Hawthorne v. Calef - 69 U.S. 10 (1864)
U.S. Supreme Court
Hawthorne v. Calef, 69 U.S. 2 Wall. 10 10 (1864)
Hawthorne v. Calef
69 U.S. (2 Wall.) 10
A state statute repealing a former statute which made the stock of stockholders in a chartered company liable to the corporation's debts is, as respects creditors of the corporation existing at the time of the repeal,
a law impairing the obligation of contracts, and void. And this is so even though the liability of the stock is in some respects conditional only, and though the stockholder was not made, by the statute repealed, liable in any way in his person or property generally for the corporation's debts.
The Constitution of the United States ordains that "No state shall pass any law impairing the obligation of contracts." With this provision in force, the State of Maine, on the 1st April, 1836, incorporated a railroad company the charter providing that "The shares of the individual stockholders should be liable for the debts of the corporation." "And in case of deficiency of attachable corporate property or estate," the provision went on to say,
"the individual property, rights, and credits of any stockholder shall be liable to the amount of his stock, for all debts of the corporation contracted prior to the transfer thereof, for the term of six months after judgment recovered against said corporation, and the same many be taken in execution on said judgment in the same manner as if said judgment and execution were against him individually, OR said creditor, after said judgment, may have his action on, the case against said individual stockholder, but in no case shall the property, rights, and credits of said stockholder be taken in execution, or attached as aforesaid, beyond the amount of his said stock."
Another section provides that if sufficient corporate property to satisfy the execution could not be found, the officer having the execution should certify the deficiency on the execution and give notice thereof to the stockholder whose property he was about to take, and if such stockholder should show to the creditor or officer sufficient attachable corporate property to satisfy the debt, "his individual property, rights, and credits shall thereupon be exempt from attachment and execution."
The plaintiff, Hawthorne, who had supplied the corporation,
then embarrassed and insolvent, with materials to build its road, having obtained judgment as a creditor against it, and being unable to get from it satisfaction (the company having, in fact, no property), sued the defendant, Calef, who was a stockholder, both at the time when the debt was contracted and when judgment for it was rendered, and no transfer of whose stock had been made. A few months after the debt was contracted, the Legislature of Maine passed a statute repealing the "individual liability" clause of the charter.
On a question before the Supreme Court of Maine -- the highest court of law in that state -- whether such repeal was or was not repugnant to the clause, above cited, of the Constitution, that court held that it was not, that the original provision -- not making the stockholder personally liable in any way -- did not constitute a "contract" between the creditor and him, within the meaning of the Constitution, and that while, but for the repealing act, the plaintiff would have been entitled to recover of the stockholder individually to the extent of his stock, this repealing act had taken away and destroyed such right.
Judgment being given accordingly, by the said court in favor of the state statute, the correctness of such judgment was now, on error, before this Court.