Contoocook Valley Railroad v. Barker

Eastman, J. There is one question in this case which is decisive of the plaintiffs’ right of recovery, and the court have therefore found it unnecessary to examine the other questions. This action was brought to recover for assessments alleged to have been made upon one share in the plaintiff corporation, for which, it is contended, the defendant was liable according to the terms of his subscription. The subscription paper which the defendant signed for one share was as follows: “ We, the subscribers, hereby agree to take the shares set against our names, being at one hundred dollars, and to pay the amount in such assessments as the directors for the time being may order. Said subscription to be expended between Oontoocookville and Henniker West Village.” Upon this agreement, the defendant having promised to pay such assessment as the directors should make upon his share, he would be liable therefor in an action of assumpsit, before resort should be had to a sale of the shares under the charter. Salem Mill Dam Corp. v. Ropes, 6 Pick. 23 ; Central Turnpike Corp. v. Valentine, 10 Pick. 142 ; Smith v. Natchez Steamboat Co., 1 Howard 479 ; South Bay Meadow Dam Co. v. Cray, 30 Maine 547; Dutchess Cotton Manuf. Co. v. Davis, 14 Johns. 238; Townsend v. Goewey, 19 Wend. 424; Glover v. Tuck, 24 Wendell 153. But before he can be made liable it must appear that he has been duly and legally assessed. Where the number of shares into which the capital stock of a corporation is .divided is fixed by the charter, and that provides that the directors may make equal assessments upon all the shares, no valid assessment can be made against a subscriber for shares until all the shares are taken, unless he in some way waive the provisions of the charter. In the case of the Central Turnpike Corporation v. Valentine, 10 Pick. 142, the act provided that the stock of the corporation should be divided into four hundred shares, of seventy-five dollars each; and that no person should be held to pay a greater sum than seventy-five dollars on any share by him sub [370] scribed for. And tbe subscription papers contained a promise of tbe subscribers to pay the sums which should be assessed on their shares. In an action brought by the corporation against a subscriber for stock, to recover an assessment laid for the general purposes of the corporation, it was held that the plaintiffs must prove that the whole number of shares were taken up before the assessment was laid. This decision was founded upon that of Salem Mill Dam Corporation v. Ropes, 6 Pick. 23, where the broad principle was laid down that no legal assessment could be made for the general objects of the act of incorporation until all the shares should be subscribed for. In a subsequent case between the same parties, the same principle was reaffirmed. 9 Pick. 187. And in a still more recent decision in the same jurisdiction, the like doctrine was held. Cabot and West Springfield Bridge v. Chapin & als., 6 Cushing 50. The English authorities are to the same effect. Fox v. Clifton, 6 Bingham 776 ; Wontner v. Shairp, 4 Manning, Granger & Scott 404 ; Pitchford v. Davis, 5 Meeson & Welsby 2; Norwich Lowstoft Company v. Theobold, 1 Moody & Malkin 151. The case in our Reports of the Littleton Manuf. Company v. Parker, 14 N. H. 543, is doubtless familiar to all who have had occasion to turn their attention to this subject. There the act of incorporation provided that the members might divide the capital stock into as many shares as they might think proper. By a written agreement the subscribers fixed the capital stock at fifty thousand dollars, divided into five hundred shares of one hundred dollars each, but only one hundred and thirty-eight shares were subscribed for ; and it was held that no assessment for the general purposes of the corporation could legally be made until all the shares were taken. And in N. H. Central Railroad v. Johnson, 10 Fost. 390, the same doctrine was held. The principle is this, that when a person subscribes for shares in a corporation, he does it upon the faith of the charter and provisions therein contained. He is entitled to his shares only according to the terms of the charter, and he can [371] likewise be called upon for assessments only according to those terms. A promise in a subscription to stock to pay the assessments upon the shares, goes no further than to make the subscribers personally liable to pay such assessments as shall be legally made. The effect of this form of subscription is to create a personal liability in the first instance upon those who subscribe, beyond the statute liability of a sale of the shares to meet the assessments. The promise to pay assessments cannot mean illegal assessments, but only such as shall be duly and legally made, according to the provisions of the charter. In Cabot and West Springfield Bridge v. Chapin & als., before cited, the court say: “ When the purpose of the subscribers to stock is that of proceeding to the execution of the business of the company, upon a partial filling up of the capital, and it is deemed expedient to levy assessments before the entire stock is taken up, there should be inserted a provision to that effect in the articles of subscription. In the absence of such a provision, it is necessary, before an individual subscriber can be charged upon his subscription, that the whole capital stock, or number of shares which constitute it, should have been taken up, or the party must have waived his rights to insist upon that condition by his own acts.” In the case before us, the charter fixed the number of shares at ten thousand, and the defendant took the exception that it was not shown that that number, or, indeed, any humber, was subscribed for when the assessments against him were made. This exception was well taken, for, on examining the case, we do not find any evidence or intimation that the whole stock, or any thing approximating to it, was subscribed for when the assessments, with which it is attempted to charge the defendant, were laid. There is no intimation, either, that the assessments were made for any but the general purposes of the corporation. Nor is there any thing having a tendency to show that the defendant had waived any of his rights, as fixed by the charter, and the subscription. [372] By the charter, the directors were authorized to make such equal assessments, from time to time, as might be necessary, on all the shares in the corporation. Laws 1848, chap. 660, § 5. They could not assess upon part of the shares, nor in unequal, sums ; and these assessments having been made on only a portion of the shares' of the corporation, were not in accordance with the charter and can not bind the defendant. They were not legally made. The decision of this point goes to the foundation of the action and shows that the suit can not be maintained; and according to the provisions of the case the verdict must be set aside and Judgment entered for the defendant.