Fourth National Bank v. Francklyn - 120 U.S. 747 (1887)
U.S. Supreme Court
Fourth National Bank v. Francklyn, 120 U.S. 747 (1887)
Fourth National Bank v. Francklyn
Decided March 21, 1887
120 U.S. 747
The liability of a corporate stockholder may be enforced only in the mode prescribed by the statutes of the state of incorporation.
This was an action at law, brought December 10, 1879, by a national bank against the executor of Edwin Hoyt, a stockholder in the Atlantic De Laine Company, to recover the amount of a debt for upwards of $100,000 due from that corporation to the plaintiff on promissory notes made and payable in December, 1873, and January, 1874. The parties duly waived a jury, and submitted the case to a referee under a rule of court, and also agreed in writing upon "a statement of certain of the facts in this action," which defined the amount of the debt due from the corporation to the plaintiff, and the material parts of the rest of which were as follows:
The Atlantic De Laine Company was a manufacturing corporation, established in the State of Rhode Island, under a charter granted in 1851 by the General Assembly of that state, which fixed and limited its capital stock at $300,000, and by § 8 of which
"the liability of the members and officers of this corporation for the debts of the company shall be fixed and limited by, and the corporation, its members and officers, shall in all respects be subject to, the provisions of an act"
mentioned below. Laws R.I. May Sess. 1851, pp. 33-36.
"Fourth. In and by an act entitled 'An act in relation to manufacturing corporations,' passed at the June session of 1847 by the aforesaid General Assembly of the State of Rhode Island, it was provided, among other things, as follows:"
" The members of every manufacturing company that shall be hereafter incorporated shall be jointly and severally liable for all debts and contracts made and entered into by such company until the whole amount of the capital stock, fixed and limited by the charter of said company, or by vote of the company in pursuance of the charter, shall have been paid in, and a certificate thereof shall have been made and recorded in a book kept for that purpose in the office of the city or town clerk of the city or town wherein the manufactory is established, and no longer, except as hereinafter provided."
"It was also therein provided that"
"When the stockholders in a manufacturing company shall be liable, by the provisions
of this act, to pay the debts of such company, or any part thereof, their persons and property may be taken therefor, on any writ of attachment or execution issued against the company for such debt, in the same manner as no writs and executions against them for their individual debts. The person to whom said officers or stockholders may render themselves liable as aforesaid may, instead of the proceedings aforementioned, have his remedy against said officers or stockholders by a bill in equity in the supreme court."
"[Laws R.I. June Sess. 1847, pp. 30, 35.] The foregoing provisions were substantially continued in force by chapter 128 of the revision of the statutes of the State of Rhode Island of 1851, and by chapter 142 of the revision of said statutes of 1872, and continued to be, and at all times mentioned and set forth herein were, and still are, in full force and effect as statutes of the State of Rhode Island."
"The whole amount of the capital stock of the Atlantic De Laine Company was never paid in, nor a certificate filed, as required by these provisions. Hoyt was a resident of New York, and stockholder in that company from its incorporation until his death in May, 1874. He left a will, under which letters testamentary were issued to the defendant in New York, but it was never proved in Rhode Island, nor were letters testamentary or of administration upon his estate ever issued there."
"Tenth. No writ of attachment or execution has ever been issued against the Atlantic De Laine Company for or on account of the claim of the plaintiff upon the aforesaid promissory notes, and no suit in equity has ever been begun in the Supreme Court of Rhode Island against any of the officers or stockholders of the Atlantic De Laine Company founded upon the plaintiff's claim herein. Upon the 30th day of March, 1874, the said Atlantic De Laine Company was duly adjudicated a bankrupt by the United States District Court for the district of Rhode Island."
The referee found the facts as agreed by the parties, and, against the objection and exception of the plaintiff, admitted in evidence the reports of the cases, adjudged in the Supreme
Court of Rhode Island, of New England Bank v. Stockholders of Newport Factory, 6 R.I. 154, and Moies v. Sprague, 9 R.I. 541, as proof of the law of Rhode Island, and found the following as an additional fact:
"Twelfth. Prior to the making of the aforesaid notes, it had been judicially determined by the Supreme Court of the State of Rhode Island, that court being the highest judicial tribunal of the said state, that the remedies provided in favor of creditors of corporations therein referred to against their stockholders by said Act of June session of 1847 were exclusive of, and did not include, the remedy of an action in favor of such creditor against such stockholder."
"Upon the foregoing facts," the referee reported as a conclusion of law that the defendant was entitled to judgment. The court confirmed his report, specially found the facts as stated by him, and gave judgment for the defendant. The plaintiff sued out this writ of error.