Dodge v. Minnesota Plastic Slate Roofing Co.

• Decision Date: 01 January 1871
• Citation: 16 Minn. 327
• Parties: OSSIAN E. DODGE v. MINNESOTA PLASTIC SLATE ROOFING CO. and others.
• Court: Minnesota Supreme Court

Page 327

16 Minn. 327

OSSIAN E. DODGEv.

MINNESOTA PLASTIC SLATE ROOFING CO. and others.

Supreme Court of Minnesota.

Appeal by defendants from an order of the court of common pleas, Ramsey county, overruling a demurrer to the complaint.

Stearns & Start, for appellants.

Henry J. Horn, for respondent.

RIPLEY, C. J.

The respondent brought an action in the court of common pleas for Ramsey county against said roofing company, a corporation organized under the general laws of Minnesota, to recover damages for a breach of contract in the inferior quality and imperfect and unskillful construction and insufficiency for its purpose of a roof constructed and furnished for him by said corporation, on a certain tenement of his in St. Paul, and recovered judgment for $283.15. Execution issued, and was returned unsatisfied, after due search and demand on the officers of the corporation for corporate property, and the judgment is wholly unpaid. The other defendants, from the time of making the contract to the commencement of this action, were and are stockholders in said corporation, holding each not less than 10 shares of $50 a share.

The complaint in this action states these facts, and demands judgment against the defendants for said sum. Said stockholders demur, on the ground that the complaint does not state facts sufficient to constitute a cause of action against them.

The reason assigned is, that respondent's cause of action to recover damages, as aforesaid, was against said corporation and its stockholders jointly, and that it is merged in the judgment; that, therefore, no joint subsisting cause of action is alleged, as it is necessary there should be.

The original cause of action grew out of a breach of contract. Unless that contract was the joint contract of the corporation and the stockholders, the demurrer is not well taken.

The doctrine of merger can be applied only to a case in which the original declaration was on a joint covenant, not to a case in which the declaration in the first suit was on a sole contract. Sheehy v. Mandeville, 6 Cranch, 253; Robertson v. Smith, 18 Johns. 459.

The contract purports to have been with the corporation alone. Is it nevertheless the contract also of the stockholders by virtue of our constitution or existing laws?

Article 10, section 3 of the constitution, reads as follows: "Each stockholder in any corporation shall be liable to the amount of the stock held or owned by him."

On this, two questions arise: First, for what is he thus liable? The answer is obvious; viz., for all the corporate liabilities. But, second, what is the character of the liability? How is he thus liable? The corporation may be liable on contract or in tort. Are all stockholders co-contractors, or co-trespassers, as the case may be?

The question would seem to answer itself. But if it be necessary to illustrate the groundlessness of such a position, under the constitution, with respect to contracts, (as to torts it cannot be necessary,) it would seem to be quite sufficient to call attention to the fact that if each stockholder is a co-contractor with the corporation, so must he be with each and every other stockholder. A. and B., for example, cannot be jointly bound with C. in one and the same promise to D., and not be at the same time bound to him jointly with each other; and, upon defendants' theory, a complaint against a corporation on a promissory note would be bad, and the suit liable to be abated, if every stockholder were not made a party.

The plaintiff in such action could not select such as he chose, as appellants appear to think he might. But it is not necessary to pursue the subject.

The appellants, however, rely on Gen. St. c. 34, § 10, as involving their proposition, not by direct enactment, but by necessary implication. That section, in their opinion, clearly implies that there is to be but one action, and that an action in which the liability of the corporation, as well as that of the stockholder, is raised and determined; and, as the liability of the stockholder can only be reached by thus impleading him with the corporation, it follows that his liability is a joint liability with the corporation.

This deduction rests in the assumption that the statute clearly implies that there is "to be but one action" — an assumption which is not only not warranted, in our opinion, by the language of the section taken by itself, but which is altogether precluded by that of the section immediately preceding, which provides that the "private property of such stockholder" shall be "liable for corporate debts," in the cases thereinafter specified.

His property is liable in those cases for "corporate debts," but by the constitution he is responsible for all the liabilities of the corporation.

By no construction can debt be held to include a liability for a trespass, for instance; yet the legislature certainly did not mean to restrict the liability imposed by the constitution. This language, therefore, would necessarily seem merely to forbid taking his property upon such claims, before their adjudication and reduction to the status of a debt, as distinguished from a liability to respond in damages for a tort. Now, if so, there must be more than one action, since the issue to be raised and determined in the action to which section 10 refers, is whether or not the stockholder is liable for a corporate debt, and such a debt must exist before such an...