Bailey, Administrator, &c., v. Hollister, Administratrix, &c.

Bailey, Administrator, &c., v. Hollister, Administratrix, &c. A member of a corporation, whose charter the legislature has reserved the power to repeal or modify, holds his stock subject to such liability as may attach to him in consequence of an extension or renewal of the charter, without his application or consent. Held, accordingly, that the estate of an intestate succeeded to the individual liability imposed on him as a stockholder in a corporation whose charter would have expired, but was extended after his death, by such act of extension, and his administrator is liable for debts of the corporation contracted after the death of the intestate. The stockholder or his.personal representative can, it seems, reheve himself only by selling the stock. Whether, when the charter has actually expired, the original stockholder may, without his assent, be continued as a corporator, quaere. Appeal from the Supreme Court. The cause was tried before a referee, who found these facts: In January, 1854, Bailey recovered a judgment against the Oriskany Manufacturing. Company, for $706.46, upon an indebtedness which arose in the years 1849, 1850,1851,1852, and 1853. Execution on the judgment having been returned unsatisfied, this action was brought to recover the same debt from the defendant, as administratrix, on the ground that, when the debt was contracted, the estate of Kirkpatrick, the intestate, was a stockholder, and as such, personally liable under the charter of the Company. Kirkpatrick died in September, 1832, being then the owner of ten shares of the stock, of the par value of $550. The defendant was appointed administratrix October 11,1832. The Oriskany Company was originally chartered Eebruary 16, 1811. (Laws of 1811, p. 97, § 2.) That charter contained a clause declaring the persons who should be stockholders at the time of dissolution liable for the debts of the Company. The prescribed duration of the charter was fifteen years. Kirkpatrick, the intestate, did not become a stockholder under that charter, which expired Eebruary 26,1826. The charter, having expired, was renewed or revived by an act passed April 16, 1826, for five years longer. The second section of this act provided that the stockholders should be jointly and severally liable in their individual capacities, to. the amount of their stock, 'for any debt thereafter contracted, provided that no stockholder-should be prosecuted until after suit and judgment and execution against the directors, “ to the end that the stockholders who were directors when any debt or demand was created shall be liable in the first instance.”. (Laws of 1826, p. 242.) While this act was in force, to wit, July 2Ó, 1827, Kirkpatrick became the owner of the stock in question and he remained the owner until his death in 1832. He was never a director. The fifth and last section of the act is in these words: “ The legislature may at any time suspend or repeal this act at its pleasure, and may at any time alter or modify the same, either in respect to the corporate rights and privileges of the Company, or as to the . rights and privileges of the stockholders generally.” Before the act of 1826 expired, and before the death of Kirkpatrick, and while he was a stockholder, to wit, April 29,1829, the legislature passed another act, which continued for fifteen years longer the original act of 1811, and repealed the renewing act of 1826, and subjected the corporation to the provisions of title 3, chapter 18, part first of the Revised Statutes. By these Statutes, the charter of every corporation is subject to' “ alteration, suspension or repeal” by the legislature. (1 R. S., p. 600, § 8.) Under the act of 1829, the charter expired April 29, 1844. . On the 16th of March, 1844, the legislature passed ánother act. The first section reduced the capital stock: the second declared the stockholders liable in their individual capacity for the debts, “ to be recovered of the stockholder who is such when the debt is contracted,” but no suit to be brought until after judgment and execution against the corporation. The third section declared that the indebtedness of the Company should never exceed the amount of its capital. The fourth section declared the charter to be extended for fifteen years from the passage of the act. (Laws of 1844, p. 34.) The indebtedness in question accrued, as above stated, in the years 1849, &c., while the act of 1844 was in force, and long after the charter under which Kirkpatrick had become a stockholder had expired. Kirkpatrick had died, as before stated, in 1832. The question, therefore, was, whether the defendant, in the character of representative, became a stockholder under the act of 1844, and in that character became liable for the ■ debts of the Company. On the books of the Company the stock stood in the name of Kirkpatrick, until 1844. It was then entered in a new stock ledger in the name of “ the estate of William Kirkpatrick.” The referee found that, after Kirkpatrick’s death, and as late as 1850, the defendant, as administratrix, received dividends on the stock in question. The referee decided against the defendant, and directed judgment for $608.81, which was affirmed in the Supreme Court. The defendant appealed to this court. George F. Comstock, for the appellant, argued that an administrator cannot bind the estate by an agreement to take stock in a corporation. Conceding that the receipt of dividends by the administratrix may estop the defendant from denying that she had consented to come in under the renewed charter of 1844, and hold the stock with the liability which it imposes, such consent may affect her personally, but does not affect her in her representative capacity. Consent or agreement being out of the question, the inquiry is whether the act of 1844, by its own inherent force, compelled the estate or representative of Kirkpatrick to be a stockholder. We deny, 1st, that the legislature, in renewing a charter, has the power to prevent any stockholder from exercising his choice to be or not to be a' stockholder after the expiration of the charter under which he held his shares; 2d, that the legislature ever intended to take away that choice. The power to “ alter, suspend or repeal,” reserved in the original charter, has reference only to the relations between the corporators and the public or the State, not to the relations between the shareholder and the corporation itself, which are in the nature of a contract, and protected from any legislative interference by the Federal Constitution. An act to revive and continue an expired or expiring charter is not within this power. It is a simple exercise of the original creative power of the legislature —identical with the power to grant charters and create corporations—valid without any reservation in a previous charter. The power claimed in this case to continue one as a stockholder in an expiring corporation cannot be distinguished in substance from a power to make one take stock in a new corporation independent of his volition. Original charters only offer corporate privileges to those who voluntarily elect to be shareholders ; and acts which renew expiring charters only make the offer to those who are willing and elect to accept the favor and continue their investments. (15 B. Munr., 341; 2 Mass., 269; 2 Conn., 578.) Corporations can always take a surrender of stock; give up to the shareholder surrendering his proportion of the capital; and re-issue the same stock to any one who will replace the capital. (Columbus City Bank v. Bruce, 17 N. Y., 507.) Charles A. Doolittle, for the respondent. [MAJORITY — Gould, J.] Gould, J. It will be conceded that when a stockholder in any corporation dies', his estate succeeds him in the title to, and the rights in, the stock he- held. Of necessity, it must take that title and those rights subject to any liability 'then existing upon them; and so long as the estate is, by operation of law, the holder of such stock, the estate must become responsible for any obligations accruing during that time, which the law may impose upon any holder of the stock, as such. Such liability proceeds not from any new contract, made by or on behalf of the estate; but is inherent in the property itself. To avoid it the estate must part from the property; must cease to be the holder of the stock. Or, calling it a contract liability, it arises out of a contract made by the stockholder, and binding his personal representatives as it bound Mm, as long as the relation of stockholder existed. The stock in the case before us was owned by Kirkpatrick, in a company whose charter the legislature had the power to alter, amend or repeal; and by that charter the corporation was to exist until April, 1844. And although Kirkpatrick died in 1832, there can be no doubt that, if his estate continued to hold the stock for the residue of the time the charter had to run, the estate would be liable to any and all the incidents wMch, during that time, might attach to the stock; and (according to th.e decision in the case of the Oliver Lee & Co.’s Bank) to any liabilities which the legislature might attach to the same stock and its holder during the same time, as the stockholder’s assent is not necessary to the attaching of the liability; and attaching it by law, without his assent, is not in violation of the Constitution of the United States. Under the decisions, it seems difficult for a stockholder, or his estate after him, to avoid the effect of any form of legislative action which has yet been had in regard to corporations. Unless his dissent is expressed by selling his stock, the law assents for him. And whatever might be true where a charter had actually expired before an act to continue or renew it had been passed, it cannot be said that extending the life of a corporation (with all its organization in full operation) is anything more than extending a liability, from which any stockholder may free himself by a sale of his rights and interest. This, if the corporation be solvent, he can do. If it be insolvent, the law affords the means of winding it up ahd stopping additional liability. Beyond this, it can afford him no protection against the acts of those with whom he voluntarily became an associate. The judgment of the Supreme Court should be affirmed. Wright, Sutherland, Allen and Smith, Js., .concurring. Judgment affirmed.