porate charters, impose an additional personal liability upon the members of an existing corporation for debts thereafter incurred. For when this reserved power exists, every subscriber takes his stock subject to whatever legislation may be thereafter passed respecting it, and there is accordingly no impairment of the obligation of contracts. So conversely,

all existing statutes or charter provisions imposing an additional liability upon stockholders for the corporate debts, enter into and become a part of all contracts between the company and its creditors, and the obligation thereby imposed is not to be impaired by a repeal of the statute or an amendment of the charter, such legislation operating only upon subsequently contracted debts.2 The same rule is applied to a change in the constitution of a State. Thus a "paid-up" policy of life insurance issued on no new consideration, and in pursuance of an express agreement in the original policy to issue it, not being a new contract, is not to be affected by a change in the constitution, made between the time of its issue and that of the original, abolishing individual liability of stockholders for debts of the company. But when the liabil

ity imposed is in the nature of a penalty, it may be abolished even in respect of claims arising prior to the enactment of the statute; for there can be no vested right to the enforcement of a penalty. And a statute changing the form of the creditor's remedy without affecting the shareholder's liability, is likewise operative upon previously existing debts."

1 In re Lee's Bank, (1860) 21 N. Y. 9; In re Empire City Bank, (1858) 18 N. Y. 199; Weidinger v. Spruance, (1882) 101 Ill. 278; Sleeper v. Goodwin, (1887) 67 Wis. 577; Sherman v. Smith, (1861) 1 Black, 587; Meadow Dam Co. v. Gray, (1849) 30 Me. 547; Gardner v. Hope Ins. Co., (1869) 9 R. I. 194. Cf. Gulliver v. Roelle, (1882) 100 Ill. 101; Black v. Womer, (1882) 100 Ill. 328; The Sinking Fund Cases, 99 U. S. 700; Green v. Biddle, 8 Wheat. 1, 84; Bailey v. Hollister, (1862) 26 N. Y. 112; Oldtown &c. R. Co. v. Veazie, (1854) 39 Me. 571.

2 Vide cases cited supra, § 24, and

McDonnell v. Alabama &c. Ins. Co., (1889) 85 Ala. 401; Central Agricultural &c. Assoc. v. Alabama &c. Ins. Co., (1881) 70 Ala. 120; Milroy v. Spur Mountain &c. Mining Co., 43 Mich. 231; French v. Teschemaker, (1864) 24 Cal. 518.

3 McDonnell v. Alabama Gold Life Ins. Co., (1889) 85 Ala. 401.

4 Union Iron Co. v. Pierce, 4 Biss. 327; Breitung v. Lindauer, 27 Mich. 217; Gregory v. German Bank, 3 Colo. 332.

5 Fourth National Bank v. Francklyn, 120 U. S. 747. Thus in Merchants' Ins. Co. v. Hill, (1884) 12 Mo.

§ 147. Construction of statutes.-The general principle that statutes in derogation of the common law are to be strictly construed, has been frequently applied to acts and charters under which the creditors of corporations have sought to hold the owners of shares liable beyond the amount remaining unpaid on their stock. Thus in Vermont, a provision in the charter of a company, that if at any time the capital stock should be impared by losses or otherwise, the directors should

App. 148; s. c. (1886) 86 Mo. 466, a law providing that on the return of an unsatisfied execution against a corporation, execution may issue on notice and motion against any stockholder to the extent of the unpaid balance due from him on his stock, was held, although retrospective, to be valid notwithstanding, and applicable to a corporation previously chartered under a special act exempting its shareholders from the double liability imposed by a general statute. Under Cal. Const., (1879) art. xxii, § 1, which provides that all laws in force at its adoption not inconsistent there with shall remain in force, and art. xii, § 3, which provides that "each stockholder of a corporation shall be individually and personally liable for such proportion of all its debts and liabilities contracted or incurred during the time he was stockholder as the amount of stock or shares owned by him bears to the whole of the capital stock," it is held that the Civil Code, § 322, adopted in 1876, fixing the stockholders' liability, was not in conflict with art. xii, § 3, of the constitution, the provisions being the same, except that under the code no one creditor can collect more than the share of his own particular debt of a stockholder, whether he has paid his share of the debts to other stockholders or not. Borland v. Haven, (1889) 37 Fed. Rep. 394.

1 Chase v. Lord, (1879) 77 N. Y. 1; Lowry v. Inman, (1871) 46 N. Y. 119; Diven v. Lee, (1867) 36 N. Y. 302; Grose v. Hill, (1853) 36 Me. 22; Coffin v. Rich, (1858) 45 Me. 511; Windham Provident Institution &c. v. Sprague, (1871) 43 Vt. 502; Dauchy v. Brown, (1852) 24 Vt. 197; Moyer v. Pennsylvania Slate Co., (1872) 71 Pa. St. 293, 297; Youghiogheny Shaft Co. v. Evans, (1872) 72 Pa. St. 331; Salt Lake City Nat. Bank v. Hendrickson. (1878) 40 N. J. 52; Nimick v. Mingo Iron Works Co., (1884) 25 W. Va. 184, 199; O'Reilly v. Bard, (1884) 105 Pa. St. 569, 573; Mean's Appeal, (1877) 85 Pa. St. 75, 78; Potter v. Stevens Machine Co., (1879) 127 Mass.

592;

Chamberlain v. Huguenot Manuf. Co., (1875) 118 Mass. 522; Gray v. Coffin, (1852) 9 Cush. 192; Dane v. Dane's Manuf. Co., (1859) 14 Gray, 488, 489. But see Hicks v. Burns, (1859) 38 N. H. 141, holding that these statutes, being from one point of view contracts, are to be interpreted in the same way as any other contract containing like provisions. Cf. Davidson v. Rankin, (1868) 34 Cal. 503; Mokelumne Hill &c. Co. v. Woodbury, (1859) 14 Cal. 265; Priest v. Essex Hat Manuf. Co., (1874) 115 Mass. 380; Ripley v. Sampson, (1830) 10 Pick. 371; Knowlton v. Ackley, (1851) 8 Cush. 93; Bassett v. St. Alban's Hotel Co., (1875) 47 Vt. 313.

forthwith repair the same by assessment, was held to be intended merely to prevent the continuance of business with an impaired capital and not to impose an additional liability upon the shareholders in favor of creditors which could be enforced by a receiver after the company had become insolvent.1 Where, however, there is no doubt that the legislative intent was to provide an additional security for the benefit of corporate creditors, there seems to be no reason for a stricter construction of the remedial provisions of these statutes than is followed in interpreting other remedial enactments. And a reasonable and sensible construction may be properly adopted.' Although, of course, where the statute is penal in its nature the courts will hesitate more about enlarging the meaning of doubtful terms than where it is remedial.1

5

§ 148. Extra-territorial effect of statutes— (a) Non-resident members.-The enforcement of the shareholder's personal liability depending upon the jurisdiction of the court over his person or property, and process served without the State conferring no such jurisdiction, it is customary to institute proceedings against non-resident members in the State of their domicile. It is important, therefore, to ascertain how far the courts of one State will enforce the statutes of another imposing such a liability. That the statutes of a State do not operate extra-territorially, proprio vigore, is well settled. How far they should be enforced beyond the limits of the State which has enacted them, must depend on several considerations, as whether any wrong or injury will be done to the citi zens of the State in which they are sought to be enforced,

1 Dewey v. St. Alban's Trust Co., (1885) 57 Vt. 332.

2 Freeland v. McCullough, (1845) 1 Denio, 413; s. c. 43 Am. Dec. 685; Marion Township &c. Draining Co. v. Norris, 37 Ind. 424, 429; Gauch v. Harrison, 12 Ill. App. 457, 461. Cf. Carver v. Braintree Manuf. Co. (1843) 2 Story, 433.

Carver v. Braintree Manuf. Co., (1843) 2 Story, 433, 437; Lane v. Morris, (1850) 8 Ga. 475; Bohn v. Brown, (1876) 33 Mich. 257; Mokelumne Hill

&c. Co. v. Woodbury, (1859) 14 Cal. 265; Ingalls v. Cole, (1859) 47 Me. 540; Dewey v. St. Alban's Trust Co., (1885) 57 Vt. 332; Weighley v. Coal Oil Co., 5 Phila. 67.

4 Thompson on Liability of Stockholders, § 54; Esmond v. Bullard, 16 Hun, 65; Cable v. McCune, (1858) 26 Mo. 371; s. c. 72 Am. Dec. 214; Cady v. Smith, 12 Neb. 628.

5 Wilson v. Seligman, (1888) 36 Fed. Rep. 154; Howell v. Manglesdorf, (1885) 33 Kan. 194.

whether the policy of its own laws will be contravened or impaired, and whether its courts are capable of doing complete justice to those liable to be affected by their decrees.' Where a person becomes a stockholder in a corporation organized under the laws of a foreign State, he must be held to contract with reference to all the laws of the State under which the corporation is organized and which enter into its constitution; and the extent of his individual liability as a shareholder to the creditors of the company must be determined by the laws of that State, not because such laws are in force in the other State, but because he has voluntarily agreed to the terms of the company's constitution. It is equally clear, upon both principle and authority, that this liability may be enforced by creditors wherever they can obtain jurisdiction of the necessary parties. This does not depend upon any principle of comity, but upon the right to enforce in another jurisdiction a contract validly entered into.

1 New Haven &c. Co. v. Linden Spring Co., (1886) 142 Mass. 349.

2 First National Bank v. Gustin &c. Mining Co., (Minn. 1890) 7 Ry. & Corp. L. J. 174; Flash v. Conn, 109 U. S. 371; Lowry v. Inman, (1871) 46 N. Y. 119; Ex parte Van Riper, (1839) 20 Wend. 614; McDonough v. Phelps, (1856) 15 How. Pr. 372; Sacketts Harbor Bank v. Blake, (1849) 3 Rich. Eq. 225; Bank of Virginia v. Adams, (1850) 1 Pars. Sel. Eq. Cas. 534; Woods v. Hicks, (1881) 7 Lea, 40; Paine v. Stewart, (1866) 33 Conn. 516; Healy v. Root, (1831) 11 Pick. 389; Gale v. Eastman, (1843) 7 Met. 14. In Aultman's Appeal, (1883) 98 Pa. St. 505, it was held under the constitution and laws of Ohio which make the stockholders of a certain corporation, incorporated under the laws of that State, personally liable to its creditors in an amount equal to the stock subscribed, that the company having become hopelessly insolvent, all its assets being exhausted, and all the stockholders reeiding in Pennsylvania and being

The validity, intérpretation

capable of being served with process, the Pennsylvania courts had jurisdiction to enforce their personal liability against them. Erickson v. Nesmith, (1860) 15 Gray, 221; s. c. (1862) 4 Allen, 233; s. c. (1866) 46 N. H. 371; Hutchins v. New England Coal Mining Co., (1862) 4 Allen, 580; Bond v. Appleton, (1812) 8 Mass. 472; Bateman v. Service, (1881) L. R. 6 App. Cas. 386; Halsey v. McLean, (1866) 12 Allen, 438; Smith v. Mutual Life Ins. Co., (1867) 14 Allen, 336; First Nat. Bank v. Price, (1870) 33 Md. 487. Thus the provision of the Missouri statute (1 Wag. ch. 37, § 22) providing that if any company formed under this act dissolve, leaving debts unpaid, suits may be brought against any person or persons who were stockholders at the time of dissolution, without joining the company in such suit; and if judgment be rendered and execution satisfied, the defendant or defendants may sue all who were stockholders at the time of the dissolution for the recovery of the portion of

and effect of the act imposing the liability are determined by the law of the State creating the corporation. The remedy, however, does not enter into the contract itself, and for this reason the individual liability of shareholders can only be enforced by the remedies provided by the laws of the forum,1 whether the proceedings be taken in a State or in a federal court. Accordingly, if the statute imposing the liability prescribes the remedy and is to be construed as restricting the enforcement of the creditor's demands to a peculiar procedure which does not exist in the foreign State, the shareholder can not be held. Thus where the statute provides that the creditor's remedy shall be by bill in equity, the liability can not be enforced in a State which has no general system of equity ju risprudence and procedure. The remedy prescribed by the statute of the State from which the corporation derives its charter should be stated in the pleading, and it should be made to appear therein that it can be employed in the State of the forum.5

§ 149. (b) Foreign corporations.-The statutory liability of shareholders depends upon the law of the State from which

such debt for which they were liable," has been held in New York to create a personal liability on the part of the stockholder which may he enforced by a common law action in other States. Savings Assoc. v. O'Brien, (1889) 3 N. Y. Supl. 764; s. c. 20 N. Y. St. Rep. 826.

1 First National Bank v. Gustin &c. Mining Co., (Minn. 1890) 7 Ry. & Corp. L. J. 174; Fourth Nat. Bank v. Francklyn, (1887) 120 U. S. 747; Chase v. Curtis, 113 U. S. 452; Fairfield v. County of Gallatin, 100 U. S. 47; South Ottawa v. Perkins, 94 U. S. 260, 267; Peik v. Chicago &c. R. Co., 94 U. S. 164; Leavenworth v. Barnes, 94 U. S. 70; Adams v. Nashville, 95 U. S. 19; Elmwood v. Marcy, 92 U. S. 289; Jessup v. Carnegie, (1880) 80 N. Y. 441; Hunt v. Hunt, (1878) 72 N. Y. 236; Elmendorf v. Taylor, 10 Wheat. 152, 160; Shelby v. Guy, 11 Wheat. 367; Nim

ick v. Mingo Iron Works, (1884) 25 W. Va. 184; Drinkwater v. Portland &c. R. Co., (1841) 18 Me. 35. Cf. Taft v. Ward, (1871) 106 Mass. 518; Lowry v. Inman, (1871) 46 N. Y.

119.

2 Fourth Nat. Bank v. Francklyn, 120 U. S. 747; Knower v. Haines, (1887) 31 Fed. Rep. 513. Cf. Flash v. Cohn, 109 U. S. 371.

3 Fourth Nat. Bank v. Francklyn, 120 U. S. 747; Lowry v. Inman, (1871) 46 N. Y. 119, 127; Erickson v. Nesmith, (1862) 4 Allen, 233; s. c. (1860) 15 Gray, 221; Nimick v. Mingo Iron Works, (1884) 25 W. Va. 184. Cf. Erickson v. Nesmith, (1866) 46 N. H. 371.

4 Erickson v. Nesmith, (1862) 4 Allen, 233; s. c. (1860) 15 Gray, 221; Patterson v. Lynde, 106 U. S. 519; S. C. 112 Ill. 196.

5 Rice v. Merrimack &c. Co., 56 N. H. 114.