Hill v. Merchants' Mutual Insurance Company/Opinion of the Court

The plaintiff in error contends that the act creating the Excelsior Insurance Company was a private act, and its charter exempted from alteration, suspension, or repeal by subsequent legislation; that its stockholders were exempted from the levy of an execution upon their individual property at the instance of a judgment creditor of the corporation in case of a deficiency of corporate property, and from actions at law by creditors; that the rights of its stockholders were not affected by subsequent legislation of a general nature; and that the method of collecting unpaid stock, specially provided for in the company's charter, was exclusive of any other remedy, except that supplied by a court of equity.

The assignment of error which gives this court jurisdiction to re-examine the judgment of the state court is that when the testator of the plaintiff in error purchased the stock of the Excelsior Insurance Company he entered into a contractual relation, not only with the company, but with the estate, both as to the method of paying for his stock, and in respect to the extent of his liability; and that the rights vested in him by the contract were taken away, and therefore the obligations of his contract were impaired by the legislation of 1879, the validity of which was sustained by the court below.

We assume, in conformity with the decision of the supreme court of Missouri,-and that view is favorable to the plaintiff in error,-that the Excelsior Insurance Company was not subject to the seventh section of the general statute of November 23, 1855, declaring that the charters of all corporations thereafter created should be granted subject to alteration, suspension, and repeal, in the discretion of the legislature; and that the other sections of that statute, specially named in the charter of the insurance company, were to stand as repealed so far as that company was concerned. The result of this construction of the charter of the insurance company is that prior to the passage of the act of 1866, which took effect March 19, 1866, no specific remedy was prescribed for creditors seeking to reach the unpaid subscriptions of stockholders. But it was open to them to proceed by a suit in equity. That such a remedy could be used without vioiating any provision of the company's charter, or any right of a stockholder cannot be doubted. But neither the company nor its stockholders had any vested right in that particular remedy They could only insist that the extent of their liability should not be increased. The act of 1866 authorized an execution to be issued against a stockholder 'to an extent equal in amount to the amount of stock by him or her owned, together with any amount unpaid thereon,' where no property or effects of the corporation could be found. This statute, if given a retrospective operation, certainly did increase the liability of those who became stockholders in the Excelsior Insurance Company prior to its passage. But the defendant in error contends that it was applicable to all who, like Hill, became stockholders after its passage. Waiving any consideration of this question, it is certain that the act of 1879, underw hich this action was instituted, did not increase Hill's liability. He was liable, by virtue of his original subscription and by his notes to the company, to pay the whole amount of his subscription. The statute of 1879 did not enlarge this liability, for it authorized an execution against a stockholder, where there was no corporate property to be levied on, only 'to the extent of the amount of the unpaid balance of such stock by him or her owned.' While, under the original charter of the company, he was liable to a suit in equity, under the statute of 1879 he was liable to be proceeded against by notice and motion in the action in which judgment was rendered against the corporation. In either mode he had opportunity to make defense.

It is, however, contended that under the charter of the company the stockholder was not bound to pay any amount beyond $10 on each share, except upon a call of the directors, and that the provision allowing an execution for the unpaid balance, pursuant to the judgment of the court, was a change of the contract. The provision in the company's charter, that 'the balance due on each share shall be subject to the call of the directors,' did not give the stockholder the right, as between himself and the company, or as between him and the company's creditors, to withhold payment of the balance due from him until the necessities of the company required payment in full for the shares subscribed The company was forbidden to make any policy or contract of insurance 'until the whole amount of shares subscribed shall be actually paid in, or secured to be paid on demand, by approved notes or mortgages on real estate.' Hence Hill executed demand notes, with surety, for the entire balance due on his original subscription. The authority of the company to call for the payment of those notes, by installments, did not give him a right, as a part of his contract, to make payment in that particularmode. His undertaking was to pay each and all of his notes on demand, and it was entirely competent for the legislature, as a regulation of the business and affairs of the company, to give its creditors a new or additional remedy by which this undertaking could be enforced in their behalf,-such remedy not increasing the debtor's liability. As said by this court in Insurance Co. v Needles, 113 U.S. 574, 580, 5 Sup. Ct. Rep. 681, the condition is implied in every grant of corporate existence that 'the corporation shall be subject to such reasonable regulations, in respect to the general conduct of its affairs, as the legislature may, from time to time, prescribe, which do not materially interfere with or obstruct the substantial enjoyment of the privileges the state has granted, and serve only to secure the ends for which the corporation was created.'

Upon the point made by the plaintiff in error, that under the original charter of the company Hill was liable only to a suit in equity, to which all the stockholders could be made parties, and in which he could compel contribution from other stockholders, whereas under the statute of 1879 he could be proceeded against alone, it is sufficient to say that, if neither the statute of 1866 nor that of 1879 had been passed, he could have been sued at law upon the notes he gave the company. The proceeding authorized by the statute of 1879 is, in effect, a suit upon his notes for the amount due thereon. His liability to pay that amount has no such connection with the liability of other stockholders as to exempt him from a suit at law to compel him to pay the sum he agreed to pay. Hatch v. Dana, 101 U.S. 205. The statute restricts any judgment against him to the amount he originally assumed to pay. Consequently no substantial right of his has been violated. 'Whatever belongs merely to the remedy may be altered according to the will of the state, provided the alteration does not impair the obligation of the contract.' Bronson v. Kinzie, 1 How. 311, 316; Sturges v. Crowninshield, 4 Wheat. 122, 200; Bank v. Francklyn, 120 U.S. 77, 755, 7 Sup. Ct. Rep. 757, and cases there cited.

Judgment affirmed.