Hanson v. Davison
| Decision Date | 26 July 1898 |
| Docket Number | 11,190 _ (253) |
| Citation | 76 N.W. 254,73 Minn. 454 |
| Parties | J. A. HANSON v. SUVIAH T. DAVISON |
| Court | Minnesota Supreme Court |
July 27, 1898
Action in the district court for Hennepin county to enforce the double liability of defendant as a stockholder in the Citizen's Bank. The cause was submitted to Elliott, J on a stipulation of facts, and judgment was ordered in favor of defendant. From the judgment entered pursuant thereto plaintiff appealed. Affirmed.
Corporation -- Liability of Stockholder Several -- Judgment.
The liability of stockholders in this state for the debts of the corporation is several, and a judgment against a part of them does not have the effect to release the others.
Obligation of Stockholder Contractual -- Allen v. Walsh Limited.
Held (distinguishing and limiting Allen v. Walsh, 25 Minn. 543), that a stockholder of a corporation, by the act of becoming such, assumes the liability for the corporate debts imposed by law, and that the obligation thus raised is not penal or statutory in its character, but purely contractual, containing all the elements of a contract, and is to be enforced as such.
Stockholder Omitted in Action under Chapter 76 -- Ancillary Action by Receiver -- Judgment in Former Action Conclusive.
Held, further, that if a stockholder's liability is not enforced in the original action, prosecuted under the provisions of chapter 76, G.S. 1878, because the court had no jurisdiction of him or his property, or for other cause, an ancillary action may, when necessary, be maintained against him alone by the receiver in the original action to enforce his liability. The judgment in the original action, so far as it determines the amount of the corporate debts after exhausting the corporate assets, is conclusive on such stockholder, unless impeached for fraud.
Omitted Stockholder -- Property May Be Sequestered in Action under Chapter 76.
Where, however, the property of such stockholder is found within the jurisdiction of the court, either before or after judgment in the original action, a separate action against the stockholder to reach the property is neither necessary nor proper; for it can be attached or sequestered in the original action.
W. S. Dwinnell, for appellant.
The primary object of the statute in relation to the double liability of stockholders is the protection of the creditor. Such being the case, why, after there has been an adjudication in the main case as to what creditors are entitled to share in funds collected, cannot the proceedings in the nature of the case at bar be instituted for the benefit of those creditors, and the stockholder be compelled to pay his liability in full? The judgment in the main action to enforce the double liability of stockholders is binding against a nonresident or omitted stockholder, and it is no defense to a supplementary action against an omitted or a nonresident stockholder to say that he has had no opportunity to contest the claims of creditors. See Hawkins v. Glenn, 131 U.S. 319; Sheafe v. Larimer, 79 F. 921; Kennedy v. Gibson, 8 Wall. 498.
W. E. Hale and M. H. Boutelle, by consent filed a brief.
The stockholders' liability is unqualifiedly contractual, and the doctrines announced in Allen v. Walsh, 25 Minn. 543, are opposed to modern authority. Carrol v. Green, 92 U.S. 509; 3 Thompson, Corp. § 3059; 1 Cook, Stockh. § 223.
The principles announced in the following cases are wholly inconsistent with the theory that G.S. 1894, c. 76, provides a peculiar and inflexible statutory remedy, to the provisions of which, in this regard, the term "exclusive" is in any wise applicable. They also demonstrate that the basic principle of procedure, in working out a remedy, are traced, not to the positive mandates of the statute, but the ordinary principles of equitable procedure. State v. Bank of New Eng., 55 Minn. 139; Harper v. Carroll, 66 Minn. 487; Olson v. Cook, 57 Minn. 552; Arthur v. Willius, 44 Minn. 409.
The remedy need not in all cases be worked out in one single action, but independent or ancillary proceedings may be maintained to reach the liability of stockholders not brought into the original action. The proceeding in the main action to enforce the stockholders' double liability becomes the original proceeding for the sequestration and administration of the fund. The office of the decree is not limited to a judgment against such of the stockholders as may be within the jurisdiction of the court, but to a final and authoritative determination of the necessity for and amount which shall be assessed against stockholders, thus presenting a basis for ancillary or auxiliary proceedings either at home or abroad, as against stockholders whose liability was not reduced to judgment in that action. This is the rule in proceedings to enforce payment of stock subscriptions. Hawkins v. Glenn, 131 U.S. 319; Tuttle v. National, 161 Ill. 497; McLaughlin v. O'Neill (Wyo.) 51 P. 243; Howarth v. Ellwanger, 86 F. 54; Sheafe v. Larimer, 79 F. 921.
Bardwell, Beeman & Weeks, for respondent.
Actions to enforce the statutory liability of shareholders in a corporation being a proceeding in equity, all shareholders must be made parties defendant. Allen v. Walsh, 25 Minn. 543; Johnson v. Fischer, 30 Minn. 173; Harris v. First, 23 Pick. 112; Minneapolis Ball Co. v. City Bank, 66 Minn. 441; Low v. Buchanan, 94 Ill. 76; Coleman v. White, 14 Wis. 762; Pollard v. Bailey, 20 Wall. 520; Crease v. Babcock, 10 Metc. (Mass.) 525. The obligation of shareholders being a joint obligation, standing on substantially the same footing as though they were copartners, a several judgment having been taken against some of the shareholders constitutes a bar to any further recovery against the other shareholders. Davison v. Harmon, 65 Minn. 402; Johnson v. Lough, 22 Minn. 203; Kingsley v. Davis, 104 Mass. 178; Crowley v. Patch, 120 Mass. 137; People v. Harrison, 82 Ill. 84; Lauer v. Bandow, 48 Wis. 638; Allen v. Sewall, 2 Wend. 327, 339.
This is an appeal by the plaintiff from the judgment herein in favor of the defendant. There is no settled case or bill of exceptions, and the assignments of error are to the effect that the findings of fact by the trial court do not sustain the judgment.
The facts so found may be summarized as follows:
The Citizens' Bank (a banking corporation duly incorporated under the laws of this state) was insolvent on July 7, 1893, and on that day duly made an assignment in insolvency for the benefit of its creditors to Walter M. Carroll, as assignee, who accepted the trust, fully executed it, and was discharged as such assignee in February, 1896. All of the creditors of the bank proved their claims against its estate, and received 29 per cent. thereof from the assignee.
In April, 1894, James C. Harper, a creditor of the bank, on behalf of himself and all other creditors, duly instituted in the district court of Hennepin county, this state, an action against all of the resident stockholders thereof, pursuant to the provisions of G.S. 1878, c. 76 (G.S. 1894, c. 76), to enforce the liability of stockholders for the debts of the bank. An order was duly made and published in that action requiring all of the creditors of the bank to intervene therein and exhibit their claims against the bank, within six months thereafter, or be forever barred from participating in the proceeds of such litigation. All of the creditors of the bank, pursuant to such order, so intervened, and proved their claims against the bank. After the expiration of the time so limited for proof of claims against the bank, and on February 15, 1897, judgment was duly rendered in the action against the bank, and all of its stockholders within the jurisdiction of the court, in favor of each of the creditors, -- of whom the plaintiff in this action was one, -- for the amount of their claims, respectively, as adjudged in that action. Reference is here made to the opinion in the case of Harper v. Carroll, 66 Minn. 487, 69 N.W. 610, 1069, for full particulars as to this judgment. Walter N. Carroll was appointed by the court receiver in the action for the purpose of collecting the respective judgments against the stockholders, and of applying the sums so collected to the payment of the judgments of the respective creditors, the aggregate amount of which was $181,254.60. Executions have been issued on each and all of the judgments, which have been returned; and there still remains unpaid on the judgments the sum of $41,254.60, exclusive of interest.
The defendant in this action was named as a defendant in the Harper v. Carroll action, but, being a nonresident, the court did not acquire jurisdiction to render judgment against her. She was, however, a stockholder of the bank at the time it became insolvent and made its assignment, and ever since has been, and now is, the owner of the capital stock thereof of the par value of $1,500, and now has property within this state to satisfy her liability to the creditors of the bank as a stockholder therein. The existence of such property within the jurisdiction of the court was discovered after the entry of the judgment in the Harper-Carroll case. Upon the discovery of such property the plaintiff herein obtained leave of court to bring this action against the defendant, to the end that her statutory liability might be collected, and paid to the receiver in the original action, and by him distributed to the judgment creditors of the bank. The defendant's property was attached. Thereupon she appeared in this action.
1. Counsel for the defendant urge in support of the decision of the trial court that the liability of stockholders in banking corporations is a joint obligation and therefore the judgment in the...
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