Ball v. Reese

• Decision Date: 06 November 1897
• Docket Number: 10182
• Parties: WILLIAM E. BALL, Trustee, v. JOHN REESE et al
• Court: Kansas Supreme Court

50 P. 875

58 Kan. 614

WILLIAM E. BALL, Trustee, v. JOHN REESE et al

No. 10182

Supreme Court of Kansas

November 6, 1897

Decided January, 1897.

Error from Harvey District Court. Hon. F. L. Martin, Judge.

Judgment reversed.

Peters & Nicholson, for plaintiff in error.

Bowman & Bucher, Branine & Branine and A. L. Greene, for defendants in error.

OPINION

JOHNSTON, J.

This was a proceeding brought by W. E. Ball to enforce the individual liability of the defendants as stockholders in the Kansas Savings Bank, a corporation incorporated under the laws of Kansas, against which, on June 18, 1891, Ball obtained a judgment for $ 10,220 on a certificate of deposit previously issued by the bank. In these proceedings the defendants undertook to show that the certificate of deposit was not a valid indebtedness of the corporation, because, as alleged, it was issued by its officers without authority. The trial court ruled that the stockholders could make any defense which the bank itself might have made, admitted testimony as to lack of authority by the officers to bind the bank, and upon such testimony held that there was in fact no indebtedness, that the judgment was not effectual, and that Ball was not entitled to an execution thereon against the stockholders.

The ruling cannot be sustained. The judgment was rendered by a court of competent jurisdiction, an execution thereon has been returned unsatisfied, and the remedies against the corporation have been exhausted. The judgment creditor is entitled to proceed against the stockholders, as the Constitution and the statutes make them individually liable for the debts of the corporation. Const., art. XII, sec. 2; Gen. Stat. 1889, PP 1192 and 1206.

The question presented for decision is: What effect is to be given to the judgment against the corporation in a proceeding to enforce the statutory liability? Is it to be deemed conclusive upon the stockholders? or can they go behind it and compel the creditor to re-litigate the questions determined between the corporation and himself? The rule appears to be well settled, and the courts seem to be well nigh unanimous in holding, that the judgment is conclusive upon the stockholders as to the liability of the corporation, except for collusion or fraud, and, of course, a judgment is of no force against any one where there is a lack of jurisdiction. The ruling proceeds upon the theory that the corporation represents its stockholders within the limits of its corporate power. Through its officers and agents it can make contracts binding upon its members, and as it has to bring and defend suits in regard to any interest of the corporation, its action in that respect, if there is good faith, necessarily binds the stockholders as to any matter in litigation. In this connection it has been said:

"It must be borne in mind that a corporation is composed of its shareholders, and that a judgment obtained against the corporation is in reality a judgment obtained against the shareholders in their corporate capacity. There is no reason why the members of a corporation should be allowed to contest a creditor's claim twice -- once in the suit against the corporation through the corporate agents, and again in the suit brought to charge them individually. If the judgment...