Holland v. Duluth Iron Mining & Dev. Co.

Decision Date29 June 1896
Citation65 Minn. 324,68 N.W. 50
CourtMinnesota Supreme Court
PartiesHOLLAND v DULUTH IRON MINING & DEVELOPMENT CO. ET AL.
OPINION TEXT STARTS HERE

(Syllabus by the Court.)

1. The stockholders of a corporation, in an action against them to enforce their personal liability arising under the constitutional provisions or by statute, are, upon the question of corporate indebtedness, concluded by a judgment previously obtained against the corporation.

2. Such a judgment, although entered by default, is also an adjudication that under the allegations of the complaint there was due to the judgment creditor the amount for which judgment was entered.

3. When the name of an individual appears on the stock book of a corporation as a stockholder, the prima facie presumption is that he is the owner of the stock; and in an action against him as a stockholder the burden of proving that he is not a stockholder, or of rebutting the presumption, is cast upon him.

4. The entries in the stock book of defendant corporation were therefore admissible in evidence for the purpose of raising the presumption before mentioned. Nor was it necessary that such book should have been kept in any particular manner, or that it contain the entries prescribed by statute.

5. Held, in view of the entries contained in the stock book, supplemented by the identifying testimony of the witnesses, taken in connection with the fact that defendant Henry S. Wilson offered no testimony tending to deny his membership in the corporation, that the finding that he was a stockholder was supported by the evidence.

6. In order to constitute one a stockholder in a corporation, it is not necessary that the certificate to which he is entitled be issued.

7. Held, upon the evidence in this case, that the trial court was justified in finding defendants Chapman and Sheridan to have been stockholders in the corporation, although certificates had never been issued, nor was it shown that any formal action had been taken whereby they became stockholders.

Appeal from district court, St. Louis county; S. H. Moer, Judge.

Action by George N. Holland against the Duluth Iron Mining & Development Company and others, stockholders of said company. There was a finding for plaintiff, and from an order denying their motion for a new trial certain of the defendant stockholders appeal. Affirmed. C. D'Autremont, Cash, Williams & Chester, Jaques & Hudson, Mann & Corcoran, Handlon & McGregor, and M. H. Crocker, for appellants.

Billson, Congdon & Dickinson, for respondent.

COLLINS, J.

This was an action brought by a judgment creditor of a corporation to enforce as against the stockholders individually their double liability for the corporate debts. At the trial the court held that the judgment previously obtained against the corporation was conclusive evidence of its indebtedness and liability, and would not permit the stockholders to litigate the merits of the claim upon which it was based. The correctness of this position is directly attacked upon an appeal from an order denying defendant stockholders' motion for a new trial. The practical effect of the decision in Dodge v. Roofing Co., 16 Minn. 368 (Gil. 327), was to hold that a judgment against a corporation was conclusive against the stockholders in any action or proceeding to enforce their individual liability, although the exact question was not before the court. And in the case of Frost v. Investment Co., 57 Minn. 325, 59 N. W. 308, which was an action upon judgments against a corporation for the recovery of money to enforce the liability of stockholders for unpaid subscriptions, and their statutory liability, it was held that the judgments were evidence of the indebtedness of the corporation; the court saying that a judgment for the recovery of money is, as against everybody, evidence of a debt from and after its rendition, as fully as could be any other transaction between the parties. The force of these decisions seems to be admitted by counsel for the defendants here, but they insist that there is a distinction in principle, as to the effect or conclusiveness of judgments against corporations, between the cases in which actions are brought against stockholders on account of unpaid subscriptions and those wherein the object is to enforce the statutory or constitutional liability, the ground for distinguishing being that anything due for unpaid subscriptions is an indebtedness to and an asset of the corporation, while the statutory or constitutional liability is not. Because this liability is to the creditors only, and is not a corporative asset, nor can the corporation enforce it, counsel urge that when the action is based upon it there is no privity of interest between the corporation and its stockholders by reason of which the latter are concluded by a judgment against the former, or which can even make the judgment prima facie evidence of a corporate indebtedness. It seems to be conceded by counsel that to the full extent of the corporate property, and whenever its assets are to be reached, there is this privity of interest, and the stockholders are bound by the judgment. Reduced to a simple proposition, the position of counsel is that when the purpose of the action is to enforce a direct liability to the corporation the stockholders cannot question the judgment, but if the liability is indirect, arises only when the corporation assets are insufficient to satisfy the debts, and can only be enforced by the creditors, the judgment is ineffectual for any purpose. When we consider the character of stock corporations, and the powers and duties of the officers selected and authorized to manage them, it is not an easy task to demonstrate upon principle why a judgment against the body corporate should sometimes and under some circumstances bind the stockholders, and not at all times and under all circumstances; or why stockholders are privies in interest, and therefore concluded by the judgment, when their liability to respond to the full extent of amounts due on unpaid subscriptions is involved, and not privies in interest, and not bound by the judgment, when the same creditor undertakes to compel response to statutory or constitutional liability to pay the same judgment. Both liabilities are incurred at the same time, and by the same act, namely, when and by the act of subscribing for stock shares. The subscriber then becomes obligated to pay for his shares, and also to pay an amount equal to their face value, if necessary, and his liability is as definitely fixed in the one case as in the other. The difficulty we have referred to is apparent from an examination of the cases cited by counsel in their briefs, in which the courts have attempted to give reasons for restricting the effect of judgments against corporations, and limiting their binding force to cases in which corporate assets only were involved; and of those cited by counsel Miller v. White, 50 N. Y. 137, and Stephens v. Fox, 83 N. Y. 313, lead. But there is great uncertainty as to the exact position of the courts of New York on this question, as has been well shown by Mr. J. C. Harper in his note to Bissit v. Navigation Co., 15 Fed. 353. To the cases commented upon by him as tending to the existing confusion in that state we will add Allen v. Clark, 108 N. Y. 269, 15 N. E. 387,...

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53 cases
  • Hale v. Hardon, 265.
    • United States
    • U.S. Court of Appeals — First Circuit
    • May 31, 1899
    ... ... Indeed, ... Holland v. Development Co., 65 Minn. 324, 68 N.W. 50, a ... ...
  • Straw & Ellsworth Mfg. Co. v. L.D. Kilbourne Boot & Shoe Co.
    • United States
    • Minnesota Supreme Court
    • June 1, 1900
    ... ... Angle, ... supra; Sheafe v. Larimer, supra. See Holland v. Duluth ... Iron M. & D. Co., 65 Minn. 324; Hancock ... ...
  • Woodward Jr. v. Sonnesyn
    • United States
    • Minnesota Supreme Court
    • April 3, 1925
    ... ... 470, 31 Am. St. 637; ... Hastings Malt. Co. v. Iron Range Brew. Co. 65 Minn ... 28, 67 N.W. 652; Downer v ... thereby. Holland v. Duluth I.M. & D. Co. 65 Minn ... 324, 68 N.W. 50, 60 ... ...
  • Converse v. ÆTna Nat. Bank
    • United States
    • Connecticut Supreme Court
    • July 30, 1906
    ... ... Holland v. Duluth Iron Mining & Development Co., 65 Minn. 324, 68 ... ...
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