McKelvey v. Crockett

• Decision Date: 06 January 1884
• Citation: 2 P. 386,18 Nev. 238
• Parties: McKELVEY v. CROCKETT.
• Court: Nevada Supreme Court

2 P. 386

18 Nev. 238

McKELVEY v. CROCKETT.

Supreme Court of Nevada

January 6, 1884

The unpaid subscriptions of a stockholder to a corporation when due, by the terms of the charter or by-laws, or when called in by assessment become legal assets of the corporation and may be reached by garnishment. Until so due, or until the insolvency of the corporation, they are only equitable assets and cannot be reached by an action at law.

Appeal from the Seventh judicial district court, Washoe county.

William Cain, for appellant.

R. M Clarke, for respondent.

BELKNAP J.

The plaintiff commenced an action by attachment against the Reno Savings Bank, a corporation existing under the laws of this state, and garnished the defendant, Crockett, upon the assumption that he was a debtor of the bank. Plaintiff recovered judgment against the bank; an execution was issued and returned nulla bona; and thereupon this action was instituted against the garnishee to enforce his liability. The liability is based upon the fact that Crockett was a subscriber to a portion of the capital stock of the corporation. It appeared that the subscriptions to the capital stock had not been fully paid in by the various stockholders, but that Crockett had paid all of the calls made upon him by the corporation.

The question presented, and the only one which we deem it necessary to consider, is whether Crockett's liability for his unpaid and uncalled subscription can be enforced in an action at law against him as the garnishee of the principal debtor. The general corporation law under which the Reno Savings Bank was incorporated fixes the manner in which payments may be required upon unpaid stock. It does not require that the capital of a corporation shall be fully paid in upon its organization, but provides for assessments to be made by the stockholders or trustees.

The portion of the statute bearing upon this subject is as follows:

"Sec 10. The stockholders of any corporation formed under this act may in the by-laws of the company prescribe the times manner, and amounts in which the payment of the sum subscribed by them respectively shall be made; but in case the same shall not be so prescribed, the trustees shall have power to demand and call in from stockholders the sums by them subscribed at such times and in such manner, payments, or installments, as they may deem proper. ***" In the absence of an assessment it is evident that the corporation cannot maintain an action upon an unpaid subscription, and because of this fact it necessarily follows that plaintiff cannot maintain this action. Garnishment is a purely statutory proceeding, aiming to invest the plaintiff with the right and power to appropriate to the satisfaction of his claim against the defendant debts due from the garnishee to the defendant. "It is in effect," says Drake, "a suit by the defendant in the plaintiff's name against the garnishee, without reference to the defendant's concurrence, and, indeed, in opposition to his will. Hence, the plaintiff usually occupies, as against the garnishee, just the position of the defendants, with no more rights than the defendant had, and liable to be met with any defense which the garnishee might make against an action by the defendant." Drake, Attachm. § 452.

Upon corresponding facts the Supreme Court of Alabama denied the liability of a garnishee. The judgment is rested upon grounds similar to those we have expressed. Bingham v. Rushing, 5 Ala. 405.

In Brown v. Union Ins. Co. 3 La. Ann 177, the plaintiff having obtained judgment against the defendant corporation, sought to charge by garnishment a subscriber to a portion of its unpaid stock. The shares were of $50 each. The garnishee had subscribed for 100 shares. He did not pay in full for the stock, but made only the cash payment of five dollars per share. The opinion proceeds: "The charter divides the subscription into two distinct portions. The first is composed of the five dollars paid at the time of subscribing, and of $25 more which were to be paid on each share by installments fixed by the charter, and all falling due within the year 1836. The other portion is composed of the other $20, for the payment of which no period is fixed, the directors being authorized to call it in at such time and in such proportions as they might see fit. The $25 to be paid at fixed periods were due to the corporation, and formed part of the assets out of which its liabilities were to be satisfied. To the extent of that debt, the garnishment must be sustained, unless it is barred by lapse of time, as alleged by the garnishee. *** For the $20 remaining on each share, the company had no action against the garnishee without a formal case, made upon all the shareholders equally, and then only for the share due by him. This...