Alabama v. Burr

Citations

• 115 U.S. 413
• 6 S. Ct. 81
• 29 L. Ed. 435
• 1885 U.S. LEXIS 1852

Syllabus

<p>The State of Alabama loaned its credit to a railroad company by indorsing its bonds. The act authorizing this to be done provided that if fradulent indorsements of bonds should be obtained, or if the bonds should be sold for less than ninety cents on the. dollar, then the railroad should be sold, and those stockholders who could not prove either ignorance of the fraud or .opposition to it, should be individually liable for the payment of the bonds fraudulently indorsed, and for all other losses that might fall upon the State by reason of any other frauds committed by the company. The State brought suit at law in this court against certain persons alleged in the declaration to be “ the majority and controlling incorporators, officers, directors, and stockholders as well as the actual managers'and controllers ” of the company. The declaration alleged that the defendants had (1) made fraudulent misrepresentations by reason of which the indorsement of an over-issue of bonds had been obtained; (2) made fraudulent misrepresentations by reason of which indorsements were obtained before the several sections of the road were fully finished, completed and equipped; and (8) that they had made unlawful and improper use of some of the bonds, or their proceeds, after they got into the hands of the company. On demurrer: Held, That the liability of the officers and stockholders to the State, was statutory only,'and that the • facts stated in the declaration were not such as to bring the defendants within the liability clause- in the statute ; (1) because the suit was not brought to recover the payment of bonds the indorsement of which had been fraud uently obtained ; and (2) because the declaration did not show that the losses sued for were the immediate consequences of the frauds alleged. '</p> <p>The legislature of Alabama, by a further act, authorized a further loan of its credit to the same company, with provisions that the bonds should not be sold under ninety cents on the