who became stockholders in the Excelsior Insurance Company prior to its passage. But the defendant in error contends that it was applicable to all who, like Hill, became stockholders after its passage. Waiving any consideration of this question it is certain that the act of 1879, under which this action was instituted, did not increase Hill's liability. He was liable, by virtue of his original subscription and by his notes to the company, to pay the whole amount of his subscription. The statute of 1879 did not enlarge this liability, for it authorized an execution against a stockholder, where there was no corporate property to be levied on, only “to the extent of the amount of the unpaid balance of such stock by him or her owned.” While, under the original charter of the company, he was liable to a suit in equity, under the statute of 1879 he was liable to be proceeded against by notice and motion in the action in which judgment was rendered against the corporation. In either mode he had opportunity to make defence.