Frank v. Morrison

Miller, J., delivered the opinion of the Court. In this case an action of assumpsit was brought on the 18th of March, 1879, by the Eeceivers of the “ Franklin Land and Loan Company of Baltimore City ” to recover from the appellant certain unpaid instalments on his subscription for stock. The declaration contains a special count, charging that prior to the 1st of April, 1876, the defendant subscribed for and agreed to take five shares of the stock of said company, and to pay $400 per share therefor, in weekly instalments of one dollar on each share until paid in full, and that he has failed to pay such instalments for more than one hundred and fifty weeks last past. It is agreed that most of the questions presented by the rulings of the Court upon the several instructions offered on both sides have been settled by the decisions of this Court in the cases of these same Receivers against Dorsey, 48 Md., 461, against Musgrave, 54 Md., and against Rider, 54 Md. Practically, the only question now open is, whether the Statute of Limitations is a bar to the action ? And as to this, it is conceded that if the contract set out in the declaration to pay for the shares, in weekly instalments of one dollar per share, is to be treated as the real contract between the corporation and the subscriber, the Statute does not apply. The proof in the case shows the name of the defendant, as a subscriber for five shares, was written on its Stock Ledger by the company’s secretary, and as he believes, though he has no distinct recollection •on the subject, by the defendant’s direction. This ledger is simply headed “ Franklin Land and Loan Company of Baltimore City,” and in one column are set out the names •of the subscribers, in another the number of shares opposite each name, and in others the weekly payments of dues, interest and fines made by each. The name of the •defendant, as a subscriber for five shares, seems to have been thus entered about the 16th of February, 1871. On [406] that day he made his first payment of $7.75, being five dollars for dues or the first instalment of one dollar per share on his stock, two dollars and a half for an entrance fee, and twenty-five cents for a small hook then given him, in which were subsequently entered the weekly payments made on his five shares. This hook contained also the printed by-laws of the company, one of which is to the effect that the capital stock of the company shall he $400,000, divided into one thousand shares of the par value of $400 each, payable in weekly instalments of one dollar per share until the whole is paid. It was customary to give a similar hook to all subscribers, and the defendant having received his, he continued to pay, and had entered therein his weekly instalments on the five shares, up to the 4th of June, 1874, making in all $927.65, and then stopped paying. During that time he also received and receipted for dividends on his stock, which the company declared each year. Now in order to let in the Statute of Limitations it has been argued with much ingenuity by the appellant’s counsel that this must he treated as a contract to pay for the stock in full within two years, as provided by the Act of 1868, ch. 471, sec. 59. The argument, briefly stated, is that this company was incorporated under this Act of 1868; that by sec. 59, of that Act it is required that the capital stock of every corporation shall all he paid in-one-half in one year, and the other half in two years from and after its incorporation; that by sec. 50 of the same Act a corporation has authority to adopt such bylaws only as are not inconsistent with law; and as a by-law which authorizes, as in this case, the stock to he paid up after a longer period than two years is inconsistent with sec. 59, it is therefore void; that although in a suit by receivers representing creditors a subscriber will not ■he permitted to say such a subscription is void, still it must he held that sec. 59, formed part of the contract of sub [407] scription, and the by-law being void, it must be treated and construed as a contract to pay within two years under this section; and the conclusion which is irresistible from the premises, is that the receivers had the right to collect the entire balance when they demanded payment in October, 1875, and the defendant denied his liability, and as this suit was brought more than three years thereafter the claim is barred by limitations. But it seems to us that the validity of the by-law has nothing to do with the question. The facts above stated, place it beyond doubt that the contract actually made between the corporation and the defendant was that he should pay for his stock in weekly instalments of one dollar per share until the whole was paid, and it is entirely immaterial whether there was a by-law providing for such payment or not. In other words if a corporation created under this Act receives subscriptions to its stock from one or all of its subscribers under express contracts with them, requiring payment only in weekly instalments, and thereby extending the time of payment beyond two years, such contracts are equally open to condemnation under sec. 59, whether made under or independent of any by-law to that effect. If such contracts are void, they must remain void. They cannot be made valid by construing them to be such as this section authorizes when the parties themselves have expressly contracted to the contrary. We are therefore brought at last to consider what is the effect and operation of this section? And this question has been completely answered by our former decisions. The section declares that “ the capital stock so fixed and limited shall all be paid in, one-half thereof in one year, and the other half thereof in two years, from and after the incorporation of said company, or such corporation shall be dissolved.” In Musgrave’s Case it was contended that no action would lie to enforce payment of the defendant’s subscription because it was not made payable in two years, as prescribed [408] by this section, hut we said : “ This provision applies only to proceedings hy the State for the dissolution of the corporation itself, and it is well settled that the cause of forfeiture cannot he taken advantage of collaterally or incidentally, or in any other mode than hy a direct proceeding instituted for that purpose against the corporation. The State creating the corporation can alone institute such a proceeding, since it may waive a broken condition of a compact made with it.” It is plain, therefore, from what was decided in that case, that the defendant in this cannot escape the obligation of his contract to pay, in weekly instalments, because hy reason of that contract the time of payment is extended beyond the period of two years prescribed in this section, and it follows that the Court below was entirely right in rejecting his ninth and twelfth prayers. In Musgrave’s Case it was decided that the instructions granted at the instance of the plaintiffs properly left the question of the allowance of interest on the several weekly instalments from the times they respectively fell due, to the discretion of the jury. In the present case, by the granting of the plaintiffs’ prayers, the jury were instructed to allow such interest as matter of absolute right. Upon further argument of this question, (which has been •allowed,) we adhere to the views expressed in the former case. In Maryland the leading case on this subject is Newson vs. Douglass, 7 H. & J., 417, in which it was held that while there are cases in which interest is recoverable as of right, such as bonds, contracts in writing to pay money on a day certain, such as hills of exchange or promissory notes, or contracts for the payment of interest, or where the money claimed has actually been used, yet with such exceptions it has long been the settled practice of the Courts of this State to refer the question of interest entirely to the jury, who may allow it or not in the shape of damages, according to the equity and justice appearing [409] between the parties on a consideration of all the circumstances of the particular case as disclosed at the trial. And in the recent case of The Baltimore City Pass. R. R. Co. vs. Sewell, 37 Md., 443, the same doctrine was re-affirmed. In our judgment, a subscription for stock in a corporation, to be paid for in instalments, is not such a contract as falls within the class of those on which interest is recoverable as of right. (Decided 27th January, 1881.) For this error in the plaintiffs’ prayers, it is conceded the judgment must be reversed and a new trial awarded, unless this Court has power to modify the judgment as the appellees’ counsel have suggested. In their brief they offer to remit the amount of interest allowed by the jury, and ask that the judgment he modified accordingly. But, in our opinion, no power has been conferred upon the Appellate Court to make the proposed modification. The judgment in the Court below upon the verdict is entirely correct, and the ease does not fall under sec. 14 of Art. 5, or secs. 39 and 40 of Art. 29 of the Code. Judgment reversed, and new trial awarded.