Another important question considered by Mr. J. Story, in the above-mentioned case, was, whether the plaintiffs were entitled to a decree, to the full amount of the dividends received by the defendants respectively, toward payment of the debts due from the bank to them, or, whether they were entitled only to a pro rata payment out of that dividend, in the proportion which the stock, held by the defendants, bore to the whole capital stock. In considering this question, he alluded to the defective manner in which the bill was drawn, and that it contained no averment of the insolvency of the other stockholders, or of other circumstances denoting a peculiar equity. He also alluded to the long delay in instituting the suit, which was not accounted for in any averments framed for that purpose. It was possible, and probable, he said, that there had been intermediate insolvencies of some of the stockholders, and that injustice might arise to other creditors not before the Court, unless it was guarded against by the decree. His conclusion accordingly was, that the duty of the Court "was best performed by holding the plaintiff's entitled to a decree, that the defendants pay out of the dividends of the capital stock, received by them, so much of the debts due to the plaintiff, as the number of shares held by them in the same capital stock (viz. 320 shares) bears to the whole number of shares in the capital stock (viz. 2,000 shares.)" In Vermont, not only the corporation, but the members composing it, are individually liable in chancery, if they do not appropriate their money to payment of their debts, or if they permit their property to be wasted.'

Though the court in the above case of Wood v. Dummer, proceeded upon the principle, that the stock was a trust fund,

198. The capital stock of an insurance company is not the primary or natural fund for the payment of losses, which may happen by the destruction of the property insured. The charter of the company contemplates the interest upon the capital stock, and the premiums received for insurance as the ordinary fund out of which losses are to be paid. De Peyster v. American Ins. Co. 6 Ib. 486.

and that the stockholders, both in law and fact, were affected with notice of the trust, it has been viewed, that the foundation of the decree was the agreement of the stockholders to pay the sums they had respectively subscribed to the capital stock. That the agreement was with the corporation, which was liable in the first instance, and the creditors had a right to claim, that as against the corporators, their equities should be worked out through the corporation.' It has been held, that where the trustees or other proper agents for that purpose, neglect to call in the debts due by the stockholders of a corporation, for stock, so as to enable the company to pay its debts, a creditor, by a bill in chancery, can compel such agents to enforce contribution from the stockholders according to their subscription. The same principle was acted upon in Slee v. Bloom, in which the stockholders were required in the first instance, to pay up the amount of their subscriptions, for the benefit of the creditors. An act of the State of Connecticut incorporating a manufacturing company provided, that the capital stock of the corporation should not exceed 50,000 dollars; that a share of the stock should be 100 dollars; that the directors might call in the subscriptions to the capital stock by instalments, in such proportions, and at such times and places, as they should think proper. After the stockholders had paid in 40 per cent. on their subscriptions, the corporation became insolvent, having no visible property. On a bill in chancery, brought by certain creditors, praying that they might be compelled to pay in the remaining 60 per cent. (or so much thereof as should be necessary) to be applied in payment of the debts of the corporation, it was held, that the obligation which the stockholders assumed, by their subscription to the capital stock of the corporation, was to pay the sum of 100 dollars on each share, in such instalments and at such times, as should be required by the directors; that the amount of the

1 See 1 Am. Law Mag. 102; but see contra, 4th vol. of the same work, 363.

3

Briggs v. Penniman, (in error) 8 Cow. (N. Y.) R. 387.

Slee v. Bloom, 19 Johns. (N. Y.) R. 474.

shares subscribed, and not the sum actually paid in, constituted the capital stock of the corporation; that it was the duty of the directors to call in such instalments as were necessary to meet the debts of the corporation, and that this duty might be enforced by a decree in chancery.' It was held in South Carolina by Chancellor Dessaussure, that where the funds of a corporation are not whole and tangible, but consist in the liability of the members to be assessed, a court of equity will lend its aid in favor of a creditor of the company to assist it in enforcing the payment of instalments required by the members, and will apply the fund so raised to discharge the debt. It is, as it were, he said, a subrogation of the complainant to the rights of the company. The Chancellor in this case relied upon the case of Dr. Salmon v. The Hamburg Company.3

The ground of the equitable liability of the members, is the credit which the company has gained as a corporation on the promise of the individual members, to raise a fund which should enable the corporation to fulfil its engagements. And it has been considered, that if the doctrine of Chancellor Dessaussure is founded upon a just view of the undertaking and liabilities of individual corporators, they would be liable in equity for debts contracted beyond the amount of their capital stock, with their consent, on the same principle, that they are bound for their subscriptions to the capital.*

In New York, upon an appeal by the defendant from the vice-chancellor, the case was, the directors of an insurance company agreed among themselves to take a majority of the stock, and to give their stock notes for the same, secured by an hypothecation of the stock, and after the company had become

1 Ward v. Griswoldville Man. Co. 16 Conn. R. 593.

Per Chan. Dessausure in Hume v. Winyaw, &c. Canal Co. originally published in Carolina Law Journ. vol. I. p. 217, and afterwards in 1 Am. Law Mag. 92.

3 1 Cases in Chan. 204; and reported in 1 Kyd on Corp. 273; and the

same case was cited by Spencer, J. in Briggs v. Penniman, sup.

1 Am. Law Mag. 103. But see the doctrine controverted by a writer in 4 Am. Law Mag. 363.

greatly embarrassed, one of the directors agreed with the president to give him $6,000, if he would take his stock and substitute his own note in lieu of the stock note of such director, which was accordingly done. It was held to be a fraud upon the creditors of the company, and the other stockholders who had paid for their stock; and that the receiver who had been appointed to wind up the affairs of the company, was entitled to recover the amount of the stock note of the director thus given up, with the exception of the sum which had actually been paid by the president to the company, out of the $6000 received by him as a premium upon his purchase.'

$4. The statute books of many of the States show, that an opinion has strongly and extensively prevailed, that the common law relative to commercial corporations is not adequate to their proper regulation and government. A very material alteration of the common law introduced by statute for the security of the creditors of a joint stock corporation, is that of making each member personally liable, in his private estate, for the company debts. Incorporated stock companies, thus regulated, may be called quasi copartnerships, being such companies as are by law capable of suing and being sued, and of taking and holding property by a corporate name, and yet have imposed upon their members a personal responsibility for the corporate debts. No evidence could show more conclusively the public opinion, that the individuals composing a corporate company were not liable for the corporate debts at common law, than this establishment by the legislature of this personal liability. It has been thought, that the legislature have thus acted wisely in continuing the principle of copartnership in operation; and that considering the multitude of corporations which the increasing spirit of enterprise gives rise to, regard for the interests of the community requires that the

1 Nathan v. Whitwell, 9 Paige (N. Y.) Ch. R. 152.

* See Spear v. Grant, 16 Mass. R. 9.

individuals whose property, thus put into a common mass, enables them to obtain credit universally, should not shelter themselves from a responsibility to which they would be liable as members of a private association.' The policy of the regulation has, on the other hand, been questioned, as cautious persons are by it prevented from investing their capital in an extensive company, the members of which are, in respect to personal liability, made to stand precisely on the footing as common partners.❜

It has been the policy of the legislature of Massachusetts, from the year 1809, to increase the liability of the individual stockholders in manufacturing corporations, for the debts of the corporation. The earliest general legislative regulation to this effect in that State, was made in 1809; though previously, one or two acts of incorporation contained a similar provision. By this general act it is provided, that "when any action shall be commenced against any corporation that may hereafter be created, or whenever any execution may issue against such corporations on any judgment rendered in any civil action, and the said corporation shall not within fourteen days after demand thereof made upon the president, treasurer, or clerk of such corporation, by the officer, to whom the writ or execution against such corporation has been committed to be served, show to the same officer sufficient real or personal property, or estate to satisfy any judgment that may be rendered upon such writ, or to satisfy and pay the creditor the sums due upon such execution, then, and upon such neglect and default, the officer to whom such writ and execution may have been committed for service, shall serve and levy the same writ or execution upon the body or bodies, and real and personal estate of any member or members of such corporation."

The above act, we are told, did not satisfy the Massachu

1 Opinion of Parker, C. J. in Marcy v. Clark, 17 Mass. R. 334.

See 2 American Jurist, p. 102; and 4 Ibid. P. 307.

3 See 2 Am. Jurist, p. 95.

• Ibid.