Hanson v. Davison

• Decision Date: 26 July 1898
• Citation: 73 Minn. 454,76 N.W. 254
• Parties: HANSON v, DAVISON.
• Court: Minnesota Supreme Court

73 Minn. 454

76 N.W. 254

HANSONvDAVISON.

Supreme Court of Minnesota.

July 26, 1898.

(Syllabus by the Court.)

1. 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.

2. 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. Held, further, that if a stockholder's liability is not enforced in the original action, prosecuted under the provisions of chapter 76, Gen. St. 1878 (chapter 76, Gen. St. 1894), 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.

3. 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.

Appeal from district court, Hennepin county; C. B. Elliott, Judge.

Action by J. A. Hanson against Suvia T. Davison to enforce her statutory liability as stockholder. Defendant had judgment, from which plaintiff appeals. Affirmed.

Canty, J., dissenting.

W. S. Dwinnell, for appellant.

Bardwell, Beeman & Weeks, for respondent.

W. E. Hale and M. H. Boutelle, as amici curiæ.

START, C. J.

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 on July 7, 1893, insolvent, and on that day duly made an assignment in insolvency for the benefit of its creditors to Walter M. Carroll, as assignee, who accepted tho trust, and 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 chapter 76, Gen. St. 1878 (chapter 76, Gen. St. 1894), 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 to apply 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 urges 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 Harper-Carroll action is a bar to the prosecution of this action. The provisions of our constitution and statute imposing the stockholders' liability for the corporate debts do not measure the extent of the liability by the debts, but by the amount of stock owned by each stockholder. Therefore the stockholders' liability is several, not joint, and a judgment against part of them does not have the effect of releasing the others. Harper v. Carroll, 66 Minn. 487, 69 N. W. 610, 1069. Although the liability is several, the stockholders may, and, upon equitable considerations, ought to, be joined in one action to enforce their several liability.

2. It is further contended in support of the judgment that the liability of stockholders in this state does not arise out of a contract, other than as implied by the statute; that the right of creditors to enforce a liability for the corporate debts is created by statute, which has prescribed the exclusive remedy, which is a single action on behalf of all the creditors, and against all of the stockholders it is intended to charge with such liability, wherein all the rights and liabilities of creditors of the corporation and stockholders must be finally adjusted and determined; hence creditors have no remedy against a stockholder of whom the court acquired no jurisdiction in such action. If this be true, then it follows that the creditors of an insolvent domestic corporation are limited, in the enforcement of their constitutional or statutory right to call upon all of the stockholders for payment of the debts of the corporation, to such only as the court of its domicile can acquire jurisdiction of, and, as a corollary of the proposition, that all nonresident stockholders who have enjoyed all the benefits and gains incident to membership in the corporation have absolute immunity from such liability, while their associates who happen to be within the jurisdiction of the court must respond to the last cent of their liability. Inequitable as such a conclusion would be, still it must be admitted that there are expressions in the opinion in the case of Allen v. Walsh, 25 Minn. 543, relied upon by the defendant, which, if taken literally, and without reference to the actual point decided by the court, justify the contention. A decision upon this claim of the defendant involves a consideration of the nature of the liability of stockholders for the debts of the corporation, the method of enforcing it, and just what was decided by the case of Allen v. Walsh. In that case, which was an action at law by a creditor, for his sole and exclusive benefit, against a single stockholder, to enforce his individual liability, it was correctly held that the action could not be maintained, and that the plaintiff's remedy was an equitable action, in behalf of himself and all other creditors, against the corporation and its stockholders, wherein the debts of the corporation must be determined, and, after exhausting the corporate assets, the liability of stockholders for the deficiency might be adjudicated and enforced pursuant to the provisions of chapter 76, Gen. St. 1878 (chapter 76, Gen. St. 1894). It was not, however, decided in that case that if a stockholder was omitted from such original action because the court could not acquire jurisdiction of him, or for any other cause, the liability could not be subsequently enforced against him by bringing him or his property into the original action, if found within the jurisdiction of the court, or by proceeding against him alone in an action ancillary to the original action in any other jurisdiction where he might be found, if the comity of the sister state would permit it. Neither is there anything in the nature of the stockholders' individual liability, or the method of enforcing it, to prevent the enforcement of the liability against a stockholder so omitted from the original action. The constitution or the statute imposes the liability on all corporations, except those organized for carrying on any kind of manufacturing or mechanical business; and it follows that every person who becomes a stockholder in a corporation organized under our laws contracts, with reference thereto, and with the creditors of the...