First Nat. Bank of Deadwood v. Gustin Minerva Con. Min. Co.

• Decision Date: 14 January 1890
• Citation: 42 Minn. 327,44 N.W. 198
• Parties: FIRST NAT. BANK OF DEADWOOD v GUSTIN MINERVA CON. MIN. CO. ET AL.
• Court: Minnesota Supreme Court

42 Minn. 327

44 N.W. 198

FIRST NAT. BANK OF DEADWOODvGUSTIN MINERVA CON. MIN. CO. ET AL.

Supreme Court of Minnesota.

Jan. 14, 1890.

(Syllabus by the Court.)

1. Where a person becomes a stockholder in a corporation organized under the laws of a foreign state, he contracts with reference to all the laws of that state which enter into the constitution of the corporation; hence the extent of his individual liability, as a shareholder, for corporate debts, must be determined by the laws of that state. This liability may be enforced by creditors wherever they can obtain jurisdiction of the necessary parties. The remedy, however, is governed by the law of the forum.

2. Where, by arrangement between the corporation and the shareholders, the stock is issued as fully paid up, without in fact having been paid for to the full amount of its par value, equity will set aside this fictitious arrangement for its payment, and hold the shareholders liable for the amount not actually paid, in favor of creditors who can fairly be presumed to have given credit to the corporation in reliance upon its apparent and professed capital having been fully paid in; but no such trust will be enforced against the stockholders in favor of creditors who have dealt with the corporation with full knowledge of the arrangement by which the stock was to be fictitiously issued as paid up.

3. If a corporation issue new shares after the claim of a creditor arose, he, not having dealt with the company on the faith of any capital represented by such shares, cannot insist on the contribution by the holders of a greater amount of capital than the corporation itself could claim from them as part of its assets.

Appeal from district court, Rice county; BUCKHAM, Judge.

G. E. Moody and John B. & W. H. Sanborn, for appellant.

Warner & Lawrence, for respondents.

MITCHELL, J.

This action was brought upon a debt of the defendant company, a corporation organized under the laws of Dakota territory, and against the other defendants, citizens of this state, as stockholders, to obtain judgment against the company for the amount of the debt, and against the other defendants for the respective amounts alleged to be due and unpaid on the stock, held by them, so far as necessary to satisfy the judgment against the corporation. To dispose of certain preliminary questions raised by the defendants it may be stated, at the outset, that it is elementary law that, where a person becomes a stockholder in a corporation organized under the laws of a foreign state, he must be held to contract with reference to all the laws of the state under which the corporation is organized and which enter into its constitution; and the extent of his individual liability as a shareholder to the creditors of the company must be determined by the laws of that state, not be cause such laws are in force in this state, but because he has voluntarily agreed to the terms of the company's constitution. It is equally clear, upon both principle and authority, that this liability may be enforced by creditors wherever they can obtain jurisdiction of the necessary parties. This does not depend upon any principle of comity, but upon the right to enforce in another jurisdiction a contract validly entered into. The remedy, however, does not enter into the contract itself; and for this reason the individual liability of shareholders can only be enforced by the remedies provided by the laws of the forum. Hence the question of the liability of the defendant shareholders must be determined by the laws of Dakota, and that of remedy by the laws of Minnesota.

That the remedy resorted to by plaintiff in this case is a proper one is well settled. Bank v. Manufacturing Co., 34 Minn. 323,25 N. W. Rep. 639. Upon the trial the judge considered it to be one triable by the court, but, on his own motion, submitted a specific question of fact to a jury; but subsequently, considering the verdict as immaterial, he proceeded without regard to it, and found the facts upon all the issues in the case. As neither party claims anything from this special finding of the jury, and as there is no exception which raises the question whether the action was triable by the court or by a jury, the whole case is reduced to the single question whether the conclusions of law are justified by the findings of fact. Section 413 of the Civil Code of Dakota provides that “each stockholder of a corporation is individually and personally liable for the debts of the corporation to the extent of the amount that is unpaid upon the stock held by him.” This is but declaratory of the common law.

The findings of fact, so far as here material, are, in substance, as follows: Prior to November 13, 1886, there had been organized, and were at that date in existence, under the laws of Dakota, two mining corporations, viz., the Gustin Belt Gold Mining Company, and the Minerva Mining Company, of the latter of which the plaintiff, a national banking association at Deadwood, Dak., was a creditor. On the date named the defendant corporation was organized for the purpose and with intention of consolidating the other two companies, acquiring their property, and with the property so acquired carrying on a general mining business. “At the time of the organization of the defendant company, and as the scheme on which the same was based, it was agreed by the parties so incorporating, and by those representing and having authority to act for the two existing companies, that all the mines and mining property of such two corporations should, upon its organization, be transferred and conveyed to the new, or defendant, company, and constitute its entire capital stock and resources for the prosecution of its enterprise, and be represented in such organization by a nominal capital stock of $2,500,000, divided into 250,000 shares, of $10 each, which should all be deemed and held as represented by the properties so conveyed to it; that 50,000 of said shares should be issued to the former shareholders of each of the two old companies, and the remaining 150,000 shares belong to and constitute the working capital of the new corporation, and be sold under its authority, and on such terms as it should direct; and the proceeds of such sales constitute a fund to pay off the debts on the properties, and develop the mines thereon, and be used generally in the prosecution of the business of the new corporation, for the benefit of all its stockholders. That it was never expected or intended by such corporation, or by those to whom its stock was issued, that any subscription to the capital stock of the new company should ever be made, or that any capital stock should ever be taken, or any capital subscribed for or paid in, except by conveyance to it of the mining properties referred to, and the sale of the stock reserved for its working...