Harrison v. Remington Paper Co.

• Citation: 140 F. 385
• Decision Date: 22 August 1905
• Docket Number: 2,129.
• Parties: HARRISON v. REMINGTON PAPER CO.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

140 F. 385

HARRISON v. REMINGTON PAPER CO.

No. 2,129.

United States Court of Appeals, Eighth Circuit.

August 22, 1905

(Syllabus by the Court.)

Const. Kan. art. 12, Sec. 2, which provides that dues from corporations shall be secured by the individual liability of stockholders to an amount equal to the stock owned by each of them, is self-executing, but the remedy at common law may be enforced only by action at law or suit in equity after judgment and return of execution nulla bona against the corporation or an equivalent exhaustion of the property of the company. Sections 1200, 1204, Gen. St. Kan. 1889, granted to a creditor of a corporation an individual action against a stockholder upon the suspension of the business of the corporation for more than a year. Section 1192, Gen. St. Kan 1889, granted to the creditor of a corporation the right to an execution against a stockholder upon the return of an execution unsatisfied upon a judgment against the corporation. Chapter 10, p. 27, Laws Kan. 1898, repealed sections 1200, 1204, Gen. St. 1889, and substituted for the action there granted a suit in equity by a receiver to be appointed after a judgment against the corporation and the distribution of the proceeds which the receiver should collect from the stockholders pro rata among all the creditors thereof. Held, this repealing act is unconstitutional and void against contracts made and rights which accrued before its passage. It lessened the value of such contracts, and tended to postpone their enforcement and thereby impaired their obligations.

A stockholder of a corporation, by his subscription for stock or by his acceptance of it, agrees with the corporation and its creditors that he will perform the obligations and discharge the duties imposed upon a stockholder by the Constitution, the statutes, and the law then in force, and his liability to creditors springs from that contract.

The remedies for the enforcement of a contract existing in a state when the contract is made are a part of its obligation. Any repeal or change of any of these remedies, which substantially obstructs or retards its enforcement or lessens the value of the agreement, impairs its obligation and is unconstitutional and void. But a repeal or change of remedies, which does not substantially diminish the value of the agreement or seriously retard or obstruct its enforcement, escapes the inhibition of the Constitution and is valid.

While a judgment upon promissory notes merges them therein, so that the owner of the judgment may not maintain an action against the judgment debtor upon them, they still remain competent evidence of the existence of the debt which they represent in all other actions.

The contract to pay the debts of the corporation is the basis of the double liability, and the action to enforce it is indivisible. The cause of action between the same parties is the same, whether it is upon one or several of the shares of stock owned by the latter, and it may not be split.

The construction of the Constitution and the statutes of a state by the highest judicial tribunal of the state which enacted them is decisive in the federal courts, in the absence of any question of general or commercial law or of right under the Constitution of the United States, and their interpretation by the courts of other states is immaterial.

A voluntary dismissal without prejudice to a future action is a failure otherwise than upon the merits, within the meaning of section 23 of the Civil Code of Kansas, which provides that if an action is commenced in time, and the plaintiff fails in it otherwise than upon the merits, he may commence a new action within one year after the failure.

Where the first action was prosecuted in a state court, a new action may be maintained in the federal court. The effect of section 23 is to make an exception to the general statute of limitations of the state, which is justiciable in the federal as well as in the state court.

Rights created and remedies provided by the statutes of the states to be pursued in the state courts may be enforced and administered in the national courts either at law, in equity or in admiralty, as the nature of the rights and the remedies may require, where the citizenship of the parties and the amounts involved bring the actions within the provisions of the Constitution and the acts of Congress.

Rulings and decisions in the course of an action which is subsequently dismissed without prejudice to a future action raise no estoppel. The only adjudication by such a judgment is that nothing is adjudged and that the parties are as free to litigate the issues as though the action had not been commenced.

When the second suit is upon the same cause of action and between the same parties as the first, the judgment in the former is conclusive in the latter as to every question which was or might have been presented in the former.

When the second suit is upon a different cause but between the same parties as the first, the judgment in the former action operates as an estoppel in the latter as to every point and question which was actually litigated and determined in the first action; but it is not conclusive relative to other matters which might have been, but were not, litigated and decided.

Where the record is such that there is or may be a material issue question, or matter in the second suit upon a different cause of action, which may not have been raised, litigated, and decided in the former action, the judgment therein does not constitute an estoppel from litigating this issue, question, or matter, unless by pleading or proof the party asserting the estoppel establishes the fact that the issue, question, or matter in dispute was actually and necessarily litigated and determined in the former action.

The test of the identity of causes of action is the identity of the facts essential to their maintenance.

A cause of action to enforce the double liability of a stockholder by motion in the event of an unsatisfied execution upon a judgment against the corporation, under section 1192, Gen. St. 1889, is not the same as one between the same parties to enforce such a liability on the ground that the corporation has suspended business for a year, under sections 1200 and 1204, because the facts of a judgment and an unsatisfied execution are essential to the former and immaterial to the latter, and the fact of suspension of business for a year is indispensable to the latter and irrelevant to the former.

Under the decisions of the Supreme Court of Kansas the commencement of an action upon one of these causes is a bar to the prosecution of an action between the same parties to recover a liability of the stockholder in the same corporation under the other.

A judgment of denial of the motion for an execution and of dismissal of the action under section 1192, Gen. St. 1889, in which the defense of a prior action under sections 1200 and 1204 was pleaded and found, raises no estoppel against the plaintiff from litigating the issues presented in an action between the same parties under sections 1200 and 1204, in which that defense was not available, where the record does not disclose that the judgment upon the motion was based upon a decision of any of the issues in the latter case.

The books and records of a private corporation are not competent evidence against third persons, in the absence of proof of their knowledge and assent to them, to establish their relation of stockholders to the corporation or to prove other contracts between them and it. But admissions of a party against his interest, inscribed upon the books of a corporation and signed by him, are as competent and persuasive evidence against him as though they were written elsewhere.

T. W. Harrison and Charles Blood Smith (James F. Getty, W. H. Rossington, and J. S. West, on the brief), for plaintiff in error.

E. S. Quinton (A. B. Quinton, on the brief), for defendant in error.

Before SANBORN and VAN DEVANTER, Circuit Judges, and ADAMS, District judge.

SANBORN Circuit Judge.

This writ of error challenges a judgment against T. W. Harrison, the defendant below, on account of his double liability as a stockholder of the Topeka Capital Company, a corporation of the state of Kansas, which was not a railroad corporation and was not organized for either religious or charitable purposes. The statement and discussion of the law and the facts in this case accordingly relates to corporations organized for pecuniary profit of the nature of the Topeka Company only. The plaintiff alleged and endeavored to prove that Harrison was the owner of 18 shares of the stock of the Topeka Company of the par value of $500 each on November 18, 1895, when it suspended business, and demanded judgment against him for $9,000, but the jury charged him with liability on account of only 11 shares, and judgment was rendered against him for but $5,500.

The Constitution of the state of Kansas (section 2, art. 12) provides that dues from corporations shall be secured by the individual liability of stockholders to an additional amount equal to the stock owned by each of them, and by such other means as shall be provided by law. This provision of the Constitution is self-executing, so that in the absence of other means provided by statute a creditor of a corporation would not be remediless. Whitman v. Bank, 176 U.S 559, 565, 20 Sup.Ct. 477, 44 L.Ed. 587; Willis v. Mabon, 48 Minn. 140, 149, 153, 50 N.W. 1110, 16 L.R.A. 281, 31 Am.St.Rep. 626. The fact that courts of some of the states have reached a different conclusion has not been overlooked. Woodworth v. Bowles, 61 Kan. 569, 60 P. 331, and cases there cited. But this contract was made before the highest judicial...