Opinion
(June Term, 1863.)
1. Upon the dissolution of a corporation by the expiration of the time for which it was chartered, its debts become extinct.
2. Under a provision in an act of incorporation, "that the private property of the individual stockholders shall be liable for the debts, contracts and liabilities of the corporation," it was Held, that the responsibility on the individual stockholders is a secondary one, and that when the debts against the corporation became extinct by the expiration of its charter, the liability of the individual stockholders became extinct also.
CAUSE sent from the Court of Equity of CUMBERLAND.
All the facts necessary to the understanding of this cause are stated in the opinion of the Court.
Buxton, for the plaintiff.
C. G. Wright and Bryan, for the defendants.
Several interesting questions are presented by the pleadings, and have been discussed in the argument, but in the view which we feel constrained to take of the case, it is only necessary for us to notice one of them. The bill was filed after the expiration of the charter of the company, for whose debts private property of the defendants, as individual stockholders, is sought to be made liable. It is a well settled principle of the common law that, upon the dissolution of a corporation, its debts become extinct. This principle was held in Fox v. Horah, 36 N.C. 358, to be in full force in this State. Hence, when the "Phenix Company" expired by the limitation of its charter on 1 January, 1860, it ceased to owe any debts, because it no longer had any existence by which it could be a debtor. The question, then, is, could the private property of the persons who were the individual stockholders of the company at the time of its dissolution, be made liable under the tenth section of the act of incorporation, for such of its debts as were then unpaid? The proper answer to this question depends upon another (346) enquiry, that is, whether the responsibility imposed by the act upon the individual stockholders is a primary or only a secondary liability. The language of the charter, after creating the corporation, with the usual powers and privileges for the purpose of manufacturing wool and cotton goods, and after prescribing various regulations ordinarily found in charters of the like kind, declares in the tenth section "that the private property of the individual stockholders shall be liable for all the debts, contracts and liabilities of the corporation in proportion to the stock subscribed by each individual." The responsibility thus imposed upon the individual stockholders is, we think, manifestly a secondary one, because it makes them liable for the debts of another person, to-wit, the corporation. Such a liability was amply sufficient for the security of the creditors of the company, should they be diligent in enforcing it, during the existence of the corporation, while, to have made it greater, would, in a considerable degree, have tended to defeat the purposes for which the company was created. The liability of the individual stockholders being thus a secondary one for the debts of the company, it follows that when the corporation expired and its debts became thereby extinct, their liability became extinct also. As long as there were debts of the company to be paid, the stockholders were bound to pay them, if necessary, out of their private means; but when the debts of the corporation ceased to exist, as such, there remained nothing upon which to attach a responsibility on those who had been members of the defunct company.
This view of the subject is sustained, as we think, by the analogy which it bears to the remedy, which is given by the Act of 1806 (Rev. Code, chap. 50, sec. 7), to creditors against the persons to whom debtors have made a fraudulent conveyance of their property. The remedy given is a scire facias upon the judgment obtained by the creditor against his debtor, against the person to whom the property of the debtor has been fraudulently conveyed for the purpose of defeating the (347) debt. In Wintry v. Webb, 14 N.C. 27, it was decided that the proceeding depended upon the original action of the creditor, and to sustain it, the judgment in that action must be in force. Hence, when it appeared in the case that the defendant in the judgment in the original suit was dead, and no person had administered upon his estate, it was held that the scire facias against the alleged fraudulent grantee could not be sustained. In that case, the secondary proceeding depended upon the existence of a valid judgment, in the first, while in the case now before us the proceeding against the individual stockholders depends upon the existence of a debt of a corporation, of which they are members. The dormancy of the judgment in the one case, and the extinction of the debt in the other, alike deprive the creditor of his remedy. The demurrer must be sustained, and the bill
PER CURIAM. Dismissed.
Cited: Von Glahn v. DeRosset, 81 N.C. 472.