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Cal. Civ. Code, $ 322 (which was enacted prior company in the state of Colorado shall be to the incorporation of such corporation), im carried on in Arapahoe county. posing the same personal liability upon stock.

“3. That the defendants are and were at holders of foreign corporations doing business within the state as upon stockholders in do all tiines herein mentioned residents and cit. mestic corporations.

izens of the state of California. 2. California stockholders in a Colorado corpo

“4. That all the indebtedness of said Los ration whose charter specified that one pur- Angeles Iron & Steel Company to plaintiff pose of the incorporation was the transaction and to plaintiff's assignors was created by of business by the corporation in California contracts made, executed, and to be per. must be deemed to have contracted with ref. formed in the state of California." erence to the provisions of Cal. Civ. Code, 8

“6. That at the time the said indebtedness 322, imposing the same personal liability upon

was created and incurred by the said coinstockholders of foreign corporations doing business within the state as upon stockholders pany there were issued of the capital stock in domestic corporations, and are bound there thereof the number of 1,311 shares, and that by, so far at least as such liability arises the defendants were at said times the own. from the corporate business carried on in ers respectively of the number of said shares California.

as set opposite their respective names, as

follows, to wit: H. L. Pinney, 50 shares; C. [No. 65.)

L. Pinney, 42 shares; W. C. Patterson, 35

shares; C. W. Damerel, 91 shares; F. E. Submitted April 26, 1901. Decided Decem- Little, 22 shares; Thomas Brooks, 38 ber 2, 1901.

shares."

Upon the stipulation and findings a judg. IN

N ERROR to the Superior Court of Los ment was rendered in favor of the plaintif.

Angeles County, State of California, to A writ of error was subsequently sued out review a judgment in favor of plaintiff in from this to that court, it being the highest an action to enforce a personal liability of court in the state to which the action could stockholders. Affirmed.

be taken.

Article 12, § 15, of the Constitution of Statement by Mr. Justice Brewer:

California, adopted in 1879, reads: This was an action to enforce a personal limits of this state shall be allowed to trans

"No corporation organized outside the liability of stockholders. It was commenced in a justice's court of Los Angeles city, Los act business within this state on more favor. Angeles county, California, on September able conditions than are prescribed by law 30, 1898, by the defendant in error against laws of this state."

to similar corporations organized under the the plaintiffs in error. It was subsequently transferred to the superior court of the nia, as amended March 15, 1876, provides

• Section 322 of the Civil Code of Califor. county, where a trial was had on January

as follows: 17, 1900, before the court without a jury. A'stipulation was signed as to the truth of dividually and personally liable for such

“Each stockholder of a corporation is invarious averinents in the complaint and an. swer, which concluded as follows:

proportion of its debts and liabilities as the "And it is stipulated that the only ques: bears to the whole of the subscribed capital

amount of stock or shares owned by him tion in this case is as to whether $ 322 of stock or shares of the corporation, and for the Civil Code of California is in violation of the provisions of the Constitution of the a like proportion only of each debt or claim United States; and if it is in violation of against the corporation. Any creditor of such provisions defendants are entitled to eral actions against any of its stockholders,

the corporation may institute joint or sevjudginent; but if said section is not in vio for the proportion of his claim payable by sation of said provisions, then plaintiff is each, and in such action the

court must ascer. entitled to judgment as prayed for in his tain the proportion of the claim or debt for complaint.” Findings of fact were also made, among judgment must be rendered against each, in

which each defendant is liable, and a several which were the following: *“2. That the Los Angeles Iron & Steel

conformity therewith. Company was a corporation organized on

"The liability of each stockholder of a cor. the 8th day of March, 1893, and incorporated poration formed under the laws of any other under the laws of the state of Colorado; state or territory of the United States, or that the seventh provision of its articles of of any foreign country, and doing business incorporation is as follows, to wit: The within this state, shall be the same as the said company is created for the purpose of liability of a stockholder of a corporation carrying on part of its business beyond the created under the Constitution and laws of limits of the state of Colorado, and the prin

this state.” cipal office of said company in the state

By the stipulation above referred to, the shall be kept at the city of Denver, Arapa- truthfulness of the following averment in hoe county, and the principal plant and the answer was admitted: principal operations of said company, be

Defendants allege that there is no stato yond the limits of the state, shall be in Los ute of the state of Colorado providing that Angeles county, state of California, and stockholders shall be liable for any portion buch other places in the state of California of the indebtedness of a corporation, and alas may be decided upon by the board of di. lege that under the laws of the state of Colorectors. The principal business of said 'rado a stockholder in a corporation is not liable for any portion of the indebtedness contention, it may be said that ordinarily it of said corporation"

is controlled by the law of the state in

which the incorporation is had. That is the Mr. M. L. Graff submitted the cause for place of contract, and, generally, the law of plaintiffs in error. Mr. J. W. McKinley the place where a contract is made governs was with him on the brief.

its nature, interpretation, and obligation. Mr. J. A. Anderson submitted the cause While this is so, it is also true that parties for defendant in error. Messrs. W. 8. Tay in making a contract may have in view some lor and Edward W. Forgy were with him on other law than that of the place, and when the brief.

that is so that other law will control. That

the parties have some other law in view and Mr. Justice Brewer delivered the opin- contract with reference to it is shown by an ion of the court:

express declaration to that effect. In the The plaintiffs in error rely upon the prop- absence of such declaration it may be disosition that the liability of a stockholder is closed by the terms of the contract and the determined by the charter of the corporation purpose with which it is entered into. In and the laws of the state in which the in. Pritchard v. Norton, 106 U. S. 124, 27 L. corporation is had. "If the constitution to cd. 104, 1 Sup. Ct. Rep. 104, many cases which a corporator has agreed does not pro- were cited by Mr. Justice Matthews, deliver vide for individual liability to creditors, he ing the opinion of the court, in which these cannot be charged with individual liability propositions were illustrated and enforced, anywhere.” 2 Morawetz, Priv. Corp. 2d ed. and on page 136, L. ed. p. 108, Sup. Ct. Rep. § 874. They invoke the lex loci contractus, p. 112, it was said: and say that the stockholders' contract was “The law we are in search of, which is to made in Colorado, that being the state in decide upon the nature, interpretation, and which the Los Angeles Iron & Steel Com. validity of the engagement in question, is pany was incorporated; that by the laws of that which the parties have, either express. that state there is no personal liability of ly or presumptively, incorporated into their stockholders; that it is not within the power contract as constituting its obligation. It of California to change the terms of that has never been better described than it was contract, the Federal Constitution (art. 1, incidentally by Mr. Chief Justice Marshall, $ 10) forbidding a state to pass a law im in Wayman v. Southard, 10 Wheat. 1, 48, pairing the obligation of contracts; that 6 L. ed. 253, 264, where he defined it as a while California, which prescribes an indi- principle of universal law,-'the principle vidual liability of stockholders, may if it that in every forum a contract is governed by sees fit exclude every corporation of anoth- the law with a view to which it was made." er state whose stockholders do not assent to T'he same idea had been expressed by Lord such liability, yet if it fails to do so, and Mansfield in Robinson v. Bland, 2 Burr. such Colorado corporation actually comes in- 1077, 1078: “The law of the place,' he said, to California to transact business, such com- 'can never be the rule where the transaction ing into the state and the transaction of is entered into with an express view to the business therein do not change the terms of law of another country as the rule by which the stockholders' contracts, or impose a per- it is to be governed. And in Lloyd v. Gui. sonal liability; and that in such a case bert, L. R. 1 Q. B. 115, 120, in the court of an attempt to enforce the statutory provi-exchequer chamber, it was said that it is sions of California so far as to change the necessary to consider by what general law personal liability of corporators in the for- the parties intended that the transaction eign corporation is in conflict with the due should be governed, or, rather, by what genprocess and equal protection clauses of the eral law it is just to presume that they have Ist section of the 14th Amendment.

submitted themselves in the matter.' LO With reference to the contention that the Brcton v. Miles, 8 Paige, 261." law of California impairs the obligation of The subject was also discussed at length the contract of the stockholders, it is enough by Mr. Justice Gray in Liverpool & G. W. to say that that law, both constitutional and steam Co. v. Phenic Ins. Co. 129 U. S. 397, statutory, was enacted long before the incor- 32 L. ed. 788, 9 Sup. Ct. Rep. 469. In Coghporation of the Los Angeles Iron & Steel lan v. South Carolina R. Co. 142 U. S. 101, Company, and that therefore § 10 of article 110, 35 L. ed. 951, 954, 12 Sup. Ct. Rep. 1 of the Federal Constitution has no appli. 150, 152, Mr. Justice Harlan, referring to cation. “It is equally clear that the law these two opinions, observed : “The elabof the state to which the Constitution refers orate and careful* review of the adjudged* in that clause must be one enacted after the cases, American and English, in the two making of the contract, the obligation of cases last cited, leaves nothing to be said which is claimed to be impaired.” Lehigh upon the general subject.". Water Co. v. Easton, 121 U. S. 388, 391, 30 In Bank of Augusta v. Earle, 13 Pet. 619, L.. ed. 1059, 1060, 7 Sup. Ct. Rep. 916, 918.588, 10 L. ed. 274, 307, Chief Justice Taney See also Central Land Co. v. Laidley, 159 said: U. S. 103, 111, 40 L. ed. 91, 94, 16 Sup. Ct. "It is very true that a corporation can Rep. 80; McCullough v. Virginia, 172 U. S. have no legal existence out of the boundaries 102, 116, 43 L. ed. 382, 387, 19 Sup. Ct. Rep. of the sovereignty by which it is created. 134.

But although it must live and have: Passing to a consideration of the stock its being in that state only, yet it does not holders' contract in the light of the other 'by any means follow that its existence there:

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will not be recognized in other places; and the laws of that state they must be assumed its residence in one state creates no insuper. to know the provisions of those laws; that able objection to its power of contracting in by them a personal liability was cast upon another. It is indeed a mere artificial be the stockholders in corporations formed uning, invisible and intangible, yet it is a per- der the laws of the state, and that that same son for certain purposes in contemplation of liability was also imposed upon the stock. law, and has been recognized as such by the holders of corporations formed under the decisions of this court. It was so held in laws of other states and doing business with. the case of United States v. Amedy, 11 in California. How can it be said that Wheat. 412, 6 L. ed. 507, and in Beaston v. those laws do not enter into the contract Farmers' Bank, 12 Pet. 135, 9 L. ed. 1030. and control as to all business done in pur. Now, natural persons, through the interven. suance of that contract within the limits of tion of agents, are continually making con- California ! Suppose these same stockholdtracts in countries in which they do not re- ers in Colorado had formed a partnership side and where they are not personally pres- with the expressed intent of carrying oa ent when the contract is made, and nobody business in California, would not that exhas ever doubted the validity of these agree pressed intent be a clear reference to the ments. And what greater objection can laws of California and an incorporation of there be to the capacity of an artificial per- those laws into the liabilities created by the Bon, by its agents, to make a contract with partnership business in California? And if in the scope of its limited powers, in a sov: this rule obtains as to contracts of partners ereignty in which it does not reside, provided between themselves, why not also as to consuch contracts are permitted to be made by tracts of stockholders between themselves in them by the laws of the place ?"

forming a corporation: And then, after discussing the question of. In this case it appears that the business • comity, added (p. 589, L. ed. p. 308): transactions out of which these liabilities

“Adopting, as we do, the principle here arose were carried on in California. They stated, we proceed to inquire whether, by resulted from business done in California by the comity of nations, foreign corporations virtue of an express contract made by the are permitted to make contracts within their stockholders with reference to such business. jurisdiction, and we can perceive no sufi. It is unnecessary to express an opinion upcient reason for excluding them when they on the question whether any personal lia. are not contrary to the known policy of the bility would be assumed by the stockholders state, or injurious to its interests.

in reference to business transacted in ColoIt is nothing more than the admission rado. Parties may contract with special of the existence of an artificial person cre- reference to carrying on business in sepaated by the law of another state, and clothed rate states, and when they make an express with the power of making certain contracts. contract therefor the business transacted in It is but the usual comity of recognizing the each of the states will be affected by the law of another state."

laws of those states, and may result in a * As, then, a corporation can have no legal difference of liability. Neither is it necesexistence outside of the state in which it is sary to express any opinion upon the quesincorporated, the contract of the stockhold. tion whether the defendants could have been ers with one another, by which the corpora- held liable under the California statutes, intion is created, is presumed to have been dependently of the provisions of the Colomade with reference to the laws of that rado charter. All that we here hold is that state, nothing being said in the charter to when a corporation is formed in one state, the contrary. But as comity permits a cor- and by the express terms of its charter it is poration to enter another state and do busi- created for doing business in another state, ness therein, it is competent for the stock and business is done in that state, it must holders in making their charter to contract be assumed that the charter contract was with reference to the laws of a state in which made with reference to its laws; and the liathey propose the corporation shall do busi. bilities which those laws impose will attend ness. And in this case the stockholders in the transaction of such business. their charter specified that the purpose of

The judgment of the Superior Court to the incorporation was partly business be affirmed. yond the limits of Colorado, and that the

i (183 U. S. 121) principal part of such outside business should be carried on in California. Not E. T. WILSON, Receiver of the First Nam content to rely upon the general authori.

tional Bank of Helena, Montana, Piff. in ty which by the rules of comity the Colora

Err., do corporation would have to enter Califor. nia and transact business therein, they in MERCHANTS' LOAN & TRUST COM. terms set forth that a part of the purpose

PANY of Chicago, Illinois. of the incorporation was the transaction of business by the corporation in California. Appeal agreed. statement when equivaNow, when they in terms specified that they

lent of special finding-question for new were framing à corporation for the purpose

view. of having that corporation do business in an agreed statement of facts cannot be taken California, is it not clear that they were

as the equivalent of a special finding of tacte, contracting with reference to the laws of within the meaning of U. S. Rev. Stat. $$ 649, that state? Contracting with reference to 700, providing for a walver of trial by jury

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and the proceedings on a trial by the court, so the defendant pleaded that the plaintiff that an exception to a general finding of the ought not to maintain his action because court upon such statement will bring up a it says that it did not, at any time between question for review, where such agreed state the ist day of December, 1894, and the 1st facts, other evidential facts from which a ma- day of June, 1895, or at any other time, purterlal oltimate lact might be inferred, but chase or become the owner of 120 shares of which is not agreed upon or found.

the capital stock of the said First National

Bank of Helena, Montana, or any share or (No. 67.)

shares of the capital stock of said bank, and

of this the said defendant puts itself upon Argued October 29, 30, 1901. Decided Decem- the country,” etc. ber 2, 1901.

Under these pleadings the plaintiff, of

course, had the burden of proving ownership N ERROR to the United States Circuit of the stock by the defendant.

The parties waived a trial by jury and en. cuit to review a judgment affirming a judg. tered into the following stipulation: ment of the District Court of Illinois in fa. "It is hereby stipulated and agreed bevor of defendant in an action to enforce an tween the parties* herein that trial by jury assessment upon shareholders in a national in this case be waived; that this cause may bank. Affirmed.

be submitted to the Honorable Christian C. See same case below, 39 C. C. A. 231, 98 Kohlsaat, judge of this court, upon the foreFed. 688.

going statement of facts duly signed by the Messrs. Delevan A. Holmes and W. E. attorneys of the parties respectively, and Mason for plaintiff in error.

that for the purpose of such trial the said Mr. John N. Jewett for defendant in statements of facts shall be taken as abso

lutely true, and shall be taken and consid

ered as all the facts concerning the transacMr. Justice Peckham delivered the

tions therein referred to, subject to any and opinion of the court:

all objections which might properly be The plaintiff in error brings this case here urged to the competency or materiality of to review a judgment of the United States any part thereof. circuit court of appeals for the seventh cir

Upon the trial before the court without a cuit (39 C. C. A. 231, 98 Fed. 688) affirm-jury, the statement of facts as agreed upon

ing a judgment of the district court of Illi. between the parties was put in evidence, and g nois in favor of the defendant. The plain- such statement contained all the evidence in

tiff in error is the receiver of the First Na- the case, which was thereupon submitted to tional Bank of Helena, · Montana, and the court for its decision. The court made brought this action against the defendant no special findings of facts, but made a gento enforce an assessment of 100 per cent or- eral finding of the issues for the defendant, dered by the Comptroller of the Currency on

embodied in a judgment which was entered all owners of shares in that bank. In his as follows: declaration the plaintiff, after alleging the

"Now come the parties by their attorneys, organization of the bank, his appointment and thereupon a jury is waived by written as receiver, and the assessment by the Comp- stipulation, and this cause is submitted to troller, averred that “the Merchants' Loan the court for trial, and the court, having & Trust Company, a corporation, at some

heard the evidence and arguments of countime between the 1st day of December, 1894, sel, and being now fully advised, finds the and 1st day of June, 1895 (the exact date issues for the defendants, to which finding being to plaintiff unknown), purchased and the plaintiff excepts, and thereupon the became the owner of 120 shares of the capi- plaintiff enters his motion for a new trial, tal stock of said First National Bank of which is heard and overruled, to which rul Helena, Montana, of the par value of $100 ing the plaintiff excepts. It is thereupon each, and continued to be, and was at the considered and adjudged by the court that time said bank suspended and ceased to do the defendants recover of the plaintiff their business, the real owner of the same; but, costs in this behalf, to be taxed, and that in order to evade the responsibility imposed execution issue therefor, to which judgment by law upon the shareholders in said bank, the plaintiff then and there excepts." caused said shares to be placed on the books

The statement of facts agreed upon and of said bank in the name of P. C. Peterson, filed in the court was subsequently allowed one of its employees, in whose name said as a bill of exceptions. There was no exshares appeared on the said books at the ception taken to any fact contained in this time of said failure. And the plaintiff statement, nor in the progress of the trial, avers that the said Peterson was at the time nor was there any request to find other spe said stock was issued to him as aforesaid, cial facts. The only exception taken was to and at the time of the failure of said bank, the general finding of the court in favor of a person of small means and not responsible the defendant. From this agreed statement financially.”

of facts it appears that on April 15, 1893, The plaintiff demanded judgment for the the defendant loaned to one Ashby of Hele sum of $12,000, being $100 on each share of na, Montana, $12,000, and took his note in the stock in the bank owned (as alleged) by the usual form payable on August 16, 1893. the defendant.

As collateral security for the payment of the As one of several defenses to the action, note at maturity, Ashby signed in blank and

1901.

WILSON V. MERCHANTS' LOAN & TRUST CO.

57

•124

delivered to the defendant a certificate rep-cates for 150 shares of the capital stock of resenting 150 shares of the capital stock of the Helena National Bank were originally the Helena National Bank of Helena, Mon. held, except as the conditions may have been tana. The note taken for the loan was of changed by the facts hereinbefore stated, but the kind usually termed a collateral note, that neither the defendant nor the said Pe. and authorized the sale of the collateral de terson ever took any part in the manageposited as security therefor upon default ment of either of said banks, or participated in the payment of the note. At the time of in the administration of their affairs." The the loan Ashby was president of the Helena "facts hereinbefore stated” consisted, not National Bank. On July 26, 1893, Ashby only of those which have been given above, made a general assignment for the benefit but also of correspondence between the offiof bis creditors, and among the property as- cers of defendant and the officers of the Helesigned by him was the certificate for 150 na National Bank and the assignee of the shares of the capital stock of the Helena Na pledgeor Ashby, which is set out in the tional Bank, described by the assignor as agreed statement. then held by the Merchants' Loan & Trust This statement has been referred to for Company in pledge. About the date of the the purpose of understanding the materialiassignment Ashby resigned the presidency ty of certain facts found or agreed upon, the of the Helena National Bank. In the sum- failure to do which prevents our use of the mer of 1894 the Ashby note still remained statement in the decision of the case. The unpaid, and the certificate of stock re contention of the plaintiff herein is that the mained in the possession of the defendant, substitution of the original stock for that of no transfer thereof being made upon the the First National Bank of Helena was made books of the bank. Later in the year 1894 without the consent of the pledgeor, and the parties in interest in Helena proposed amounted to a conversion of the stock, and to consolidate the Helena National Bank made the defendant, when it took the shares with the l'irst National Bank of Helena, and of stock in the consolidated bank, the own. the consent of a sufficient number of share er thereof, and rendered it liable to assess. holders in the bank was obtained before the ment as such owner, notwithstanding the defendant was asked to consent to the trans- fact that the stock was entered and refer of the shares held by it in pledge, on the mained on the books of the bank and in the same terms upon which the owners of shares certificate issued by the bank, in the name in the Helena National Bank had agreed to of Peterson, as owner. a consolidation of the two banks, by taking Aside from the question whether the de shares in the First National Bank of Hele fendant had or had not the right as pledgee na in exchange for their shares in the Hele- of the stock in the Helena National Bank to na National Bank, at the rate of 80 per cause the same to be transferred into shares cent of new shares in exchange for the old. of the other bank after a majority of the In response to such request the defendant stockholders had consented to a consolidasent the certificates for the 150 shares in the tion, it would seem that if Ashby, the owner, Helena National Bank to the president of had himself consented to the arrangement, that bank. In exchange therefor certificates or subsequently ratified it, the substituted for 120 shares of stock in the First National stock would remain under the same terms Bank Helena were sent to the defendant, and conditions as attached to the original the shares heing entered, at request of de stock, and it would be simply a pledge to, fendant, on the books of the bank and in the and not an ownership of stock by, the de certificates, in the name of P. C. Peterson, fendant; and as the stock never stood in the an employee of the defendant. Subsequent name of the defendant, the case would be ly, the First National Bank of Helena went governed by that of Pauly v. State Loan into the hands of a receiver, who found the T. Co. 165 U. S. 606, 41 L. ed. 844, 17 Sup. 120 shares standing on its books in the namoct. Rep. 465, and the cases there cited, and of Peterson. The receiver, after the assesg. Jackson v. Emmons, 176 U. S. 532, 44 L. ment was made, commenced this actioned. 570, 20 Sup. Ct. Rep. 465. against the defendant trust company, alleg. The difficulty we meet, which prevents the ing that it was the real owner of the stock, decision of the case from resting on the and that it stood in the name of Peterson statement of facts, lies in the omission there. for the purpose of enabling the defendant to from of any finding or agreement upon the evade liability as owner.

question of fact whether the pledgeor had The note remains unpaid, although two or had not consented to the change; and insmall payments on account have been made stead of any such finding or agreement there by the assignee of the maker since the as. is placed in the statement certain corresignment.

spondence from which, together with other It is part of the statement agreed upon facts stated, an inference of consent or per that the original shares of stock were placed haps ratification might be drawn, but is not in defendant's possession simply as a pledge found or agreed upon, thus leaving the ultior collateral security for the payment of the mate fact of consent or nonconsent a matter note made by Ashby, and the certificates of inference, and an inference of fact, and which have been substituted for them, as al. not of law; and this is a material fact arisready mentioned, “have ever since been and ing upon the statement as agreed upon. now are in the possession and control of the Neither is there any finding upon the ques. defendant, and are held by it in the same tion of the consent of the assignee of tho way and for the same purpose as the certifi- pledgeor to the substitution of the stock,

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