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    PINNEY v. NELSON, 183 U.S. 144 (1901)

    U.S. Supreme Court

    PINNEY v. NELSON, 183 U.S. 144 (1901)

    183 U.S. 144

    H. L. PINNEY, C. L. Pinney, W. C. Patterson, and Thomas Brooks, Plffs. in Err.,
    R. T. NELSON.
    No. 65.

    Submitted April 26, 1901.
    Decided December 2, 1901.

    This was an action to enforce a personal liability of stockholders. It was commenced in a justice's court of Los Angeles city, Los Angeles county, California, on September 30, 1898, by the defendant in error against the plaintiffs in error. It was subsequently transferred to the superior court of the county, where a trial was had on January 17, 1900, before the court without a jury. A stipulation was signed as to the truth of various averments in the complaint and answer, which concluded as follows:

    Findings of fact were also made, among which were the following: [183 U.S. 144, 145]  

    Upon the stipulation and findings a judgment was rendered in favor of the plaintiff. A writ of error was subsequently sued out from this to that court, it being the highest court in the state to which the action could be taken.

    Article 12, 15, of the Constitution of California, adopted in 1879, reads:

    By the stipulation above referred to, the truthfulness of the following averment in the answer was admitted:

    Mr. M. L. Graff submitted the cause for plaintiffs in error.

    Mr. J. W. McKinley was with him on the brief.

    Mr. J. A. Anderson submitted the cause for defendant in error.

    Messrs. W. S. Taylor and Edward W. Forgy were with him on the brief.

    Mr. Justice Brewer delivered the opinion of the court:

    The plaintiffs in error rely upon the proposition that the liability of a stockholder is determined by the charter of the corporation [183 U.S. 144, 147]   and the laws of the state in which the incorporation is had. 'If the constitution to which a corporator has agreed does not provide for individual liability to creditors, he cannot be charged with individual liability anywhere.' 2 Morawetz, Priv. Corp. 2d ed. 874. They invoke the lex loci contractus, and say that the stockholders' contract was made in Colorado, that being the state in which the Los Angeles Iron & Steel Company was incorporated; that by the laws of that state there is no personal liability of stockholders; that it is not within the power of California to change the terms of that contract, the Federal Constitution ( art. 1, 10) forbidding a state to pass a law impairing the obligation of contracts; that while California, which prescribes an individual liability of stockholders, may if it sees fit exclude every corporation of another state whose stockholders do not assent to such liability, yet if it fails to do so, and such Colorado corporation actually comes into California to transact business, such coming into the state and the transaction of business therein do not change the terms of the stockholders' contracts, or impose a personal liability; and also that in such a case an attempt to enforce the statutory provisions of California so far as to change the personal liability of corporators in the foreign corporation is in conflict with the due process and equal protection clauses of the 1st section of the 14th Amendment.

    With reference to the contention that the law of California impairs the obligation of the contract of the stockholders, it is enough to say that that law, both constitutional and statutory, was enacted long before the incorporation of the Los Angeles Iron & Steel Company, and that therefore 10 of article 1 of the Federal Constitution has no application. 'It is equally clear that the law of the state to which the Constitution refers in that clause must be one enacted after the making of the contract, the obligation of which is claimed to be impaired.' Lehigh Water Co. v. Easton, 121 U.S. 388, 391 , 30 S. L. ed. 1059, 1060, 7 Sup. Ct. Rep. 916, 918. See also Central Land Co. v. Laidley, 159 U.S. 103, 111 , 40 S. L. ed. 91, 94, 16 Sup. Ct. Rep. 80; McCullough v. Virginia, 172 U.S. 102, 116 , 43 S. L. ed. 382, 387, 19 Sup. Ct. Rep. 134.

    Passing to a consideration of the stockholders' contract in the light of the other contention, it may be said that ordinarily [183 U.S. 144, 148]   it is controlled by the law of the state in which the incorporation is had. That is the place of contract, and, generally, the law of the place where a contract is made governs its nature, interpretation, and obligation. While this is so, it is also true that parties in making a contract may have in view some other law than that of the place, and when that is so that other law will control. That the parties have some other law in view and contract with reference to it is shown by an express declaration to that effect. In the absence of such declaration it may be disclosed by the terms of the contract and the purpose with which it is entered into. In Pritchard v. Norton, 106 U.S. 124 , 27 L. ed. 104, 1 Sup. Ct. Rep. 104, many cases were cited by Mr. Justice Matthews, delivering the opinion of the court, in which these propositions were illustrated and enforced, and on page 136, L. ed. p. 108, Sup. Ct. Rep. p. 112, it was said:

    The subject was also discussed at length by Mr. Justice Gray in Liverpool & G. W. Steam Co. v. Phenix Ins. Co. 129 U.S. 397 , 32 L. ed. 788, 9 Sup. Ct. Rep. 469. In Coghlan v. South Carolina R. Co. 142 U.S. 101, 110 , 35 S. L. ed. 951, 954, 12 Sup. Ct. Rep. 150, 152, Mr. Justice Harlan, referring to these two opinions, observed: 'The elaborate and careful re- [183 U.S. 144, 149]   view of the adjudged cases, American and English, in the two cases last cited, leaves nothing to be said upon the general subject.'

    In Bank of Augusta v. Earle, 13 Pet. 519, 588, 10 L. ed. 274, 307, Chief Justice Taney said:

    And then, after discussing the question of comity, added (p. 589, L. ed. p. 308):

    The judgment of the Superior Court is affirmed.

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