Louisiana Paper Co. v. Waples

WOODS, Circuit Judge. This is not the case where there has been a subscription of stock, and the by-laws or other regulations adopted by the stockholders or directors prescribe how the subscriptions shall be called in, or the charter itself declares in what installments the directors may call in the stock payments. In such a case, there can be no doubt that the entire stock subscribed, whether called in by the directors or not, is a fund for the satisfaction of the debts of the corporation, and its payment can be enforced. Such regulations only pertain to the administration of the affairs of the corporation. In this case the charter, which was required to be recorded in a public office, and published in a newspaper at the domicile of the corporation, prescribed the installments by which forty per cent, of the stock subscribed should be paid, and then declared that the residue, or any portion thereof, should not be called for unless-with the assent of three-fourths of the stockholders, and then only to increase the business of the corporation. The rule with regard to unpaid subscriptions of stock is this, that whatever sum is subscribed by the stockholders, and held out to the public as the stock of the corporation, is liable to be called in for the payment of its debts, even though the directors may refuse to make the call. Purton v. New Orleans & C. R. Co., 3 La. Ann. 19. The power conferred upon directors to call in installments upon the shares, is a discretionary power; but that discretion is= merely modal relating to the time and manner of making payments. When the wants of the company require those payments, it becomes the duty of the directors to cause them to be made, as much so as to require payment of debts due the company. It is not discretionary with the directors to say whether or not the debts of the company shall be paid when they have the power to compel payment. Ward v. Griswoldville Manuf’g Co., 16 Conn. 601. These doctrines are well established. Do they apply to the [970] case in hand? It is to the charter of a corporation that reference is to he made to determine the rights of the public. Stark v. Burke, 9 La. Ann. 341. Now, looking at the charter of the Louisiana Paper Manufacturing Company, what was the contract which the public was advised the stockholders had entered into with the corporation? Not to pay their subscriptions absolutely, nor to pay them when, in the discretion of the directors, it might be necessary for the wants of the company. No obligation was assumed to pay any more than forty per cent, of the stock subscribed, unless upon the vote of three-fourths of the stockholders, and then for a particular purpose. Clearly, as between the corporation and the stockholders, the unpaid stock above forty per cent, could not be called in except on the terms prescribed by the charter. The public, the creditors of the corporation, are in no stronger position than the corporation itself, for the charter which informed the public of the amount of the capital stock of the corporation, also gave notice that the stockholders were under no obligation to pay more than forty per cent., except on their own vote, carried by a majority of three-fourths, and for a particular purpose. If the directors had called a meeting of the stockholders to vote on the question of calling in the unpaid sixty per cent, of the stock, and the stockholders had refused their assent, would it have been the duty of the directors, would they have had any power, to call it in, notwithstanding the adverse vote? Clearly, not. Is their duty to call in the stock any clearer, or their power any greater because no such meeting has been called and no such vote taken? The stockholders have made their contract with the corporation, the public have been explicitly advised of its terms, and the stockholders, therefore, can only be held to perform what they have agreed to do. The company can claim no more, nor can the creditors of the corporation say they have been misled. In my judgment, the stockholders are not liable to pay the unpaid sixty per cent, until the same has been called in by a three-fourths vote of the stockholders, for the purpose of increasing the business of the corporation. Such residue is not due until after such a vote, and the law of this state declares that the stockholder of an incorporated company is only liable to the company for the unpaid balance- due to the company on the shares owned by him. The following authorities have been consulted, and tend to sustain the views expressed: Burlington & M. R. R. Co. v. Boestler, 15 Iowa. 555; Penobscot & K. R. Co. v. Dunn. 39 Me. 587; Philadelphia & W. C. R. Co. v. Hickman, 28 Pa. St. 318; Carlisle v. Cahawba & M. R. Co. 4 Ala. 70. It results from these views that there was no error in the charge of the district court. Its judgment is, therefore, affirmed.