Farwell v. Wadsworth

Gary, P. J. In June, 1881, the Chicago Mining Company was organized as a corporation under the laws of the State of Michigan. June 23, 1881, six certificates, for one thousand shares each, of stock in the corporation, were issued to “William Sturges, trustee.” Two days later three of them were surrendered by Sturges, and a new certificate for three thousand shares was issued in the name of the appellant. This certificate was delivered by Sturges to the appellant, as, so far as any evidence shows, collateral security to him for the payment of $17,500. When that delivery was made does not appear, but it must have been some time later than the day the certificate was issued, the issue having been in northern Michigan, and the delivery in Chicago. Upon the testimony of the appellant—•“ My im pz’ession is, the stock was transferred to my nazne. He subscribed it originally to put it in my name. It would not be much collateral unless it was,”—the appellees insist, and the Circuit Court found in effect, that in the origizzal issue, Stuz'ges was a trustee for the appellant. If the appellant was liable on the theory of that finding and on that alone, its truth might well be questioned. The appellees are judgment creditors of the corporation, and execution upon their judgment having been returned unsatisfied, have filed this bill to compel the appellant to pay to them so much of the amount unpaid to the corporation on the shares held by him, as will satisfy their judgment. This relief the Circuit Court awarded to them. It lies at the foundation of the appellees’ claim that there should be a personal liability, absolute or contingent upon call of the appellant, to pay to the corporation so much of the par of his shares as had not been paid. Whether he is so liable is to be determined by the law of Michigan. The 18th section of the act under which the corporation was organized provides that “the board of directors may call in the subscription to the capital stock * * * by installments * * * and if a stockholder fails to pay ”tlie stock may be sold in the mode therein stated. It does not appear that there were any subscriptions for the stock of this corporation. The record does not show any promise as in Klein v. Alton & S. R. R., 13 Ill. 514. The statute does not in terms make the stockholders liable, and at least two of the judges of the Supreme Court of Michigan, as it was organized three years ago, seem to have been inclined to the opinion that there was no such liability. Young v. Erie Iron Co., 65 Mich. 111. The legislative intent that the board of directors may call is clear enough in the section cited, but it shows no such intent that the stockholders shall be personally liable to pay, upon which supposed intent the Supreme Court of the United States distinguish the case of Webster v. Upton, 91 U. S. 65, from the cases there cited, in which it had been held that no such liability existed. To the sufficient reason for denying such liability assigned in Mech. F. & M. Co. v. Hall, 121 Mass. 272, may be added as especially applicable here, that the statute of Michigan manifestly contemplates, what the geographical situation of the mining region of Michigan and the commercial relations of manufacturing cities outside of that State with that region, made probable, if not certain, that in the organization of mining corporations, many of the stockholders would be residents of other States. Can it be supposed that the State of Michigan intended to put its own citizens at a disadvantage by imposing a personal disability, readily enforced against its own citizens by the courts of that State, yielding a cheerful obedience to its laws, while as against other stockholders the remedy must be sought in foreign, and perhaps reluctant, tribunals? Holding that no such personal liability exists under the statute of Michigan, it follows that the decree appealed from is erroneous, and it is therefore reversed and the cause remanded, with directions to the Circuit Court to dismiss the bill at the cost of the appellees. Heversed and remanded.