McKusick v. Seymour, Sabin & Co.

• Decision Date: 18 January 1892
• Parties: MCKUSICK, v SEYMOUR, SABIN & CO., (MINNESOTA THRESHER MANUF'G CO., INTERVENER.)
• Court: Minnesota Supreme Court

48 Minn. 158

50 N.W. 1114

MCKUSICK,vSEYMOUR, SABIN & CO., (MINNESOTA THRESHER MANUF'G CO., INTERVENER.)

Supreme Court of Minnesota.

Jan. 18, 1892.

(Syllabus by the Court.)

1. Section 3, art. 10, of the constitution of the state, relating to the liability of stockholders for corporate debts, held to be self-executing. Following Willis v. Sanitation Co., 50 N. W. Rep. 1110.

2. The individual liability of stockholders for corporate debts may be enforced in a sequestration proceeding against the corporation under Gen. St. 1878, c. 76, upon the application or complaint of any creditor who has become a party to the proceedings. Following Arthur v. Willius, 46 N. W. Rep. 851,44 Minn. 409.

Appeal from district court, Washington county.

Proceedings by Myron McKusick against Seymour, Sabin & Co. for the appointment of a receiver and the sequestration of the effects of defendants. The Minnesota Thresher Manufacturing Company intervened, and filed a supplemental complaint against John F. Meagher and others. From an order overruling the demurrer to the intervener's supplemental complaint John F. Meagher and others appeal. Affirmed.

Horace G. Stone, for appellants.

Flandrau, Squires & Cutcheon and Davis, Kellogg & Severance, for respondent.

MITCHELL, J.

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 title 2, c. 34, St. 1866. 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 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 section 3, art. 10, 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. Sanitation Co., 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. Syndicate, (Minn.) 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, based upon the history of chapter 76, Gen. St. 1878, and the construction put upon it in the state of New York, from which most of its provisions, particularly sections 15 to 22, inclusive, were originally borrowed, as part of chapter 77 of our Revised Statutes of 1851, and which had been construed in Mann v. Pentz, 3 N. Y. 415, as applying only to “moneyed corporations,” referred to in section 12.

The burden of the arguments is that, in adopting this statute, we also adopted this construction, although one of the counsel seems to take the ground that only sections 15 and 16 apply to actions brought under section 12, and that section 17 and those following refer to an action to be brought by creditors only, and different from that provided for in section 9 or in section 12, and that only the corporate assets, properly so called, can be sequestered in an action under section 9; while another counsel, although seeming to claim that all of the sections from 15 to 22, inclusive, apply only to actions brought under section 12, concedes that a receiver, where one is appointed, may enforce this liability of stockholders, and claims that he alone can do so, and that it cannot be done as attempted in this case, upon the complaint or application of a creditor. It is difficult to perceive any good reason why one method of enforcing the liability of stockholders should obtain in the case of moneyed corporations and another in the case of other corporations; or one method in actions whose primary object is to dissolve the corporation, and another in actions “to sequestrate its stock, property, things in action, and effects,” which almost...