Messersmith v. Sharon Savings Bank

Mr. Justice Gordon delivered the opinion of the court, January 3d 1881. It is difficult to understand upon what principle Messersmith seeks to avoid his obligation to the plaintiff corporation. There was no doubt about his liability when he subscribed for the stock, but he now seems to think that he ought to be released by virtue of his assignment to McCarter. Exactly why this should be so, why he should be discharged from his contract by the mere fact of his assignment of it to a third party, has not been made clear to us. Had McCarter agreed with the bank to assume this obligation, and had the bank thereupon executed a release to Messersmith. the [443] matter would be of easy comprehension, hut that the transfer of the stock, without more, should have the effect contended for cannot he admitted. It is said the bank officers assented to the transfer, and that it was made on the books of the bank. Concede this to be so, that does not help the matter, for McCarter did not thereby assume the unpaid instalments of the stock subscription, neither was Messersmith thereby released: Franks Oil Co. v. McCleary, 13 P. F. Smith 317; Coal Co. v. Otterson, 4 W. N. C. 545. Furthermore, as was well said by. the learned judge of the court below, the capital stock of a corporation is a trust fund for the protection and benefit of creditors, and this extends to the entire stock subscribed, and not merely to the percentage paid in. This is true, and with him -we are inclined to think that such stock would be but sorry security for creditors if the subscriber could, at any lime, cast off his liability by a transfer to another party, who, as we have seen, thereby assumes no liability to the corporation. On no principle of law or morals can the doctrine advocated by the defendant be sustained, since it, in effect, makes the execution of the contract depend wholly upon the will of the obligor. Judgment affirmed.