Goldman v. Christy
| Decision Date | 02 March 1923 |
| Docket Number | No. 23167.,23167. |
| Citation | 192 N.W. 360,155 Minn. 91 |
| Parties | GOLDMAN v. CHRISTY et al. |
| Court | Minnesota Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Hennepin County; W. C. Leary, Judge.
Action by Benjamin T. Goldman against John W. Christy and others. Judgment for plaintiff, and from an order denying a motion for new trial, defendants appeal. Reversed.
Our statutes contemplate that a suit to enforce liability of stockholders to creditors shall be a plenary suit for the benefit of all creditors who have an opportunity to join and to participate in its benefits. When one such suit is prosecuted to a finality it is a bar to further piecemeal pursuit of the same stockholders by individual creditors who have had an opportunity to participate, but who have seen fit to permit their opportunity to pass. Fowler, Carlson, Furber & Johnson and Walter S. Whiton, all of Minneapolis (Daniel Fish, of Minneapolis, of counsel), for appellants.
Geo. S. Grimes, of Minneapolis, for respondent.
On February 26, 1917, plaintiff commenced an action against the Minneapolis Copper Company, a South Dakota corporation, to recover $8,500 on a promissory note. On September 8, 1920, plaintiff took judgment by default for $7,001.09, and thereafter execution was issued thereon and returned unsatisfied.
On March 6, 1919, Ole Lee, a judgment creditor of the copper company, commenced an action, on behalf of himself and all other creditors of the copper company, ‘to sequestrate the stock, property, things in action and effects' of the company within the state of Minnesota, to appoint a receiver for the same, to reduce the assets of the corporation within this state to cash, and distribute the same among the creditors of the corporation. On March 14, 1919, George S. Grimes was appointed receiver of the corporation and was authorized and directed by the court to collect all claims due the corporation for unpaid stock or otherwise.
On March 21, 1919, Grimes, as such receiver, commenced action in Minnesota, against a large number of persons, including this plaintiff, alleging that they were stockholders in said corporation. Defendant answered, alleging that the stock held by him was held as collateral security to a note of the company for $8,500, and asked that, in the event the court held him liable as a stockholder, the amount due on the note be offset against his stock liability.
On June 9, 1919, the court made its order requiring all creditors of the corporation to file claims with the court, ‘or be precluded and forever barred from participating in any distribution of corporate property thereafter made in the above-entitled action or proceeding.’ This plaintiff never filed his claim.
On December 13, 1919, the court made its order allowing claims and providing--
‘That any and all persons be, and they and each of them are, hereby precluded and forever barred from participating in any distribution of the property or assets, realized, or to be distributed in the above-entitled action or proceeding.’
The total claims allowed aggregated less than $5,000 exclusive of interest.
In May, 1920, the court filed its decision in the receiver's action ordering judgment against certain stockholder defendants in amounts aggregating approximately $60,000. The action was dismissed as to this plaintiff.
The receiver collected from the stockholders against whom judgment had been ordered an amount sufficient to pay the claim filed together with costs and expenses.
On November 26, 1920, in the original action, on petition of the receiver, he was discharged, and in the stockholders' action, on petition of the receiver, an order was filed ‘that said stockholders, defendants in the above-entitled action against whom judgment was ordered, be, and they are hereby discharged from any and all further liability by reason of said action and proceedings, and that no judgment or further proceedings be had herein against said defendants, or either of them.’
This it seems to us is tantamount to a final judgment.
Thereafter, and in 1921, plaintiff commenced this action against defendants as stockholders, to recover of them the amount due on his judgment against the company.
Defendant is a South Dakota corporation, and plaintiff alleged in his complaint a provision of the South Dakota Constitution, that ‘no corporation shall issue stock or bonds except for money, labor done, or money or property actually received,’ and a provision of the South Dakota statute, that Not all of the defendants in the former stockholders' suit are parties to this.
Plaintiff had judgment and defendants appealed from an order denying a motion for a new trial.
Defendants make a number of contentions on this appeal. We need consider only one, for, in our opinion, that one disposes of the case. That is the contention that the pending action is barred by the receivership action. In our opinion, this plaintiff should have asserted his claim in that action.
There is much diversity in different jurisdictions as to extent of liability of stockholders of corporations, and also as to methods of enforcing such liability. Some forms of liability exist at common law. Some states, by constitutional or statutory provision, create liability to the corporation and some to creditors. Some provide for methods of enforcement; some do not. If there be liability, but no method of enforcement provided the law will always find a method. The Constitution and statutes of South Dakota, taken together, clearly provide for liability of the stockholders to creditors, where stock is issued and less than the par value is paid therefor. The statute of South Dakota does not provide a remedy for the enforcement of this liability but leaves the creditors to the same form of action that they could have brought if there were no statute. Latimer & Inglis v. Citizens' State Bank, 102 Iowa, 162, 166, 71 N. W. 225. It may no doubt be enforced in other states and it has been held that it is enforceable in other states in an ordinary suit at law. Bearse v. Mabie, 198 Mass. 451, 84 N. E. 1015. See, also, Western National Bank v. Lawrence, 117 Mich. 669, 76 N. W. 105;Whitman v. Oxford National Bank, 176 U. S. 559, 567, 20 Sup. Ct. 477, 44 L. Ed. 587;Bell v. Farwell, 176 Ill. 489, 52 N. E. 346,42 L. R. A. 804, 68 Am. St. Rep. 194, construing a similar statute in Kansas; and such is the decision of the South Dakota court, in applying its statute relating to banking corporations, Union National Bank of Omaha v. Halley, 19 S. D. 474, 104 N. W. 213.
In general the extent of the stockholder's liability is determined by the law of the corporate domicile, but the method of enforcement is determined by the law of the forum. First National Bank of Deadwood v. Mining Co., 42 Minn. 327, 44 N. W. 198,6 L. R. A. 676, 18 Am. St. Rep. 510. Where the liability has been reduced to a judgment in the state of corporate domicile, the judgment may be enforced in any state by virtue of the full faith and credit clause of the federal Constitution. Converse, Receiver, v. Hamilton, 224 U. S. 243, 32 Sup. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292;Selig v. Hamilton, Receiver, 234 U. S. 652, 34 Sup. Ct. 926, 58 L. Ed. 1518, Ann. Cas. 1917A, 104. But we have no such situation here.
Where no method of enforcement is provided in the state of corporate domicile, and no judgment is involved, we know of no provision...
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