Harper v. Carroll
| Decision Date | 23 December 1896 |
| Docket Number | Nos. 10,230 - (115).,s. 10,230 - (115). |
| Citation | 66 Minn. 487 |
| Parties | JAMES C. HARPER v. WALTER N. CARROLL and Others.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
Action in the district court for Hennepin county. The case was tried before Elliott, J., who found in favor of plaintiff, and judgment was entered against certain defendants. Some of defendants appealed from orders denying their motions for a new trial, and others appealed from the judgment. Modified.
Shaw, Cray, Lancaster & Parker, Hahn & Hawley, Woods, Kingman & Wallace, Jones & Babcock, John B. Atwater, and Wilkinson & Traxler, for appellants.
W. S. Dwinnell and Young & Fish, for respondent.
This is an action to enforce the statutory double liability of the stockholders of the Citizens' Bank of Minneapolis, a banking corporation, organized under chapter 33 of the General Statutes of this state. This is the second appeal in the case. See 62 Minn. 152, 64 N. W. 145. After the former appeal, the case was tried by the court, without a jury.
From the findings of the court and other proceedings, the following facts appear: On May 17, 1893, the bank suspended payment, closed its doors, and ceased to do business. Thereafter, on July 8, 1893, it made a general assignment for the benefit of its creditors, under the insolvency law of 1881. The assignee qualified, administered the assets of the bank, and paid to the creditors dividends amounting in all to 29 per cent. of their claims, which is all that will be realized from the assets of the bank unless something is collected or realized on certain judgments against certain apparently insolvent judgment debtors of the bank.
The plaintiff, a creditor of the bank, commenced this action, making all of the resident stockholders parties. An order was made for creditors to exhibit their claims and become parties to the action. In pursuance thereof, 337 creditors did so. Their claims were proved and allowed, amounting in the aggregate to $202,524.50 from which was deducted the 29 per cent. in dividends paid by the assignee. The balance, with interest thereon to February 8, 1896, the date of the order for judgment herein, amounted to $175,223.69. The capital stock of the bank is $250,000, but stockholders holding in the aggregate $28,800 of this stock are nonresidents, and no service on them or jurisdiction over them was obtained in this action.
Judgment for double the amount of his stock was ordered against each of the other stockholders except J. U. Barnes, who holds $1,000 of stock, and who seems to have been overlooked by inadvertence in the conclusions of law and order for judgment until long after these appeals were taken, when the court amended its order and conclusions. Judgment was also ordered for double the amount of his stock against each prior stockholder who held stock within a year before the assignment and transferred it during that time. The aggregate amount of judgment so ordered against such present and prior stockholders is $513,200. The court makes some distinctions between the liabilities of the present stockholders and the liabilities of the prior stockholders, which distinctions we will notice more fully hereafter.
The conclusions of law and order for judgment further provide that after the receiver has collected all amounts due the creditors, or all he is able to collect, any defendant stockholder or stockholders who have contributed more than his or their share may apply to the court, on notice, for a judgment of contribution against all other stockholders who have contributed less than their share. The court reserves no judicial control over the executions to be issued against the stockholders in the different classes, and makes no provision for issuing execution against any stockholder for any less amount than the full amount of the judgment against him; except, possibly, in some contingencies, as to some of such prior stockholders as hereinafter stated.
Some of the defendant stockholders appeal from orders denying their motions for a new trial, and others appeal from the judgment.
1. Appellants contend that it is error to enter judgment against each stockholder for the full amount of his statutory double liability, when the amounts for which judgment is so entered aggregate two or three times the amount of the corporate indebtedness to enforce payment of which judgment is given. Thus, in this case the amounts for which judgment is so entered against the stockholders aggregate $513,200, while the amount of such corporate indebtedness is only $175,223.69. It is contended that such judgment is the final adjudication of the rights of the parties, and that the court should, before the entry of judgment, determine which stockholders are solvent, and which are insolvent, and order judgment against each of the solvent stockholders for his pro rata share of the whole balance of the corporate indebtedness, to be apportioned among such solvent stockholders in proportion to the amount of stock held by each.
We cannot agree with appellants. This would leave the creditors to incur the risk, not only of an erroneous decision on the part of the court that some stockholders were solvent who were, in fact, insolvent, but also the risk of some stockholders becoming insolvent between the time the court ordered judgment and the time of entry thereof or levy of execution. After the court determines who are and who are not solvent stockholders, appeals may be taken which will delay the entry of judgment or issue of execution for months and even years. When the time finally arrived when the creditors could issue execution, they might find many to be execution proof whom they had always regarded as solvent. If the creditors took all of these risks, it would often happen that they would find themselves unable to collect one-half their claims when they came to test by execution the solvency of the stockholders found by the court to be solvent. But, though not one-half of the statutory double liability of the stockholders had been exhausted in the entry of judgment, the judgment would, as appellants contend, be a final determination of the rights of the creditors, and they would be remediless as to the balance of their claims left uncollected.
Conceding that the liability of the stockholders is only secondary, and that in some respects they may be regarded as sureties, each to a limited amount, for the corporate indebtedness, and are only liable for the balance remaining unpaid after the corporate assets are exhausted, in what other kind of a case is the creditor required to take such risks in the entry of judgment against the sureties for his principal debtor, as appellants insist that these creditors should take, and why should they be required to take these risks in such a case as this? In what other instance is the surety given a chance to escape a part of his liability to the creditor by any doctrine of apportionment of the indebtedness between him and his co-sureties? It is clear that the creditors in this case cannot be required to take any such risks. They are entitled to collect the full balance of their claims, even though it exhausts the statutory double liability of every stockholder to its full limit. Who can say in advance that it will not exhaust such liability to its full limit, and in what other way can this be determined except by the issue of execution?
Then, one of two propositions must be true: First, the creditors are entitled to successive judgments for successive assessments until the full limit of such statutory liability is exhausted, if such successive assessments and judgments are made necessary by reason of the insolvency of stockholders; or, second, the creditors are entitled to one judgment for the full amount of such statutory liability. We are of the opinion that the latter is the proper method of procedure, and that but one judgment should be rendered, which should cover the utmost possible liability of each stockholder to the creditors.
The former decisions of this court are not in conflict with this position. In Clarke v. Cold Spring O. H. Co., 58 Minn. 16, 59 N. W. 632, the court merely held that, where the plaintiff (the only creditor) failed to bring in all the solvent stockholders within the reach of process, he could not complain that the court awarded him only such a pro rata judgment against the (presumably solvent) stockholders brought in as would, with the same pro rata amounts contributed by said stockholders not brought in, make up the amount of his claim. In First Nat. Bank v. Winona Plow Co., 58 Minn. 167, 59 N. W. 997, the appellant stockholders contended that each stockholder is only liable to the amount of his stock, ratably with all other stockholders, solvent and insolvent, within reach of process, and beyond reach of same. We simply held that the position was not well taken.
2. But, while the creditors are entitled to judgment in the first instance against each stockholder for the utmost possible limit of his liability to them, it does not follow that they should be allowed to use this judgment oppressively, by issuing execution against some or all of the stockholders for the full amount of the judgment against each, or by collecting all of their claims from some of the solvent stockholders, leaving these to seek contribution from other solvent stockholders. Though regulated by statute, this is essentially an equitable proceeding, and the rules of equity should be applied unless inconsistent with the provisions of chapter 76, or the theory of our code practice, as modified by chapter 76. The execution of the judgment in this case should not have been left solely to the ministerial officers of the court, the receiver and sheriff, who must issue and levy execution for the full amount of the judgment against each stockholder, when execution is issued against him at all; and it is...
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