Howell v. Manglesdorf

• Decision Date: 06 February 1885
• Citation: 33 Kan. 194,5 P. 759
• Court: Kansas Supreme Court
• Parties: S. R. HOWELL v. A. MANGLESDORF & CO

5 P. 759

33 Kan. 194

S. R. HOWELL v. A. MANGLESDORF & CO

Supreme Court of Kansas

February 6, 1885

Error from Atchison District Court.

PROCEEDING to enforce the individual liability of S. R. Howell, as a stockholder in the Atchison Industrial Exposition and Agricultural Fair Association. At the February Term, 1884 the court ordered that execution in favor of A. Manglesdorf & Co. issue against S. R. Howell as a stockholder of said corporation, for the sum of $ 100 and the costs of this proceeding. Howell brings the case to this court. The opinion states the material facts.

Judgment reversed.

Smith & Solomon, for plaintiff in error.

Jackson & Royse, for defendants in error.

JOHNSTON J. All the Justices concurring

OPINION

JOHNSTON, J.:

This proceeding was instituted in the district court of Atchison county, to enforce the individual liability of S. R. Howell, the plaintiff in error, as a stockholder in the Atchison Industrial Exposition and Agricultural Fair Association, a corporation organized under the laws of the state of Kansas, with its principal place of business at the city of Atchison. S. R. Howell subscribed to the capital stock of the corporation, and owned twenty shares thereof, amounting to one hundred dollars. The corporation became insolvent. A. Manglesdorf & Co., the defendants in error, recovered a judgment against the corporation, upon which an execution was issued and a return thereof made, that no property or effects of the corporation could be found upon which to levy the execution. The defendants in error began this proceeding by a motion filed in the district court, and obtained service of the notice of the motion upon S. R. Howell, at Chicago, Illinois. He appeared specially, and moved the court to set aside the service of the notice and motion, for the reason that the same was not served within the jurisdiction of the court, but was served upon him in the state of Illinois, of which state he was and is a resident. This motion was overruled by the court, and an order made awarding an execution against S. R. Howell as a stockholder in the corporation to the amount of the stock owned by him in the corporation. This action of the court is complained of by plaintiff in error.

The question to be decided arises under a statute which reads as follows:

"SEC. 32. If any execution shall have been issued against the property or effects of a corporation, except a railway or a religious or charitable corporation, and there cannot be found any property whereon to levy such execution, then execution may be issued against any of the stockholders, to an extent equal in amount to the amount of stock by him or her owned, together with any amount unpaid thereon; but no execution shall issue against any stockholder, except upon an order of the court in which the action, suit or other proceeding shall have been brought or instituted, made upon motion in open court, after reasonable notice in writing to the person or persons sought to be charged; and upon such motion, such court may order execution to issue accordingly; or the plaintiff in the execution may proceed by action to charge the stockholders with the amount of his judgment." (Comp. Laws 1879, ch. 23, § 32.)

It will be observed that two remedies for enforcing the individual liability of stockholders are prescribed in the statute above quoted. In the one case, the judgment creditor of an insolvent corporation may proceed by a summary action on a motion in the court where the judgment was rendered against the corporation; in the other, by an ordinary action to be instituted wherever personal jurisdiction of the stockholders can be acquired. Before the summary proceeding by motion can be maintained, notice to the stockholder must be given, in order that he may appear and make such defense as can be made and as is necessary to protect his interest. The statute does not define the form of the notice nor the time nor place of its service, but only prescribes that a "reasonable notice in writing" shall be given to the person sought to be charged. Whether the notice given in this case is sufficient, and what constitutes a reasonable notice under this statute, must depend very largely upon the nature of the proceeding based upon the notice. While the proceeding is summary in its character, and its maintenance contingent upon the insolvency of the corporation, or upon the rendition of a judgment against the corporation and the return of an execution thereon of nulla bona, yet we cannot regard it as an interlocutory or auxiliary proceeding in the action against the corporation. In the action against the corporation no notice of its pendency is given to the stockholder; he is not directly interested in the action, as his liability is only secondary to the corporation, and exists alone by reason of this statutory provision, and of that provision of the constitution in pursuance of which the statute is enacted. (Const., art. 12, § 2.) His liability to the creditors of the corporation is in the nature of a guaranty; the action or proceeding to enforce the same does not accrue until the execution upon the judgment against the principal is returned unsatisfied. We think that the proceeding against the stockholder, whatever remedy may be employed, is an independent one. It will readily be conceded if the proceeding is distinct and independent, and the issues between the parties are personal, and if the consequence of the proceeding is in the nature of a judgment in personam, that the notice or process of the court upon which the jurisdiction depends cannot be served beyond the jurisdiction of the state. Before either of the remedies pointed out by the statute can be employed by the creditors, the stockholder must be brought into court and have his day there. He is not concluded by the judgment...