M'Kusick v. Seymour, Sabin & Co.
| Decision Date | 18 January 1892 |
| Citation | 48 Minn. 158 |
| Parties | MYRON McKUSICK <I>vs.</I> SEYMOUR, SABIN & CO. (First Case.) |
| Court | Minnesota Supreme Court |
Seymour, Sabin & Co. was a business corporation organized under 1878 G. S. ch. 34, § 109. On May 12, 1884, it confessed judgment in the district court in favor of Myron McKusick. Execution was issued on the judgment, and returned wholly unsatisfied. Thereupon McKusick commenced an action in the district court, Washington county, setting forth these facts, and praying that the property of the corporation be sequestered, and a receiver appointed to continue its business until a sale could be made under the order of the court. 1878 G. S. ch. 76, § 9. On the same day an order was granted, requiring the corporation to show cause before McCluer, J., why such receiver should not be appointed at once. The parties appeared, and by consent J. C. O'Gorman was appointed such receiver of the property of the corporation, and empowered to continue its business, employ and discharge officers, prosecute and defend actions, and wind up its affairs.
The receiver thus appointed qualified and entered upon the discharge of his trust. On September 9, 1884, the district court made another order requiring all the creditors of Seymour, Sabin & Co. to exhibit their claims within six months after the first publication of the order, and become parties to the proceeding, and in default thereof that they be precluded from all benefit of the judgment, and from sharing in the distribution of the assets realized under such judgment.
The Minnesota Thresher Manufacturing Company, another corporation, thereupon presented and filed its claim against Seymour, Sabin & Co., and afterwards, on August 15, 1889, by leave of the court, presented and filed its supplemental complaint (1878 G. S. ch. 76, § 16) on behalf of itself and all the other creditors, and against all the stockholders of Seymour, Sabin & Co., (about 60 in number,) to enforce the liability given by the constitution, art. 10, § 3. An order was entered making the stockholders parties to the action, and requiring them to enter their appearance and to answer this complaint, and providing for the service of a summons upon each in conformity with the order.
This complaint stated that the debts of Seymour, Sabin & Co. exceeded $2,250,000, all incurred subsequent to July 5, 1881, of which the thresher company held at first $873,186.33, and had since purchased $1,043,598.71 more; that the total assets of Seymour, Sabin & Co. had been sold, and had realized only $45,000; that its capital stock was $1,650,000, divided into shares of $50 each, and that Meagher, Wilder, Kelly, and about 60 others held this stock. The complaint prayed that each of said stockholders account with the receiver and said Thresher Company and the other creditors concerning said debts, assets, and their liability as stockholders, and pay into court an amount equal to the par value of their respective holdings of stock, and that the same be distributed among the creditors.
Many of the stockholders appeared and demurred to this complaint upon grounds stated in the opinion, and it was stipulated that M. D. Grover, Esq., should, as referee, hear argument and report to the court what order he advised to be made upon the demurrers. He heard argument, and reported July 14, 1891, that the demurrers should be overruled, and it was so ordered. The stockholders appealed to this court.
Horace G. Stone, for some of appellants.
Warner, Richardson & Lawrence, for other appellants.
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Flandrau, Squires & Cutcheon and F. B. Kellogg, for respondent.
This case comes up on appeal from an order overruling the so-called "supplemental complaint" of the Minnesota Thresher Manufacturing Company, a creditor of Seymour, Sabin & Co., a corporation organized under 1866 G. S. ch. 34, tit. 2. The facts alleged in this complaint are as follows: Upon the complaint of McKusick, a judgment creditor of Seymour, Sabin & Co., after execution issued and returned unsatisfied, a decree or judgment had been rendered sequestrating all the property, things in action, and effects of the corporation, and appointing a receiver of the same. The receiver still continues in the discharge of his duties, but it appears that the corporation is hopelessly insolvent, and has not property or effects sufficient to pay over two (2) per cent. of its debts. The Minnesota Thresher Manufacturing Company, in pursuance of an order of court, exhibited its claims against the corporation, and became a party to the sequestration proceeding. Subsequently, in behalf of itself and all other creditors who had exhibited their claims, it filed its so-called "supplemental complaint" against all the stockholders of the corporation, having first obtained an order of court allowing it to do so, and requiring the stockholders thus impleaded to appear and defend. In obedience to this order the stockholders (appellants here) appeared, and demurred to the complaint. The object of the complaint is to recover in this sequestration proceeding from the stockholders on their individual liability for corporate debts under article ten, (10,) section three, (3,) of the constitution. That this section of the constitution is self-executing, and creates a liability on the part of each stockholder for corporate debts in a sum equal to the amount of stock held or owned by him, has been determined in the case of Willis v. St. Paul Sanitation Co., ante, p. 140, (50 N. W. Rep. 1110,) just decided. Inasmuch as it appears that these appellants had become stockholders before the indebtedness constituting the claims of the thresher company was incurred, and that they have always since continued to be stockholders, questions as to the amount of their liability that may arise in view of the fact that their holdings of stock have varied in amount at different times during the intervening period are not involved in this appeal.
The only remaining question is merely one of practice, viz., whether this "double liability" of stockholders can be thus enforced in this sequestration proceeding at the instance or upon the complaint of a creditor who has become a party to it. Unless to be overruled, Arthur v. Willius, 44 Minn. 409, (46 N. W. Rep. 851,) is decisive of this question, for, notwithstanding an attempt of counsel to do so, that case cannot be distinguished from the present. To the same effect, by implication at least, is the more recent case of Spooner v. Bay St. Louis Syndicate, 47 Minn. 464, (50 N. W. Rep. 601.) As rules of practice are but a means to an end, and ordinarily, as in this case, do not go to the merits of a controversy, such questions should not, as a general rule, occupy an extensive space in the decisions of courts of last resort; and, if a rule is once established which works well in practice, the mere fact that it may be technically erroneous is not necessarily a sufficient reason for changing it by overruling former decisions. Although counsel for appellants do not entirely agree among themselves in their conclusions as to what is the proper method of enforcing such a liability against stockholders, yet all their arguments against the practice adopted in this case are mainly what may be called "historical," — that is,...
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