Opinion of the Court. to pay debts, ceases by death. This construction, however, would be manifestly unsound. The obligation of a subscriber to stock, to contribute to the amount of his subscription for the purpose of the payment of debts, is contractual, and arises from the subscription to the stock. True, whether there is to be a call for the performance of this obligation depends on whether it becomes necessary to do so in consequence of the happening of insolvency. But the obligation to respond is engendered by and relates to the contract from which it arises. This contract obligation, existing during life, is not extinguished by death, but like other contract obligations survives and is enforceable against the estate of the stockholder. The principle controlling the subject was quite clearly stated by Shipman, J., in Davis v. Weed, 7 Fed. Cas. 186. There, stock of a national bank stood in the name of a person who died in January, 1871. Nearly one year afterwards, on December 12, 1871, the bank became insolvent, and more than five years thereafter several assessments were made by order of the Comptroller of the Currency, and an action was instituted against the administrator to enforce payment. Two defences were interposed by the administrator, as follows: 1, that the estate of the decedent had been settled according to law, prior to the assessments, and that as there were no assets in the hands of the administrator at the time of the demand and he had fully administered the estate and had received no assets since the demand, no judgment could be rendered against him; and, 2, that inasmuch as the insolvency of the bank occurred after the death of the intestate, when the title of the stock became vested in the administrator, no debt or liability existed at any time against the estate; that the liability, if any, was against the administrator, who, by section 5152 of the Revised Statutes, was freed from personal liability, and was only liable to the extent of the trust'estate and funds in his hands at the time of the demand. The first contention was held untenable, upon a consideration of the statutes of Connecticut in regard to the settlement of estates, and the presentation, allowance and payment of claims against the estates of solvent deceased persons. In disposing of the second contention the court said: Opinion of the Court. "The original liability of the intestate to pay the assess ments which may be ordered by the Comptroller was a voluntary agreement, evidenced by his subscription or by his becoming a stockholder. It is not imposed by way of forfeiture or penalty. It is imposed by the statute, but it also exists by virtue of the contract which the intestate entered into when he became a stockholder. When the stockholder dies his estate becomes burdened with the same contract or agreement which the dead man had assumed, and so long as it, through the executor or administrator, holds the stock as the property of the estate, and the stock has not been transferred on the books of the bank, and the liability has not been discharged by some act which shows that the new stockholder has taken the place of the old one, the contract liability still adheres to the estate. This liability is not the result of any new contract, for the administrator did not voluntarily become the owner of the stock; it came to him as the dispenser of the goods of the dead, and the liability rested upon the stock, and was a part of the contingent liability of the estate, at least until it was transferred to some other person by a transfer free from fraud." The question was settled in Richmond v. Irons, 121 U. S. 27, where the court said (pp. 55, 56): "Under the national banking act the individual liability of the stockholders is an essential element of the contract by which the stockholders became members of the corporation. It is voluntarily entered into by subscribing for and accepting shares of stock. Its obligation becomes a part of every contract, debt and engagement of the bank itself, as much so as if they were made directly by the stockholder instead of by the corporation. There is nothing in the statute to indicate that the obligation arising upon these undertakings and promises should not have the same force and effect, and be as binding in all respects, as any other contracts of the individual stockholder. We hold, therefore, that the obligation of the stockholder survives as against his personal representatives. Flash v. Conn, 109 U. S. 371; Hobart v. Johnson, 19 Blatchford, 359. In Massachusetts it was held, in Grew v. Breed, 10 Met. Opinion of the Court. 569, that administrators of deceased stockholders were chargeable in equity, as for other debts of their intestate, in their representative capacity." And a similar determination as to the nature of a responsibility like the one in question has been arrived at by the state courts in decisions on kindred statutes, and, indeed, its correctness is not controverted by any authority to which we have been referred or which we have been able to examine. The accepted doctrine finds nowhere more lucid statement than in the courts of New York. Thus, in Bailey v. Hollister, 26 N. Y. 112, judgment having been recovered against a manufacturing company upon indebtedness which arose in the years 1849, 1850, 1851, 1852 and 1853, an action was brought, after return of execution unsatisfied, to recover the same debt from the personal representatives of the estate of one Kirkpatrick, on the ground that when such indebtedness was contracted the estate of Kirkpatrick was a stockholder, and, as such, personally liable under the charter of the company. Kirkpatrick had died intestate in 1832, and the stock stood on the books of the company in his name until 1844, when it was entered in a new stock ledger in the name of the estate, which thereafter received dividends. The facts of this transfer and the payment of dividends were not, however, in the opinion of the court treated as material factors in the decision. The court, in an opinion delivered by Gould, J., said (p. 116): "It will be conceded that when a stockholder in any corporation dies, his estate succeeds him in the title to, and the rights in, the stock he held. Of necessity, it must take that title and those rights subject to any liability then existing upon them; and so long as the estate is, by operation of law, the holder of such stock, the estate must become responsible for any obligations accruing during that time which the law may impose upon any holder of the stock as such. Such liability proceeds not from any new contract, made by or on behalf of the estate, but is inherent in the property itself. To avoid it the estate must part from the property; must cease to be the holder of the stock. Or, calling it a contract liability, it arises out of a contract made by the stockholder, Opinion of the Court. and binding his personal representatives, as it bound him, as long as the relation of stockholder existed." And it may be added, the law presumes, in the absence of express words, that the parties to a contract intend to bind not only themselves, but their personal representatives. Kernochan v. Murray, 111 N. Y. 306. The doctrine enunciated in Bailey v. Hollister, as above stated, was later applied in Cochran v. Wiechers, 119 N. Y. 399, 403, where the court held that liability imposed by statute upon stockholders in limited liability companies to respond for the debts of the company, "to an amount equal to the amount of stock held by them respectively," was in the nature of a contract obligation, which survived the death of the stockholder. The court, after approvingly quoting a portion of the opinion of Gould, J., above excerpted, added (p. 404): "The liability of the estate of the deceased stockholder under the statute is so well established, upon principle and authority, that further discussion is unnecessary. Chase v. Lord, 77 N. Y. 1; Flash v. Conn, 109 U. S. 371; Richmond v. Irons, 121 U. S. 27." The debt then being one due by the estate of Matteson, if the allotment of the shares in indivision be not considered, the question then is, taking the allotment into view, what was its effect? The argument is that the next of kin to whom the allotment was made can only be held responsible to the extent of the interest which they took in the stock, and therefore there was error committed in enforcing the whole amount of assessment against the next of kin who were served, to the extent of the distributive share of the property of the estate received by them. But this contention directly conflicts with the interpretation of the statutes of Minnesota by the court of last resort of that State in this case. It is clear that, by necessary implication, it was decided that by the statutes of Minnesota under which the allotment in indivision was made, the heirs or next of kin remained, by operation of law, to the extent to which they received the property of the estate, subject to be sued and to respond to the debts of the estate existing at the time the allotment took place. But the rights arising Opinion of the Court. from the allotment, under the statutes of Minnesota, cannot be greater than those which the statutes in question conferred. The contention, therefore, amounts to this, that in so far as the statutes of Minnesota operated in favor of the participants in the allotment the statutes are to be respected, but to the extent that they imposed obligations upon the allottees they are not bound thereby. It is argued, however, that as by the law of Minnesota the liability to be called upon to pay a debt of the estate, to the extent of the distributive share received, depended solely upon whether there was such debt existing at the time the allotment was made, and as there was no such debt in the present instance, no duty to respond arose. This is predicated upon the assumption that because the insolvency happened after the allotment, therefore there was no debt at the time of the allotment. This assumes that whether there was a debt depended upon the date of the insolvency. In effect, this is but to argue that the estate was never liable at all. Such clearly is the essence of the proposition, for if it be that whether there was a debt is to be alone ascertained by the happening of insolvency and not by referring to the date of the subscription, then where insolvency occurred after the death of the stockholder, there would be no responsibility. The unsoundness of this view has been already demonstrated. Moreover, the Supreme Court of Minnesota, in effect, in this case has held that the statute of that State making the allottees liable, each to the amount of their distributive share, for the debt of the estate embraced a contract liability, to pay an assessment, contingent on the happening of insolvency, although that event had not taken place at the time of the allotment. The contention is next made that conceding there was a debt of the estate, and granting that the statute embraced a preëxisting contract obligation which had not ripened into an actual demand because insolvency had not taken place, nevertheless the court below erred, because by the effect of the allotment the estate had ceased to exist and all its property had passed to the allottees This but reiterates the misconception already disposed of. Whether the effect of the allotment VOL. CLXXVI-34 |