McDonough agt. Phelps.

public auction, and the proceeds first applied in payment of the instalment called for, and expenses, and the surplus refunded to the owner.

It may be that this provision is not equivalent to an au thority to demand payment of the subscription. It may be that the principles of the valuable case of the Kennebec &c., R. R. Co. agt. Kendall, (31 Maine Rep. 610,) would govern this case. An agreement to subscribe to the stock for a given number of shares did not create a personal liability; neither the charter nor any statute imposed such liability, and it did not arise from the agreement. See also the observations of the court, upon the case of The Hartford & New-Haven Co. agt. Kennedy, (12 Conn. Rep. 499.)

It is true that by the law of several states, upon a judgment and execution returned unsatisfied against a company, the creditor may sustain an action to compel payment of the amount of unpaid subscriptions to satisfy his demand. Such is the case in Ohio, (Henry agt. The Vermilion R. R. Co., 7 Ohio Rep. 187;) in Alabama, (Allen agt. Montgomery R. R. Co., 11 Alb. Rep. 437 ;) in Maryland, (Hall agt. U. Ins. Co., 5 Gill, 484;) in South Carolina, (Haslett agt. Wotherspoon, 1 Strob. Eq. Rep. 209;) and in Georgia, (Hightaver agt. Heaton, 8 Georgia, 486.) And in the case in Ohio, it was held that an agreement to secure to any stockholder the privilege of paying up in store goods, or otherwise except in money, was a fraud upon other stockholders, and payment in money might be enforced.

In our own state a similar proceeding was taken in the leading case of Slee agt. Bloom, (19 John. Rep. 456.) But in Mann agt. Pentz, (3 Comst. 415,) it was held under the Revised Statutes, (2 R. S. 463, § 42, (36),) that the proceedings under a judgment to sequestration, does not effect at once a dissolution of the company; that a receiver under this section could not sustain a suit against a stockholder who had paid up all the calls. He merely represented the company, and could collect only its assets proper. But he could sustain an action to recover unpaid calls from delinquent stockholders. The capital

McDonough agt. Phelps.

stock of a corporation is a trust fund for payment of its creditors.

No such action, however, could be sustained except in equity, by taking an account of the assets and debts, and making all the delinquent shareholders parties, and such a bill was to be filed by the creditor on behalf of himself and all others, not by the receiver. Some other authorities in other states may be usefully noticed.

In Mann agt. Cook, (20 Conn. Rep. 178,) it was decided that a receiver appointed by a court in New-York of a company organized in that state, could sustain an action against a stockholder resident in Connecticut, to compel him to pay up the amount of his unpaid subscription. The plaintiff as representative of the creditors, could bring a suit. That the directors could not receive a subscription at less than the par value of the stock, under a private arrangement. It would operate as a fraud upon creditors and other stockholders.

(Sackett's Harbor Bank agt. Blake and others, 3 Rich. Eq. Rep. 226.) The Jefferson Woolen Company was incorporated by the state of New-York, and Ann Izard, who afterwards married the defendant Blake, became a stockholder. The corporation made two notes, which were discounted by the plaintiffs. The property of the company was afterwards sold on execution, and it became dissolved.

The act of New-York of 1811, as to the individual responsibility of stockholders upon a dissolution and insolvency, was in the case. The bill charged an application to other stockholders, and that they had already paid the amount they were bound to contribute; that there were no other members known to the plaintiffs from whom a recovery could be had; that the defendants had not paid anything towards the debts of the company. These material facts it is stated, were proven. The bill was to enforce the payment of the plaintiff's demand. The court held, that the act of New-York, impairing a personal responsibility of stockholders in derogation of the common law rule, was valid.

2d. That the interpretation of the act given by the tribunals

McDonough agt. Phelps.

in New-York, would be adopted in Virginia. 3d. That these decisions settled that a case of dissolution had occurred. 4th. That the other stockholders need not be joined. And a decree for the amount of the subscription (deducting a certain sum paid before on account of debts,) was made. In these cases, we find the principle that the tribunals of other states will enforce against a resident stockholder the same rights which the company, its creditors or representative, could have enforced against him, in the state which created the corporation.

After some hesitation, I consider that the last clause of the act of 1845, involves the proposition that if an action could not be sustained in Connecticut without making all the stockholders parties, for a general account and distribution, it cannot be supported here. How that is, does not appear. It would be singular that a separate action could be allowed which could not be permitted against a domestic corporation, nor in Connecticut itself, if the law be similar there to what it is here.

My conclusions are, that to sustain a suit, the court must see that the following points are plainly established; that the corporation could, in Connecticut, succeed in such a suit; that it is clear the subscription of the stock in the manner charged was illegal; that it is clear it was incapable of ratification by the directors or stockholders, or if capable has not been ratified; that a demand for payment in money can be supported and that a forfeiture of the stock is not the only remedy, and that such an action could be brought there without making it on behalf of creditors at large and against stockholders generally.

Nor is it an objection to this view, that some of the points suggested appear to be matters of law. These are, however, in truth, matters of fact. The question is, could the suit be supported in Connecticut by the corporation? That is a question of fact, and the law of Connecticut is matter of fact for us, as much as the other matters purely and admittedly such.

There is one other view of this case which may deserve seri

In re Marsac and others.

ous consideration. A corporation is a creation of the law of the state adopted for the promotion of its internal prosperity or regulation; among its franchises is everything which regards its management, the obligations of its members, their relations among each other, and to the aggregate body. The right to make calls upon such members and collect the amount, is a franchise conferred by the state; and a franchise connected with property. I doubt the legality of the law of another state which deprives the corporation of this right without being heard in its assertion.

Judgment for the defendants on the demurrer with costs, and liberty to amend the complaint in twenty days, as advised.

SUPREME COURT.

In the Matter of the Petition of CHARLOTTE MARSAC and EMILY MARSAC and others, infants, &c.

A report of a referee, "that in his opinion it would be proper to allow said infants to prosecute an action for the partition or sale of the real estate men. tioned in the petition," is not sufficient to warrant the court in ordering proceedings in such an action. Under the statute, the facts which warrant such a conclusion, should be set forth in the report.

Brooklyn Special Term, September, 1856.

APPLICATION by infants on petition, for partition and sale of premises.

BIRDSEYE, Justice. The 2d section of chap. 277 of the laws of 1852, directs that the authority prayed for in this petition shall not be given, and that no partition or sale shall be directed by the court, "unless it shall be made satisfactorily to appear that the interests of such infant require such partition or sale."

In re Marsac and others.

I do not find in the papers before me, any evidence whatever that the interests of these infants cannot be sold for their full value, in the manner by which alone they could have been sold prior to the act of 1852. If such a sale can be effected, the whole expense of a partition suit will be saved. If, however, that cannot be done, it will be easy to make the fact appear; as by showing that the co-tenants have been applied to, to purchase and have refused, or that they are unable, or that they had notice of the proceedings before the referee, &c.

The order of reference heretofore made in this matter is not presented to me. But before the court can grant such application as this, I think there should be something more than the mere statement of the referee, "that in his opinion it would be proper to allow said infants to prosecute an action for the partition or sale of the real estate mentioned in the petition." Under the statute cited, the facts which warrant such a conclusion, should be set forth in the report; that the court may judge upon them whether the necessity exists for a proceeding so protracted and expensive as that here sought to be instituted.