Bohn v. Brown

• Decision Date: 18 January 1876
• Court: Michigan Supreme Court
• Parties: August Bohn v. James F. Brown. [1]

33 Mich. 257

August Bohn v. James F. Brown. ^[1]

Supreme Court of Michigan

January 18, 1876

Heard October 15, 1875

Error to Saginaw Circuit.

Judgment affirmed, with costs.

F. L Eaton and Albert Trask, for plaintiff in error, cited Grund v. Tucker, 5 Kan. 70; Downworth v Coolbaugh, 5 Iowa 300; Corse v. Sanford, 14 Iowa 235; Gaskell v. Dudley, 6 Met. 548; Johnson v. Somerville D. & B. Co., 15 Gray 216; Thayer v. N. E. Lith. Co., 108 Mass. 523; Milliken v. Whitehouse, 49 Me. 527; Vanhook v. Whitlock, 2 Ed. Ch., 304; Alvord v. Lent, 23 Mich. 369; Attorney General v. Bank, Har. Ch., 315; Mill Dam Foundry v. Hovey, 21 Pick 455; Gray v. Bennett, 3 Met. 522; Haynes v. Brown, 36 N. H., 566; Carver v. Braintree M. Co., 2 Story 432.

John J. Wheeler, for defendant in error, cited: Witherbee v. Allen, 3 Keyes 565; Miller v. White, 50 N. Y., 137; McMahon v. Macy, 51 N. Y., 155; Belmont v. Coleman, 21 N. Y., 96; Coffin v. Reynolds, 37 N. Y., 640; Aiken v. Wasson, 24 N. Y., 482; 14 Wend, 58; Cable v. McCune, 26 Mo. 371; Cable v. McGaty, 34 Mo. 573; Lockhart v. Van Alstyne, 31 Mich. 76.

OPINION

Graves, J.

The plaintiff, a child, was in August, 1869, taken as a passenger on the East Saginaw city railway, and whilst being carried as such passenger was severely hurt through the negligence of the company's conductor. For such injury an action was brought against the company, and on the 5th of March, 1873, the plaintiff obtained judgment for damages five thousand five hundred dollars and costs taxed at ninety-five dollars and sixty-six cents.

The corporation then brought the case here on writ of error, and we affirmed the judgment in July of the same year.-- 27 Mich. 503. An execution was issued and returned nulla bona, and the plaintiff, having thus failed to collect of the corporation, instituted this action against Brown to enforce collection of him as owner and holder of a considerable amount of unpaid capital stock, and the jury having found against the plaintiff by express direction of the court, he now claims a revision of the proceedings on writ of error and bill of exceptions. The suit, of course, does not assume to proceed for a common-law cause of action against Brown, but is prosecuted against him on the strength of certain provisions of the act under which the company was incorporated, and being the amended act of February 13th, 1855, entitled "an act to provide for the construction of train railways."-- Ch. 76, C. L.

The main question is, whether the claim of a passenger under such circumstances, after judgment against the carrier and execution returned unsatisfied, affords a ground of action against the stockholder. All admit that the point depends upon the construction due the provisions before mentioned, and these provisions are found in the eighteenth and twentieth sections of the act.

The eighteenth section reads as follows: "The stockholders of every company incorporated under this act shall be jointly and severally liable in their individual capacity for all labor performed for such company; and shall also be liable for the debts of such company, for an amount equal to the amount of any unpaid stock in such company, held by them at the time such debt was contracted and suit commenced thereon, to be recovered of any stockholder who is such when the debt is contracted, or any subsequent stockholder."

The nineteenth section makes directors and stockholders jointly and severally liable for existing company debts, and debts afterwards contracted whilst such directors continue in office and the others remain stockholders, in case the directors declare or pay a dividend when the company is insolvent, or when the payment would either render it insolvent or diminish the amount of capital stock. Then comes the twentieth section, which reads as follows:

"But no suit shall be brought against any individual stockholder for any debt of such company as provided in the last two preceding sections, until judgment on the demand shall have been obtained against the company, and execution thereon returned unsatisfied in whole or in part, or until the company shall have been dissolved; and any stockholder who may have paid any debt of such company, either voluntarily or by compulsion, shall have a right to sue and recover of such company the full amount thereof, with interest, costs and expenses; and any such stockholder, who may have paid as aforesaid, shall have a right to bring an action against, and recover of the rest of the stockholders, or any one or more of them, the due proportion thereof which such stockholder or stockholders ought to pay; and if such action for contribution shall be brought against more than one stockholder, the judgment and the execution thereon shall specify the amount to be recovered and collected from each defendant."

As understood, the position of plaintiff's counsel is, that it makes no difference in respect to the right to sue the stockholder, whether the cause of action against the company is a pure tort, committed by the company through its servants, or one sounding exclusively in contract; and that the judgment recovered against the company is conclusive, or at least prima facie sufficient, to ground an action against the stockholders under the provisions in question.

On the other hand, defendant's counsel insists, that the cause of action against stockholders is identical with that against the corporation, and that to bring stockholders under individual liability the cause of action must be a debt contracted by the corporation, and not a liability of the company arising from the tortious conduct of company agents or servants, and that a judgment recovered against the corporation for such tortious conduct is not a debt contracted to bind stockholders as individual debtors. In the few cases found in which courts have considered similar provisions there would seem to have been much diversity of opinion. And looking at the question which arises here, and the shape it assumes under the influence of the facts which have a bearing, it appears to me that the authorities cited by counsel do not offer forcible aids. Hence in forming an opinion on the precise case to be decided, it is the better way to read the foregoing provisions as we think they were intended to be read, and then apply them to the actual facts.

In pursuing this course we must suppose that the mind of the legislature being specially drawn to the subject of departing from the regulations of the common law in regard to the liability of corporators, and conceiving a purpose to make certain members responsible for company liabilities, the extent of the departure and the class of liabilities, if less than all, and the limitations and conditions, if any, would naturally be indicated with some distinctness, and we should expect to find in the terms and arrangement of the statute, without straining or refinement, the real sense of the legislature. Whether in our judgment the legislature went too far, or did not go far enough, is not for us to consider. The scope of our duty is to ascertain just how far the law makers went, and then to pause precisely where they did. In studying the provisions here with this object, we are forced to think that the expressions used to denote the conditions of the stockholders' liability are to be taken in their natural and ordinary sense.

Passing these general remarks, we are to consider, in the first place, whether it was meant that a judgment, for whatever cause, against the company should be deemed in itself a definite ground of action against the stockholder. The plain language of the law appears to negative any such purpose. The cause of action against the stockholder is made identical with that against the company. The original debt or demand against the company is what the stockholder is made liable for, and not something of a different nature. In regard to this there is no ambiguity. The idea is never departed from. The right to sue the stockholder is just as broad, or more precisely, the causes of action on which he may be held are just the same, in case the corporation is dissolved, as in case it is not, and in all instances where the corporation is dissolved, care is taken to dispense expressly with the condition requiring judgment to be first obtained against the company. Accordingly in such cases no judgment could exist to sue upon, and the original cause of action would have to be resorted to. The statute throughout assumes the existence of a cause of action against the stockholders prior to judgment against the company, and in case the corporation is not dissolved, requires the proceedings against the company as preliminary...