Merchants' Nat. Bank v. Bailey Manuf'g Co.

• Decision Date: 05 December 1885
• Citation: 34 Minn. 323,25 N.W. 639
• Parties: MERCHANTS' NAT. BANK v BAILEY MANUF'G CO. AND OTHERS.
• Court: Minnesota Supreme Court

34 Minn. 323

25 N.W. 639

MERCHANTS' NAT. BANKvBAILEY MANUF'G CO. AND OTHERS.

Supreme Court of Minnesota.

Filed December 5, 1885.

Appeal from an order of the district court, Ramsey county, overruling demurrers to complaint.

C. E. & A. G. Otis, for respondent, Merchants' Nat. Bank.

John B. & W. H. Sanborn, for appellants, Ferdinand Willius and others.

GILFILLAN, C. J.

The plaintiff, a creditor of the corporation defendant, sues it for the debt, and joins the other defendants, subscribers to and holders of its capital stock, to have determined and enforced their liability to creditors for the unpaid installments on their stock. Some of the stockholder defendants demur to the complaint on two grounds: That there is a defect of parties defendant, and that no cause of action was stated against them. As to the latter ground two propositions are made: First, that there is no joint liability; the liability of the stockholders being several, or each for himself alone. This will be disposed of in considering the first ground of demurrer. Second, that no action against stock-holders to enforce liability for unpaid installments on stock lies till judgment and execution returned unsatisfied, in whole or in part, against the corporation. In the case of a debt (without saying how it would be in case of an action in tort) there is no warrant in the statute, either in the provisions of chapter 34 or chapter 76, for this proposition. To sustain the ground of demurrer that there is a defect of parties defendant, the defendants claim that the plaintiffs' only remedy to enforce the liability against them is an action under chapter 76, in the nature of a suit in equity against all the stockholders, in which all the creditors should be joined as plaintiffs.

Although it is not clear from the complaint that there are other stockholders than the defendants subject to liability, on account of unpaid installments on stock, we shall, for the purpose of deciding the question presented, assume that there are. That question is, do the provisions of chapter 34, Gen. St. 1878, allow the creditor of a corporation, included within it, to bring an action in the nature of an action at law against the corporation, to establish the debt, and join in it one or more, though not all, of the stockholders, for the purpose of enforcing against him or them the individual liability for the corporation debts? It has not been directly decided by this court. In Dodge v. Minnesota Plastic Slate Roofing Co., 16 Minn. 368, (Gil. 327,) the action was under chapter 34, but there had been a judgment for the debt rendered against the corporation in a prior action, and the point made was that the liability of the corporation and stockholders was joint and was merged in the judgment. The court overruled the point. In Johnson v. Fischer, 30 Minn. 173, S. C.14 N. W. Rep. 799, the corporation was not one of those provided for in chapter 34, and it was therefore held that the action should have been brought under chapter 76, and not chapter 34. In both of these cases it is assumed or taken for granted that chapter 34 does provide a remedy to the creditor in the case of corporations coming within it. But the point not being directly involved, what is said in the opinions does not have the force and effect of a decision. In Allen v. Walsh, 25 Minn. 543, the corporation was an insolvent bank. The provisions of chapter 34 do not apply to banks, and the court therefore held that no action could be maintained under that chapter, but that it should have been brought under chapter 76, which applies to all corporations.

The sections of chapter 34 necessary to consider are the ninth, tenth, and eleventh. Section 9 merely defines the liability. Sections 10 and 11 are as follows:

“Sec. 10. The private property of no stockholder shall be levied on under the preceding section unless such stockholder, as well as the corporation, is duly served with process in the action, and the issue involving his individual liability, as aforesaid, raised and determined; and in no case whatever shall such property be levied on while sufficient corporate property can be found to satisfy the execution, or any part thereof.

“Sec. 11. The officer holding an execution which may be levied on private property, as aforesaid, shall make demand of payment thereon of the president, secretary, or some officer of the corporation acting, or who was one of the last acting officers thereof; and if he does not forthwith pay said execution, or point out corporate property that may be levied on, the officer shall indorse the fact of such demand, refusal, or neglect upon said execution, and thereupon may levy the same upon the property of the stockholder served and impleaded as aforesaid. Such levy may be made to satisfy any balance due upon the execution after levy upon corporate property or part payment out of corporate funds.”

These sections imply an action in which the corporation and the stockholder or stockholders sought to be held must be both served with process, so that judgment may be rendered against each, and in which, in addition to the issue against the corporation, there shall be the issue against the stockholder involving his individual liability, both the fact and the amount of it raised and determined, and, of course, a judgment upon such issues,-a money judgment, to be enforced in the...