Cushing v. Perot

• Citation: 34 A. 447,175 Pa. 66
• Decision Date: 13 April 1896
• Docket Number: 178
• Parties: Nathan Cushing v. T. Morris Perot, Appellant
• Court: Pennsylvania Supreme Court

34 A. 447

175 Pa. 66

Nathan Cushing v. T. Morris Perot, Appellant

No. 178

Supreme Court of Pennsylvania

April 13, 1896

Argued January 17, 1896

Appeal, No. 178, July T., 1895, by defendant, from order of C.P. No. 1, Phila. Co., Dec. T., 1894, No. 760, making absolute a rule for judgment for want of a sufficient affidavit of defense. Reversed.

Assumpsit to enforce a liability of a stockholder of a corporation of the state of Kansas, imposed by the laws of Kansas.

The plaintiff's statement was as follows:

Nathan Cushing, the plaintiff in the above case, claims of the defendant, T. Morris Perot, the sum of $5,000, which sum is justly due and owing by the defendant to the plaintiff, upon the cause of action whereof the following is a statement:

Heretofore to wit, upon the 1st day of December, 1888, the defendant subscribed for fifty shares of the par value of $100 of the capital stock of the Western Farm Mortgage Trust Company, a corporation created and doing business under and by virtue of the laws of the state of Kansas, with its principal office situate in the city of Lawrence, state of Kansas.

The said fifty shares of stock in said corporation were immediately thereafter issued to the said defendant, and he then was, and now is, the holder of said stock, and entitled to all the rights, benefits and privileges, and subject to all of the duties, liabilities and obligations arising therefrom.

Plaintiff alleges that the said corporation was, inter alia, empowered "to issue and sell its debentures, and secure the same by pledge of notes, bonds and other securities, real and personal; to guarantee the payment of principal and interest of loans by it negotiated, or made and sold."

That the said corporation sold a large number of bonds, and mortgages, and debenture bonds in the city of Philadelphia state of Pennsylvania, in which city and state the said defendant is, and was, a resident.

That upon the 5th day of March, 1892, the said corporation became insolvent, and a receiver was, on that day, appointed to wind up and settle the affairs of the said corporation.

That the constitution of the state of Kansas and a general statute in force at the time said company was incorporated and said subscription of stock was made as aforesaid, and still in force in said state, provide as follows:

ARTICLE XII. SECTION 2, OF THE CONSTITUTION.

"Dues from corporations shall be secured by an individual liability of the stockholders to an additional amount equal to the stock owned by each stockholder, and such other means as shall be provided by law; but such individual liabilities shall not apply to railroad corporations, nor corporations for religious and charitable purposes."

An act of the general assembly of the state of Kansas, approved the 29th day of February, 1868, entitled:

"AN ACT CONCERNING PRIVATE CORPORATIONS." CHAPTER 23 SECTION 46.

"No stockholder shall be liable to pay debts of a corporation beyond the amount due on his stock and an additional amount equal to the stock owned by him."

SECTION 32 OF THE AFORESAID ACT OF THE GENERAL ASSEMBLY.

"If any execution shall have been issued against the property or effects of a corporation, except a railway, or religious, or a charitable corporation, and there cannot be found any property whereon to levy such execution, then execution may be issued against any of the stockholders to an extent equal in amount to the amount of stock by him or her owned, together with any amount unpaid thereon; but no execution shall issue against any stockholder except upon an order of the court in which the action, suit or other proceeding shall have been brought or instituted, made upon motion in open court after reasonable notice in writing to the person or persons sought to be charged; and upon such motion, such court may order execution to issue accordingly, or the plaintiff in the execution may proceed by action to charge the stockholders with the amount of his judgment."

That during the year 1890, the plaintiff became a creditor of the said corporation, and upon the 23d day of March, 1893, instituted an action against the said corporation in the circuit court of the United States, in the district of Kansas, known as the eighth judicial circuit, to recover the amount of the said indebtedness, said action being numbered 6952. The said action was so proceeded in, that upon the 10th day of February, 1894, after legal service of the writ upon the defendant corporation, the said plaintiff obtained a judgment against the said defendant corporation, and damages were assessed in the sum of $4,738.

That upon the 22d day of February, 1894, the plaintiff caused an execution to be issued under said judgment against the said defendant corporation to the United States marshall for said district, who returned said execution wholly unsatisfied, it appearing that there could not be found any property whereon to levy such execution, all of which will more fully and at length appear by reference to certain exemplified copies of the records of said circuit court hereto attached and marked schedule "A" and schedule "B," and made a part of this, the plaintiff's statement of demand.

That there is now due the said plaintiff the amount of said judgment, $4,738, with interest thereon from February 10, 1894, at 6 per centum per annum, together with $25.41 costs, or a total of $5,028.73; and the said sum of $5,028.73 was due the said plaintiff at the time the writ in this case was issued.

Plaintiff avers that no part of said judgment, interest or costs has been paid to him by the said defendant corporation, and that the same remains wholly unpaid and unsatisfied; and that the said defendant corporation owns no property, estate or effects from which the said judgment can be paid or collected.

By virtue of the premises, and the provisions of the constitution of the state of Kansas, and the act of assembly herein referred to, the said defendant, T. Morris Perot, became, and is, liable individually and severally to the plaintiff for the sum of $5,000, that being the amount of the stock owned by him of the defendant corporation, to wit, The Western Farm Mortgage Trust Company.

The plaintiff alleges that prior to the bringing of this suit he notified defendant of the facts herein set forth, and demanded from him payment of the said sum of $5,000 as aforesaid, which the defendant has refused and neglected to pay, or any part thereof.

The affidavit of defense was as follows:

T. Morris Perot, the defendant above named, being duly affirmed according to law, says that there is a defense to the plaintiff's claim in the above stated suit, the nature and character of which are as follows, viz: I deny that I am indebted to the plaintiff in any sum whatever. The plaintiff's demand is based upon the alleged law of the state of Kansas, to the effect that the stock of a corporation is liable to the creditors of the corporation for a sum equal to the par value of the stock. I own fifty shares of the stock of The Western Farm Mortgage Trust Company, for which I paid full par value, in cash; and when I purchased this stock, I had no knowledge nor information in regard to the Kansas laws. I am a citizen of Pennsylvania, and I deny that the laws of Kansas are binding upon me. And further, I am the owner of certain Kansas mortgages which are guaranteed to me by the said The Western Farm Mortgage Trust Company for about $5,000, which mortgages are now utterly worthless, and I therefore claim that I am a creditor of the said trust company for $5,000 upon their said guaranty. Suit has been brought against me, on my alleged liability as stockholder of The Western Farm Mortgage Trust Company, in the district court of Marion county, state of Kansas, by the Western National Bank of New York as creditor of The Western Farm Mortgage Trust Company, and judgment has been rendered therein against me for about $5,000, on which execution has been issued and levied upon my real estate in Kansas. This judgment exhausts any possible liability which I may have incurred under the alleged Kansas laws to any creditor of The Western Farm Mortgage Trust Company, and I therefore deny that the plaintiff has any claim against me for any sum whatever.

All of which is true, and all of which I expect to be able to prove on the trial of this cause.

The court made absolute a rule for judgment for want of a sufficient affidavit of defense.

Error assigned was above order.

Judgment reversed.

William C. Hannis, Albert S. Letchworth with him, for appellant. -- The Kansas statute should not be enforced in this state, because; (a) It is penal in character; (b) to enforce it in this state is a matter of comity, not of right, and it would work a hardship on a citizen of this state who has already paid more than his share; (c) justice cannot be done between the creditors and stockholders in this proceeding: Dreisback v. Price, 133 Pa. 560; Woods v. Wicks, 7 Lea, 40; Derrickson v. Smith, 27 N.J.L. 166; Moies v. Sprague, 9 R.I. 541; Sturges v. Burton, 8 Ohio 215; Gridley v. Barnes, 103 Ill. 211; Sayles v. Brown, 40 F. 8; Patterson v. Lynde, 112 Ill. 205; Rice v. Hosiery Co., 56 N.H. 127; May v. Black, 77 Wis. 107; Nimick v. Iron Works, 25 W.Va. 184; Bank v. Rindge, 154 Mass. 203; Fowler, v. Lamson, 146 Ill. 472; Hoyt v. Bunker, 50 Kansas, 574; Leucke v. Tredway, 45 Mo.App. 507; Universal Fire Ins. Co. v. Tabor, 27 P. 890; Baines v. Babcock, 27 P. 674; Wilson v. Seligman, 144 U.S. 41; Stutz v. Handley, 41 F. 531; Curran v. Bradner, 27 Ill.App. 582; Libby v. Tobey, 82 Me. 397; Aultman's App., 98 Pa. 505; Bank v. Gillespie, 115 Pa. 564.

The defendant had a right to set off in this action his claim as a creditor of the corporation to an amount...