Page:Henry Osborn Taylor, A Treatise on the Law of Private Corporations (5th ed, 1905).djvu/530

 § 500.] THE LAW OF PRIVATE CORPORATIONS. [CHAP. VIII. not personally liable for the corporate debts after they have fully paid their subscriptions. Here the state may alter the enabling act so as to make the shareholders liable personally for all debts contracted by the corporation after such amend- ment; 1 but not so as to make them liable for debts contracted before such amendment, as such retroactive legislation would (a) impair the obligation of a contract, and (b) deprive share- holders of their property without due process of law. To change the legal effect of a contract so as to impose additional burdens on the person already liable thereunder, impairs its obligation, for constitutional provisions exist as much for the protection of debtors as of creditors. 2 The contract of which the obligation is impaired by making shareholders liable for debts already contracted, is the contract by which the indebt- edness was incurred. Upon the making of this contract, which was not embodied in the charter or enabling act of the corpora- tion, and so subject to alteration, legal relations arose in respect of the corporate enterprise between shareholders and creditors ; and one of the rights of shareholders occasioned by the con- tract was that they should not be liable thereunder beyond the extent of their interest in the corporate funds. Consequently, imposing increased liability on the shareholders in respect of this contract would impair (alter) its obligation. In the second place, it is clear that the imposing of increased liability on the shareholders would give a creditor a right against them which he had not when the contract was made ; and as every right implies a corresponding liability or duty, which in its turn (at least in a case of this nature) implies the giving up of a right, such amendment would deprive a person of a right, i. e., of property without due process of law. 3 1 Sherman v. Smith, 1 Black, 587. 2 " The objection to a law on the ground of its impairing the obliga- tion of a contract, can never depend on the extent of the change which the law effects in it. Any deviation from its terms, by postponing or ac- celerating the period of performance which it prescribes, imposing condi- tions not expressed in the contract, or dispensing with the performance 510 of those which are, however minute or apparently immaterial in their effect upon the contract of the par- ties, impairs its obligation." Wash- ington, J., in Green v. Biddle, 8 Wheat. 1, 84. 3 " Whatever modification of the liability of stockholders in banks may be legally made that shall oper- ate upon future stockholders, or upon the present stockholders pro-