Questions of Public Law (1737)

Cornelius van Bynkershoek

Whether Individual Members Can Be Sued For, and Be Made to Pay, the Debt of a Corporation

SENECA rightly argues that the individual members of a corporation are responsible only for their proportionate share of the debts of the corporation. The whole debt, therefore, cannot be exacted from an individual member, and so, conversely, individual members of a corporation cannot exact what is due the corporation. If you would rather have these two points from a jurist than from a philosopher, here are the words of Ulpian: ‘What is owed to the corporation is not owed to the individual members, and what the corporation owes the individual members do not owe.’ Whatever the corporation has lent or borrowed, the loan or debt attaches to the corporation itself; and since it is practically difficult to prosecute or sue the individual members for their proportionate share, action at law is not permitted to any except the one designated by law; and this is the syndic of the corporation through whom everything shall be transacted and done that needs to be done in the general behalf. This person represents the treasury of the company, and he exacts whatever is due the treasury, and if the treasury owes anything action is brought against him, for it would be harsh and covetous to exact from the individual members a debt incurred by the whole community.

According to these principles the Court of Holland in the decision rendered against the citizens of Enkhuizen on November 19, 1441, expressly stipulated that judgement should not be exacted upon the individual citizens and inhabitants of Enkhuizen who were not officially concerned. And in his edict of October 12, 1464, Philip of Burgundy, in action against the cities of Northern Holland, suspended the writ that had been ordered into execution against the citizens of Enkhuizen, and he ordered all the citizens to be summoned together so that the money due might be exacted from all pro rata. Philip II of Spain, also in section 11 of the edict which he issued in behalf of Elanders on January 12, 1586, forbade individual peasants to be sued for the whole debt of the whole community, but conceded that each could be sued for his proportion, or to quote the very words: ‘whatever the lot, quota or portion of each should amount to’; a decision which, by the way, I approve only when there is no community treasury. Again, when the admiralty board of Northern Holland was brought to trial before the Supreme Court and was sentenced to pay a fine, one of the board, a judge, was arrested and detained till he should satisfy the judgement, but in 1659 he was dismissed. This, too, is a case which was bitterly discussed afterwards. I recall also that the burgomaster of Harderwijk was arrested because of a debt of his city, but he was released and the plaintiff sustained defeat by a decision of the Supreme Court on June 30, 1730, while I was presiding. This decision was rendered partly on the basis of the above-quoted passage from the Digest, partly on other grounds. Now all these examples prove that what the corporation owes, the individual members do not owe. But this is also wholly true that what the individual members owe is not a debt of the corporation and it cannot be exacted from the corporation. Private funds satisfy private debts, the public chest, the public debt. Much less is a corporation responsible for delinquencies on the part of a member. Accordingly the counsellors of the States-General responded correctly to the States-General on July 22, 1666, that the court of Brabant erred in seizing the goods of a monastery because of the damage done on the part of one of its monks.

Now though these things are so and rest upon law, I fear that they have not obtained at all times and all places. I do not here have reference to the class of cases where the individual is arrested and held for the debt of the community by means of reprisals, for since there is no occasion for reprisals unless justice has been denied, this type does not concern us here. I speak rather of the instances where test cases are brought against the corporation, for even in this way individuals are forced to pay the debts of corporations. If this is done to save the state it may perhaps be defended-. But if the safety of the state is not at stake it is wholly wrong. The Estates of Holland were entirely concerned for the public welfare when in the well-known decree of March 31, 1588, on the exaction of tribute, they openly decreed that for the unpaid taxes of cities, rural districts, and colleges, individual members and inhabitants of those places should be sued and compelled to pay the taxes. The same reasons were effective when on July 16, 1657, by a decree of the same body action at law was granted even against communities for the unpaid taxes of individuals. For by that decree magistrates of rural districts were ordered to pay into the state treasury, according to a list made for the purpose, the amount of the mill-tax on property which the inhabitants owed. And this procedure is still in vogue in collecting the one and the one-half per cent. taxes, although the magistrates are not held to be at fault in the collection. But this holds true, I say, in public cases and in favour of the state treasury; and if there be any injustice in such procedure, the injustice to individuals is counterbalanced by the benefits accruing to the community. Even by the Roman law similar considerations held good in such cases according to the Code. But even under different circumstances it has frequently occurred that private individuals have been held and condemned to pay the debts of a state, so that at times attempts have been made to forestall the injustice of this procedure by obtaining special writs of exemption; as for instance when Philip of Burgundy granted a special dispensation of this land to the citizens of Dordrecht in 1424, giving them ‘full exemption from arrest for debts of the city for the period of four years . According to the evil custom mentioned above, when the man who had lent money to the city of Brunswick was not repaid, the States-General on November 9, 1640, decreed that the creditor might seize the goods of the citizens of Brunswick wherever found; a decree which Aitzema reports and rightly condemns. Even the Court of Holland in our own day arrested a monk from a monastery near Ghent on account of a debt of the monastery and detained him in custody at The Hague, condemning him to pay what the monastery owed. But this is a decision which I should not like to adopt, although I am aware that very many interpreters of the law are so lacking in wisdom as to accept it. Peckius is one, and there are others. But I could find more authorities who contradict, if I were not nauseated by the offal of the learned interpreters who merely affirm or deny the point in question without offering any solid basis of legal argument.

But the jurists who have acquired some wisdom from legal arguments still think the above-mentioned rule should be followed and that individual members do not owe what the corporation owes. But there are those who add the exception: ‘unless the corporation binds itself and its members explicitly’. I agree if the sovereign makes this contract by right of eminent domain which he exercises over his subjects and their property. I dissent if this contract is made without the consent of the sovereign by magistrates of cities or officials of any other corporation, for they are not competent in law to bind for the whole sum individual members of cities or corporations and their property contrary to law, unless therefore they secure a special dispensation from the sovereign permitting this, or the consent of every individual member, we shall still stand by the above-cited line 7, section 1. As I have said, I consider that the sovereign’s authority extends to this point, and I think no one has expressed any doubt that it does. And so the Estates of the United Provinces, acting on instructions from the several provinces or securing subsequent ratification for the act, rightly bound themselves by section 23 of the Union of Utrecht (January 23, 1579), agreeing that if the Estates of any province incurred any liability to the Union, the subjects of the Estates in question and their goods any and everywhere might be seized and levied upon in satisfaction of the claim. Presently on July 13, 1579, a special constitution was made by certain governors and most of the provinces of the United Netherlands in which the same clause was adopted to cover cases where the Estates did not pay in the contributions which they had promised. The Hollanders, in their response to Leicester (par. 4), dated October 4, 1587, said that this provision had been enforced against them the year before. Again the counsellors of the States-General in a letter to that body dated December 14, 1716, told with many details how this provision had often been enforced in other provinces up to the year 1639.

It would have been excellent for the state if the counsellors had not ceased to exact contributions according to that constitution after 1639, and if the Estates of the several provinces had not opposed such exactions, for it was their duty not to oppose when they had pledged their word to pay. But the practice came to an end that year, and with great detriment to the state. When the Estates of Holland observed the harm done they decreed on May 2, 1663, that the States-General should take measures to bring back into enforcement the above-mentioned section 23 of the Union of Utrecht and the constitution of July 13, 1579. But since most of the provinces are in arrears, I suppose that the States-General, not to mention the several provinces, will not succeed in this. It would have been much better to enforce the clause in question and the constitution outright than to request a new sanction of them; for it is not clear that this right which the state constantly employed on the basis of a mutual compact was ever abrogated, a right, which, to be truthful, the state must employ for its own salvation. So long a time had not passed since 1639 that they need have assumed the constitution in question abolished by disuse. But the desire to enforce the law would have profited little if the Estates of the several provinces disregarded their pledges and opposed it; and the more they were in arrears the more they would oppose the measure. They had due cause for fear that the Estates themselves and their individual delegates to the States-General might be levied upon to satisfy the debts of their provinces. And so none of the Estates would hear of having the subjects of the provinces levied upon, in fact they protected the subjects of other provinces, lest if those were called upon to pay, something similar would happen to them and theirs.

And furthermore, what authority should exact the dues from the Estates in arrears? You say the counsellors of the States-General who have charge of the state treasury and the exaction of the contributions to which the Estates have agreed. But these do not possess executive power in the several provinces, nor any jurisdiction, nor any military authority without permission of the Estates. So wherever you turn, if the Estates oppose, the exaction of contributions is very difficult if not impossible, unless the several Estates, in accordance with the constitution of July 13, 1579, concede the authority to the counsellors of the States-General. But now that this constitution has foolishly been allowed to become a dead letter, for reasons that I have mentioned, and now that the debts owed by the several provinces to the common treasury are greater than ever this cession of authority is hardly to be expected despite our hopes. Regarding the right to exact the contributions authorized by the Estates there are three excellent letters, long but by no means verbose, written by the counsellors of the States-General to that body, bearing the dates December 14, 1716, January 18, and January 27, 1717. There is also extant a proposed new tax regulation drawn up on April 12, 1721, by the delegates of the States-General and their counsellors, and submitted to the several provinces on the same day. And though this regulation, while sufficiently just, was drawn up so as to be acceptable to the Estates, it has not yet been possible to secure its adoption. We have accordingly made no progress in the matter as yet.

Meanwhile, it is true that the Estates of the several provinces pledge their subjects and their goods to the whole amount for the common debt of their own province. And this is wholly correct since the Estates have, or at least claim to have, sovereignty as regards taxes. Indeed, no one would deny that the sovereign is endowed with this right, unless he is wholly ignorant of the meaning of the word sovereignty. But what is permitted a sovereign will not at once be permitted the chief officials of any and every corporation, as for instance the magistrates of cities; and yet in commenting upon the above-cited passage from the Code, Busius remarks that judging from practice he had responded that the magistrate had this power; and this is also the opinion of another jurist. Even the judges of Leyden on September 1, 1578, and the Court of Holland in deciding an appeal of the case on November 5, 1579, condemned a man to pay the full amount of the city’s debt, using the argument that the magistrate had contracted the obligation in the name of the city. The same court rendered a similar decision in 1588, and even the Supreme Court did so in an appealed case on September 18, 1590. But I consider these responses and decisions erroneous, because the magistrate cannot rightly suo jure bind his fellow-citizens and their private property; and this is also the opinion of others officially expressed. I say suo jure advisedly, for it would be another matter if the sovereign conceded this authority to him since in that case the act of pledging would be considered as deriving from the sovereign. It would also be another matter if the citizens gathering for this purpose would consent to the pledge, for in this way a sponsio of the city is made, and by this sponsio the individuals are bound. And this is the very point that the jurists explain clearly in the passage just cited.