National Bank v. Paige's

The opinion of the court was delivered by Royce, J. The right of recovery in this case is based upon section three, of the act incorporating the Rutland Manufacturing Company, approved October 31, 1864. The notes declared upon were executed by said company at a time when the debts contracted by it were greater in amount than three fourths of the capital actually paid in, and it is claimed that S. P. Paige, who was a director of said company at the time the notes were executed, so assented to their execution that he became personally liable. Upon the facts found, his liability must depend upon the con [457] struction that may be given to said section. It provides that: “ No part of the capital stock shall be withdrawn, or in any manner diverted from the legitimate business of the company, nor shall the company at any time contract debts to an amount greater than three fourths of the capital actually paid in; and any director assenting to the contracting of debts to a greater amount shall be personally liable for such excess, to the creditors of the company.” The apparent purpose of that section was to prevent any withdrawal or use of the capital of the corporation that might be prejudicial to its creditors, and any increase of the indebtedness of the corporation beyond the limit prescribed. To entitle the plaintiff to recover it must appear that by the giving of the notes declared upon, the indebtedness of the corporation was thereby increased. While it is true that the giving of a new obligation for a previous indebtedness is generally treated as a new contract, and merges the previous contract or obligation, and the new or substituted obligation is the evidence of the indebtedness upon^which the remedy must be sought, the original indebtedness is not thereby increased. That remains the same; it is in substance and in fact, the same indebtedness evidenced by a new promise. From the facts found we understand that the giving of the notes upon which a recovery is sought, was in reality the substitution of new promises to pay for old ones ; and that the actual indebtedness of the corporation was not thereby increased. It could not have been intended by that section of the act of incorporation to deprive the officers of the corporation of the right to substitute one evidence of an indebtedness for another when they might think it for the interests of the stockholders to do^so, and it could be done without prejudice to the creditors. This view is decisive against the right of recovery. The question whether S. F. Paige so assented to the giving of the notes as to become personally liable, which has been so fully and ably argued, it is not necessary to decide. It is, however, proper to remark that it seems to us that the facts found do not furnish sufficient evidence of such an assent. The judgment is affirmed, and ordered certified back to the Probate Court.