Minneapolis Paper Co. v. Swinburne Printing Co.

• Decision Date: 07 December 1896
• Docket Number: Nos. 10,248 - (121).,s. 10,248 - (121).
• Citation: 66 Minn. 378
• Court: Minnesota Supreme Court
• Parties: MINNEAPOLIS PAPER COMPANY v. SWINBURNE PRINTING COMPANY and Others.<SMALL><SUP>1</SUP></SMALL>

Page 378

66 Minn. 378

MINNEAPOLIS PAPER COMPANY v. SWINBURNE PRINTING COMPANY and Others.¹

Nos. 10,248 - (121).

Supreme Court of Minnesota.

December 7, 1896.

Appeal by certain defendants from an order of the district court for Hennepin county, Elliott, J., overruling a demurrer to the complaint. Affirmed.

Walter C. Tiffany, Hahn & Hawley, and Woods & Kingman, for appellants.

Welch, Hayne, Hubachek & Conlin, for respondent.

MITCHELL, J.

This action was brought by the plaintiff, in behalf of itself and all other creditors, against the defendant corporation and all its stockholders, to enforce the constitutional liability of the latter for corporate debts. The defendant company was not what is called a "moneyed corporation." The complaint contains no allegation that the plaintiff had obtained judgment against the defendant corporation, but it does allege that it, being hopelessly insolvent, had, before the commencement of this action, made an assignment, under the insolvent law of this state, of all its property for the benefit of all its creditors; that all of such property was in the possession of the assignee, who was engaged in converting it into money for the benefit of creditors; that its value did not exceed one-fifth of the amount of the claims already proved and allowed against the corporation. It will be observed that the object of the action was, not to sequestrate the corporate assets (if an assignment had been made as alleged, there could be no assets to sequestrate), but to enforce the personal liability of the stockholders for corporate debts.

The only question raised by the demurrer to the complaint, and by the appeal from the order overruling it, is whether it was necessary, in order to maintain the action, that a judgment should have been first obtained against the corporation, and an execution thereon returned unsatisfied, as provided by G. S. 1878, c. 76, § 9.² Very little aid in the determination of this question will be derived from decisions in other states, under different statutes, or in the absence of any statute on the subject. The case resolves itself into a question of the construction of the various provisions of chapter 76; and, to construe these provisions intelligently, it is necessary to refer to the history of that chapter, — a subject which we had occasion to consider somewhat in McKusick v. Seymour, Sabin & Co., 48 Minn. 158, 50 N. W. 1114.

It is well known that Rev. St. 1851, c. 77, was a transcript of Rev. St. Wis. 1849, c. 114. Wisconsin had previously borrowed the provisions of that chapter from 2 Rev. St. N. Y. 1829, p. 462, c. 8, art. 2. By our Revised Statutes of 1866, chapters 76 and 77 of the Statutes of 1851 were consolidated, and chapter 76 adopted in substantially its present form. In New York and Wisconsin it was held that the provisions corresponding to sections 9 to 20, inclusive, of our Revised Statutes of 1851 (which include sections 12 to 22,³ inclusive, of our present chapter 76), applied only to "moneyed corporations" of the kinds described in section 12 of our present chapter 76; that the provisions corresponding to sections 9 and 10⁴ of our present statute which referred to corporations other than moneyed, simply provided as their language implied, for a summary mode of compelling the application of the corporate assets to the payment of corporate debts, and hence that, in an action brought under these sections, delinquent stockholders, or stockholders who were personally liable for corporate debts, could not be reached; that the only remedy of creditors was, after the corporate assets were exhausted, to bring a suit against the stockholders, which would be governed by the general principles and practice of equity. Mann v. Pentz, 3 N. Y. 415; Adler v. Milwaukee P. B. Mnfg. Co., 13 Wis. 57.

The language of those sections which were held to apply exclusively to moneyed corporations clearly implies that an action such as the statute authorizes might be brought by a simple contract creditor, in which not only would the corporate assets be sequestrated, but also the personal liability of stockholders, directors, or other superintending officers for corporate debts, might be enforced, and they be compelled to contribute to pay the deficiency after the corporate assets were exhausted. And we take it that it was well settled that, in order to maintain such an action under this statute in the case of such corporations, it was not necessary that a plaintiff creditor should have first obtained judgment against the corporation. Such we assume to have been the law in this state down to 1866. But in McKusick v. Seymour, Sabin & Co., supra, we held that the effect of the revision of 1866, by which chapters 76 and 77 of the Revised Statutes of 1851 were, with certain changes, consolidated into one entitled "Actions respecting corporations," the first section of which⁵ declared that "this chapter embraces all corporations," was to make all the provisions of the chapter applicable to all corporations (whether moneyed or not), unless expressly limited in their application. Probably we should have added, "or unless, in their nature, they were clearly inapplicable to corporations generally." Hence we held in that case that in an action under chapter 76, although the corporation was not a moneyed one, the individual liability of stockholders for corporate debts might be enforced. This could be done, not by virtue of sections 9 and 10 (for they, by their terms, refer only to the sequestration of corporate assets), but by virtue of subsequent sections, notably section 17,⁶ which prior to the revision of 1866, had applied only to moneyed corporations.

The result of the peculiar form of chapter 76, as revised, is that we have one section (9), referring by its terms exclusively to the sequestration of corporate assets, which gives the right to maintain such an action only to a judgment creditor upon whose judgment execution has been returned unsatisfied; while we have other sections, now applicable to all corporations, which, standing by themselves, allow a simple contract creditor to maintain an action both to sequestrate corporate assets, and to enforce the individual liability of stockholders for corporate debts. It therefore becomes the duty of the court to harmonize these provisions by holding that the latter are limited and qualified by the former, but they should be held to be thus limited and qualified only to the extent necessary to remove the inconsistency.

Bearing in mind that sections 9 and 10 refer only to the sequestration of corporate assets, and also that in any action under chapter 76 the corporate assets must be sequestrated and exhausted before resort can be had to stockholders to pay the deficiency, it is evident that the inconsistency between the different sections exists only where there are corporate assets which are the subject of sequestration in the action. Hence, in order to harmonize the different provisions of the statute, it is only necessary to hold that the sections relating to actions to enforce the liability of stockholders are limited or qualified by section 9 merely in cases where there are corporate assets to be thus sequestered. Otherwise expressed, the rule would be that, where there are corporate assets subject to sequestration in the action, no suit can be instituted under chapter 76 to enforce the liability of stockholders of a corporation, other than a money one, except by a judgment creditor, unless the...