Hager v. Cleveland

Robinson J., delivered the opinion of the Court. This suit is brought under the provisions of Article 26, section 52, of the Code, to recover of the appellant, a debt due by The Antietam Manufacturing Company of Washington county, and contracted when he was a stockholder in said company. .The defence rests mainly upon two grounds — 1st. That the amount of capital stock fixed by the articles of association and recorded certificate not being taken, the company never was incorporated, and therefore had no power to create debts, binding on the subscribers; and 2dly. That the appellant had transferred his stock prior to the institution of this suit.

The 40th section of Article 26, of the Code, prescribes all the requirements necessary to the incorporation of manufacturing companies, and when these are fully complied with, and the certificate recorded, the associates become a corporate body, entitled to and possessed of the franchises of a corporation, as effectually as if the same had been by'a direct grant from the State. Sec. 41, Art. 26. In Hughes vs. The Antietam Manuf. Co., 34 Md., 316 , it was decided that these requirements had been complied with, and the corporate existence of the company is therefore no longer an open question.

There is a wide difference between the existence of the company as a corporate body, and the liability of parties for their subscription to its capital stock. As a general rule, where the capital stock and number of shares are fixed in the recorded certificate, no valid assessments or calls can be made on subscribers ⁴⁹¹ until the whole capital stock is taken, unless there be a provision to that effect, either in the recorded certificate, or general law under which the company is incorporated; and in such a case, the subscription may be considered to that extent as conditional. It is a condition, however, which the subscribers may waive, and with their assent the company cannot only organize, but do all other things incident to, and necessary for the prosecution of the particular business for which it was incorporated. This waiver may be either express or implied from the acts and declarations of the subscribers.

If knowing the whole capital stock has not been taken, they attend the meetings of the company, cooperate in the votes for the expenditure of money — for the purchase of property-— for the making of contracts, and other acts which could only be properly done upon the assumption that the subscribers intended to proceed with the stock partially taken up, they would be estopped from setting up such a defence. Cabot and West Springfield Bridge Co. vs. Chapin, and others, 6 Cushing, 50 . In the case before us, then, if the appellánt, knowing that the whole capital stock had not been subscribed, participated in the organization of the company, attended its meetings, was one of the directors, and privy to the purchase of the machinery, for the payment of which this suit was brought, he will not be heard now to deny the regularity of the organization, or to set up as a defence a partial subscription of the capital stock. This brings us to the second ground of defence: whether the transfer of stock by the appellant, exonerates him from personal liability for a debt contracted when he was a stockholder, and before the whole capital stock was paid in ?

The language of the 52d section, it must be admitted, is general in its terms, and does not in words declare whether the individual liability shall attach to such as are stockholders at the time the debt is contracted, or to those holding stock at the time the suit is brought. It is obvious ⁴⁹² however that the protection of the creditor was the paramount object the Legislature had in view, and the section in question, ought to receive such a construction as will best accomplish this object. In conferring the rights and franchises of a corporation upon companies incorporated under Article 26, the Legislature has affixed as a condition precedent to the exercise thereof, that the stockholders shall be individually liable for the debts of the company until the whole capital stock is fully paid in. The original stockholders, by their acceptance of the charter, and subsequent purchasers in becoming members, must be considered as assenting to the terms and conditions thus imposed, and it is upon the faith of these terms and conditions that the public are