North v. Brace

Ellsworth, J. This case must turn essentially upon the proper construction of the writing of the 7th of November, 1854. We will not say that the construction which we have adopted is entirely free from doubt; and yet, after much consideration, we are on the whole satisfied that it is the correct one. The writing, we think, is to be understood between the parties as if it had been signed by all the stockholders of the corporation, instead of a part of them—-that is, each one binding [71] himself to the extent of his stock, or in the proportion of his stock to all the stock of the corporation, and no further. We know from the motion, if the fact is important, that this was the belief and expectation of those who subscribed the instrument. They regarded such a general engagement as equal and fair among the stockholders, each agreeing to pay, if need be, his exact proportion of the loss. But aside from this extraneous matter, on which we do not particularly rely, we rest our opinion upon the obvious meaning of the writing itself, gathered in part from the expression “ owners of the stock of the company,” (not owners of stock merely, but owners of the stock, implying that all the stock is represented and that all the stockholders are speaking,) but more especially from the concluding words of the writing—“ in proportion to the amount of stock held by us respectively in said company.” These words give the proportion or limitation of the liability of each ; each agreeing to be liable as his stock bears proportion to all the stock in the company. If the writing does not mean this, it seems to us that there is no limitation whatever expressed in it; for if the proportion is confined to the few who happened to sign the paper, and does not relate to all the stockholders of the company, no one who signed could have guessed what burthen he had assumed upon himself; for this would necessarily depend upon how many persons should sign after him, and those who were first applied to and signed, as they would do as a matter of course, might have to bear the whole loss, whereas we feel confident that each subscriber intended and understood that his liability was a fixed quantity and so any one when he subscribed the writing had no occasion to know or inquire who else would or would not sign it. Each was willing to bear his share, and it was equal and fair that each should obligate himself in the proportion stated. The language of his undertaking is—I ought to bear my proportion in case of a loss, and therefore I am willing to bind myself to that extent. Nor has the petitioner any ground of complaint that he can not now cast the great and onerous burthen of paying the debts of the company upon these four or five solvent respond [72] ents. He obtained their names under a clear and guarded limitation to the contrary, and probably not one of them would have signed the paper had be dreamed it would be construed as now claimed by the petitioner. Neither the language nor meaning of the transaction sustains any such claim. Possibly the petitioner has unfortunately misunderstood the writing and thereby been led into error; but this can not avail him here. He is bound to know the law as well as the other party, and having got only a part of the stockholders on his paper, as he chose to stop there, he must abide the consequences of his neglect, and may not now cast upon them the duty, as well as the risk of solvency, of others, some of whom were in fact insolvent at the time. This view of the writing renders it unnecessary for us to decide what shall be done respecting the shareholders who were insolvent at the time of signing or have become so since; for, if no one is liable beyond his proportion of stock, he has nothing to do with any other person’s stock, whether such person be solvent or insolvent. His liability will not be increased or diminished by any thing but the increase or diminution of the general loss, of which he must pay his proportion at a fixed rate, to be determined solely by the amount of his stock. As a general doctrine of equity it is true, as claimed by the petitioner’s counsel, that where there is an entire debt 01; duty owed equally by several, the solvent debtors must share equally in any burthen thrown upon them by the insolvency of a part of their number; but the doctrine is not applicable to a case where there is no such entire duty, and where the duty is specifically limited and restricted. The effect of a limitation is very well illustrated by the cases of Deering v. Earl of Winchelsea, 2 Bos. & Pul., 270, and Swain v. Wall, 1 Rep. in Cha., 149. We can not express our own views better than in the language of the Lord Chancellor of England in the first case. “ If therefore by his contract a party may exempt himself from the liability, or that extent of liability, in which without a special engagement he would not be involved, it seems to follow that he may by special engagement contract [73] so as not to be liable in any degree.” There is just such an engagement here, limiting the liability to the amount of each one’s stock. A question was made as to what was the time which we are to adopt in ascertaining the number of shares of stock held by each of the subscribers with reference to their liability on the agreement, whether the date of the wilting itself, the 7th of November, or the date of the petitioner’s indorsement of the company notes, or the time of the bankruptcy of the company. We think the date of the writing is the proper time. Whoever of the subscribers indorsed the company notes upon the en gagement of the writing, did it upon the credit of the writing as it was, and therefore upon the credit of those whose signatures were appended to it. It is quite possible that any subscriber might have the right, by giving notice to the other subscribers, to withdraw from the obligation as to after indorsements, and thereafter be free from liability to any one who should subsequently indorse the company paper upon the strength of the writing. But this was not done or attempted; and most certainly without it no subscriber could be allowed, by privately transferring his stock on the books of the company to a stranger, who would not by purchasing the stock become a party to the writing, to cast off the obligation resting upon himself as a party to it. Good faith as well as the law forbids this result. The subscribers ought to be considered as consenting to the continuance of the obligation until it is can-celled by some positive act, and due notice of the fact given to each subscriber. Following out this view of the case, it appears, on the facts found by the court, that all the solvent subscribers to the writing have more than paid their proportions of the company debts. The shares of stock are four hundred and sixty, and the companydebtis $20,627.51. This, divided among all the shares, if we have made no mistake in our computation, gives $44.84 to each share. Those of the subscribers who are insolvent, viz.: George Loomis, Stephen Birdsell, Victory Hart and Daniel A. Grant, each owning twenty shares, have paid nothing at all, and Augustus Grant, who owns forty shares, has paid only [74] $696.51, of the $1,792 which is his part to pay. These several balances are now due to the subscribers who have overpaid, and in the proportion in which they have overpaid. The petitioner therefore is entitled to recover from these delinquents his share, and G. D. Wadhams, one of the respondents, who has greatly overpaid his part, is entitled on his cross-bill to recover his proportion. These amounts can easily be ascertained by computation. The result then is, that all the subscribers who have overpaid their proportions are entitled to have the bill dismissed ; and as to the rest, the petitioner and Wadhams are entitled to decrees in their favor for their respective proportions of what is due them, upon the principles which we have stated. Mr. Griswold we lay out of the case, for both the petitioner and Wadhams have released him. Mr. Brace has paid more than his share, and he too is released by the petitioner, and therefore the petitioner has no claim on him, though Wadhams' would have had, so far as we can see, if Brace had not paid up his share. In this opinion the other judges concurred.